Internal control and employees’ occupational fraud on expenditure claims

Abstract

Purpose

The purpose of this study is to investigate the weaknesses of internal control in expenditure claim procedure and to identify the opinions of employees regarding an occupational fraud. This study also attempts to examine the most popular occupational fraud committed by the employee and whether a company’s working environment contributed to the fraud.

Design/methodology/approach

A case study approach was adopted to investigate and analyse the weaknesses of the internal control and occupational fraud incidents. A mixed method of data collection, specifically, survey questionnaire and document analysis were used.

Findings

This study found that the internal control of the expenditure claim procedure was weak and needed improvement. This study also found that a strong internal control and a better remuneration paid to the employees could reduce the risk of the occupational fraud committed in the company. In terms of fraud types, this study discovered that claims on mileage, followed by petrol, accommodation and suppliers’ invoice were the most popular occupational frauds committed by the employees. Finally, employee dissatisfaction and poor working-environment culture influence occupational fraud’s level in the organizations.

Research limitations/implications

The results provide further confirmation of the fraud triangle theory on the causes of fraud, i.e. opportunity because of a weak internal control and financial pressure because of low and non-standardized salary. This study, however, was conducted only on one company.

Practical implications

This study provides some recommendations to overcome the weak internal control and improve employees’ satisfaction which lead to better working environment. Thus, opportunities for fraud in the company can be reduced.

Originality/value

This study is original, as it focusses specifically on occupational fraud which is rare in fraud literature, particularly for a study that is conducted in developing markets like Malaysia. It also has examined various related sensitive documents and reports of employee frauds that are generally difficult to be accessed by researchers.

Citation

Nawawi, A. and Salin, A.S.A.P. (2018), "Internal control and employees’ occupational fraud on expenditure claims", Journal of Financial Crime, Vol. 25 No. 3, pp. 891-906. https://doi.org/10.1108/JFC-07-2017-0067