The causes, impact and prevention of employee fraud

Abstract

Purpose The purpose of this paper is to investigate the causes and impact of employee fraud, focusing on one particular industry, namely, the automotive industry. Design/methodology/approach One company was selected as a case for the study. Qualitative data analysis was used for the study, with two techniques for data collection. First was the content or document analysis on various reports, such as employee fraud reports and records of disciplinary action, and second was a series of interviews with employees from different levels and various departments of the company. Findings This study found that the most popular type of fraud is misappropriation of assets, including theft of cash and inventories. No significant differences were seen in terms of fraudster position, as they can come from both the lower and the executive level. However, majority of the fraudsters come from the operational and sales department. This study also found that majority of the fraudsters in the case study were male, new employees and young adults. Their motivations to commit fraud include lack of understanding about fraud behavior, opportunity to commit fraud and lifestyle and financial pressure. Research limitations/implications The results provide further confirmation of the Fraud Triangle Theory and Fraud Diamond Theory on the causes of the fraud. They are also consistent with much prior research and surveys conducted by global professional firms on fraud and its related causes and implications. This study, however, was conducted on only one company with several series of interviews and three years of document analysis. Future research should collect and analyze data from a higher number of companies with more respondents for interviews and longer period for document analysis to get more accurate results. Practical implications This study provides some recommendations for fraud prevention in the future based on real fraud cases and those that involved managing cases up to and including disciplinary decision. These include closed supervision, fraud awareness training, clearer job descriptions, cultivation of a pleasant working environment and improved security control. Social implications This study found that some of the causes of fraud include social factors like lifestyle and financial pressure due to low income. Policy adjustments, such as an effort to push people beyond the poverty line with higher minimum wages, need to be made to prevent low-income workers from seeing their company as another source of illegal income. Originality/value This study is original, as it focuses on a company that operates in the automotive industry, which is rare in fraud literature, particularly in developing markets. In addition, the company is new, so analysis can be conducted on how the company evolved and learned from the fraud analysis for prevention in the future. Furthermore, this study used two techniques of data collection, so that verification of the findings may be made for better reliability.

Public Sector Accountability – Evidence From the Auditor General’s Reports

“…Second, the government also needs to strengthen the principles of accountability, transparency, and integrity in public services. Having poor ethical practices is detrimental to the organizational performance and may lead to fraud and financial disaster of the organization (Salin et al, 2017;Omar et al, 2016;Manan et al, 2013). In this context, the National Audit Department can play the important role by practising an open door policy and encourage government agencies to forward their problems and difficulties in planning and implementing their jobs and responsibility.…”

Peran Komitmen, Kompetensi, Dan Spiritualitas Dalam Pengelolaan Dana Desa

“…Bahkan, Badan Pengawas Keuangan (BPK) mengung kapkan adanya permasalahan pe ngelolaan yang disebabkan oleh pengetahuan perang kat desa yang sangat minim, terutama jika tidak diikuti oleh pengawasan dan pen dampingan yang maksimal dalam pengelo laan dan pelaporan keuangannya. Hal ini tentu saja dapat mengakibatkan terjadinya penyimpangan atau korupsi (Andoh, Quaye, & AkomeaFrimpong, 2018;Omar, Nawawi, & Salin, 2016;Yenkey, 2018). Seperti hal nya contoh kasus yang terjadi di Kabupa ten Buleleng yaitu Kepala Desa Kalianget didakwa menyelewengkan dana desa yang berasal dari APBDes selama kurun waktu 2009 hingga tahun 2011.…”

Are The Model of Fraud Triangle Elements Sufficient Enough to Prevent Fraud?: Evidence In North Sumatra Province

“…Therefore, auditors will find it difficult to observe employees working under pressure because they do not want to share problems, such as gambling addiction, alcoholism or pressure from family and friends [13]. The motivation for fraud perpetrators to commit fraud is the existence of financial pressures and a luxurious lifestyle [16]. A study conducted byUmar, Sitorus, Surya, Dauki and Suyanti also found that pressure affects dysfunctional behavior and motivates negative actions [17].…”

“…Opportunities are observable elements because opportunities are related to internal controls within the organization that can be observed by auditors [13]. Opportunities refer to the belief that fraudsters can commit fraud without being caught because of internal weaknesses of control such as lack of supervision or separation of duties and that their potential that can effectively commit crimes.Lack of understanding of fraud caused motivation to commit fraud [16]. Fraud will be more efficient and effective against the internal control mechanism and compliance with regulations [21].…”