Tackling practical issues in fraud control: a practice-based study

Ach Maulidi and Jake Ansell

Journal of Financial Crime, 2020, vol. 28, issue 2, 493-512

Abstract: Purpose - The purpose of this paper is to provide a warning sign for fraud studies in developing occupational fraud deterrent, and offer possible solution to deal with it. Design/methodology/approach - This study was conducted in one of regencies in Indonesia. The authors interviewed nine top managers across local agencies and four senior local government internal auditors. The people involved have formal and informal networks with a regent who has been arrested by Indonesia’s Corruption Eradication Commission, because of white-collar crime syndicates, when running governmental systems. Findings - While many approaches to fraud mitigation have been proposed, organisations in practice particularly in the public sector find it hard to implement successful methods to understand, detect and prevent fraud. In practice, this occurs due to simplified assumption on or multiplicity of overlapping fraud concepts. There is also a lack of appreciation of impact of organisational dynamics which facilitates fraud. Behavioural and political issues within an organisation need to be addressed when proposing fraud prevention. The study emphasises that it is too naïve to offer internal control as one-size-fits-all fraud prevention. For practitioners, corrupt behaviour tends to be the most challenging part, compared to other fraud schemes such as asset misappropriation and financial statement fraud. In this paper, the authors urge organisation to adapt a more systematic approach, involving across governmental anti-corruption agencies and civil society actors. This may be facilitated through communication among those parties, including a sound whistleblowing system. Then, organisation also should consider preventive measures that go beyond from administrative or technical internal controls. Originality/value - The results may give new directions for designing fraud prevention.

Keywords: Governmental sectors; Fraud mitigation; Internal control; Whistleblowing system (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-07-2020-0150

DOI: 10.1108/JFC-07-2020-0150

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