The causes, impact and
prevention of employee fraud
A case study of an automotive company
Mastura Omar 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 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 signicant 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 nancial pressure.
Research limitations/implications – The results provide further conrmation 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 rms 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 nancial 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
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
1012
Journal of Financial Crime
Vol. 23 No. 4, 2016
pp. 1012-1027
© Emerald Group Publishing Limited
1359-0790
DOI
10.1108/JFC-04-2015-0020
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