The Tendency for Occupational Fraud in Malaysian Small Medium Enterprises and The Effect of Internal Control, Ethical Culture and Awareness on Fraud

Abstract

Occupational fraud requires serious attention due to its detrimental effect towards businesses, nation's economy, and community well-being. Implications led to businesses losing their revenue while affecting global economy negatively and depriving the society of fair share on nation's wealth. Malaysia's businesses have seen cases of occupational fraud among small, medium sized enterprises (SME) representing the significant portion of country's business population of 95%. Such vulnerability among them were due to deficiency in control system. Hence this study aims to assess the influence of internal control, fraud awareness and ethical culture on tendency of occupational fraud within SMEs in Malaysia. Most past studies have focused on public sector and listed companies while limited study was done on SME with inconsistent results. Questionnaire survey was adopted with SME staffs as respondents from 384 SME out of 907,065 establishments. Data collected was analyzed using multiple regression which revealed significant influence by internal control and fraud awareness factors on tendency of occupational fraud among SME staffs, while ethical culture showed insignificant influence. This study has limitation due to limited number of response rate of 33% and sample may not consist of SME whose staffs had committed occupational fraud. The finding provides further evidence on tendency of occupational fraud among SMEs. It will be useful for organizations, especially SMEs in understanding potential areas requiring further attention to remedy occupational fraud.