Understanding fraud in Malaysian SMEs
| Date | 02 July 2018 |
| DOI | https://doi.org/10.1108/JFC-08-2017-0077 |
| Pages | 870-881 |
| Published date | 02 July 2018 |
| Author | Abdoulaye N’Guilla Sow,Rohaida Basiruddin,Siti Zaleha Abdul Rasid,Maizaitulaidawati Md Husin |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Understanding fraud in
Malaysian SMEs
Abdoulaye N’Guilla Sow,Rohaida Basiruddin,
Siti Zaleha Abdul Rasid and Maizaitulaidawati Md Husin
Azman Hashim International Business School, Universiti Teknologi Malaysia,
Kuala Lumpur, Malaysia
Abstract
Purpose –The paper aims to providean overview of fraud riskamong Malaysian small- and medium-sized
enterprises(SMEs). In particular, the authors investigate the understandingof SME owners and managers on
fraud schemesand the usage of antifraud measures.
Design/methodology/approach –A sample of 126 Malaysian SMEs from different industries
participatedin this study.
Findings –The results suggest that MalaysianSMEs are exposed to a broad range of fraud schemes, yet
few take actionsto prevent these frauds.
Practical implications –The findings should be useful to academic researchers, entrepreneurs,
regulatorsand others who are interested in understanding the fraud risk in small businesses.
Originality/value –This study extendsand contributes to prior literature by linking the state of fraud and
SMEs in developingcountries.
Keywords Malaysia, Fraud, Anti-fraud measures, Fraud scheme, Small medium enterprises
Paper type Research paper
Introduction
Fraud has become a global concern, threatening all sizes and types of businesses across
the world. When fraud occurs, organizations suffer financial losses and non-financial
losses. ACFE (2012) claims that an organization loses approximately 5 per cent of its
yearly revenue to fraud. In Malaysia, KPMG (2013) found that RM2.047m in fraud loss
has been reported with losses ranging RM10,001 to RM100,000. Although these figures
are just an approximation, they are good enough to see how fraud is threatening
businesses. Moreover, fraud impacts the reputation of small- and medium-sized
enterprise (SME) victims and the confidentiality of its stakeholders, causes the failure of
several strategies undertaken by organizations and may even put the whole company out
of business. Finally, when fraud becomes a cost of doing business, it will put SMEs in a
competitive disadvantage.
The prevalence of fraud in business depends on the ability of the organization to
stop its causal factors. Some organizations have enough resources to face the threats
surrounding their businesses, while others are not well equipped to do so. According to
ACFE (2012),SMEshavemoredifficulty fighting fraud as compared to large
corporations. As a result, SMEs are more exposed to fraudulent activities. This
situation could result from the limitation of the resources of SMEs, which leads to low
application of antifraud policies (Wells, 2004) as compared to large organizations or to
the negligence of antifraud policies and procedures by SMEs owners and managers
(ACFE, 2012;Laufer, 2011).
JFC
25,3
870
Journalof Financial Crime
Vol.25 No. 3, 2018
pp. 870-881
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-08-2017-0077
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