Ahmad Saiful Azlin Puteh Salin

Internal controls and fraud-empirical evidence from oil and gas company

Purpose The purpose of this study is to examine the type of internal control weaknesses and its impact that leads to fraud activities in an oil and gas company, which is rarely found in empirical research. Design/methodology/approach A case study approach was taken to investigate and analyse the fraud incidents to the deepest understanding. A mixed method of data collection, specifically document analysis and interviews, was used. Findings The study found that internal control weaknesses can be major contributing factors for fraud to be committed. Poor supervision and improper documentation process provide opportunity to misappropriate the assets, worst off if it includes several people that cooperate to conduct those illegal malpractices. Research limitations/implications The results provide further confirmation of the fraud triangle theory on the causes of the fraud, i.e. opportunity because of weak internal control. It also validates with many prior studies conducted by global professional firms such as KPMG, PricewaterhouseCoopers and Association of Certified Fraud Examiners on fraud and its related causes and implications. This study, however, was conducted on only one company with limited number of interviews. Practical implications This study provides some recommendations to improve weak internal control, which in turn will reduce opportunities of fraud committed in the company. Originality/value This study is original, as it focuses on a company that operates in the highly specialized industry, i.e. oil and gas, which is rare in fraud literature, particularly in developing markets such as Malaysia. It has examined various documents and reports of employee fraud that are generally difficult to be accessed by researchers to be finally published in an academic journal. The findings of this study are inferred from direct access of company documents that are private and confidential.

Internal control weaknesses in a cooperative body: Malaysian experience

The purpose of this study is to examine the current state of the internal control practices in the cooperative body, an organisation area that has always been neglected in governance empirical research. This study also provides recommendations to overcome those weaknesses. A case study approach was selected for this study by selecting one cooperative body as a case. This study employed document analysis as the method of data collection and the data were analysed by using the latest COSO Internal Control - Integrated Framework. This study found that the selected cooperative body had very poor internal control. There was low data integrity where too many errors were detected in both the financial and non-financial data, while its daily transactions were recorded by using manual tools but without proper security leading to possible fraud. Furthermore, the effort to automate the system by acquiring a new software program has miserably failed due to incompetency of the workforce. To worsen matters, the employees also did not appreciate the importance of internal control.

Corporate governance and auditor quality – Malaysian evidence

Purpose - – The purpose of this paper is to conduct an investigation into the relationship between a firm’s corporate governance mechanisms (audit committee (AC) composition and operation, block shareholder, chief executive officer duality, financial state, ownership dominance, political connection, share price, and family control) and auditor quality selection in Malaysia, for periods before and after the introduction of Malaysian Code of Corporate Governance (MCCG) in 2007. Design/methodology/approach - – In total, 300 companies listed on the Malaysian Stock Exchange from 2006 to 2008 were selected. A binary regression method was used to analyze the data collected from both annual reports and financial databases. Findings - – The study has found that in general, MCCG 2007 influenced auditor selection through restructuring of corporate governance tools, such as ACs and internal audit functions. Research limitations/implications - – Results have provided evidence that the restructuring of corporate governance may contribute and drive company to enhance the quality of the audit performed by selecting better quality auditor and/or improvising the audit-related functions within the company such as formalizing internal audit function. This study, however, employed an archival method of study and only used three years (2006, 2007, and 2008) of data analysis. Future research should analyze data from a longer period and utilize a field survey to understand reasons for auditor selection from the company perspective. Originality/value - – Building on previous studies, this study contributes to the current body of knowledge as it also considers the objective from the perspective of the revised MCCG 2007. It examines whether the introduction of new or revised corporate governance guidelines may immediately impact company auditor selection. Therefore, it compares the auditor quality of the company from pre-MCCG 2007 (2006) and post-MCCG 2007 (2008).

The causes, impact and prevention of employee fraud: A case study of an automotive company

Purpose The purpose of this paper is to investigate the causes and impact of employee fraud, focusing on one particular industry, namely, the automotive industry. Design/methodology/approach One company was selected as a case for the study. Qualitative data analysis was used for the study, with two techniques for data collection. First was the content or document analysis on various reports, such as employee fraud reports and records of disciplinary action, and second was a series of interviews with employees from different levels and various departments of the company. Findings This study found that the most popular type of fraud is misappropriation of assets, including theft of cash and inventories. No significant differences were seen in terms of fraudster position, as they can come from both the lower and the executive level. However, majority of the fraudsters come from the operational and sales department. This study also found that majority of the fraudsters in the case study were male, new employees and young adults. Their motivations to commit fraud include lack of understanding about fraud behavior, opportunity to commit fraud and lifestyle and financial pressure. Research limitations/implications The results provide further confirmation of the Fraud Triangle Theory and Fraud Diamond Theory on the causes of the fraud. They are also consistent with much prior research and surveys conducted by global professional firms on fraud and its related causes and implications. This study, however, was conducted on only one company with several series of interviews and three years of document analysis. Future research should collect and analyze data from a higher number of companies with more respondents for interviews and longer period for document analysis to get more accurate results. Practical implications This study provides some recommendations for fraud prevention in the future based on real fraud cases and those that involved managing cases up to and including disciplinary decision. These include closed supervision, fraud awareness training, clearer job descriptions, cultivation of a pleasant working environment and improved security control. Social implications This study found that some of the causes of fraud include social factors like lifestyle and financial pressure due to low income. Policy adjustments, such as an effort to push people beyond the poverty line with higher minimum wages, need to be made to prevent low-income workers from seeing their company as another source of illegal income. Originality/value This study is original, as it focuses on a company that operates in the automotive industry, which is rare in fraud literature, particularly in developing markets. In addition, the company is new, so analysis can be conducted on how the company evolved and learned from the fraud analysis for prevention in the future. Furthermore, this study used two techniques of data collection, so that verification of the findings may be made for better reliability.

Inventory control weaknesses – a case study of lubricant manufacturing company

Purpose For a manufacturing company, inventory control and management is crucial to ensure smooth production and sustainable sales performance, as well as preventing stockout that will result in customer switch to competitors. This study intends to examine the effectiveness of cycle count activities, one of the inventory control tools to manage inventory. Beside, this study also wishes to identify any loopholes in practices and procedures in inventory control of companies. Design/methodology/approach One of the lubricant manufacturing companies in Malaysia was selected as a case study and mixed method data collection of document analysis and observation were employed. The analysis and examination was conducted by using COSO Framework 2013 as guidance. Findings This study found that problems in inventory control can be caused by inconsistency of practices due to incomplete or absent standard operating procedures. Furthermore, no segregation of duties and excessive reliance on one person to conduct many tas...

Employee fraud and misconduct: empirical evidence from a telecommunication company

Purpose The purpose of this study is to examine whether policies and procedures, one of the fundamental elements in the internal control environment, are adequate and effective in preventing fraud and unethical practices committed by employees of a company. In addition, this study attempts to assess the awareness and understanding of employees on the existence of relevant company policies and standard operating procedures for internal fraud and misconduct deterrence. Design/methodology/approach Five cases from one Malaysian telecommunication company were randomly selected as a case study. Content analyses were conducted on actual cases of internal fraud and wrongdoings that were investigated and the enforcement that was discharged by the company. Findings This study found that the company has sufficient policies and standard operating procedures to curb internal fraud and wrongdoing. However, they are ineffective and malfunction when responsible personnel violate or override the policies and procedures, irrespective of whether this is caused by carelessness, poor knowledge or clear intention to act dishonestly. Research limitations implications This study was conducted on only one company with a limited number of investigated fraud cases. Access to higher number of fraud cases, particularly those that involved large amount of losses and considered as high-profile cases, were denied because of confidentiality. Practical implications The study found that weak compliance to internal controls provides opportunities for fraud to occur, consistent with the fraud triangle theory. Fraud, committed both outside and inside an organization, can be considered as a worrying problem in the organization because of its severe impact on the reputation and bottom line figures of the company. The study provides important information to management to strengthen their compliance with the internal control system generally and policies and procedures particularly. Originality/value This study is original, as it focuses on the actual fraud cases that occur in the telecommunication industry, which is under-researched in fraud literature, particularly in developing markets such as Malaysia. Prior empirical research on fraud and unethical practices has concentrated on factors that contribute to fraud and the financial and non-financial impacts of fraud in an organization.

Determinants and problems of successful ERP implementations - Malaysian experience

This study aims to analyse factors influencing the success of the implementation of enterprise resource planning (ERP) system and examine any problems associated with its execution. Two companies from the construction and property development industry were selected as case studies. Triangulation of data collection methods which included observation, document analysis and interviews was employed. This study found that support from the top management, end-user satisfaction, change management, as well as the reorganisation of business process as the factors that can either lead to the success or failure of the outcome of an ERP system implementation. Poor support from top management, data quality and the usefulness of information from the ERP system are the top obstacles that need to be managed by the companies to ensure their return on ERP investment is worth every dollar. This study implicates that training needs to be provided for all level of staff including top-level management.