Sage Journals: Discover world-class research

Abstract

Fraud has emerged as an undesirable offshoot of human greed and pressure to perform in growing corporate world. It has led to erosion of stakeholders’ confidence across the globe. Now, they see the annual reports and other corporate filings with scepticism. Despite increasing instances of fraud, the anti-fraud mechanism of the business organisations is not up-to-date. The present study aims to examine the effectiveness of fraud detection and prevention methods used by corporate sector. A survey of 336 auditors seeking their perception about effectiveness of various anti-fraud methods has been conducted. The findings reveal that corporate governance is the most effective tool against fraud. Use of information technology, timely audit, regular inspection and corporate policies and procedures, also, play a vital role in curbing fraudulent practices in an organisation. Thus, the findings suggest that expenditure on effective anti-fraud methods should not be viewed as an expense; instead, it must be considered as an investment as it saves from the potential losses due to fraud and damage to business stability, revenue and image.

Keywords

Corporate fraud auditors’ perception fraud prevention fraud detection India

Get full access to this article

View all access options for this article.

References

Albrecht

W. S.

Albrecht

C. O.

Albrecht

C. C.

Zimbelman

M. F.

(2012). Fraud examination (4th ed.). Mason, USA: Cengage Learning.

Alleyne

Howard

(2005). An exploratory study of auditors’ responsibility for fraud detection in Barbados. Managerial Auditing Journal , 20(3), 284–303.

Association of Certified Fraud Examiner (ACFE). (2014). Report to nations on occupational fraud and abuse, 2014 global fraud survey . Austin: Association of Certified Fraud Examiners.

Association of Certified Fraud Examiner (ACFE). (2016). Report to nations on occupational fraud and abuse, 2016 global fraud survey . Austin, USA: Association of Certified Fraud Examiners.

Beasley

M. S.

Carcello

J. V.

Hermanson

D. R.

(2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting Horizons , 14(4), 441–454.

Bierstaker

J. L.

Brody

R. G.

Pacini

(2006). Accountants’ perceptions regarding fraud detection and prevention methods. Managerial Auditing Journal , 21(5), 520–535.

Bolton

R. J.

Hand

D. J.

(2002). Statistical fraud detection: A review [online]. Retrieved 20 October 2016, from http://metalab.uniten.edu.my/~abdrahim/ntl/Statistical%20Fraud%20Detection%20A%20Review.pdf

Brennan

N. M.

McGrath

(2007). Financial statement fraud: Some lessons from US and European case studies. Australian Accounting Review , 17(42), 49–61.

Burnaby

Howe

Muehlmann

B. W.

(2011). Detecting fraud in organisation: An internal audit perspective. Journal of Forensic & Investigative Accounting , 3(1), 195–233.

10.

Caplan

(1999). Internal control and detection of management fraud. Journal of Accounting Research , 37(1), 101–117.

11.

Carpenter

T. D.

Reimers

J. L.

(2005). Unethical and fraudulent financial reporting: Applying the theory of planned behavior. Journal of Business Ethics , 60(2), 115–129.

12.

Ceonen

T. L.

(2008). Essentials of corporate fraud . Hoboken, New Jersey: John Wiley & Sons Inc.

13.

Chi-Chi

O. A.

Ebimobowei

(2012). Fraudulent activities and forensic accounting services of banks in Port Harcourt, Nigeria. Asian Journal of Business and Management , 4(2), 124–129.

14.

Coram

Ferguson

Moroney

(2006). The value of internal audit in fraud detection. Retrieved 27 September 2014, from http://www.theage.com.au/ed_docs/Fraud_paper.pdf

15.

Crumbley

D. L.

Apostolou

N. D.

(2005). The expanding role of forensic accountant. The Forensic Examiner , 39–43.

16.

Deloitte. (2012). Indian banking fraud survey—2012 navigating the challenging environment . India: Deloitte Touche Tohmastu India Private Limited.

17.

Deloitte. (2014). India fraud survey Edition I . Retrieved 15 June 2015, from https://www2.deloitte.com/content/dam/Deloitte/in/Documents/finance/in-finance-annual-fraud-survey-noexp.pdf

18.

Desai

M. S.

Richards

T. C.

Embse

T. V.

(2002). System insecurity-firewalls. Information Management & Computer Security , 10(3), 135–139.

19.

Dorminey

Fleming

Kranacher

Riley

(2012). The evolution of fraud theory. Issues in Accounting Education , 27(2), 555–579.

20.

Field

(2009). Discovering statistics using SPSS . London, England: SAGE Publications.

21.

Field

(2013). Discovering statistics using IBM SPSS statistics . London, England: SAGE Publications.

22.

Ghazali

M. Z.

Rahim

Ali

Abudin

(2014). A preliminary study on fraud prevention and detection at the state and local government entities in Malaysia. Procedia—Social and Behavioral Sciences , 164, 437–444.

23.

Gliem

J. A.

Gliem

(2003). Calculating, interpreting, and reporting Cronbach’s alpha reliability coefficient for Likert-type scales. Retrieved 3 September 2016, from https://scholarworks.iupui.edu/bitstream/handle/1805/344/Gliem%20&%20Gliem.pdf?s

24.

Gottschalk

(2010). Knowledge strategy for financial crime prevention. Journal of Emerging Trends in Computing and Informational Sciences , 2–10.

25.

Gullkvist

Jokipii

(2013). Perceived importance of red flags across fraud types. Critical Perspectives on Accounting , 24(1), 44–61.

26.

Gupta

Gill

N. S.

(2012). Prevention and detection of financial statement fraud—An implementation of data mining framework. International Journal of Advanced Computer Science and Applications , 3(8), 150–156.

27.

Halbouni

S. S.

Obeid

Garbou

(2016). Corporate governance and information technology in fraud prevention and detection: Evidence from the UAE. Managerial Auditing Journal , 31(6–7), 589–628.

28.

Hassink

Meuwissen

Bollen

(2010). Fraud detection, redress and reporting by auditors. Managerial Auditing Journal , 25(9), 861–881.

29.

Hillison

Pacini

Sinason

(1999). The internal auditor as fraud buster. Managerial Auditing Journal , 14(7), 351–363.

30.

Kaminski

A. K.

Wetzel

T. S.

Guan

(2006). Can financial ratios detect fraudulent financial reporting? Managerial Auditing Journal , 19(1), 15–28.

31.

Kassem

Higson

(2012). Financial reporting fraud: Are standard setters and external auditors doing enough? International Journal of Business and Social Science , 3(19), 283–290.

32.

Klein

K. J.

Dansereau

Hall

R. J.

(1994). Levels issues in theory development, data collection, and analysis. Academy of Management Review , 19, 195–229.

33.

Knapp

C. N.

Knapp

M. C.

(2001). The effects of experience and explicit fraud risk assessment in detecting fraud with analytical procedures. Accounting, Organizations and Society , 26, 25–37.

34.

KPMG. (2008). Continuous audit/continuous monitoring: Using technology to drive value by managing risk and improving performance. Retrieved 20 October 2016, from https://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/cacm080609.pdf

35.

KPMG. (2012). India fraud survey 2012 . KPMG, India. Retrieved 11 December 2014, from https://www.kpmg.com/FR/fr/IssuesAndInsights/.../India-Fraud-Survey-2012.pdf

36.

Krambia-Kaparis

(2002). A fraud detection model: A must for auditors. Journal of Financial Regulation and Compliance , 10(3), 266–278.

37.

Kroll. (2013). 2013/2014 global fraud . Retrieved 2 September 2016, from http://www.kroll.com/CMSPages/GetAzureFile.aspx?path=~%5Cmedia%5Cfiles%5Cintelligence-center%5Cglobal-fraud-report-2013-2014-english.pdf&hash=a84e800f9068acd3e3ce664e95666772c22ccf4547183e750ecf984b2041343d

38.

Kroll. (2015). Global fraud report vulnerabilities on the rise . New York, NY: Kroll.

39.

Law

(2011). Corporate governance and no fraud occurrence in organizations: Hong Kong evidence. Managerial Auditing Journal , 26(6), 501–518.

40.

Mangala

Kumari

(2015). Corporate fraud prevention and detection: Revisiting the literature. Journal of Commerce & Accounting Research , 4(1), 35–45.

41.

Mangala

Kumari

(2016). Auditors’ perception toward red flag: An Indian Evidence. In Arora

Mangala

Savita

(Eds), Management mosaic traversing across assorted research arena (pp. 97–111). Delhi: Wisdom Publication.

42.

Miceli

M. P.

Near

J. P.

(1984). The relationships among beliefs, organization position and whistle blowing status: A discriminate analysis. Academy of Management Journal , 27(4), 687–705.

43.

Mohd-Sansui

Mohamed

Omar

Mohd-Nassir

M. D.

(2015). Effects of internal controls, fraud motives and experience in assessing likelihood of fraud risk. Journal of Economics, Business and Management , 3(2), 194–198.

44.

Neil

(2008, March 30). Write up a factor analysis. Retrieved 20 October 2016, from http://www.bwgriffin.com/gsu/courses/edur9131/content/Neill2008_WritingUpAFactor Analysis.pdf

45.

Omar

N. B.

Din

H. F.

(2010). Fraud diamond risk indicator: An assessment of its importance and usage. In International Conference on Science and Social Research (pp. 607–612). Kuala Lumpur, Malaysia.

46.

Peltier-Rivest

Lanoue

(2011). Thieves from within: Occupational fraud in Canada. Journal of Financial Crime , 19(1), 55–64.

47.

Prabowo

H. Y.

(2013). Better, faster, smarter: Developing a blueprint for creating forensic accountants. Journal of Money Laundering Control , 16(4), 353–378.

48.

PwC. (2008). Fraud a guide to its prevention, detection and investigation . PricewaterhouseCoopers, Retrieved 5 August 2015, from http://www.pwc.com.au/consulting/assets/risk-controls/fraud-control-jul08.pdf

49.

PwC. (2010). Internal audit state of the productivity of the profession survey . PricewaterhouseCoopers.

50.

PwC. (2011). Fighting frauds in public sector . PricewaterhouseCoopers. Retrieved 31 July 2014, from https://www.pwc.com/en_GX/gx/psrc/pdf/fighting_fraud_in_the_public_sector_jun

51.

PwC. (2016). PwC’s global economic crime survey 2016 an India perspective . PricewaterhouseCoopers. Retrieved 5 October 2016, from https://www.pwc.com/gx/en/economic-crime-survey/pdf/GlobalEconomicCrimeSurvey2016.pdf

52.

Rahman

R. A.

Anwar

I. S.

(2014). Effectiveness of fraud prevention and detection techniques in Malaysian Islamic banks. Procedia—Social and Behavioral Sciences , 145, 197–202.

53.

Razaee

(2005). Causes, consequences, and deterrence of financial statement fraud. Critical Perspective of Accounting , 16, 277–298.

54.

Razaee

Burton

E. J.

(1997). Forensic accounting education: Insights from acade-mics and certified fraud examiner practitioners. Managerial Auditing Journal , 12(9), 479–489.

55.

Razaee

Riley

(2010). Financial statement fraud prevention and detection (2nd ed.). Hoboken, New Jersey: John Wiley & Sons.

56.

Renzhou

(2011). Research on legal procedural function of forensic accounting. Energy Procedia , 5, 2147–2151.

57.

Salleh

S. M.

Othman

(2016). Board of director’s attributes as deterrence to corporate fraud. Procedia Economics and Finance , 35, 82–91.

58.

Singleton

T. W.

Singleton

A. J.

(2010). Fraud auditing and forensic accounting (4th ed.). Hoboken, New Jersey: John Wiley & Sons.

59.

Siregar

S. V.

Tenoyo

(2015). Fraud awareness survey of private sector in Indonesia. Journal of Financial Crime , 22(3), 329–346.

60.

Zhou

Kapoor

(2011). Detecting evolutionary financial statement fraud. Decision Support System , 50, 570–575.

61.

Ziegenfuss

D. E.

(1996). State and local government fraud survey for 1995. Managerial Auditing Journal , 11(9), 50–55.

Auditors’ Perceptions of the Effectiveness of Fraud Prevention and Detection Methods

Abstract

Abstract

Keywords

Get full access to this article

References