Fraud Risk Management to Detect and Prevent Employee Fraud in Small Rural Businesses

Author(s)

Daphne Yuying Bishop, Liberty UniversityFollow

Date

5-2022

Department

Graduate School of Business

Degree

Doctor of Business Administration (DBA)

Chair

John M. Halstead

Keywords

COSO integrated risk management, employee fraud, small rural business, case study, internal control weakness

Disciplines

Accounting

Recommended Citation

Bishop, Daphne Yuying, "Fraud Risk Management to Detect and Prevent Employee Fraud in Small Rural Businesses" (2022). Doctoral Dissertations and Projects. 3663.
https://digitalcommons.liberty.edu/doctoral/3663

Abstract

This section provides discussion and research results of this study. The researcher used qualitative multiple case study to explore how small rural businesses establish Committee of Sponsoring Organizations of the Treadway Commission (COSO) internal controls to deter and prevent employee fraud. A qualitative multiple case study was based on the fraud diamond theory. Thirty small business owners or managers located in rural areas were interviewed to gain a greater understanding of the effectiveness of internal control in small rural businesses. After thematic analysis, the researcher identified seven major themes: (a) management’s commitment to integrity and ethical value, (b) identifying high-risk areas, (c) separation in key business functions, (d) ethically informed risk management, (e) leveraging technology, (f) financial and staffing challenges, and (g) low COSO familiarity. The findings showed that the participants implemented internal control procedures to the best of their abilities and knowledge to protect their business assets. Therefore, it appears that the internal control actions could help small business owners avoid potential profit loss. The research found strengths and weaknesses of internal control implementations. The strengths of their implementation were their awareness of the control environment, risk management, monitoring and information, and communication. The weakness of the implementation came from control activities, predominantly the violation of the separation of duties. Most of the participants knowingly or unknowingly gave the same employee multiple business responsibilities that could compromise the internal control procedure.