Fraud Risk Research Articles

Mechanisms for Objectivity Ensuring and Fraud Prevention in the Online Academic Assessment

The recent online teaching experience we all were forced into during the pandemic period made us reflect on the existing teaching practices and their efficacy, while imposing on finding new ways, roles and functions for the classical teaching, learning and assessment activity. Academic assessment in particular proved to be a challenge in the sense that new and unexpected isses had to be managed. While the use of digital platforms offered support for new assessment and evaluation strategies, including improved feedback and ways of tracking students’ development, sensitive issues such as that of avoiding exam fraud risks, and the need for improving evaluation validity and authenticity appeared. The present paper offers an insight on university students’ and teachers’ perception on academic assessment, its added value and risks. It also provides some empirical proves for the need of integrating valuable lessons from the online evaluation experience and transfer them in hybrid and onsite academic education process.

THE EFFECT OF AUDITOR CHARACTERISTICS ON ALLEGED FRAUD OCCURRENCE AND ITS IMPACT ON FINANCIAL STATEMENT FRAUD RISK ASSESSMENT AND AUDIT PROGRAM MODIFICATIONS

The goal of this study is to examine the relationships between the auditor's qualities and alleged fraudulent activity, as well as those between alleged fraudulent activity and fraud risk assessment and between fraud risk assessment and audit program modifications. The population in this study were auditors at Public Accounting Officer. Selection of samples in this population using purposive sampling method. The sample used in this study were auditors who worked at Public Accounting Officer. The analytical tool used in this study is Structural Equation Modelling which is run through the Partial Least Squares Structural Equation Modelling program. The results of the analysis in this study are the characteristics of the auditors that affect the alleged occurrence of fraud. This shows that the better the level of specialization of the auditor, the easier it will be for the auditor to detect earnings manipulation and misstatements in a company's financial statements. Fraud affects the initial fraud risk assessment. The existence of suspected fraud in the financial statements may affect the initial fraud risk assessment. If the allegations are true, the company is proven to have committed fraud. The initial fraud risk assessment has an effect on the modification of the audit program.

TOWARD A NEUROECOLOGICAL MODEL OF FINANCIAL CAPACITY AMONG OLDER ADULTS

Abstract In recent decades, technology has changed how individuals interact with their money and with each other. A combination of financial vulnerability and low technological literacy puts many older adults at risk for identity theft, fraud, and financial exploitation. We reviewed the literature on financial capacity, financial exploitation, and digital literacy. Extant models and measures of financial capacity among older adults emphasize numeracy and basic functional skills, such as writing checks and counting change; these may not reflect the digital nature of contemporary financial activity. We propose the neuroecological model of financial capacity among older adults. This function-led model contends that financial capacity consists of neurocognitive abilities to make sound financial decisions in a complex environment, to use technology to monitor and carry out financial activities, and the ability to protect personal information and guard against fraud. This points to a need for more ecologically valid measures of financial capacity and vulnerability to financial exploitation that addresses the role of technology in everyday financial activities.

TELEPHONE FRAUD AGAINST OLDER ADULTS IN CHINA: EVIDENCE FROM THE CHINA HEALTH AND RETIREMENT LONGITUDINAL STUDY

Abstract Background Falling victim to telephone fraud is a devastating crisis for older adults because they can lose their life savings, adversely affecting their well-being. This study aimed to identify risk factors associated with telephone fraud among Chinese older adults. Method: A case-control study was conducted using the fourth wave of the 2018 China Health and Retirement Longitudinal Study data on older adults 60 years and above (N = 445 with telephone fraud experience; 9,994 with no fraud and other fraud experience). Control variables for the logistic regression analysis included the individual’s demographics of gender, residential location, marital status, and educational level. Results Older adult males (OR = 1.424, 95% CI = 1.156-1.755, p = 0.001), urban residence (OR = 2.257, 95% CI = 1.706-2.986, p < 0.001), urban-rural integration zone (OR = 2.322, 95% CI = 1.654-3.260, p < 0.001), received higher education [OR = 1.704, 95% CI = 1.211-2.397, p = 0.007]), and higher pension classification (OR = 1.352, 95% CI = 1.220-1.500, p < 0.001) were associated with increased risks of telephone fraud. Conclusion Telephone fraud affects older adults in China at the upper rather than lower end of the socio-economic gradient, suggesting vulnerability from their use of digital technologies compared to those on the lower ladder of the socio-economic gradient. Findings highlight the need for fraud education of older adults with access to the digital broad band to reduce their risk for telephone fraud.

SELECTING INDICATORS OF PREDICTING FRAUD RISK. CASE STUDY FOR ROMANIAN BUSINESS ENVIRONMENT

The act of fraud has been practiced since ancient times and manifests itself in different ways. The aim of the study is to apply the Beneish score on Romanian firms and to identify which indicators are sensitive to the state of fraud. The sample was selected from the Bucharest Stock Exchange and consists of 66 companies traded on the main market for the years 2016-2021. The collected data were analyzed year-by-year and cross-sectional methods (panel data) using manually collected information extracted from financial statements downloaded from the Bucharest Stock Exchange. Based on this data, the Beneish score was calculated and then statistical tests were performed. Using the obtained results from the Beneish Score calculation, we were able to divide the companies into two groups. The obtained scores, clearly underlines the two states: fraud and non-fraud. The ones in the fraud state have a decreased score, while the companies with no likelihood of fraud risk have lower scores. To further investigate our results, we identified sensitive items in both states such as DSRI (Days Sales Receivable Index) and GMI (Gross Margin Index). In conclusion, several theories or hypotheses are offered to explain the underlying motivations for fraud appearance. Romanian companies listed on regulated markets can be classified into risk groups in terms of fraudulent financial statements by applying the Beneish score. The results of the present study are in the interests of the policy makers, management team, business analysist and as well for the general use.

Analysis of the Role of Internal Audit in Enhancing Company's Internal Control

The qualitative investigation into auditing strategies within multinational companies aims to explore and understand the effectiveness of various approaches in addressing fraud risks. Employing purposive sampling, key stakeholders including senior executives, auditors, and regulatory authorities were interviewed. Additionally, document analysis was conducted on relevant organizational documents. Thematic analysis was employed to derive patterns and insights from the data. Findings reveal that internal auditing plays a foundational role in assessing internal controls and identifying vulnerabilities, while external audits enhance transparency despite concerns about auditor independence. Forensic auditing emerges as crucial in uncovering fraudulent activities, and the integration of data analytics shows promise in enhancing fraud detection capabilities. Contextual factors such as geographic dispersion and cultural diversity present challenges, while stakeholder perceptions underscore the strategic importance of effective fraud risk management. Recommendations include prioritizing proactive measures, fostering collaboration, and strengthening corporate governance mechanisms to mitigate fraud risks effectively. This research contributes insights into enhancing fraud risk management practices within multinational corporations.

Analysis of the Influence of Fraud Risk Factors According to Fraud Diamond on Fraud Financial Statements in Manufacturing Companies Listed on the Indonesia Stock Exchange

This study aims to examine the influence of external pressure, financial target, ineffective monitoring, rationalization, and capability on financial statement fraud. Financial Statement Fraud is measured by earnings management using discretionary accruals. This study uses secondary data were taken from the manufacturing companies which are listed in Indonesian Stock Exchange. Sample selection is done by purposive sampling method and sample obtained from this research were 45 of a total 135 companies. Method of analysis used multiple linear regression analysis. The result show that simultanoeusly of external pressure, financial target, ineffective monitoring, rationalization, and capability have a significant influence on financial statement fraud. Partially, external pressure, financial target, rationalization, and have no significant influence on financial statement fraud. Ineffective monitoring partially has a significant influence on financial statement fraud.

Penerapan Algoritma Advanced Encryption Standard (AES) Untuk Keamanan Data Transaksi Pada Sistem E-Marketplace

Sriwedari Village known as a producer of superior plant seeds and fruits in the Salaman District area. The Sriwedari Seed Shop is a form of business from the village government that sells various kinds of plant seeds and fruits from nurseries by the local community. However, in its application the sales and transaction system still uses a fairly conventional method. By opening an offline store and marketing products through social media networks, the Sriwedari Seed Shop has less regular customers. Not to mention the risk of fraud from customers who order seeds through social media is a concern for sellers Therefore, this research was conducted with the intention of answering the problems above by creating an e-marketplace system in the form of an online store that will be integrated with a payment gateway that has various online payment methods. In addition, data security will also be applied to the payment system using the Advanced Encryption Standard (AES) cryptographic algorithm which functions to encrypt payment transaction data so that data records stored in the database are not easy to read and prevent misuse of data by parties who do not have access rights. The method used in developing this system is Rapid Application Development (RAD). This method is very suitable to be applied in software development with minimal resources so that it can speed up the iteration process at each stage of development while still paying attention to input from potential system users. The results of this research are an integrated e-marketplace system with payment gateway services that have various payment methods with transaction data security using the AES cryptographic algorithm.

Pengaruh Pengendalian Intern Terhadap Efektivitas Biaya Perjalanan Dinas

Business travel is a cost that quite affects cash disbursements, so it is necessary to carry out effective controls to prevent fraud. The company has implemented internal control but there are still some irregularities in the management of official travel expenses. This study aims to analyze the influence of internal control on the cost effectiveness of official travel at Shafira Corporation. The research method uses quantitative research methods. Sources of data obtained from primary data with data collection through filling out a questionnaire given to 31 respondents who are employees of the company and the author’s direct observations. Data analysis used a simple regression method. The results of the study indicate that the internal control system affects the effectiveness of official travel expense where the elements of internal control have been implemented so as to minimize the risk of fraud and violations of official travel expense. The results of this study will have an impact on the cost of official travel which is carried out in accordance with budget standards and work programs that have been determined through the implementation of internal control functions.

Internal Audit as a Tool to Reduce the Risk of Fraud and Abuse

Abstract Objective The purpose of the publication is to present auditing as a tool to reduce the risk of fraud and abuse. The article describes the role of auditing in minimizing fraud, its application in business entities and its effectiveness. It presents the role of both internal and external auditing in reducing fraud. Methodology Both the qualitative and quantitative methods were applied in the publication. The former was used for the purpose of presenting the application of auditing in business practice, and the latter to describe the effectiveness of its operation. Findings The results of the analysis showed that auditing is an effective tool for reducing fraud and abuse. Significant effectiveness in this regard is exhibited by internal audit services. Value Added The publication is part of a series of articles describing tools for reducing fraud and abuse. It shows the application of selected tools at the organizational level and their effectiveness. It also helps answer the question concerning the validity of the tools’ implementation and provides a premise for further research to develop a comprehensive model for combating fraud in business entities. Recommendations Research on the use of auditing as a tool for reducing fraud and abuse should be conducted with a breakdown of entities by industry. This will allow verification of which industry is characterized by the greatest use of auditing in this regard. It will also make it possible to assess the effectiveness of the measures taken to minimize the risk of fraud by industry entities.

Application of a compliance system to prevent corporate fraud in large companies

The use of compliance systems is one of the most important components of ensuring the functioning of the activities of large companies in conditions of a high level of security. Working with big data puts organizations in front of various problems related to confidentiality and information security. Compliance systems can reduce risks by increasing the competitiveness of enterprises in the market and raising awareness of employees about illegal actions in general. Recently, the application of laws preventing corrupt business transactions has intensified, and the escalating foreign economic situation requires effective actions from business leaders, therefore, the study of ways to apply the compliance system in large companies is necessary. Within the framework of this article, the author examines the essence of compliance, its main functions, as well as methods and methods of compliance control in large organizations operating in the domestic market. An important role in this scientific article is assigned to the levels of development of the compliance system, consideration of international standards, as well as the areas of compliance in large companies, which are highlighted by the author in accordance with the specifics and features of the activities of large companies in the domestic market. The author also considers compliance principles, the observance of which is necessary to ensure the achievement of the company's goals, the development of methods for their adoption, as well as ensuring system control of the functioning of the organization. The paper focused on the need to continue implementing the development strategy of large companies aimed at automating business processes. The main tools for countering corporate fraud that are used by large companies in conditions of aggravation of the risk of corporate fraud are listed.

Complementary level of financial and tax aggressiveness and the impact on cost of debt: A cross-country study

Managers can take advantage of the flexibility of accounting choices to act opportunistically through financial aggressiveness and/or tax aggressiveness. The higher the complementary level of financial and tax aggressiveness, the higher the risk arising from the levels of error or fraudulent reporting carried out by such firms (fraud risk). This study aims to examine the impacts of the complementary level of financial and tax aggressiveness on the cost of debt. We estimate these relationships with a two-stage estimator method using 7 200 firm-year samples from East Asia and Europe for the period 2014 to 2016. In the first stage, a binary logistics model is used to examine the factors that influence the complementary level of financial and tax aggressiveness. Then in the second stage, we use a regression model to examine the effect of the complementary level of financial and tax aggressiveness on the cost of debt. We find that the complementary level of financial and tax aggressiveness has a positive and significant effect on the cost of debt, meaning that the higher the complementary level of financial and tax aggressiveness, the higher the cost of debt faced by firms. Creditors perceive the practice of financial and tax aggressiveness as a significant firm risk, thus tending to increase the cost of the debt they provide.

Analysis of Segmentation, Targeting and Positioning Strategies in Fraud Risk and Their Impact on Organizational Potential Consequences in Achieving Organizational Goals

Data compiled by Indonesian Corruption Watch shows that during 2016, there were 482 corruption cases with a total state loss of IDR 1.47 trillion (Indonesian Corruption Watch 2017). International Transparency in a 2016 survey showed Indonesia ranked 90th out of 176 countries measured by the level of corruption with a score of 37 (Transparency International 2016). Reform in the field of state finances has been implemented through a package of laws consisting of UUD No. 17 of 2003 concerning State Finance, UUD no. 1 of 2004 concerning the State Treasury and UUD no. 15 of 2004 concerning Examination of State Financial Management and Responsibility. The implementation of the Segmentation, Targeting and Positioning (STP) strategy can be used as a "lubricant" and an exit strategy in mitigating and preventing the occurrence of fraud risk. more optimal.

Online Presence System Design Based On Data Granted Validity

The presence of employees in an agency is very important for recording attendance accurately and avoiding fraud in the manual attendance process. Therefore, designing an online presence system is the right solution to overcome this problem. A good online presence system must have high accuracy and be integrated with an efficient data management system. One way to improve the accuracy of the online attendance system is to use the data validation method provided. The manual attendance system used by the company suffers from inaccuracies and fraud. Therefore, this study aims to overcome this problem by designing and implementing an online presence system based on the validity of the data provided. Information system development methods are used to design online presence systems that use blockchain technology to ensure data validity and reduce the risk of fraud. In conclusion, an online attendance system based on the validity of the data provided can be an effective and efficient alternative solution for institutions that still use manual attendance systems.

The role of audit procedures according to the International Auditing Standard (ISA No. 240) in detecting and limiting fraudulent practices

The research aims to demonstrate the role of audit procedures accordance to (ISA. No.240) in detecting and reduction fraudulent practices in the financial statements of companies listed in the Iraqi Stock Exchange, as the standard specializes in determining the responsibility of the auditor in determining fraud when auditing financial statements. To achieve the objectives of the research, the descriptive analytical approach was used, as the opinions of a sample of auditors were surveyed by distributing (60) questionnaires and (50) valid questionnaires were retrieved for analysis, that is, at a rate of (83%), and the research problem is that “the failure of the traditional audit procedures It led to the issuance of many standards that increase and contribute to the discovery of fraudulent practices in the financial statements, so it is necessary to resort to efficient and effective procedures, which is reflected in the quality of the audit process.” According to the analysis of the results of the answers to the questionnaire, there was agreement on the importance of auditing standard 240, the auditor's responsibility for studying fraud when performing the audit of the financial statements. The research found, through the use of statistical methods, that "there is a significant relationship for the adoption of audit procedures in accordance with auditing standard 240 in discovering the risks of fraud in the financial statements of Iraqi companies." Governance and management of the economic unit to reduce and detect fraud, describes the central determinants of the audit process in the context of fraud and outlines the responsibilities of the auditor for detecting significant and effective misstatements resulting from fraud. The research recommended the necessity of contacting the offices of major auditing companies that have field experience and benefiting from their expertise in this field

Examining the Role of Personality Traits, Digital Technology Skills and Competency on the Effectiveness of Fraud Risk Assessment among External Auditors

In accordance with ISA 240, it is the responsibility of external auditors to obtain reasonable assurance that financial statements are free from material misstatement, whether caused by fraud or error. Recently, the auditing profession in Malaysia has been significantly challenged by the explosion of fraud cases and by auditors’ failure to determine the “true and fair view” of the financial statement. This incident has tarnished the reputation of the audit profession. The effectiveness of the external auditor function, especially when related to fraud risk assessment, is commonly called into question. Hence, this study aims to assess individual factors (personality traits, digital technology skills, and competency) that may contribute to the effectiveness of fraud risk assessment among external auditors. A total of 455 questionnaires were distributed to external auditors, and a total of 150 (32.96%) responses were received. Data were thoroughly analyzed using Smart-PLS 4.0. This study found that digital technology skills contribute to the effectiveness of fraud risk assessment, whereas personality traits and competency do not. The findings implied that an effective technique of fraud risk assessment among external auditors requires digital technology skills. This study contributes to the literature by confirming the critical role of digital technology skills in enhancing the effectiveness of fraud risk assessments.

Fraud Risk in Peer Lending Fintech Transactions: The Role of Consumer Protection Regulation in Indonesia

Fintech P2P Lending has caused many complaints from its consumers. This study discusses how consumer protection regulations can reduce fraud from the P2P Lending platform. This study uses a normative research method using a legal approach and a case approach. The population used in this study were P2P customers. This study analyzes the problem with a legislative concerning consumer protection and financial services authority regulation about information technology borrowing and borrowing services. Data collection used primary legal materials in the form of laws and secondary legal materials obtained from library studies in the form of literature. The researcher applies a qualitative data analysis method. The results of this study are one of the key factors in protecting consumer rights derived from various regulations related to the supervision and supervision system carried out by the government. The government should do more education and outreach to the public regarding the fintech peer to peer lending platform and the formation of the Investment Alert Task Force. The study and formulation of government regulations must be balanced with the speed of technological change and digital transformation by involving practitioners so as not to harm each other. Synergy between stakeholders (collaboration), law, surveillance, and data protection can reduce the risk of illegal P2P platform practices. Coordination and synergy between policy makers and stakeholders will greatly facilitate handling in regulating the P2P Lending platform so as not to cause overlapping regulations that cause new problems.

Optimization of the Automated Sales System as an Effort to Minimize Fraud & Improve Internal Control at The Distribution Company PT Sehat Selalu Banyak Rejeki

Information systems are essential in developing a business, especially in integrating data between one role and another. In addition, the development of information systems can be utilized by management in carrying out internal controls to manage the organization or company and minimize the risk of fraud resulting in material losses. This study aims to explain how the form of efforts to optimize the sales system in a company so that it becomes an automated system as an effort to minimize the risk of fraud and forms of internal control efforts. The research method used is an agile method (to develop a web-based information system) and descriptive qualitative (to identify how to implement a strategy to minimize fraud and as an effort to carry out internal control). The results of this study provide information that the implementation of an integrated web-based system which in this study is referred to as ISSS, can assist companies in improving internal control through the efficiency and effectiveness of business processes which are also visualized in the BPMN notation. This study also explains that implementing a web-based information system presented in the ISSS makes it easier for companies to minimize fraud to reduce material losses.

INTEGRATION BETWEEN CORPORATE GOVERNANCE AND INFORMATION TECHNOLOGY GOVERNANCE TO REDUCE THE RISK OF FINANCIAL AND ADMINISTRATIVE FRAUD/ TESTING STUDY ON COMPANIES REGISTERED IN THE IRAQ STOCK EXCHANGE

Corporate governance in general and IT governance in particular have recently received a great deal of attention in developed countries، developing countries and transitional economies as a result of a number of cases of financial and administrative corruption that have plagued many major companies in the United States of America and East Asian countries، for example، due to weak corporate governance and IT governance systems. The lack of corporate governance and IT governance systems as a subsystem of corporate governance enables company administrators to prefer their personal interests at the expense of the interests of minority rights، shareholders، creditors and other stakeholders such as employees، suppliers and the general public، The study found a set of results after the statistical tests، which created scientific evidence of the effectiveness of the test on the existence of an organic link between the mechanisms and principles of corporate governance and IT governance as an integral part of corporate governance، as the diversity of asset portfolios and obligations enhances the occurrence of financial and administrative fraud، as well as the activation of the application of corporate governance and IT governance contributes to reducing the risk of financial and administrative corruption and improper practices that may facilitate the possibility of Fraudulent practices occur، The study recommends the application of the integrated portal between corporate and IT governance aimed at reducing risks arising from financial and administrative corruption while intensifying training courses to increase their technical skills and expertise in how to deal with IT governance mechanisms in order to ensure that their competitive advantage is enhanced. Keywords: Risks of Financial And Administrative Fraud، Corporate Governance، IT Governance

STRATEGIES USED BY THE AUTHORITIES IN DEALING WITH ONLINE PURCHASING FRAUD

Cases of online purchase fraud are escalating and this has created concerns about the level of security available for online users. Previous studies have provided solutions to deal with the risk of fraud when using the Internet but no study has focused on discussions about the strategies employed by the Malaysian authorities when dealing with online purchase fraud. Therefore, this study aims to discuss the strategies employed by Malaysian authorities to make online purchasing safe for online users. This qualitative study employed the interview method and content analysis to collect and analyse data, respectively. The documents analysed included journal articles by past researchers, while interviews were conducted with government and non-government agencies that are directly involved with online users. Findings show that the authorities have disseminated consumer information and education through the media, provided channels for lodging complaints, communicated directly with sales service providers, conducted monitoring and inspections, enforced the disclosure of eight vital pieces of information according to P.U (A) 458, encouraged the procurement of the SSM BizTrust certificate, established collaborations with related agencies and conducted research. It is hoped that the suggested improvements can be implemented so that the implemented strategies can have a more positive effect.