Asset misappropriation in small businesses

Abstract

Purpose This paper aims to increase the understanding of the types of insider financial frauds that occur within small businesses by focusing on a sample of businesses that have not employed a certified fraud examiner (CFE) in response to employee theft. Design/methodology/approach The survey data analyzed come from 102 small businesses (100 employees or fewer) in a midsized Midwestern city in the USA, and reflect 125 reported employee thefts. Findings The study results indicate that small businesses that do not hire a CFE report certain thefts with greater and lower frequencies as compared to small businesses that do hire a CFE. For particular types of frauds, CFEs may be no more useful than the efforts of business owners or managers, and other employees. Practical implications There may be important organizational differences between businesses that hire CFEs and those that do not, differences related to the ways in which business finances are maintained, the ways in which specific controls are used and the ability of employees to access business resources. These factors may create business-based opportunity structures that make particular types of insider financial frauds more or less likely to occur within a particular business. Originality/value Existing research on insider financial frauds may not appropriately account for small businesses that cannot afford, or are unwilling, to hire a CFE. The findings discussed in this paper contribute to a more complete picture of the types of frauds that small businesses experience, as well as how these businesses deal with insider theft.

Research on fraud: an overview from small medium enterprises (SMEs)

“…Fraud elements like employee theft, corruption, asset misappropriation and fraudulent financial statement were discussed widely in prior studies. For example, Kennedy (2018) discussed asset misappropriation in small businesses, workplace theft in SMEs was examined by Yekini et al (2018), corruption and SME by Wellalage et al (2019) and Ullah (2020) and fraudulent financial statements by Aris et al (2015). However, currently, there are four main categories of a fraud scheme (otherwise known as a fraud tree) that involved corruption, asset misappropriation, financial statement fraud (MIA, 2021; N’Guilla Sow, et al , 2018b) and an additional, new scheme that is cyber-criminality or cyber fraud (Andoh et al , 2018).…”

“…Corruption is most likely committed by the owners of SMEs (Wellalage et al , 2019; Ullah, 2020) compared to asset misappropriation committed by owners, employees and stakeholders (Omar et al , 2016; Gunasegaran et al , 2018; N’guilla Sow et al , 2018a, 2018b). Therefore, asset misappropriation refers to the misuse of the organisation’s assets for personal benefits involving check and payment tampering, cash larceny, payroll and skimming, among others (Kennedy, 2018; ACFE, 2020). There are a few studies that explore asset misappropriation research in SMEs like N’guilla Sow et al (2018a, 2018b), Krambia‐Kapardis and Zopiatis (2010), Andoh et al (2018), Kramer (2015), Gunasegaran et al (2018), Omar et al (2016), Yekini et al (2018) and Kennedy (2018) (Table 4).…”

“…Therefore, asset misappropriation refers to the misuse of the organisation’s assets for personal benefits involving check and payment tampering, cash larceny, payroll and skimming, among others (Kennedy, 2018; ACFE, 2020). There are a few studies that explore asset misappropriation research in SMEs like N’guilla Sow et al (2018a, 2018b), Krambia‐Kapardis and Zopiatis (2010), Andoh et al (2018), Kramer (2015), Gunasegaran et al (2018), Omar et al (2016), Yekini et al (2018) and Kennedy (2018) (Table 4). The Association of Certified Fraud Examiners recognised that 86% of fraud cases reported involved a loss of assets with a median loss of $100,000 and mostly occurring in small organisations (ACFE, 2020).…”

Keyakinan Hukum Karma Memoderasi Pengaruh Hedonisme Pada Kecurangan Dalam Pelaporan Keuangan

“…Seperti yang diungkapkan Utama et al,(2018), salah satu contoh dari pressure yaitu dorongan untuk memiliki barang -barang yang bersifat materi. Kennedy (2018), Rostami & Rezaei (2021), Liu et al (2021), Roszkowska (2021), Schmidt et al (2021), dan Himmah (2013) juga menyatakan bahwa karakteristik pribadi yang individual, materialis dan kapitalis mendorong orang untuk melakukan hal yang negatif tanpa memikirkan dampak atas perbuatan tersebut, salah satunya adalah melakukan kecurangan (fraud) atau perilaku tidak etis. Berdasarkan fraud triangle theory yang dimana dapat mendeteksi kecurangan dari seorang pekerja, terdapat hukum karma yang sering dikenal oleh masyarakat, yang dimana hukum karma ini sering dijadikan landasan bagi beberapa individu dalam bertindak.…”

Analisis Implementasi Pengendalian Internal Terhadap Risiko Theft of Cash Siklus Pendapatan

“…Dalam Association of Certified Fraud Examiners atau ACFE (2016) menyebutkan bahwa dalam fraud tree, komponen asset misappropriation terbagi ke dalam tujuh kategori utama dan salah satunya berupa pencurian kas. Asset misappropriation dalam bentuk pencurian kas sebagian besar dilakukan oleh karyawan atau pihak yang bertanggung jawab atas kas karena adanya kesempatan untuk melakukannya secara langsung [28].…”