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The causes, impact and prevention of employee fraud

The causes, impact and prevention of employee fraud PurposeThe 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/approachOne 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.FindingsThis 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/implicationsThe 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 implicationsThis 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 implicationsThis 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/valueThis 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Crime Emerald Publishing

The causes, impact and prevention of employee fraud

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References (35)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1359-0790
DOI
10.1108/JFC-04-2015-0020
Publisher site
See Article on Publisher Site

Abstract

PurposeThe 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/approachOne 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.FindingsThis 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/implicationsThe 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 implicationsThis 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 implicationsThis 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/valueThis 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.

Journal

Journal of Financial CrimeEmerald Publishing

Published: Oct 3, 2016

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