Internal controls and fraud –
empirical evidence from oil and
gas company
Khairul Mizan Zakaria and Anuar Nawawi
Faculty of Accountancy, Universiti Teknologi MARA,
Shah Alam, Malaysia, and
Ahmad Saiful Azlin Puteh Salin
Faculty of Accountancy,
Universiti Teknologi MARA Perak Tapah Campus, Malaysia
Abstract
Purpose – The purpose of this study is to examine the type of internal control weaknesses and its impact that
leads to fraud activities in an oil and gas company, which is rarely found in empirical research.
Design/methodology/approach – A case study approach was taken to investigate and analyse the
fraud incidents to the deepest understanding. A mixed method of data collection, specically document
analysis and interviews, was used.
Findings – The study found that internal control weaknesses can be major contributing factors for
fraud to be committed. Poor supervision and improper documentation process provide opportunity to
misappropriate the assets, worst off if it includes several people that cooperate to conduct those illegal
malpractices.
Research limitations/implications – The results provide further conrmation of the fraud triangle
theory on the causes of the fraud, i.e. opportunity because of weak internal control. It also validates with
many prior studies conducted by global professional rms such as KPMG, PricewaterhouseCoopers
and Association of Certied Fraud Examiners on fraud and its related causes and implications. This
study, however, was conducted on only one company with limited number of interviews.
Practical implications – This study provides some recommendations to improve weak internal
control, which in turn will reduce opportunities of fraud committed in the company.
Originality/value – This study is original, as it focuses on a company that operates in the highly
specialized industry, i.e. oil and gas, which is rare in fraud literature, particularly in developing markets such
as Malaysia. It has examined various documents and reports of employee fraud that are generally difcult to
be accessed by researchers to be nally published in an academic journal. The ndings of this study are
inferred from direct access of company documents that are private and condential.
Keywords Case study, Malaysia, Fraud, Internal control, Oil and gas
Paper type Case study
Introduction
Internal controls can be described as policies and procedures established to provide
reasonable assurance that the specic entity objectives will be achieved. It is a process
affected by the organisation’s board of directors, management and other personnel
(COSO, 2013). The main purpose of internal controls is to support the entity in managing
their risk to achieve the entity’s established objectives and sustain their performance.
For example, nancial and operational information must have strong internal control
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
JFC
23,4
1154
Journal of Financial Crime
Vol. 23 No. 4, 2016
pp. 1154-1168
© Emerald Group Publishing Limited
1359-0790
DOI
10.1108/JFC-04-2016-0021
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