Frauds in Business Organizations: A Comprehensive Overview

Frauds in Business Organizations: A Comprehensive Overview

Marie G. Nakitende, Abdul Rafay, Maimoona Waseem
Copyright: © 2024 |Pages: 18
DOI: 10.4018/979-8-3693-2045-7.ch045
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Abstract

Fraud has been evolving and increasing with the change in the work environment, organizational structures, industrialization, and legislation. Money, greed, manipulation, job pressures, family needs, opportunity, politics, rationalization are the crucial reasons that lead people to behave fraudulently. The purpose of the chapter is to discuss a brief overview of theories of fraud. It presents causes that inspire individuals to commit fraud, methods for identifying fraud, and motives that encourage people to commit fraud. Management must try to eliminate the vulnerabilities that offer criminals the chance to commit fraud. Organizational leaders must be diligent, implement a robust anti-fraud strategy, and discourage all improper practices. Employee performance can also be strengthened through realistic anti-fraud preparation, and conformity with legal and regulatory obligations. Thus, fostering an ethical corporate culture is essential for fraud prevention.
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2. Background

Trustworthiness in business is usually taken for granted because business owners believe workers can be trusted (Smith, 2016). This naive confidence causes business owners to become victims of workplace fraud which allows them to misappropriate properties. Both men and women commit fraud in every sector, except for the banking industry where women outnumber men (Bonny, Goode, & Lacey, 2015). If an employee is motivated to commit fraud, that person could be of any age or gender and may appear trustworthy. When companies know that they are not immune to occupational fraud, researchers need to continue research on occupational fraud and workplace monitoring procedures. Fraud is one of the most challenging issues to solve (Gullkvist & Jokipii, 2013). Van Gelder and DeVries (2016) indicated that there is a lack of facts regarding employee misconduct by ordinary employees, considering the incidence of employee theft. High-profile white-collar offences are more discussed in research although fraud in the workplace is more frequently committed. Occupational fraud now has gained relatively large research attention.

Sutherland (1983) introduced the term white-collar crime. White-collar fraud occurs when persons in senior positions use their power and position to manipulate legislation decisions in their favor (Friedrichs, 2004). It is a classical form of fraud caused by employees as an abuse of power. This form of fraud occurs in the workplace environment if there are unclear policies or procedures to control deceitful behavior. White-collar crimes also involve acts like theft, false statements, evasion, manipulation of information, etc. Data from the Report released by the Association of Certified Fraud Examiners (ACFE, 2009) found that businesses had at least 5% of fraud-related revenue losses. Moreover, KPMG's (2010) Fraud Survey reported a marked rise in total fraud levels, with employee fraud being by far the most prevalent form of fraud.

The most frequently used operational definitions for fraud used in this discussion are the following.

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