The Inducements on Employees’ Intentions to Commit Fraud : the Moderating Effect of Employees’ Perceived Effectiveness of Corporate Governance

 




 

Kon, Zhee San (2021) The Inducements on Employees’ Intentions to Commit Fraud : the Moderating Effect of Employees’ Perceived Effectiveness of Corporate Governance. Masters thesis, Tunku Abdul Rahman University College.

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Abstract

Fraud motivation has been discussed by a lot of researcher until today. However, there are less research emphasis the factors that would cause a person to rationalise their wrongful behaviour especially on psychological area. Also, some of the company has invested in a lot of corporate governance mechanisms but not necessarily helps to prevent fraud from happening especially when their employees perceive all the corporate governance activities as a show and their welfare will not be affected even if they have committed fraud. As a result, this study assesses the factors that induce employees to commit fraud which include pressure, rationalisation and opportunity. This study has further examined the influence of employees’ perceived effectiveness of corporate governance on the factors that induce the employee to commit fraud. Also, the data was collected from 166 full-time employees who are from different level of the management in order to result greater generalisability of total population. The collected data was further analysed using statistical tools of Statistical Package for the Social Sciences (SPSS) and Partial Least Squares Path Modeling Method with Smart-PLS. The conceptual framework has been developed based Fraud triangle theory and Green Tape theory. In fraud triangle theory it mainly emphasises on the factors induce which include pressure, opportunity and rationalisation. While, Green Tape theory argues that the probability of rule effectiveness depends on the combined presence of written requirements, with valid means-ends relationships, which employ optimal control, are consistently applied, and that have purposes understood by employee (DeHart-Davis 2009). The effect of corporate governance will be discussed first in this study. Subsequently, the relationship between pressure, rationalisation and opportunity was further assessed together with the effect of perceived effectiveness of corporate governance. Based on the result of this study, it further confirmed the elements of fraud triangle developed by Cressey (1973) such as pressure, fraud and opportunity are not standalone but interconnected. The study found out that the employees’ fraud intention could not be predicted by pressure alone, it can be predicted when employee rationalise their wrong behaviour and/or opportunity is available. From present study, it further confirms that employees’ perceived effectiveness of corporate governance would significantly influence the fraud intention of the individual and reduce the tendency of inducement to commit fraud. Based on the study, the company is required to ensure that all the corporate governance mechanisms are implemented effectively in governing the behaviour of employees. Proper communication as well as ethics training are needed to ensure that employees are aware about their role and responsibility toward fraud prevention as well as the intended outcome that a company desires to achieve through proper corporate governance practices. Not limited to that, top management should also be consistent in playing their supervisory role for the purpose to enhance self-regulation of employees and it would slowly help the company to create a good ethical culture. This only happens when employees are aware that their behaviours will be always monitored by an invisible eye, and it is impossible where their wrongful behaviours would not be detected by the company. Regarding limitation of the research, some of the respondents are not from the background of business study, where they may have limited insight and knowledge of corporate governance especially about how corporate governance mechanisms are being implemented in the company. As a result, they might provide their perception intuitively based on their basic understanding of the questionnaire which would cause minor impacts on data validity. For future research, researchers could further explore about the factors that cause employees rationalise their wrong behaviours. This future research would be more value adding, if researchers could further target the employees who have the exposure to corporate governance related matters for the purpose to investigate the factors that causing them to rationalise the wrong behaviours even though they possess high level of ethical awareness.

Item Type: Thesis / Dissertation (Masters)
Subjects: Social Sciences > Management > Corporate governance
Faculties: Faculty of Accountancy, Finance & Business > Master of Corporate Governance
Depositing User: Library Staff
Date Deposited: 15 Apr 2021 06:19
Last Modified: 06 Apr 2022 07:18
URI: https://eprints.tarc.edu.my/id/eprint/17547