Research on fraud: an overview from small medium enterprises (SMEs)

Published date22 October 2021
Date22 October 2021
Subject MatterAccounting & finance,Financial risk/company failure,Financial crime
AuthorSiti Faizah Zainal,Hafiza Aishah Hashim,Akmalia M. Ariff,Zalailah Salleh
Research on fraud: an overview
from small medium
enterprises (SMEs)
Siti Faizah Zainal,Hafiza Aishah Hashim,Akmalia M. Ariff and
Zalailah Salleh
Universiti Malaysia Terengganu, Kuala Nerus, Malaysia
Purpose The purpose of this paper is to presenta review of literature on fraud with a specic focus on
small and medium enterprises (SMEs). Specically, it aims to provide further knowledge on recent
developmentsin fraud research and offers suggestions for future research.
Design/Methodology/Approach This paper systematically reviews the fraud literature, by
organisingthem into ve sections; denition, elements,theories, factors and prevention mechanisms.
Findings The most common factors of fraud in SMEs are the low morale among employees and weak
internal controlwithin the organisations. Nonetheless, researchon fraud involving SMEs is limited, albeit the
importanceof SMEs to the economy.
Research Limitations/Implications This paper encapsulatesthe importance of research on fraud in
SMEs by offeringdirections for future research. Among others,future studies might indicate the link between
corruption, nancing sourcesand innovation of SMEs, especially within the context of an emerging country
and reveal the cost of the criminaljustice system to identify more accurately the cost of fraud in SMEs.
Originality/Value The focus on fraud in SMEs and the recent period of study offer a foundation for
future research directed at the factors of fraud and the prevention mechanisms. Futureresearch can further
explore and broaden theliterature on fraud involving SMEs throughresearch that focuses on the impact of
fraud and the types of controlmechanisms that suit the SMEs. Greater understanding of fraud in the SMEs
allowsin identifying the best approachto prevent and detect fraudfor small businesses with limitedresources.
Keywords Literature review, Small and medium enterprises, Fraud
Paper type Literature review
1. Introduction
This paper explores the frauds occurrence in small and medium enterprises (SME). This
phenomenon is getting worse day by day, as shown in a report on the global study of
occupational fraud and abuse (Association of Certied Fraud Examiners, 2020). The report
shows there were 2,504 reported cases from 125 countries. Fraud caused total losses of more
than $3.6bn. It is also reported that the companies lose about 5% of their revenues due to fraud
each year and fraud is a signicant contributing factor to smallbusiness failure (Association of
Certied Fraud Examiners, 2020;Dunne, 2014). It became more severe as fraud has caused
various impacts to small businesses because it increased the total cost of fraud (MacErlean,
1995), including direct costs like nancial losses (Johnson and Rudesill, 2001;Yekini et al., 2018
and Andoh et al., 2018), indirect costs like loss of productivity from hiring and ring employees,
The study is supported by the Fundamental Research Grant Scheme (FRGS) FRGS/1/2020/SS01/
UMT/02/3 provided by the Ministry of Higher Education Malaysia. The authors would like to thank
the Ministry for the support.
Research on
Journalof Financial Crime
Vol.29 No. 4, 2022
pp. 1283-1296
© Emerald Publishing Limited
DOI 10.1108/JFC-09-2021-0205
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