Asset Misappropriation Employee Fraud: A Case Study on an Automotive Company in Indonesia
Abstract
This study is aimed to provide an exploration of asset misappropriation employee fraud and its prevention program on an automotive company in Indonesia. This study is a case study researches collecting data by document analysis and interviews with ten informants from various departments to obtain more in-depth information about the occurrence of fraud. This study found that the most popular types of fraud on automotive company are manipulation of customer account payments (lapping), embezzlement of customer deposits that are not deposited to the company (skimming) and theft of inventory. The driving factors for committing fraud are financial pressure, lifestyle extravagant, opportunities for fraud, and lack of understanding of fraudulent behavior. Employee fraud disrupts company’s operations, consumes work time and manpower, and damages the business reputation. Fraud causes the company to incur unnecessary financial losses and expenses that will affect the company's sustainability in the future.
Keywords: asset misappropriation, employee fraud, automotive company
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References
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Adenuga, K., Pressley-borrego, D. L., & Mbuh, P. E. (2020). Employee Fraud: An Empirical Review Of Ghost Workers. International Journal of Innovative Research and Advanced Studies (IJIRAS), 7(3), 119–125.
Albrecht, W. S., & Schmoldt, D. W. (1988). Employee Fraud. Business Horizons, 31(4), 16–18. https://doi.org/10.1016/0007-6813(88)90063-8
Aris, N. A., Maznah, S., Arif, M., Othman, R., & Zain, M. M. (2015). Fraudulent Financial Statement Detection Using Statistical Techniques: The Case Of Small Medium Automotive Enterprise. 31(4), 1469–1478.
Bakri, H. H. M., Mohamed, N., & Said, J. (2017). Mitigating Asset Misappropriation Through Integrity and Fraud Risk Elements: Evidence Emerging Economies. Journal of Financial Crime, 24(2). https://doi.org/10.1108/JFC-04-2016-0024
Bowen, G. A. (2009). Document Analysis as a Qualitative Research Method. Qualitative Research Journal, 9(2), 27–40. https://doi.org/10.3316/QRJ0902027
Bressler, M. S., & Bressler, L. A. (2007). A Model for Prevention and Detection of Criminal Activity Impacting Small Business. The Entrepreneurial Executive, 12, 23–36.
Cialdini, R. B., Petrova, P. K., & Goldstein, N. J. (2004). The Hidden Costs of Organizational Dishonesty. MIT Sloan Management Review, 45(3), 67–73.
Cressey, D. R. (1950). The Criminal Violation of Financial Trust. American Sociological Review, 15(6), 738–743.
Ermongkonchai, P. (2010). Understanding Reasons for Employee Unethical Conduct in Thai Organizations: A Qualitative Inquiry. Organization Behavior and Human Resource Management, 6(2).
Farooq, K., & Brooks, G. (2013). Arab Fraud and Corruption Professionals’ Views in The Arabian Gulf. Journal of Financial Crime, 20(3), 338–347. https://doi.org/https://doi.org/10.1108/JFC-03-2013-0017
Feess, E., & Timofeyev, Y. (2020). Behavioral Red Flags and Loss Sizes From Asset Misappropriation: Evidence from The US. Advances in Accounting Behavioral Research, 23, 77–117. https://doi.org/10.1108/S1475-148820200000023004
GAIKINDO. (2015). Perkembangan Industri Otomotif Indonesia. https://www.gaikindo.or.id/perkembangan/
Goh, E., & Kong, S. (2018). Theft in The Hotel Workplace: Exploring Frontline Employees’ Perceptions Towards Hotel Employee Theft. Tourism and Hospitality Research, 18(4), 442–455. https://doi.org/10.1177/1467358416683770
Hermawan, S., & Amirullah. (2016). Metode Penelitian Bisnis: Pendekatan Kuantitatif & kualitatif. Metode Penelitian Bisnis Bandung, 264.
Hollow, M. (2014). Money, Morals and Motives: An Exploratory Study into Why Bank Managers and Employees Commit Fraud at Work. Journal of Financial Crime, 21(2), 174–190. https://doi.org/10.1108/JFC-02-2013-0010
Johnson, W. C., Xie, W., & Yi, S. (2014). Corporate Fraud and The Value of Reputations in The Product Market. Journal of Corporate Finance, 25, 16–39. https://doi.org/10.1016/j.jcorpfin.2013.10.005
Kalovya, O. Z. (2020). Determinants of Occupational Fraud Losses: Offenders, Victims and Insights From Fraud Theory. Journal of Financial Crime. https://doi.org/10.1108/JFC-10-2019-0136
Kassem, R. (2014). Detecting Asset Misappropriation: A Framework for External Auditors. International Journal of Accounting, Auditing and Performance Evaluation, 10(1), 1–42. https://doi.org/10.1504/IJAAPE.2014.059181
Kazemian, S., Said, J., Hady Nia, E., & Vakilifard, H. (2019). Examining Fraud Risk Factors on Asset Misappropriation: Evidence from The Iranian Banking Industry. Journal of Financial Crime, 26(2), 447–463. https://doi.org/10.1108/JFC-01-2018-0008
Kennedy, J. P. (2016). Sharing the Keys to The Kingdom: Responding to Employee Theft by Empowering Employees to Be Guardians, Place Managers, and Handlers. Journal of Crime and Justice, 39(4), 512–527. https://doi.org/10.1080/0735648X.2014.998701
Kennedy, J. P. (2018). Asset Misappropriation in Small Businesses. Journal of Financial Crime, 25(2), 369–383. https://doi.org/10.1108/JFC-01-2017-0004
Kennedy, J. P., & Benson, M. L. (2016). Emotional Reactions to Employee Theft and the Managerial Dilemmas Small Business Owners Face. Criminal Justice Review, 41(3), 257–277. https://doi.org/10.1177/0734016816638899
Krambia‐Kapardis, M., & Zopiatis, A. (2010). Investigating Incidents of Fraud in Small Economies: The Case for Cyprus. Journal of Financial Crime, Vol. 17(2), 195–209.
Kramer, B. (2015). Trust, But Verify: Fraud in Small Businesses. Journal of Small Business and Enterprise Development, 22(1), 4–20. https://doi.org/10.1108/JSBED-08-2012-0097
Le, T. T. H., & Tran, M. D. (2018). The Effect of Internal Control on Asset Misappropriation: The case of Vietnam. Business and Economic Horizons, 14(4), 941–953. https://doi.org/10.15208/beh.2018.64
Lokanan, M. E. (2014). How Senior Managers Perpetuate Accounting Fraud? Lessons for Fraud Examiners from an Instructional Case. Journal of Financial Crime, 21(4), 411–423. https://doi.org/10.1108/JFC-03-2013-0016
Mani, B. G. (2001). Performance Appraisal Systems, Productivity, and Motivation: A Case Study. Public Personnel Management, 31(2), 141–159. https://doi.org/10.1177/009102600203100202
Mansor, N. (2017). Understanding the Fraud Triangle Theory and Fraud Diamond Theory, Understanding the Convergent and Divergent For Future Research. International Journal of Academic Research in Accounting, Finance and Management Sciences, 5(October 2015), 38–45. https://doi.org/10.6007/IJARAFMS/v5-3/1823
Maynard-Patrick, S., & Higgins, L. N. (2019). Gleam Lighting: A Collaborative Experiential Payroll Fraud Case. Management Teaching Review, 4(4), 317–333. https://doi.org/10.1177/2379298118811149
Moleong, L. J. (2017). Metodologi Penelitian Kualitatif (Revisi). Remaja Rosdakarya.
Moorthy, M. K., Seetharaman, A., Jaffar, N., & Foong, Y. P. (2015). Employee Perceptions of Workplace Theft Behavior: A Study Among Supermarket Retail Employees in Malaysia. Ethics and Behavior, 25(1), 61–85. https://doi.org/10.1080/10508422.2014.917416
Murray, J. G. (2014). Procurement Fraud Vulnerability: A Case Study. EDPACS: The EDP Audit, Control, and Security Newsletter, 49(5), 7–17.
Nigrini, M. J. (2019). The Patterns of The Numbers Used in Occupational Fraud Schemes. Managerial Auditing Journal, 34(5), 602–622. https://doi.org/10.1108/MAJ-11-2017-1717
Ojo, A. T., & Ayadi, O. F. (2014). Financial Malpractices and Stock Market Development in Nigeria: An Exploratory Study. Journal of Financial Crime, 21(3), 336–354. https://doi.org/10.1108/JFC-05-2013-0034
Omar, M., Nawawi, A., & Puteh Salin, A. S. A. (2016). The Causes, Impact and Prevention of Employee Fraud, a Case Study of an Automotive Company. Journal of Financial Crime, 23(4), 1012–1027. https://doi.org/10.1108/jfc-04-2015-0020
Pacini, C., Lin, J. W., & Patterson, G. (2021). Using Shell Entities for Money Laundering: Methods, Consequences, and Policy Implications. Journal of Forensic and Investigative Accounting, 13(1), 73–89.
Raj, B., Kolachina, S., Kumar, B. R., & Kusum. (2018). Assessment of Risk Factors in Misappropriation of Assets - Evidence from the Indian Banking Sector. International Journal of Pure and Applied Mathematics, 118(24), 1–13.
Reurink, A. (2018). Financial Fraud: a Literature Review. Journal of Economic Surveys, 32(5), 1292–1325. https://doi.org/10.1111/joes.12294
Sugiyono. (2020). Metode Penelitian Kualitatif. Alfabeta.
Suh, J. B., Shim, H. S., & Button, M. (2018). Exploring The Impact of Organizational Investment on Occupational Fraud: Mediating Effects of Ethical Culture and Monitoring Control. International Journal of Law, Crime and Justice, 53(February), 46–55. https://doi.org/10.1016/j.ijlcj.2018.02.003
Wolfe, D. T., & Hermanson, D. R. (2004). The Fraud Diamond: Considering the Four Elements of Fraud.
Yekini, K., Ohalehi, P., Oguchi, I., & Abiola, J. (2018). Workplace fraud and theft in SMEs: Evidence from the mobile telephone sector in Nigeria. Journal of Financial Crime.
Yin, R. K. (2009). Case Study Research: Design and Methods (Fourth).
Yusrianti, H., Ghozali, I., & N. Yuyetta, E. (2020). Asset Misappropriation Tendency: Rationalization, Financial Pressure, and the Role of Opportunity (Study in Indonesian Government Sector). Humanities & Social Sciences Reviews, 8(1), 373–382. https://doi.org/10.18510/hssr.2020.8148
Yusuf, Z., Nawawi, A., & Salin, A. S. A. P. (2020). The Effectiveness of Payroll System in The Public Sector to Prevent Fraud. Journal of Financial Crime, 1982. https://doi.org/10.1108/JFC-08-2017-0075
Zuberi, O., & Mzenzi, S. I. (2019). Analysis of Employee and Management Fraud in Tanzania. Journal of Financial Crime.
ACFE. (2017). Fraud Examiners Manual. In ACFE.
ACFE Indonesia Chapter. (2019). Survei Fraud Indonesia 2019. ACFE Indonesia.
Adenuga, K., Pressley-borrego, D. L., & Mbuh, P. E. (2020). Employee Fraud: An Empirical Review Of Ghost Workers. International Journal of Innovative Research and Advanced Studies (IJIRAS), 7(3), 119–125.
Albrecht, W. S., & Schmoldt, D. W. (1988). Employee Fraud. Business Horizons, 31(4), 16–18. https://doi.org/10.1016/0007-6813(88)90063-8
Aris, N. A., Maznah, S., Arif, M., Othman, R., & Zain, M. M. (2015). Fraudulent Financial Statement Detection Using Statistical Techniques: The Case Of Small Medium Automotive Enterprise. 31(4), 1469–1478.
Bakri, H. H. M., Mohamed, N., & Said, J. (2017). Mitigating Asset Misappropriation Through Integrity and Fraud Risk Elements: Evidence Emerging Economies. Journal of Financial Crime, 24(2). https://doi.org/10.1108/JFC-04-2016-0024
Bowen, G. A. (2009). Document Analysis as a Qualitative Research Method. Qualitative Research Journal, 9(2), 27–40. https://doi.org/10.3316/QRJ0902027
Bressler, M. S., & Bressler, L. A. (2007). A Model for Prevention and Detection of Criminal Activity Impacting Small Business. The Entrepreneurial Executive, 12, 23–36.
Cialdini, R. B., Petrova, P. K., & Goldstein, N. J. (2004). The Hidden Costs of Organizational Dishonesty. MIT Sloan Management Review, 45(3), 67–73.
Cressey, D. R. (1950). The Criminal Violation of Financial Trust. American Sociological Review, 15(6), 738–743.
Ermongkonchai, P. (2010). Understanding Reasons for Employee Unethical Conduct in Thai Organizations: A Qualitative Inquiry. Organization Behavior and Human Resource Management, 6(2).
Farooq, K., & Brooks, G. (2013). Arab Fraud and Corruption Professionals’ Views in The Arabian Gulf. Journal of Financial Crime, 20(3), 338–347. https://doi.org/https://doi.org/10.1108/JFC-03-2013-0017
Feess, E., & Timofeyev, Y. (2020). Behavioral Red Flags and Loss Sizes From Asset Misappropriation: Evidence from The US. Advances in Accounting Behavioral Research, 23, 77–117. https://doi.org/10.1108/S1475-148820200000023004
GAIKINDO. (2015). Perkembangan Industri Otomotif Indonesia. https://www.gaikindo.or.id/perkembangan/
Goh, E., & Kong, S. (2018). Theft in The Hotel Workplace: Exploring Frontline Employees’ Perceptions Towards Hotel Employee Theft. Tourism and Hospitality Research, 18(4), 442–455. https://doi.org/10.1177/1467358416683770
Hermawan, S., & Amirullah. (2016). Metode Penelitian Bisnis: Pendekatan Kuantitatif & kualitatif. Metode Penelitian Bisnis Bandung, 264.
Hollow, M. (2014). Money, Morals and Motives: An Exploratory Study into Why Bank Managers and Employees Commit Fraud at Work. Journal of Financial Crime, 21(2), 174–190. https://doi.org/10.1108/JFC-02-2013-0010
Johnson, W. C., Xie, W., & Yi, S. (2014). Corporate Fraud and The Value of Reputations in The Product Market. Journal of Corporate Finance, 25, 16–39. https://doi.org/10.1016/j.jcorpfin.2013.10.005
Kalovya, O. Z. (2020). Determinants of Occupational Fraud Losses: Offenders, Victims and Insights From Fraud Theory. Journal of Financial Crime. https://doi.org/10.1108/JFC-10-2019-0136
Kassem, R. (2014). Detecting Asset Misappropriation: A Framework for External Auditors. International Journal of Accounting, Auditing and Performance Evaluation, 10(1), 1–42. https://doi.org/10.1504/IJAAPE.2014.059181
Kazemian, S., Said, J., Hady Nia, E., & Vakilifard, H. (2019). Examining Fraud Risk Factors on Asset Misappropriation: Evidence from The Iranian Banking Industry. Journal of Financial Crime, 26(2), 447–463. https://doi.org/10.1108/JFC-01-2018-0008
Kennedy, J. P. (2016). Sharing the Keys to The Kingdom: Responding to Employee Theft by Empowering Employees to Be Guardians, Place Managers, and Handlers. Journal of Crime and Justice, 39(4), 512–527. https://doi.org/10.1080/0735648X.2014.998701
Kennedy, J. P. (2018). Asset Misappropriation in Small Businesses. Journal of Financial Crime, 25(2), 369–383. https://doi.org/10.1108/JFC-01-2017-0004
Kennedy, J. P., & Benson, M. L. (2016). Emotional Reactions to Employee Theft and the Managerial Dilemmas Small Business Owners Face. Criminal Justice Review, 41(3), 257–277. https://doi.org/10.1177/0734016816638899
Krambia‐Kapardis, M., & Zopiatis, A. (2010). Investigating Incidents of Fraud in Small Economies: The Case for Cyprus. Journal of Financial Crime, Vol. 17(2), 195–209.
Kramer, B. (2015). Trust, But Verify: Fraud in Small Businesses. Journal of Small Business and Enterprise Development, 22(1), 4–20. https://doi.org/10.1108/JSBED-08-2012-0097
Le, T. T. H., & Tran, M. D. (2018). The Effect of Internal Control on Asset Misappropriation: The case of Vietnam. Business and Economic Horizons, 14(4), 941–953. https://doi.org/10.15208/beh.2018.64
Lokanan, M. E. (2014). How Senior Managers Perpetuate Accounting Fraud? Lessons for Fraud Examiners from an Instructional Case. Journal of Financial Crime, 21(4), 411–423. https://doi.org/10.1108/JFC-03-2013-0016
Mani, B. G. (2001). Performance Appraisal Systems, Productivity, and Motivation: A Case Study. Public Personnel Management, 31(2), 141–159. https://doi.org/10.1177/009102600203100202
Mansor, N. (2017). Understanding the Fraud Triangle Theory and Fraud Diamond Theory, Understanding the Convergent and Divergent For Future Research. International Journal of Academic Research in Accounting, Finance and Management Sciences, 5(October 2015), 38–45. https://doi.org/10.6007/IJARAFMS/v5-3/1823
Maynard-Patrick, S., & Higgins, L. N. (2019). Gleam Lighting: A Collaborative Experiential Payroll Fraud Case. Management Teaching Review, 4(4), 317–333. https://doi.org/10.1177/2379298118811149
Moleong, L. J. (2017). Metodologi Penelitian Kualitatif (Revisi). Remaja Rosdakarya.
Moorthy, M. K., Seetharaman, A., Jaffar, N., & Foong, Y. P. (2015). Employee Perceptions of Workplace Theft Behavior: A Study Among Supermarket Retail Employees in Malaysia. Ethics and Behavior, 25(1), 61–85. https://doi.org/10.1080/10508422.2014.917416
Murray, J. G. (2014). Procurement Fraud Vulnerability: A Case Study. EDPACS: The EDP Audit, Control, and Security Newsletter, 49(5), 7–17.
Nigrini, M. J. (2019). The Patterns of The Numbers Used in Occupational Fraud Schemes. Managerial Auditing Journal, 34(5), 602–622. https://doi.org/10.1108/MAJ-11-2017-1717
Ojo, A. T., & Ayadi, O. F. (2014). Financial Malpractices and Stock Market Development in Nigeria: An Exploratory Study. Journal of Financial Crime, 21(3), 336–354. https://doi.org/10.1108/JFC-05-2013-0034
Omar, M., Nawawi, A., & Puteh Salin, A. S. A. (2016). The Causes, Impact and Prevention of Employee Fraud, a Case Study of an Automotive Company. Journal of Financial Crime, 23(4), 1012–1027. https://doi.org/10.1108/jfc-04-2015-0020
Pacini, C., Lin, J. W., & Patterson, G. (2021). Using Shell Entities for Money Laundering: Methods, Consequences, and Policy Implications. Journal of Forensic and Investigative Accounting, 13(1), 73–89.
Raj, B., Kolachina, S., Kumar, B. R., & Kusum. (2018). Assessment of Risk Factors in Misappropriation of Assets - Evidence from the Indian Banking Sector. International Journal of Pure and Applied Mathematics, 118(24), 1–13.
Reurink, A. (2018). Financial Fraud: a Literature Review. Journal of Economic Surveys, 32(5), 1292–1325. https://doi.org/10.1111/joes.12294
Sugiyono. (2020). Metode Penelitian Kualitatif. Alfabeta.
Suh, J. B., Shim, H. S., & Button, M. (2018). Exploring The Impact of Organizational Investment on Occupational Fraud: Mediating Effects of Ethical Culture and Monitoring Control. International Journal of Law, Crime and Justice, 53(February), 46–55. https://doi.org/10.1016/j.ijlcj.2018.02.003
Wolfe, D. T., & Hermanson, D. R. (2004). The Fraud Diamond: Considering the Four Elements of Fraud.
Yekini, K., Ohalehi, P., Oguchi, I., & Abiola, J. (2018). Workplace fraud and theft in SMEs: Evidence from the mobile telephone sector in Nigeria. Journal of Financial Crime.
Yin, R. K. (2009). Case Study Research: Design and Methods (Fourth).
Yusrianti, H., Ghozali, I., & N. Yuyetta, E. (2020). Asset Misappropriation Tendency: Rationalization, Financial Pressure, and the Role of Opportunity (Study in Indonesian Government Sector). Humanities & Social Sciences Reviews, 8(1), 373–382. https://doi.org/10.18510/hssr.2020.8148
Yusuf, Z., Nawawi, A., & Salin, A. S. A. P. (2020). The Effectiveness of Payroll System in The Public Sector to Prevent Fraud. Journal of Financial Crime, 1982. https://doi.org/10.1108/JFC-08-2017-0075
Zuberi, O., & Mzenzi, S. I. (2019). Analysis of Employee and Management Fraud in Tanzania. Journal of Financial Crime.
Published
2022-07-27
How to Cite
SETIAWAN, Nanang; TARJO, Tarjo; HARYADI, Bambang.
Asset Misappropriation Employee Fraud: A Case Study on an Automotive Company in Indonesia.
Jurnal Ilmiah Akuntansi dan Bisnis, [S.l.], v. 17, n. 2, p. 214-233, july 2022.
ISSN 2303-1018.
Available at: <https://ojs.unud.ac.id/index.php/jiab/article/view/78471>. Date accessed: 24 nov. 2024.
doi: https://doi.org/10.24843/JIAB.2022.v17.i02.p03.
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