Fraud victimization in Greece: room for improvement in prevention and detection

Author:Maria Krambia Kapardis, Konstantinos Papastergiou
Position:Cyprus University of Technology, Limassol, Cyprus
Pages:481-500
SUMMARY

Purpose The purpose of this paper is to investigate fraud victimisation of Greek companies during the financial crisis years. Moreover, the paper seeks to encourage the implementation of proactive and reactive measures in an effort to minimize fraud victimisation. Design/methodology/approach Drawing on an extensive literature review and utilising a questionnaire administered by Krambia-Kapardis and Zopiatis (2010), auditors and management of companies who had fallen victim to fraud provided information on the typology of fraud and on... (see full summary)

 
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Fraud victimization in Greece:
room for improvement in
prevention and detection
Maria Krambia Kapardis
Cyprus University of Technology, Limassol, Cyprus, and
Konstantinos Papastergiou
Department of Accounting and Finance,
Athens University of Economics and Business (AUEB), Athens, Greece
Abstract
Purpose – The purpose of this paper is to investigate fraud victimisation of Greek companies during
the nancial crisis years. Moreover, the paper seeks to encourage the implementation of proactive and
reactive measures in an effort to minimize fraud victimisation.
Design/methodology/approach Drawing on an extensive literature review and utilising a
questionnaire administered by Krambia-Kapardis and Zopiatis (2010), auditors and management of
companies who had fallen victim to fraud provided information on the typology of fraud and on
proactive and reactive measures taken after a fraud incident had been reported to them. Both
descriptive and inferential statistics were utilized to analyze the collected data and address the
postulated research questions.
Findings – The survey has found that no industry or size of company is immune from fraud, with
bigger companies and small- and medium-sized enterprises (SMEs) falling victim to industrial
espionage and theft of cash and counterfeit, respectively. The banking and insurance sector appeared to
be affected mainly by money laundering. Management fraud was mainly in the form of window
dressing, whilst employee fraud involved predominately theft of cash and assets. Loss of reputation
emerged as the main concern for the victim, and it had a determining impact on deciding not to report
cases to the police.
Research limitations/implications – Because of the sensitive topic being investigated and despite
having assured the respondents that their anonymity would be guaranteed, the respondents were
hesitant in responding. Thus, the response rate was 16.4 per cent, slightly lower than a similar study
carried out in Cyprus (Krambia-Kapardis and Zopiatis 2010). The ndings, however, are considered to
be reliable, given the fact that the respondents were individuals well versed with the topic under
investigation and in a position to know if their company had fallen victim to fraud.
Practical implications – The ndings have practical relevance to both industry stakeholders and
academics who wish to further explore fraud victimization in the Greek business environment. Given
that the nancial crisis in Greece is continuing, fraud risk assessment ought to concentrate in the area
of cash, and preventative measures need to be considered by the regulators and the victims.
Originality/value – Whilst fraud victimisation studies are becoming popular by the Big 4 accounting
rms, there is no fraud victimisation study concentrating on the typology of fraud in Greece. With this
survey, it will be possible to draw conclusions and make suggestions to the accounting profession on
how to combat fraud, at a time, when the economic crisis is persisting and fraud is expected to escalate.
Keywords Greece, Prevention, Fraud, Typology of fraud, Victimisation
Paper type Research paper
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
Fraud
victimization
in Greece
481
Journalof Financial Crime
Vol.23 No. 2, 2016
pp.481-500
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-02-2015-0010
Introduction
Fraud and nancial crimes generally, although complex, have existed since time
immemorial, evolving over the centuries and becoming more complex and difcult to
investigate causing catastrophic consequences to businesses and the economy of a
country. Fraud erodes investor trust and inuences stock market liquidity and
performance, yet investors are not aware of common fraud (Cumming and Johan, 2013)
until they are victimized, and auditors have difculty identifying indicators of
narcissism and personality trait linked to unethical or fraudulent behaviour (Johnson
et al., 2013). According to Pickett (2012, p. 7), “large frauds have led to the downfall of
entire organizations, massive investment losses, signicant legal costs, incarceration of
key individuals, and erosion of condence in capital markets”. More specically, the
Association of Certied Fraud Examiners (Association of Certied Fraud Examiners,
2014) estimated that a typical organization loses 5 per cent of its annual revenues to
fraud and corruption. If applied on the Central Intelligence Agency, 2013 (estimated)[1],
this translates to nearly $3.7 trillion. Some developed countries have experienced a
number of occupational fraud cases in the past decade, including: Enron, WorldCom,
Parmalat, Bernie Madoff and Satyam frauds (Bhasin, 2013;Buchanan and Yang, 2005;
Clauss et al., 2009;Kuhn and Sutton, 2006, and Li, 2010) that have shown that no
industry or size of company is immune to fraud. As a result, people’s reliance on
nancial information and the condence and faith in business relations have negatively
affected the nancial stability of companies and countries; thus, fraud victimization
studies (Barlaup et al., 2009;Krambia-Kapardis and Zopiatis, 2010) provide information
on the dark gure of fraud, in an effort to reduce this crime.
Greece, a country that has in recent years found itself in the midst of a deep economic
crisis, and with a gross domestic product (GDP) of $240bn in 2013[2], is expected to have
lost an estimated of $12bn to fraud. Moreover, the huge mass of hidden harm that
nancial crime and corruption cause in a country[3] has a negative impact on an
economy like Greece’s, and it can put it in deeper economic downturn. Because of the
dark gure of fraud and the low reporting of fraud incidence (as illustrated in
Krambia-Kapardis and Tsolakis, 2011 and reiterated in Papandreous’ 2013 court
proceedings), such crimes have low visibility. Thus, fraud victimization studies can
provide useful information to stakeholders and regulators to decrease the incidence of
fraud.
Given the limited published work on fraud victimization in Greece, the current paper
seeks to investigate a typology of fraud and preventative and investigative methods
used once fraud has been reported to management. Such ndings will assist both the
regulators (e.g. Stock Exchange, Professional Associations) and practitioners (external,
internal, fraud auditors and forensic accountants) to implement legislation, regulation,
adequate internal controls and a corporate culture in minimizing the impact of fraud on
the victims. Organisations and in particular audit committees ought to carry out routine
fraud risk assessments; thus, information derived from the present study will assist
them in identifying high risk areas to concentrate their testing in.
Literature review
Although many researchers describe fraud and nancial crimes as “invisible crimes”
(Jupp et al., 1999), these have common characteristics when they are committed (Croall,
1999;Pickett and Pickett, 2002). Despite being criticized for their reliability,
JFC
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482

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