An Investigation into Factors That Influence and Motivate Fraud Within Small Business (2018)

Financial fraud affects businesses globally on many levels, with small businesses (100 employees). Small businesses are thought to face greater threats to fraud as a consequence of their internal structure and their tendency to function with high levels of trust. This dissertation seeks to discover how small businesses can best mitigate fraud through exploring owners’ perceptions of fraud; whilst examining the motivations behind management and employee actions to engage in fraud and the main methods used to combat it.

This study looks to build on the concepts of agency theory, as a common suggested solution to self-interested behaviour such as fraud is to place a stronger reliance on formal controls; however, this can consequently affect behaviour and also result in fraud. The methodological design behind this research was qualitative in nature; the primary data gathered from the four small businesses was compared to identify themes and then compared against the secondary data using comparative analysis to identify similarities and consistency.

This dissertations’ inductive approach permitted a greater understanding than already prevalent in the literature; the in depth-study of how small businesses combated fraudulent behaviour was examined as one unit. The literature surrounding fraud stereotyped small businesses as weak, lacking controls and ignorant to fraud. However, this dissertation found substantial evidence that small businesses in practice are in fact aware of fraud; but, responded to it differently in comparison to large businesses.

The findings from this dissertation built on the narrow views and assumptions of agency theory and suggested when trying to control and co¬ordinate behaviour; small businesses should view it as a two-way street; whilst using the informal system to subtly encourage more formal mechanisms.

Dissertation aim and objectives

• Identify the various types of fraud and their impact on small businesses
• Critically assess the structures of small businesses and whether they facilitate fraud
• Evaluate the motivations for fraud to determine the most effective way to mitigate them
• Establish how small businesses prevent, detect and deter fraudulent activity through the critical analysis of previous literature
• Identify the best practice for small business to mitigate fraud through the critical analysis of interview data

• 20,000 words – 66 pages in length
• Excellent use of literature
• Excellent analysis of subject area
• Well written throughout
• Includes interview transcripts
• Ideal for finance and accounting students

1 – Introduction
Background
Aim and Objectives
Dissertation Structure

2 – Literature Review
Types of Fraud in Small Businesses and Their Impact
Structure of Small Businesses: Does it facilitate fraud?
Motivations for Fraud
The Fraud Triangle
Pressures
Opportunity
Rationalisation
The Fraud Diamond
Internal Controls
Types of Internal Controls
Combating Fraud

3 – Methodology
Research Philosophy
Research Approach
Methodological Choice
Research Strategy
Time Horizon
Techniques and Procedures
Data Collection
Data Analysis
Research Limitations and Ethics

4 – Data Analysis and Results
Types of Fraud in Small Businesses and Their Impact
Structure of Small Businesses: Does it Facilitate Fraud?
The impact of Fraud
Motivations for Fraud
Internal Controls
What Control Works Best?
Combating Fraud
Control Design
Control Purpose
Owner’s Experiences of Fraud

5 – Conclusions and Recommendations
Conclusion
Further Recommendations

Appendix
Interview Transcripts