The case studies of fraud prevention mechanisms in the Malaysian medium enterprises

Author:Malar Gunasegaran, Rohaida Basiruddin, Siti Zaleha Abdul Rasid, Adriana Mohd Rizal
Position:Azman Hashim International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia
Pages:1024-1038
SUMMARY

Purpose The purpose of this paper is to identify the extent and type of fraud scheme, prevention mechanisms and challenges experienced by the Malaysian medium enterprises. Design/methodology/approach The multiple case studies approach has been used in this study. The data were collected through interviews with the directors, owners, managers and supervisors of three medium-size... (see full summary)

 
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The case studies of fraud
prevention mechanisms in the
Malaysian medium enterprises
Malar Gunasegaran,Rohaida Basiruddin,Siti Zaleha Abdul Rasid
and Adriana Mohd Rizal
Azman Hashim International Business School, Universiti Teknologi Malaysia,
Kuala Lumpur, Malaysia
Abstract
Purpose The purpose of this paper is to identify the extent and type of fraud scheme, prevention
mechanismsand challenges experienced by the Malaysian medium enterprises.
Design/methodology/approach The multiple casestudies approach has been used in this study. The
data were collected through interviews with the directors, owners, managers and supervisors of three
medium-sizeenterprises.
Findings The ndings suggestthat the fraud cases experienced by the enterprises were related to broken
trust and non-cashlarceny. The implementation of fraud prevention mechanismsin the enterprises seem to be
very limitedbecause of resources and budget constraints.
Practical implications The ndings of the study have an alarming implication for the owners and
directors of the selected medium-size organizations. They seem to have shown proactivity and to have
responded to fraudin their organizations by implementing fraud preventionmechanisms; however, not to the
extent that large organizations have done. This fact may expose the companies to the risk of losing their
competitivenessand the ability to survive in the marketplace.
Originality/value This paper contributes to the growingliterature on the studies of fraud scheme and
the fraud prevention mechanism in the medium-size enterprises, particularly in the context of developing
country. Prior studies in these areas have predominantly been undertaken by large organizations of
developed countries, which offer different environment, litigation and institutional setting thus limits the
generalizabilityof fraud prevention mechanism to small- and medium-size businesses.
Keywords Fraud prevention mechanisms, Medium enterprises
Paper type Research paper
Introduction
Despite measures and regulations imposed by governments and by the management of
various establishments, fraud remains costly for organizations. According to a recent
survey by the Association of Certied Fraud Examiners [Association of Certied Fraud
Examiners (ACFE) 2016], on an average,an organization may lose approximately 5 per cent
of its revenue to fraud, and thiswill have a greater impact on smaller organizations than on
larger ones. Therefore, the issueof fraud will continue to be important and to form a part of
managementsand policymakersconcerns, especially, in regard to small and medium
enterprises (SMEs).
The different sizes and complexities of organizations tend to imply different fraud risks
and consequent measures, with some overlap. Corruption and nancial statement fraud are
the most common types of fraud in large organizations [Association of Certied Fraud
Examiners (ACFE),2014, 2016;Brickey, 2006;Kulik et al., 2008;Sidak, 2003], while check
JFC
25,4
1024
Journalof Financial Crime
Vol.25 No. 4, 2018
pp. 1024-1038
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2017-0034
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm

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