Revisiting employee fraud: gender, investigation outcomes and offender motivation
| Date | 05 October 2015 |
| Pages | 447-467 |
| Published date | 05 October 2015 |
| DOI | https://doi.org/10.1108/JFC-04-2014-0018 |
| Author | Paul Bonny,Sigi Goode,David Lacey |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Revisiting employee fraud:
gender, investigation outcomes
and offender motivation
Paul Bonny, Sigi Goode and David Lacey
College of Business and Economics, The Australian National University,
Canberra, Australia
Abstract
Purpose – This paper aims to present the ndings of a study examining fraud in the workplace
setting, principally in the Australasian context. Although prior research into occupational fraud is
conceptually rich, there is a lack of empirical evidence of this important but elusive problem.
Design/methodology/approach – Based on investigative data from 14 participating rms, the
paper provides insights into the gender breakdowns and stated motivations of offenders. The paper
also provides evidence of the number of investigations, interviews and reports to law enforcement in
these rms.
Findings – The study nds that genders are evenly balanced for most rms, with females
signicantly outnumbering males in banking rms. Self-imposed nancial hardship was the most
popular motivator. Of the number of admissions to wrongdoing, only half were subsequently reported
to law enforcement.
Research limitations/implications – Particularly complex or advanced types of occupational
fraud may go unreported or undetected: as a result, the gures presented in this study may be
incomplete. Reported gures are based largely on historical data provided by respondents, and the
authors are unable to report accurate details of the respondent rms. This makes it difcult to determine
the frequency of offending against the background population.
Practical implications – Investigators should continue to look for changes in the life circumstances
of their staff. Such changes will give an indication of instances of staff living beyond their means and the
sudden nancial pressures that can compel occupational fraud. Instead of trying to supervise staff to an
impractical degree, managers and proprietors would be well advised to be alert to the kind of pressures
that their staff might experience.
Social implications – Social control and detection measures are likely to be easier to implement and
less invasive than technical controls. The study provides additional pressure to update traditional
conceptualisations of the male white collar offender. While male offenders were responsible for larger
losses per case, females were more numerous in the summary offence data.
Originality/value – Gaining insights into the problem of employee fraud and white collar crime is
difcult. The authors’ contribution in this paper is to provide empirical insights into the makeup of
white collar offenders, including insights on gender.
Keywords Gender, Motivation, Fraud, Organisational corruption, Workplace dishonesty
Paper type Research paper
Introduction
It is clear that employee fraud is a serious problem, affecting businesses in many
countries. Holtfreter (2004) cites some US$600 billion in annual employee-related fraud
activity. In the USA, the Association of Certied Fraud Examiners (2004) estimated that
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Revisiting
employee
fraud
447
Journalof Financial Crime
Vol.22 No. 4, 2015
pp.447-467
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-04-2014-0018
the typical rm loses up to 6 per cent of revenue to employee fraud. Beck et al. (2002,
p. 31) estimated that internal theft was responsible for 24 per cent of retail sector stock
losses across Europe, amounting to more than €4.3 billion annually. The British Retail
Consortium (2009) reported that staff theft accounted for 7 per cent of retail crime losses.
The 2003 New Zealand Survey of Retail Theft and Security reported that employees
were responsible for 48 per cent of “known” thefts (Guthrie, 2003), a very similar gure
to the 47 per cent attributed to employee theft in the 2009 National Retail Security
Survey conducted in the USA (Hollinger and Langton, 2009).
In the Australian and New Zealand context, signicant work has been done into the
problem of employee fraud. KPMG’s Fraud Survey (2002) reported on data collected
from 361 organisations in Australia and New Zealand. The survey found that 73 per cent
of organisations with more than 1,000 employees and 90 per cent with less than 1,000
employees reported at least one instance of fraud. Employees were responsible for 73 per
cent of all frauds by number and 67 per cent by value. A similar survey conducted by
Ernst and Young (2000) reported that employees were responsible for 82 per cent of
“serious” fraud cases. The 1999 New Zealand Survey of Retail Theft and Security
(Guthrie, 1999) reported that employees were believed to be responsible for 40.5 per cent
of retail thefts and 26 per cent of all losses to “shrinkage”. Evidence in Guthrie (2003)
showed that retailers estimated that employees were responsible for 15 per cent of total
losses due to theft, customers for 81 per cent and suppliers for 4 per cent. However, at the
same time, they reported that employees were responsible for 48 per cent of “known”
thefts, compared with the 51 per cent reported as customer theft and 1 per cent reported
as supplier fraud.
Gaining insights into the problem of employee fraud and white collar crime is
difcult (Levi, 2012). For example, larger rms may be concerned about adverse market
and shareholder reactions to news of deviance and insecure operations (Warren, 2000).
Poorly resourced rms may lack the ability to appropriately discover and pursue
internal fraud. White collar offenders may be reluctant to discuss their transgression
because of shame or damage to their reputation. Managers can be reluctant to admit that
such crime can affect their rm (Minkes, 2010). Even if managers can overcome such
problems, determining an appropriate level of funding for security prevention can be
difcult (Holtfreter et al., 2008). Finally, managers may feel that academic study of these
processes and outcomes is too intrusive or untrustworthy to warrant cooperation
(Kotulic and Clark, 2004). This means that gaining access to relevant incident and
response data, if it even exists, is difcult (Goldstraw-White, 2011).
Our contribution in this paper is to provide empirical insights into the makeup of
white collar offenders, including insights on gender. This study examines employee
fraud in the Australian and New Zealand context. This study focuses on the motivation
of offenders and the workplace organisational factors leading to theft and fraud
offending by employees. If indeed there are specic motivational or situational factors
that give rise to offending, the identication of these should prove valuable in informing
professional practice in the development of prevention and detection strategies.
The study has two main areas of interest. The primary interest relates to the gender
makeup of the factors that motivate offenders to commit acts of fraud in their
workplace. Despite the work that has been undertaken to quantify the employee fraud
problem, the lack of available data means we have little insight into factors such as
gender. Despite useful work such as Daly (1989), Albonetti (1998),Robb (2006) and
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