Determinants of asset misappropriation at the workplace: the moderating role of perceived strength of internal controls
| DOI | https://doi.org/10.1108/JFC-04-2020-0067 |
| Pages | 1191-1211 |
| Published date | 10 June 2020 |
| Date | 10 June 2020 |
| Author | Theodora Aba Abekah Koomson,Godfred Matthew Yaw Owusu,Rita Amoah Bekoe,Maureen Oquaye |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Determinants of asset
misappropriation at the
workplace: the moderating
role of perceived strength
of internal controls
Theodora Aba Abekah Koomson,
Godfred Matthew Yaw Owusu and Rita Amoah Bekoe
Department of Accounting, Business School,
University of Ghana, Accra, Ghana, and
Maureen Oquaye
Department of Finance, Business School, University of Ghana, Accra, Ghana
Abstract
Purpose –This paper aims to investigate the prevalence of asset misappropriationat the workplace and
examines the dominant factorsthat influence individuals to misappropriate assets at the workplace.Relying
on the most recent theory on fraud(the stimulus/pressure, capability, opportunity, rationalization and ego (S.
C.O.R.E. model) as the theoreticalbasis, the study examines the effect of pressure, rationalization, capability,
opportunity/strength of internal control system and ego on asset misappropriation at the workplace while
controllingfor the effect of ethical values.
Design/methodology/approach –A total of 883 valid responses from individualsworking in various
organizations in Ghana were collected by means of a self-administered questionnaire. The hypothesized
relationships of the study were testedby means of a structural model analysis using the partialleast square
based structuralequation modelling technique.
Findings –Results from the structural modelanalysis demonstrate that individuals misappropriate assets
at their workplace due to pressures they face, their ability to rationalize their actions as not wrong, their
capabilities and their egos. The results, however, indicate that the extent to which an individual will
misappropriate asset depends,to a large extent, on the person’s perception of the strength of internal control
mechanisms at the workplace. The findings of the study make significant contributions to the fraud
discourse.
Originality/value –Theoretically, the study is among the first to provide empirical support for the
applicability of the S.C.O.R.E. model in the fraud literature. Again, this study extends knowledge on
occupational fraud literature by examining an area that has received the least research attention: asset
misappropriation.The study also highlights the important role of internal controls in reducingthe occurrence
of asset misappropriationat the workplace.
Keywords Fraud triangle, Structural equation modelling, Ethical values, Asset misappropriation,
Internal control system
Paper type Research paper
1. Introduction
The occurrence of fraudulent activitiesremains one of the key challenges confronting many
business organizations in contemporary times. The issue of fraud continues to attract the
Moderating
role of
perceived
strength
1191
Journalof Financial Crime
Vol.27 No. 4, 2020
pp. 1191-1211
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-04-2020-0067
The current issue and full text archive of this journal is available on Emerald Insight at:
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attention of researchersglobally because of the increasing growth in reported cases of fraud
and its negative impact on sustainabilityof businesses. Organizations lose about5% of their
revenues to fraud every year, translating to about US$7.1bn from a sample of 2,690 cases
reviewed by the Associationof Certified Fraud Examiners (ACFE) (2016) in their 2018 report
to the nations (ACFE, 2016). While the literature acknowledges that fraud could be
perpetuated both externallyand internally, the evidence provided by extant studies(Asmah
et al.,2019;Nigrini, 2019;Robinson and Aria, 2018;Zahari et al.,2020) demonstrate that
internally perpetuated fraud by employees, management and sometimes owners of firms
(occupational fraud) has been more rampant than the former in recent years. Most of these
studies have focussed predominantlyon financial statement fraud with less attention on the
other forms of occupationalfraud.
Notwithstanding the relevance of financial statement fraud to the fraud discourse,
empirical studies have shown that the frequency with which employees engage in other
forms of fraudulent activities, most especially asset misappropriation, far surpasses the
former (ACFE, 2016;ACFE, 2018;Zahari et al.,2020). According to the ACFE (2018) report,
asset misappropriation alone occurred in 89% of all reported fraud cases between 2016 to
2018. Interestingly, while cases of asset misappropriation continue to be on the rise, the
focus of most academic researchers have been on financial statement fraud. The few
existing studies on asset misappropriation have focussed on issues such as financial
expertize of audit committees in relation to asset misappropriation (Mustafa and Youssef,
2010), the internal audit function and the detection of asset misappropriation (Coram et al.,
2008), red flags of asset misappropriation (Gullkvist and Jokipii, 2013), asset
misappropriation and corporategovernance (Chapple et al.,2007) but not on the factors that
influence individualsto misappropriate asset at the workplace.
In addition, most studies in the area of fraud have relied heavily on the fraud triangle
theory (FTT) and the fraud diamond theory (FDT) in developing theoretical underpinnings
for the factors predicted to be responsible for the occurrence of fraud. While these theories
have been useful in shapingour understanding on fraud and its related concepts, Vousinas’s
(2019) S.C.O.R.E. model though recent, is believed to be wider in scope, and hence, should
provide useful extension to our understanding on the fraud phenomenon. The theory
proposes that five factors influence individuals to commit any fraudulent act, namely,
pressure, rationalization, capability, opportunity and ego. However, till date, the
applicability of the S.C.O.R.E.model remains an open question as it lacks empirical support.
The study finds the factor “opportunity”of the S.C.O.R.E. model, from an accounting
perspective, to bothermore on internal control issues. In this paper, the element opportunity
is redefined to measure the perceived strength of internal controls (PSICs) from the view
point of employees.
This study fills the aforementioned gaps by investigating the prevalence of asset
misappropriation at the workplace focussing on the factors that influence individuals to
misappropriate asset at the workplace. The study also uses the new theoryon fraud, S.C.O.
R.E. model, in examining the relationshipsthat exist among the variables in the study. The
study, in addition, tests the moderating role of the PSICs in the relation the identified
determinants havewith asset misappropriation.
The rest of the paper is structured as follows: the Section2 reviews existing literature on
the variables of interest and underpinningtheories and discusses how the hypotheses tested
in the study were developed. Section 3 follows with a discussionof the methods used in the
study. The subsequent Section 4 presents and discusses the key findings of the data
analysis. The paper ends with a summary of the entire paper and draws conclusions by
highlighting the key findingsand contributions of the study in Section 5.
JFC
27,4
1192
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