Prospectus: Occupational Fraud
Problem Statement
Occupational fraud has severe impacts on small businesses because it interrupts most of the business operations, costs the organization additional resources and time to deal with the damage caused by the fraudulent activities, and also tarnishes the reputation of the firm (Omar, Nawawi & Salin, 2016). Occupational fraud costs small businesses about $200,000, which is almost twice the average amount of $104,000 loss per fraud that is incurred by large organizations (Vranješ, 2017). The general business problem is that substantial financial losses are incurred by small businesses in the United States every year as a result of occupational fraud within a company. The specific business problem is that some small U.S. business leaders lack strategies to prevent occupational fraud.
Purpose Statement
The purpose of this qualitative single case study is to explore the strategies that small U.S. business leaders use to prevent occupational fraud. The targeted population composed of five managers from a single firm in the northeast region of Texas who have utilized the strategies to prevent occupational fraud successfully. The implications for social change include the potential to use internal controls that would help to reduce cases of occupational fraud, thus allowing the small businesses to grow. As the business continues to thrive, more employment opportunities would become available for individuals living in the northeastern part of Texas. Additionally, preventing occupational fraud would create a healthy anti-occupational fraud culture that runs from top-level managers to low-level employees. This culture would make the company be more resistant to other criminal activities. As the company grows, it can invest in some community development projects.
Nature of the Study
The methods used by researchers to obtain information are quantitative, qualitative, and mixed methods (Venkatesh, Brown & Bala, 2013). A qualitative method is used to explore a research question through the use of data sources such as observations, interviews, and analysis of documents (Baškarada, 2014). The purpose of this study was to explore the strategies used to prevent occupational fraud through interviews, observations, and review of documents, therefore, the qualitative research was the appropriate method. The quantitative method is used to examine and analyze relationships and group differences among variables, thus making it inappropriate for this study. The mixed methods are employed by researchers to combine the qualitative and quantitative methods in a study (McCusker & Gunaydin, 2015). The mixed-method would not work in this study because of the quantitative component.
The three qualitative designs used by researchers are case study, phenomenology, and ethnography. In this study, a single case study was used to explore the strategies that are used by small business leaders to prevent occupational fraud. Generally, a single case study is used to acquire and understand information from a specific organization (McCusker & Gunaydin, 2015). According to Shelton, Smith, and Mort (2014), a phenomenological study is used by researchers to understand the personal meanings of participants after experiencing a phenomenon. However, the purpose of this study was not to gather the personal meanings of participants. On the other hand, the ethnographical study is used to describe the behaviors, values, beliefs, and language in a particular culture, which was not the goal of this study.
Central Research Question
What strategies do small U.S. business leaders use to prevent occupational fraud?
Interview Questions
- How do occupational frauds affect business operations?
- What strategies did you use in detecting and preventing occupational fraud?
- What measures did you consider to ensure the strategies are effective?
- What challenges did you have to deal with from the use of the implemented strategies?
- How did you monitor the implemented strategies?
- What additional information can you give on the strategies that you used to prevent and detect occupational fraud?
Conceptual Framework
The conceptual framework for this qualitative single case study is the fraud triangle that is credited to Donald R. Cressey. The fraud triangle was developed in 1953 to explain why employee committee crimes (Zakaria, Nawai & Salin, 2016). The framework has been used in this study to describe how the various elements of the fraud triangle translate into potential risk factors for employees to commit occupational fraud. Small U.S. business leaders can easily model strategies to prevent and detect fraudulent activities when they understand the factors that contribute to employee fraud.
The three key elements of occupational fraud are pressure, rationalization, and opportunity. “Pressure” describes the employee’s motivation or drive to commit fraud (Zakaria et al., 2016). Some of these pressures may be unrelated to work such as addiction, overwhelming debt, or even family issues. Work-related pressures may include high demands to meet financial targets. “Opportunity” to commit occupational fraud is heightened when there are no internal controls put in place. As a result, the risk of getting caught is low. The third element is “rationalization,” which describes an employee’s justification for his or her fraudulent actions (Reinstein & Taylor, 2017). For instance, an employee may consider it appropriate to steal because he or she was not paid fair compensation. Therefore, understanding the elements of the fraud triangle would help small business managers to predict the risk factors of occupational fraud.
Significance of the Study
This qualitative single case study would be of value to businesses because it will help small business managers to implement effective strategies that would aid in preventing and detecting occupational fraud. One of the key strategies is the implementation of internal controls, such as adequately monitoring the activities of the employees. Effective use of internal controls would prevent occupational fraud. As a result, small businesses would thrive, and in turn, create more employment opportunities. The creation of employment would improve the economic and financial stability of the company and community.
Additionally, this study may contribute to the improvement of business practice in various ways. For instance, based on the risk factors identified in the study, small business owners may be able to gain insights on the effective ways of preventing and detecting occupational fraud. As business owners develop strategies, they should be aware of both internal and external factors affecting the business operations. This would help in identifying potential areas where occupational fraud is likely to occur. According to van Gelder and de Vries (2016), small businesses are significantly affected by asset misappropriation because the managers tend to think that the business is not vulnerable to occupational fraud since it is small-sized, hence do not implement internal controls.
Moreover, the results of this study would have significant contributions to positive social change. When businesses are financially and economically stable, they will be able to grow and reinvest in community projects that would benefit society. Effective implementation of internal controls would prevent asset misappropriation, and businesses would be able to increase income distribution, opportunities for employment, and also reduce social conflicts (Yost & Croes, 2016). Through social entrepreneurship, small businesses can develop the community by ensuring wealth distribution and addressing hunger and education-related issues. Therefore, internal controls can help small business managers to secure their businesses within the community and, at the same time, contribute to positive social development.
References
Baškarada, S. (2014). Qualitative case study guidelines. The Qualitative Report, 19(40), 1-18. http://nsuworks.nova.edu/tqr/
McCusker, K., & Gunaydin, S. (2015). Research using qualitative, quantitative or mixed methods and choice based on the research. Perfusion, 30(7), 537-542. https://doi.org/10.1177%2F0267659114559116
Omar, M., Nawawi, A., & Salin, A. S. A. P. (2016). The causes, impact and prevention of employee fraud. Journal of Financial Crime, 23, 1012-1027. doi:10.1108/JFC042015-0020
Reinstein, A., & Taylor, E. Z. (2017). Fences as controls to reduce accountants’ rationalization. Journal of Business Ethics, 141, 477-488. doi:10.1007/s10551- 015-2701-6
Shelton, C. L., Smith, A. F., & Mort, M. (2014). Opening up the black box: An introduction to qualitative research methods in anesthesia. Anesthesia, 69, 270- 280. doi:10.1111/anae.12517
Van Gelder, J. L., & DeVries, R. E. (2016). Traits and states at work: Lure, risk, and personality as predictors of occupational crime. Psychology, Crime & Law, 22, 701-720. doi:10.1080/1068316X.2016.1174863
Venkatesh, V., Brown, S. A., & Bala, H. (2013). Bridging the qualitative-quantitative divide: Guidelines for conducting mixed methods research in information systems. MIS Quarterly, 37, 21-54. http://misq.org/
Vranješ, S. (2017). Presence of corporate frauds at a global level. Innovation and Economic Research, 5(1), 153-166. http://economicsrs.com/index.php/economicus/article/view/106
Yost, E., & Croes, R. (2016). Conditions associated with increased risk of fraud: A model for publicly traded restaurant companies. The Journal of Hospitality Financial Management, 24, 92-109. doi:10.1080/10913211.2016.1236546
Zakaria, K. M., Nawai, A., & Salin, A. S. A. P. (2016). Internal controls and fraudempirical evidence from oil and gas company. Journal of Financial Crime, 23, 1154-1168. doi:10.1108/JFC-04-2016-0021