Reasons for committing fraud

Reasons for committing fraud

Reasons for committing fraud

Reasons for committing fraud
Reasons for committing fraud

The respondents suggested the following factors from their experience as the reasons for committing fraud:
. the moral values of individuals;
. the need to maintain an increasing social status;
. persons unhappy with their job;
. persons with drugs and gambling addictions;
. people with increasing indebtedness;
. individuals who “see other people doing it”; and
. persons who feel that they would not be caught.
The understanding and reaction to fraud was determined not only by the size of the fraud and who committed it, but also against which organisation the fraud was committed. One manager from a financial institution said that:

Organisations like financial institutions, keep such matters in-house and try to recover losses or minimise erosion of public confidence by not prosecuting perpetrators of fraud. Banks, credit unions and insurance companies are organisations most likely to have fraudulent activity.

Auditors and users did not view fraudulent financial reporting as a major issue, as it was commonly felt that there were no major incentives to do it. Unlike in the USA, many companies did not have bonus payments tied to financial results. Furthermore, respondents argued that there were no publicised cases of fraudulent financial reporting in Barbados These findings agreed with KPMG’s (2000a) results. However, a small minority (8.3 per cent) of the users felt that it could happen whenever additional financing was needed or tax liabilities needed to be reduced.

Audit procedures
The auditors claimed that they assessed internal controls, the role of the internal auditors, going concern issues, management’s characteristics, and worked to uncover related party transactions, and ensured that audit findings are conveyed to the board of directors or audit committee, wherever applicable. For example, it was pointed out that auditors always check the current year’s audit to see if the recommendations from the previous year’s audit were carried out. Both auditors and users agreed that these procedures should be done, as the overall mean ranged from 4.93 to 5.00 for these procedures.
However, in Table I, auditors showed a significantly lower mean score of 1.21 compared to a higher mean score of 4.58 for users on the question of actively searching for illegal acts (t ¼ 212:244, df ¼ 41, p . 0:001). The auditors were adamant that they were not responsible for searching for illegal acts, as compared to users agreeing that this procedure should be done. One auditor argued that “such duties are merely incidental to the engagement”. However, users expected all these procedures to be carried out, and as one user commented “. . . anything short of this can be considered as negligence!”.
One of the auditors’ duties is to report to management on the company’s internal controls. If this is being done, the incidence of fraud as a result of poor controls should be minimised. One auditor argued that:
Large businesses tend to rely more on extensive internal controls and sometimes internal audit departments, whereas small businesses, with limited resources, see financial statement audits as equivalent to fraud audits.

Another auditor further pointed out that:

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