APPROVAL FORM

The undersigned certify that they supervised the dissertation of Recall Jirivengwa

with registration number R2117455Q entitled: An assessment of the effects of fraud

risk management practices and whistle blower system on fraud detection in small

and medium enterprises in the retail sector: a case study for Mupandawana. The

dissertation was submitted in partial fulfilment of the requirements of the Masters

of commerce in Forensic Auditing and Accounting degree (MFA) at Midlands State

University.

--------------------------------------------- -----------------------------

SUPERVISOR DATE

------------------------------------------------- ------------------------------------

CHAIRPERSON DATE

[i]
 RELEASE FORM

Name of author: Recall Jirivengwa

Project title:

An assessment of the effects of fraud risk management practices and whistle blower system

on fraud detection in small and medium enterprises in the retail sector: a case study for

Mupandawana growth point.

Degree title: Master of Commerce in Forensic Auditing and Accounting degree

Degree granted: 2022

Permission is hereby granted to Midlands State University library to produce

copies of this dissertation, lend and sell such copies for private, scholarly or

scientific purposes only. The researcher reserves other publication rights and

neither the dissertation nor exclusive extracts may be printed or otherwise

reproduced without the author’s consent.

SIGNED: R. Jirivengwa

DATE: 5 December 2022

RESIDENTIAL ADRESS: 1666 First Road Glen View One

CONTACT NUMBER: 0772772166

EMAIL ADDRESS: rjirivengwa@gmail.c

[ii]
 DECLARATION

I, Recall Jirivengwa , do hereby declare that this dissertation is a product of my

own work and research except to the extent indicated in the acknowledgement,

references and report in the body of the report and that it has not been submitted

in full or partial fulfilment of any other degree or at any other university or

institution.

R Jirivengwa

----------------------------------- 5 December 2022

Researcher’s signature Date

[iii]
 DEDICATION

I dedicate this work to the Almighty God for his favour, and to my wife Beauty and my two boys

Alvin and Ashley for their support and cooperation. The project is also dedicated to my parents,

Hosea and the late Raviro for being wonderful parents. I would want to thank my supervisor for

the patience and guidance in making this project a success

[iv]
 ABSTRACT

The study sought to assess the effects of fraud risk management practices and

whistle blower system on fraud detection in small and medium enterprises in the

retail sector in Mupandawana. The structured questionnaire was used as the main

research instrument. The “Likert five-point ranking scale was used for items in the

questionnaire. The study was done including small and medium enterprises in the

retail sector in Mupandawana growth point. A total of 53 small and medium

enterprises employees and owners completed questionnaires. The respondents were

selected through random sampling. The researcher used pilot testing was done to

test validity and reliability of the data collection instrument. The SPSS version

16.0 was used to analyse the data in the research. Internal consistency of the

variables that is how closely related a set of variables are as a group was done using

Cronbach’s alpha. Data from the study was presented using percentages,

frequencies, tables and figures. The researcher got authorization from the university

and consent from respondents before carrying out the study. The study found out

that small and medium enterprises were exposed to electronic transfer fraud and

accounts receivable fraud to a large extent. The researcher also found out that fraud

risk management practices were effective in preventing fraud in small and medium

enterprises.

[v]
 ACKNOWLEDGEMENTS

I wish to acknowledge the assistance I got from the following people who made it

possible for this document to be put together. First, my family who gave me moral

support and encouragement when temptations to quit the project were high. I further

acknowledge the profound assistance I got from the Midlands State University staff

whose expert advice enabled me to compile this research this report.

Lastly, I appreciate the assistance I got from fellow students, workmates and

friends.

[vi]
Table of Contents

APPROVAL FORM ........................................................................................................................ i

RELEASE FORM ........................................................................................................................... ii
DECLARATION ........................................................................................................................... iii
DEDICATION ............................................................................................................................... iv
ABSTRACT .................................................................................................................................... v
ACKNOWLEDGEMENTS ....................................................................................................... vi
CHAPTER ONE ............................................................................................................................. 1
1.0 Introduction ........................................................................................................................... 1
1.1 Background to the study................................................................................................... 1
1.2 Problem Statement ................................................................................................................ 5
1.3 Objectives of the study .......................................................................................................... 5
1.4 Research questions ................................................................................................................ 6
1.5 Significance of the study ....................................................................................................... 6
1.6 Assumptions of the study ...................................................................................................... 7
1.7 Delimitations ......................................................................................................................... 7
1.8 Limitations ............................................................................................................................ 7
1.9 Definition of terms and abbreviations ................................................................................... 8
CHAPTER 2 ................................................................................................................................... 9
LITERATURE REVIEW ............................................................................................................... 9
2.0 Introduction ........................................................................................................................... 9
2.1 Theoretical Literature Review ............................................................................................... 9
2.1.1 Fraud Theories.................................................................................................................... 9
2.2.1 Fraud................................................................................................................................. 16
2.2.2 Occupational fraud ........................................................................................................... 16
2.2.3 Fraud Tree ........................................................................................................................ 17
2.2.4 Employee fraud ................................................................................................................ 18
2.3 Fraud Risk Management ..................................................................................................... 19
2.3.2 The Fraud Management Lifecycle Theory ....................................................................... 19
2.3.3 Internal controls................................................................................................................ 21
2.3.4 Fraud Risk Management Techniques ............................................................................... 22
2.3.5 Whistleblowing ................................................................................................................ 24
2.4 Empirical literature review .................................................................................................. 26
2.5 Research gap ....................................................................................................................... 32

[vii]
 2.6 Chapter Summary.............................................................................................................. 32
CHAPTER THREE ...................................................................................................................... 33
RESEARCH METHODOLOGY.................................................................................................. 33
3.0 Introduction ......................................................................................................................... 33
3.1 Research Philosophy ........................................................................................................... 33
3.2 Research design ................................................................................................................... 34
3.3 Research Method ................................................................................................................. 34
3.4 Population and Sample ........................................................................................................ 34
3.5 Research Instruments .......................................................................................................... 36
3.6 Data Sources ..................................................................................................................... 37
3.7 Data Collection Procedures ................................................................................................. 37
3.8 Data validity and reliability ................................................................................................. 38
3.8.1 Reliability ......................................................................................................................... 38
3.8.2 Validity ............................................................................................................................. 38
3.9 Data Presentation and Analysis Procedures ........................................................................ 39
3.9.1 Data Analysis ................................................................................................................... 39
3.9.2 Data Presentation.............................................................................................................. 40
3.10 Ethical Considerations....................................................................................................... 40
3.11 Chapter Summary.............................................................................................................. 41
CHAPTER 4 ................................................................................................................................. 42
DATA PRESENTATION, ANALYSIS AND DISCUSSION ..................................................... 42
4.0 Introduction ......................................................................................................................... 42
4.2 Reliability analysis .............................................................................................................. 43
4.3 Social and demographic information .................................................................................. 44
4.3.1 Gender of the respondents ................................................................................................ 44
4.3.2 Age of respondents ........................................................................................................... 45
4.3.3 Respondents’ qualifications ............................................................................................. 46
4.3.4 Work experience .............................................................................................................. 46
4.3.5 Main activities of the business ......................................................................................... 47
4.3.6 Fraud Risk Management Department .............................................................................. 48
4.3.7 Fraud Risk exposure and prevalence ................................................................................ 49
4.3.8 Effectiveness of Fraud risk management practices in SMEs ........................................... 50
4.3.9 Whistle blower protection practice .................................................................................. 51
4.4 Chapter summary ................................................................................................................ 53
CHAPTER 5 ................................................................................................................................. 54
[viii]
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS................................................. 54
5.0 Introduction ......................................................................................................................... 54
5.1 Executive summary ............................................................................................................. 54
5.2 Summary of major findings ................................................................................................ 54
5.2.1 The amount of exposure to fraud risks in small and medium enterprises ...................... 55
5.2.2 The effectiveness of fraud risk management practices among small and medium
enterprises.................................................................................................................................. 56
5.2 3 the effect of whistleblower policies on employee fraud .................................................. 56
5.3 Conclusions ......................................................................................................................... 57
5.4 Recommendations ............................................................................................................... 57
5.5 Areas of further study .......................................................................................................... 58
REFERENCES ............................................................................................................................. 59

[ix]
 CHAPTER ONE

INTRODUCTION

1.0 Introduction

The aim of this study was to assess the effects of fraud risk management practices and whistle

blower system on fraud detection in small and medium enterprises in the retail sector in Gutu.

Employee fraud is increasing in Zimbabwe and affects firms regardless of size. According to

CIMA (2018) it is estimated that organisations may be losing as much as 7% of their annual

turnover to fraud. Employees have been known to commit fraud against employees such as payroll

fraud, false expense claims and cash theft. The small and medium enterprises need to mitigate

against fraud risks.

This chapter outlines the background to the study, the statement of the problem and looks at the

objectives of the study. The research questions, significance of the study and the assumptions

under which the study were carried out are also covered in this chapter. The limitations which the

researched faced in this study are covered in this chapter together with the scope of the study. All

the key definitions which were necessary for the carrying out of this study are covered in this

study. The chapter ends with a summary of what was covered in the study.

1.1 Background to the study

Small and medium enterprises are important engines in driving the economies of both developing

and developed countries. Small and medium enterprises employ few persons and are characterised

a relatively small amount of capital and turnover. According to ACFE(2018) the number of frauds

and the amounts involved are ever increasing. Organisations have been trying to mitigate losses

incurred from fraud through the implementation of fraud risk management practices such as

internal controls, training employees.

1
The small and medium enterprises are more vulnerable to fraud because of lack of internal controls

and also lack of expertise by the management. Fraud is according to Tarjo (2021) a deliberate and

intentional act by a group or individual to cause harm to organization done secretly. It is aimed at

creating a personal gain for oneself and to create a loss to another. There are three main categories

of fraud that affects organisations regardless of size are asset misappropriations which involve

theft or misuse of an organization’s assets, fraudulent financial statements and corruption.

According to BDO (2020) a typical organization loses 5% of its revenues to fraud. Employees at

every level of the organization commit fraud.

The Zimbabwean economy is characterised by many SMEs which are mostly found in the informal

sector. The small grocery shops coined “tuckshops” are mostly found in the informal sector. The

small and medium enterprises tend to be family owned and run and therefore trust amongst

employees and the owners tend to be high. This trust has led to the incidence of fraud occurring.

The high incidence of fraud has led to some small and medium enterprises to adopt fraud risk

management practices in order to detect fraud in small firms.

The study’s objectives is to investigate the effect of employee fraud management practices on

fraud detection in small and medium enterprises. The Small and medium enterprises are more

vulnerable to fraud due to inefficient or inexistent fraud risk management practices.

This study aims to establish how weak internal control systems contributes to employee fraud.

Internal control systems tend to deter fraud. Collusion between small and medium enterprises and

third parties is determined in this study. It examines how whistleblower facilities influence

employee fraud in small and medium enterprises

Small and medium enterprises in Zimbabwe

Small and medium enterprises are defined by the Small and Medium Enterprises Act of Zimbabwe

(24:12) as a business employing 6-72 people and has an annual turnover of US$500 000 to US$3

million. These enterprises are important to the Zimbabwean economy as they employ 75% of the

2
workforce. According to the Financial Tribune SMEs contributed $8, 58 billion to the country’s

gross domestic product.

Fraud in small and medium enterprises are more vulnerable to fraud and have led to their failure.

Chapman (2022). The ICAEW (2022) guideline warned that fraud is becoming cyber-enabled

because the internet is giving fraudsters more opportunities to infiltrate companies. This has

increased their success rate when carrying out fraud. The success rate is high because the small

and medium enterprise managers are gullible and often follow unsecured websites which results

in fraudsters taking advantage.

Some small and medium enterprises are more vulnerable to fraud due to the nature of their services,

for example retail shops. In the United Kingdom, 44% of small business are targeted for fraud.

Employee fraud

The ACFE (2018) defines occupational or employee fraud as a situation whereby a person uses

his or her occupation for personal enrichment through misuse or misapplication of an

organization’s assets or resources. Employees in the US according to Department of Commerce,

employee theft or fraud is responsible for a third of all business bankruptcies. The small business

losses through fraud averaged $200,000 per incident.

Employee fraud tend to have disastrous consequences to all stakeholders. It tends to be committed

by employees who have a strong understanding of the business and have the power to override

controls. Mohammed et al (2021)

The incidence of fraud are ever increasing in all countries, Zimbabwe included. In Malaysia

according to PwC (2020), 68% of the fraud were committed by employees and 35% was committed

by collusion with third parties. Fraud committed by non-managerial employees include but is not

limited to embezzlement, petty theft, bribery, corruption, misappropriation of assets and computer

fraud. Dadzie-Dennis et al (2018) Fraudulent activities are costly to small and medium enterprises

as they lack cover for losses incurred. Nawawi and Salim (2018).

3
Employee fraud in Zimbabwe

Muleya (2022) noted that employee fraud is mainly perpetrated by managers, accounts clerks,

cashiers and sales representatives. He attributed the increases to lapses in company’s lapses in the

security system.The increase in the usage of the internet have led to an increase in fraud threats

through lack of cyber security. Sitemere(2022)

In Zimbabwe companies have lost a lot of funds in fraud and robbery through collusions between

employees and third parties, The ZB Bank in 2021 lost USD2,5 million when its employee

Shadreck Njowa colluded with third parties and faked an armed robbery.Fraud is occurring in

firms which includes asset misappropriation and corruption. Asomaning (2019) stated highly

effective fraud risk management practices leads to an improvement in bank performance. He noted

that the fraud risk management practices were effective in mitigating fraud risk,

Chimwene (2017) noted that employee fraud is wide spread and collusion of employees led to

creation of phantom participants who obtained undeserved benefits. The businesses are losing a

lot of funds from employees who commit fraud for several reasons amongst them greediness.

Financial performance is enhanced by better established risk management. Kariuki (2017).

Businesses regardless of size have to find ways of mitigating the effects of fraud. This will include

having fraud risk management practices such as anti-fraud strategies measures, internal control

measures and physical measures such as employing security guards in place. This will minimize

or eliminate the losses resulting from fraud. Hussain (2019) found out that fraud risk management

has a positive relationship with bank performance. Wanjiru(2020) in his studies found out that

only preventative and corrective controls have a negative effect on the degree of fraud.This study

aims to find out the effects of fraud risk management on fraud detection on small and medium

enterprises. It aims to find out if there are any effects on fraud detection of fraud risk management.

4
1.2 Problem Statement

Many small and medium enterprises faces the possibility of fraud occurring every day.

According to ACFE (2020) eighty-nine per cent of the fraudsters have are first time offenders and

therefore it is difficult to use trend analysis to predict the likelihood of fraud occurring in a firm.

There is need to have a strong fraud risk management policy in place to reduce the risk of loss

resulting from the commission of fraud. According to BDO (2020) fraudster possess characteristics

that align to top performing employees. There is need to reduce the incidence of fraud and

therefore fraud risk management is one of the key practices which are used to reduce fraud. There

have several researches on fraud risk management practices. However there is limited literature on

the effects of fraud risk management practices on fraud detection in small and medium enterprises.

This study seeks to find the effects of fraud risk management on fraud detection.

1.3 Objectives of the study

Main objective

The main objective of this study is to examine the effectiveness of the fraud risk management

practices by small and medium enterprises in Gutu.

The study aims to achieve the following specific objectives:

(i) To explore the amount of exposure to fraud risks in small and medium enterprises

(ii) To identify the fraud risk management practices in small and medium enterprises

(iii) To ascertain the effectiveness of fraud risk management practices among small and

medium enterprises in Mupandawana

(iv) To investigate the effect of whistleblower policies on employee fraud

5
1.4 Research questions

The following research questions were formulated in order to achieve the objectives of the

study:

(i) What is the amount of fraud risk exposure in small and medium enterprises?

(ii) What are the fraud risk management practices in place in small and medium enterprise?

(iii) Are fraud risk management practices effective in reducing employee fraud in small and

medium enterprises?

(iv) What are the effects of the whistleblower policies on employee fraud in small and

medium enterprises?

1.5 Significance of the study

The study will add to existing literature through original work through original work which

will address the effects of fraud risk management practices by small and medium enterprises

in Zimbabwe. This literature will act as a reference starting point for future researchers.

The study will be helpful to government departments who aim to support small and medium

enterprises. SEDCO for example will use the information generated from this study to advice

the SMEs managers and employees to prevent fraud and when setting up fraud risk

management practices.

The Zimbabwe Republic Police (ZRP) will use this study in the prevention of fraud by knowing

the gaps which can be exploited by criminals or fraudsters.

The owners and senior managers of small and medium enterprises will get to know the types

of fraud risks affecting their firms. This knowledge will be used in structuring strategies to

mitigate fraud risks and also used when running the businesses. The knowledge will enable the

small and medium enterprises to reduce their level of exposure to fraud risk thereby ensuring

efficiency and profitability.

6
 The study will expose the level of efficiency of small and medium enterprises in managing

fraud risks as well as the investors’ perception of fraud risks in small and medium enterprises.

Employees who will be whistleblowers will benefit from this study as it offers information on

their protection and how it carry out whistleblowing.

The employees will also use the study as reference material on recognizing fraud and the

detrimental effects on the organization.

1.6 Assumptions of the study

The following assumptions guided the research.

 The majority of the respondents will cooperate and respond to questionnaires addressed to

them.

 Transport to and from area of study will be easy to arrange

 The sample is representative of the population and the findings from the sample will generalise

the population

 Secondary data relevant to the study is readily available and accessible

1.7 Delimitations

Delimitations are parameters and factors which affect the research study which the researcher can

control. They have an influence on the study. The retail sector in Zimbabwe has many small and

medium enterprises. These research study was restricted to Mupandawana growth point because

of resource and time constraints. The research study was restricted to a randomly selected sample

of 53 small and medium enterprises employees and owners.

1.8 Limitations

Price (2017) defined limitations as possible constraints or weaknesses of the research study. The

researcher faced the following limitations during the course of the study.

7
1.8.1 Resentments from respondents

Some of the participants approached by the researcher did not trust the researcher at first as they

suspected him to be a law enforcement officer. The researcher had to convince them that the

research was purely for academic purposes. The owners and the employees eventually cooperated

and fully participated in the research study.

1.8.2 Time constraints

The researcher had a busy schedule at work, family time and study time. The researcher had to

sacrifice time in order to carry out the study. The respondents also faced time constraints as they

operated long working hours and every day. They sacrificed their busy working schedule to

complete and return the questionnaire.

1.9 Definition of terms and abbreviations

The following terms and abbreviations were used to facilitate easy and consistent interpretations

of the research project.

SMEs – small and medium enterprises

Small and medium enterprises – They are firms which employ less than 50 workers

Fraud – the use of intentional dishonesty to achieve a financial advantage over another party.

Fraud risk- the risk of unexpected financial, material or reputational loss as a result of fraudulent

actions of persons internal or external to the organisation.

8
 CHAPTER 2

LITERATURE REVIEW

2.0 Introduction

This chapter looks at the effect of fraud risk management practices on fraud detection in small and

medium enterprises. The areas covered in this chapter includes the concept of fraud, fraud risk

management fraud triangle or diamond theory.

The chapter will also carry an examination of other theoretical literature and a review of the

literature on the effects of fraud risk management on fraud detection in small and medium

enterprises.

2.1 Theoretical Literature Review

The study is based on Fraud Theories and Risk Management. Fraud occurs in all organization

regardless of their size and geographical location. The reasons why people commit fraud are

varied and there are theories which have been developed in trying to explain why employees

commit fraud. There have been measures which have been developed to try to eliminate fraud.

2.1.1 Fraud Theories

There have been several theories which seeks to explain why people or employees commit fraud.

The theories aim to explain the reasons why people commit fraud whether they are in position of

trust or not. People commit fraud for different reasons which tend to be universal regardless of

geographic location, language, and culture or ethnic background. These theories have developed

over the years and have included new interesting dimensions on the reasons why people commit

fraud and will continue to commit fraud.

9
2.1.1.1 Fraud Triangle Theory

It is a theory which was developed by Donald Cressey in 1953 which explains the factors that lead

to fraud and other unethical behavior in organisations. Nyoman et al (2019)

Cressey from his interaction with 250 criminals found out that there are three factors or conditions

that enable employees to commit occupational fraud. The criminals interviewed met two

conditions which are the acceptance of a position of trust in good faith and the violation of the

trust by the criminal. These three factors interact with each other and are not independent of each

other. Kariuki (2017).

These factors are pressure, opportunity and rationalization.

Pressure

According to Natalis (2019) pressure is the pressure to commit a criminal act such as fraud. It

may relate to a non-shareable financial need. The need may result from money problems, gambling

debts and alcohol or drug addiction. It may be viewed as a financial or emotional force pushing

towards fraud. This need remains secret to the violator of the trust and the criminal perceive

themselves as having a need which cannot be sanctioned socially. They believe that no person will

understand their need thus it remains secretive. The pressure may only be temporary, but it may

push a person to do things they would not normally do. ACIPA (2019) identified financial targets

,personal financial need and external financial stability as the types of pressure or motivation which

can a person to commit fraud. The pressure may come from within the potential fraudster him or

herself or it may come from the environment. In Zimbabwe the economic environment and the

low salaries have been a factor which has led to an increase in fraud cases. The increase in drug

abuse which is increasing can also be sighted as a pressure which can lead to the commitment of

fraud. Several writers have classified the pressure into different categories but which tend to be

interrelated. The pressure can come from three main sources which are personal pressure resulting

from lack of personal control which leads to a secretive personal pressure. This may result from

10
financial and nonfinancial personal pressure. Nonfinancial personal pressure include pressure

because of lack of financial discipline and greediness and these are non-shareable because they are

viewed as if they can be controlled.

Source : Kassem (2012)

Opportunity

It is a chance to commit fraud without being caught by management or authority. It arises due to

weaknesses in internal controls, management oversight ineffectiveness or abuse of authority. The

person who commits fraud usually sees an opportunity and reasons that he will not be caught by

the person who entrusted him with the organisation’s assets. The opportunity will allow the fraud

to take place without the offence being noticed. The criminal believes that the opportunity provides

ample time for him to carry out the offence without being noticed .Opportunity cannot be observed

and therefore remains in the background. Opportunities exist in the perception and mind of the

criminal. Opportunity refers to the ability and power of an employee to realize the weaknesses of

the

organizational system and taking advantage of it by making fraud possible. The perpetrator should

be able to identify the existence of an opportunity which he can take advantage of to commit fraud.

The fraud even when pressure is there if an opportunity does not exist. An opportunity to commit

11
fraud may exist because of things such as negligence of employee’s breach of policies and lack of

disciplinary action which makes it worthwhile to commit the fraud.

Rationalisation

This occurs when an employee tries to justify his criminal intentions. It is the most difficult factor

to measure. Kanu et al (2020). The perpetrator will formulate some idea which is morally

acceptable before engaging in selfish and unethical behavior such as committing fraud.

Rationalisation is taken as excuses and justifications that the fraud perpetrated is different from

criminal activity carried out by others. He tries to justify the commitment of the offence and aim

to get sympathy from other members of the society. A person is unlikely to commit fraud if he or

she cannot justify the immoral and unethical actions. He can justify his actions using the following

statements for example “I was borrowing the money and would pay back later” or “I wanted to

pay medical bills for my parent or child.” Rationalisation is difficult to identify or notice as the

mind of the perpetrator cannot be read. It is a justification for fraudulent behaviour because the

employee lacks personal integrity or moral reasoning and will therefore act unethically. A person

will commit fraud if he lacks ethical values and the ability to commit the fraud also depends on his

personal attitudes.

Adapted from Sprague (2018)

12
According to Sprague (2018) at least two of these fraud triangle elements must exist in order for

fraud to be successfully carried out. The elements identified by Cressey are used by managers in

order to eliminate fraud. There is need to reduce pressure on employees for example by trying to

give employees a salary which reduces the financial needs of the employee. Emotional stress or

force can be reduced by covering the employee’s social needs for example by showing concern

for the employee’s social wellbeing. The organization may use the fraud triangle as a guideline in

order to eliminate the opportunity to commit fraud. They may implement measures such as

internal controls and other preventative controls such as establishing a code of conduct which gives

employees guideline on how to conduct themselves in the organization. The Cressey’s Fraud

Triangle theory is a necessary instrument when reducing the occurrence of fraud.

However, some theorists have criticized Cressey’ theory arguing that each fraud case has its own

unique factors which are not necessarily classified under the Fraud Triangle Theory. It is difficult

to observe rationalization and pressure when fraud takes place but the theory remains important in

reducing fraudulent behavior. The changes in the environment, both technologically and socially

have also led to fraud rather than the three factors.Burkey and Sarney (2018) criticized the theory

on the ground that it does not take into account ethics which has a bearing on the people’ decision

making process.

2.1.1.2 Fraud Diamond Theory

There is a second theory which developed because practitioners felt that the fraud triangle was

unable to solve fraud issues because pressure and rationalisation are difficult to be observed. It

is a refinement of the Fraud Triangle called Fraud Diamond theory. This theory was proposed by

Wolfe and Hermanson in 2004. Vousinas (2019). The theory still believes that for fraud to take

place there is need for a non-shareable pressure or motivation, an opportunity exists and the

perpetrator can justify or rationalize his or her actions. The three conditions as per Fraud Triangle

13
were also encompassed in this theory. The four components of the fraud diamond are shown in the

diagram below Figure 2.1

Pressure Opportunity

Rationalisation Capability

Fraud Pentagon Figure 2.1

Capability

It was added as the fourth dimension to pressure, opportunity and rationalization. The fraud will

take place if the right people with the right abilities to commit fraud are in place. Capability is

the personal skills and characteristics of fraud perpetrators which play an active role for fraud to

be carried out in the presence of pressure, rationalisation and opportunity. It is a situation whereby

a person who has the necessary skills, traits and abilities to commit fraud. The skills include the

ability to deceive people. The fraudster will have a motive and would have identified an

opportunity and will use his abilities to turn it into a reality to commit fraud. Wolfe and Hermanson

identified position, ego, coercion, stress, deceit and intelligence as the elements which supports

capability.

Capability of a person to commit fraud includes his expertise to exploit opportunities and also to

tell lies and ability to force others to hide or commit fraud. Artani and Wetra (2017) Fraud is less

likely to occur without having the right person with the right skills to execute manipulation of

information. According to Nugradeni and Triatmoko (2016) there are six elements which fraud

perpetrators which are position, intelligence, level of self-confidence or ego , lying effectively ,
14
stress immunity and coercive immunity. Capability is of particular importance when carrying high

value or long term frauds. Rationalisation and capability are interrelated and the strength of each

element influences the others. The function or position of the perpetrator in the organization

enables capability to commit fraud. The position and the role played by the perpetrator may be a

perfect opportunity for him to breach the organisation’s trust.

The other dimension of the capability is the intelligence level of the perpetrator. Intelligence comes

into play when the fraudster understands and is capable of exploiting internal control weaknesses

and to use his position, function or authorized access to his greatest advantage. Intelligent, creative

and experienced people are able to get a full grasp of the controls and their vulnerability and will

commit high value and long term fraud. According to ACFE (2020) about 51% of the occupational

fraud perpetrators has at least a first degree and 49% were over 40years of age which means the

fraud perpetrators were educated and experienced. The fraudster has great confidence and strong

ego that he will not be detected and believes that he can easily pull himself out of the mud. The

estimated cost of fraud to the fraudster is lower the more confidence the fraudster is. A person with

ego is one who has the zeal to succeed at all costs and is self-absorbed and self-confident. Fraud

perpetrators tend to have strong ego and great confidence that they will not be detected.

Coercion, deceit and stress also related the qualities needed by the fraudster to be capable to carry

out fraud. A successful fraudster is able to coerce others to commit or conceal fraud. Capability

also includes the ability to lie effectively and consistently. In order to avoid detection, the fraudster

must be able to convincingly tell people including auditors lies. The fraudster must be able to

handle stress as the fraudulent act and its concealment tend to be stressful.

The Fraud Triangle and Fraud Diamond Theories are necessary when formulating strategies to

reduce the occurrence of fraud in small and medium enterprises. The fraud risk management

policies formulated will be premised on these two theories. However, the Fraud Triangle and
15
Diamond Theories have the limitation that they do not take into consideration ethics which drive

people’s decisions Burkey and Sanney (2018). Bartels (2018) defined ethics as a set of principles

guiding people’s decisions and behaviours within a specified circumstance. Ethics are what the

society generally considers to be right or wrong and are therefore moral guidelines. According to

Mansor and Abdullahi (2017) the absence of personal integrity could lead people to commit fraud

and therefore the reasons why people commit fraud is not only limited to pressure, opportunity,

rationalisation and capability.

2.2.1 Fraud

ACFE (2018) defined fraud as any activity which relies on deception to achieve a gain at the

advantage of another. The fraud will become a criminal offence when misrepresentation is made

knowingly of the truth or when a material fact is concealed in order to induce another to act to

his or her disadvantage.

2.2.2 Occupational fraud

ACFE (2021) defines occupational fraud as the use of a person’s occupation to enrich him or

herself through the deliberate and intentional misuse or misapplication of the employing

organisation’s resources or assets. It is committed by an employee, officer, manager or owner of

an organization.

Norazida M et al (2021) divided occupational fraud into management fraud and employee fraud.

However there is no clear distinction between management and employee fraud.This study is

restricted to misappropriation of assets which includes theft of company’s assets, false expense

reports and falsified sales in order to get more sales commission.

16
2.2.3 Fraud Tree

ACFE classified occupational fraud into three subgroups: Corruption, Asset Misappropriation and

Financial Statement Fraud. In this study the researcher concentrated on the asset misappropriation

category as it is the most common type of occupational fraud accounting for 89%. ACFE (2018)

Adapted from ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse.

17
Asset misappropriation

It is the most commonly occurred fraud type in organization. It includes misuse and theft of assets.

It is carried out by third parties or employees who abuse their position to steal from the

organization through fraudulent activities. It includes stealing of trivial items such as ball point

points to large scale misappropriation of assets. These type of fraud is committed by people

entrusted with holding and managing the assets and interests of an organization and its employees.

The fraud triangle subdivided the asset misappropriation into theft of cash on hand , theft of cash

receipts and fraudulent disbursements. Theft of cash involves the stealing of cash convert it to

personal use thereby depriving the organization of its rightful possessions.

2.2.4 Employee fraud

Employee fraud is defined as an intentional or deliberate misconduct or misappropriation of a

corporation’s assets by employees from which it may incur losses. Said et al (2018) The business

will incur losses resulting from the actions of its employees. The fraud results from deception and

its aim by the employee is to gain an unfair advantage at a disadvantage to his or her employer.

Employee fraud is the main reason why small businesses fail and it negatively affect business

operations. Bunn et al (2019) It leads to closure of business and loss of jobs and negatively affect

the economy through reduced demand, unemployment and reduced taxes and output. Fraud also

has a psychological effect on employees because of the trust amongst the employees.

A fraudster’s profile in terms of demographic and psychological profile cannot be distinguished

from an honest person’s profile. Othman and Ameer (2022). The person who is likely to commit

fraud is difficult to detect. According to BDO (2021) eighty percent of the employees will either

steal or not depending on their rationale and ten per cent will steal at any opportunity.

18
Oluwatuyi (2019) defined fraud as an illicit and nonviolent criminal activity which is committed

with the main aim of earning wealth illegally.

2.3 Fraud Risk Management

Fraud risk management is the set of any planned activities and measures taken to reduce risk

including fraud risk. Apreku-Djan (2022) The activities are designed with the objective of

preventing, detecting and responding to fraud risk faced by enterprises. T

The enterprises may put in place policies designed to prevent, detect and respond to fraud. Wininda

et al (2019) . The purpose of fraud prevention policies is to help to prevent risks including fraud.

These prevention policies including having a Code of conduct, carrying out a third party due

diligence and communication training for the employees.

Fraud detection policies will be put in place in order to find fraud and misconduct whenever they

occur.

A part of fraud risk management policies are the fraud response policies whose purpose is to take

appropriate corrective actions when fraud takes place such as investigations, enforcement actions.

2.3.2 The Fraud Management Lifecycle Theory

The Fraud Management Lifecycle Theory is dynamic theory which was promulgated by Wesley

in 2004. It identified eight stages followed in fraud risk management and which is not necessarily

in order. Effective fraud management requires a balance in the competing and complementary

actions within the fraud management lifecycle. These stages or activities determine the success or

failure of fraud risk management within an organization.

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The first stage is deterrence which involves actions and activities whose purpose is stop or prevent

fraud from taking place. This activities may include physical security or even requiring passwords

to get access to controlled areas.

The second stage is prevention which activities and actions which aim to prevent fraud from

occurring. The firm can prevent fraud from occurring through measures such as having an audit

committee which works hand in hand with the internal audit department. Some of the measures

which prevent fraud such as carrying out proper due diligence on new customers and new

employees

Detection is the third stage is a set of actions and activities which aim to uncover or reveal the

presence of fraud or an attempt to defraud the organization. The fraud or attempt is identified

before, during and after the completion of the fraudulent activity.

Mitigation is the fourth stage which is meant to stop the occurrence of a loss from fraud. It is

carried out in order to hinder a fraudster from continuing or completion of any fraudulent activity.

This activity is done to discourage potential fraudsters from committing fraud to the detriment of

the organization.

Gathu(2018) cited policy activities as the sixth stage. The activities done involve the creation,

evaluation and communication in the deployment of policies which are meant to reduce fraud

incidences

The organization will carry out an analysis in order to determine the factors which resulted in the

loss occurring.

The seventh stage of the Fraud Management Practices is the investigations which involves

obtaining sufficient information and evidence in order to stop fraudulent activities and obtain

restitution or to recover assets. This involves the provision of evidence and support for the

successful prosecution and conviction of the fraudster.

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The last stage is prosecution which involves the successful conviction of the fraudster. Gathu

(2018)

2.3.3 Internal controls

COSO (2016) sets out the five principles of fraud management which the organization can follow

in order to mitigate or reduce the effects of fraud The principles are:

 The small and medium enterprises must prepare and communicate fraud risk management

program to senior management including the board of directors in order to get their

commitment to high ethical values and integrity.

 There is need for the small and medium enterprise will conduct an inclusive and

comprehensive fraud and risk assessment, These assessments are carried out in order to

identify risk and fraud schemes and assess the probability of significant fraud occurring

 The organisation selects, develops, and disseminates preventive and detective fraud

control activities. These activities aim to reduce the risk of fraud occurring or not

being detected in a timely manner.

 There is a need to set up communication channels to transmit information about

potential fraud

 The organization selects, develops and evaluates so as to ascertain whether each of

the principles of fraud risk management exists and functions well.

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2.3.4 Fraud Risk Management Techniques

Several fraud risk management techniques are used within the organization to minimize fraud

.The techniques include management style, fraud detection and deterrence procedures, internal

controls and fraud policies.

Fraud policies

A fraud policy is a document that sets out procedures and responsibilities to be followed in trying

to eliminate fraud. Deloitte (2021)

Key elements of fraud policies which should be set up are:

 Clearly defining actions which are fraudulent

 Allocation of fraud management responsibilities among employees

 The formal procedures which employees should follow if fraud is suspected

 A statement that all fraud offenders will be prosecuted

 A statement stating that all effort will be made by the organization to obtain assets

fraudulently acquired

 Encouragement to employment to report any suspicion of fraud

Anti-fraud strategy

According to Trodovic (2020) it is a policy which aims to reduce or eliminate fraud .It is

based on integrity and zero tolerance for fraud.

In an anti-fraud strategy the fraud risk management must contain five key functions as

follows:

 There is need to carry out an assessment of fraud risk for critical places and people exposed

to fraud possibility, for example in a grocery shop an assessment will be carried out at the

cash till and around cashiers

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 Fraud prevention procedures and methods need to be established in order reduce fraud risk.

In small and medium enterprises these measures maybe in form of physical measures such

as restricting physical entry through employing security guards and the use of passwords.

 Fraud detection methods and procedures need to be put in place. These measures will help

in quick detection of fraud which will minimize the fraud losses.

 There is need to put in place a fraud reporting process. This enables a quick response to

the fraud allegations thereby minimizing losses.

 Lastly, there is need to adopt a policy that will ensure the implementation of programs to

eliminate fraud risk.

Best practices to mitigate fraud

Hussein and Hilal (2021) set out the following as best practices to minimize fraud risk:

 Establishing policies and procedures in fraud prevention

 Establish appropriate fraud detection ,prevention and appropriate reporting procedures

 There is need to ensure compliance with the policies and procedures which would have

put in place

 Ethical behavior of the employees must be defined. Ethics is what the society generally

consider to be right or wrong

 There is need to incorporate fraud awareness through orientation among new and

existing employees. This fraud awareness program will deter employees from

committing fraud and will allow detection of the fraud.

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2.3.5 Whistleblowing

Nurhidayat and Kusumasari (2018) defined whistleblowing as a practice whereby a current or

former employee reports unethical or illegal action such as fraud in an organization to those people

who can correct these actions. Whistleblowing involves ethics since people who are ethical tend

to report behavior which can harm an organization or the society. Whistleblowing is carried out in

public interest. Employees will be free to whistle blow if the firm has developed a culture of ethics,

accountability and transparency.

Whistleblowing plays a major in the detection of fraud. ACFE (2018) reported that 43% of the

occupational fraud is detected by tip from employees and outsiders.An organization need to

develop whistleblower policies and procedures in order to encourage whistleblowing and also to

deter fraud. Whistleblowing is beneficial to the organization since it helps to prevent harm to the

firm through corruption and fraud.

Whistleblowers prefer to have their identity remain anonymous, that is they don’t want to be

exposed. Kumar and Santoro (2017) It takes a lot of courage for someone to reveal fraudulent

information. Whistleblowers prefer to remain anonymous because they fear the reprisal such as

dismissal, persecution or even physical harm.Whistleblowing is an internal control system meant

to reduce or eradicate fraud. It is carried out in order to expose illegal, immoral or illegitimate

practices such as fraud and theft. Basri et al (2017)

The Sarbanes-Oxley Act and Committee of Sponsoring Organisations (COSO) both recommends

the use of whistleblowing policies for internal control purposes. Small and medium enterprises

will have to put in place measures which encourage employees to report acts of misconduct or

fraud.

PwC (2020) recommends the firms to develop whistleblower policies and procedures in place. The

policies developed should:

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 Complement and add value to the existing communication channels between employees

and the management

 Offer protection to employees

 Make sure that disclosures made in confidence are properly investigated and dealt with

decisively and

 Make sure that all the relevant disclosures are reported properly to top management

The setting up of whistleblowing policies and procedures will help in making employees aware

of the whistleblowing procedures which encourage employees with morality to blow the

whistle.The whistleblowers will report fraud when they feel that they can report fraud if they

are reporting to people with the power and willingness to action. Employees are unwilling to

blow the whistle as it may result in the whistleblower losing a career, or be isolated by others.

Rustiarini and Merawati(2020) suggested that employees will be encouraged to blow the

whistle if the employees believe that there is organizational justice within the organization.

There are several ways of blowing the whistle and Maulida (2021) noted that Jabor Banten

Bank in Indonesia can make anonymous whistle blows through the bank’s website. The

whistleblowing policy should state the procedures which can be used in reporting fraud.

Whistleblowing is done in the public interest and should take precedence to the employee’s

sense of loyalty to an organization. Scatturo (2018)

Saputra (2020) stated that employees will be motivated by morality when they blow the

whistle. Whistleblowing must be done in confidence and the disclosure must be made in good

faith.

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2.4 Empirical literature review

This section presents review of related literature from previous studies on employee fraud in

businesses, weak internal control systems, fraud risk management, whistleblower protection

systems and fraud detection

2.4.1Fraud risk management

Hussein and Hilan (2021) looked at the impact of risk management on reducing financial fraud.

He used questionnaires which were distributed to 252 respondents. The research found out that

risk management practices help in reducing fraud,

Asomaning (2019) assessed the effectiveness of fraud risk management. He used structured

questionnaires which he distributed to 100 bank employees. He found out the level of fraud risk to

be low in banks. He attributed the low fraud occurrence to fraud risk management.

Internal control systems influence employee fraud management in small and medium enterprises

according to Chimwene (2017). She carried out a census survey and used 478 questionnaires to

small and medium enterprises employees.

Kariuki (2017) carried out research to assess fraud risk management and financial sustainability in

non-governmental organisations operating in Kenya. His research found out that fraud risk

management leads to financial sustainability for NGOs operating in Kenya.

Gathu (2018) carried out a research on the effects of fraud risk management practices on medical

aid in Kenya. He found out that from a survey of 120 respondents that fraud risk management

tends to reduce fraudulent claims in medical aid. There is a possibility of researching the topic ib

the Zimbabwean context.

Norazida et al (2021) researched on the factors influencing employee fraud in Malaysian banks.

The study was carried out using survey research. They issued 130 questionnaires to bank

employees and investigated on the effect of Fraud Pentagon Fraud theory. They found out that

26
pressure, opportunity, rationalization and capability all have a positive influence on employee

fraud.

Wanjiru and Ndegwa (2020) used a positivist research philosophy and a casual research design to

investigate the effects of preventative controls on fraud occurrence in listed companies in Kenya.

They used a sample of 320 managers and used regression analysis and found out that preventive

controls reduced the level of fraud occurrences.

Tarjo and Anggoro (2021) investigated the effect of fraud risk management implementation on

fraud prevention. They used questionnaires which were issued to 163 respondents and he found

out that fraud risk management can improve fraud prevention,

Forensic accounting has a significant effect on the detection of fraud according to Oluwatuyi

(2019). Oluwatuyi carried out a study on the effects of forensic accounting on the detection of

fraud in public sector. He carried out the survey by issuing 238 questionnaires to sample chosen

from employees of public sector employees.

Chimwai and Munyanyi(2019) carried out a study on the risk attitude , risk perception and risk

management strategies adoption in Zimbabwe. They carried out the research by issuing 288

questionnaires to respondents. They found out that perceived risk and risk attitude both have a

positive and significant relationship to the adoption of risk management strategies. If they view

the risk to be significant the owners and senior managers will introduce fraud risk management

strategies.

Thamada et al (2021) used questionnaires and secondary data to analyse how small and medium

enterprises perceive risk. They found out that sound risk management identifies and manages all

the risks including fraud risk that affect business growth and sustainability.

Sunarti et al (2020) carried out a research on the use of fraud risk management as an anti-fraud

model in Bali , Indonesia. He used interviews and observation in tourist resort areas. His study

27
concluded that organisations with no clear lines of authority and no separation of duties are prone

to fraud.

Artati and Noviyanti (2020) used experimental research design to find an alternative fraud model

and auditor risk preferences. The study found out that the use of the Pentagon Fraud model will

result in a more conservative fraud risk exposure.

Karanja (2018) used descriptive explanatory study and questionnaires to study the effects of fraud

risk management practices on the level of activity by an agent bank in Nairobi , Kenya. The study

concluded that fraud risk management practices reduced fraud occurrences and were effective in

mitigating fraud.

Hussain and Baker (2019) studied the effects of risk management, risk culture on the performance

of the banking sector. He used theoretical literature review and that there was a positive

relationship between fraud risk and bank performance.

Al Qubtan et al (2021) carried out a research with the primary data being collected through

interviews. The study was on the practical risk management approaches used by small and medium

enterprises. The study concluded that most SMEs are employing the bottom up model whereby

the problems are solved as they are brought to the attention of the supervisors or managers dealing

with fraud.

Mkhwanazi (2017) gave self-administered questionnaires to health workers employed by the

Department of Health in eThekwini District South Africa. The study was on the efficiency and

effectiveness of fraud risk management in the Health department. The study discovered that

employees lacked knowledge of the department’s prevention strategies.

Shahzad et al (2022) looked at the role of formalization of risk management methods among

perceived business risk and organization performance. He used questionnaires and found out that

the performance of the organization has a significant positive relationship with al components of

perceived business risk.

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Karunaratane (2018) studied that impact of enterprise risk management on the firm’s performance

in Sri Langa financial institutions. He used convenient sampling method and used survey

questionnaires from 45 respondents. The study concluded that enterprise risk management had no

significant impact on the firm’s performance.

Wibowo and Tobing (2021) carried out a study on the implementation of fraud risk assessment

and antifraud strategy in government institutions. They used case study approach, questionnaires,

interviews and focus study groups to gather information. They concluded that there are several

strategies which can be used to reduce fraud.

2.4.2 Employee fraud

Van der Heijeden (2021) carried out a study to find out if there is a relationship between an

employee’s position and the easy to commit fraud. He used interviews and questionnaires and the

study found out that fraudsters tend to be highly educated and the education placed them in a better

position and improves the ability of a person to spot internal control weaknesses.

Rinendy (2017) looked at the effects of organizational trust to reduce employee fraud risk. He used

a survey research design and questionnaires. The conclusion of the study was that employee trust

helps to reduce employee fraud risk.

Petersen (2018) carried out an investigation on the effectiveness of internal controls activities in

combating occupational fraud risk in SMEs. The study was carried out using questionnaires and

interviews. The study concluded that firms with ineffective controls were at the risk of

occupational risk.

Korletey (2018) looked at the causes of employee fraud in the banking sector in Ghana. The data

was collected using questionnaires administered to 250 employees from 20 selected banks.

Interviews were also used to collect data. The study found out that ineffective corporate culture

and ineffective internal controls resulted in fraud occurring.

29
Jassey (2020) carried out a research study to look at the factors determining employee behavior.

The primary data was collected by distributing questionnaires to employees who work in finance.

The study concluded that ethical corporate culture has no significant effect on employee fraud.

2.4.3 Fraud detection and prevention

Moummer et al (2020) carried out a study on the impact of applying fraud detection and prevention

instruments in reducing occupational fraud. He carried out the study using questionnaires. He used

a sample of 501 supervisory employees of the Ministry of Health in Gaza strip. He found out that

fraud detection and prevention instruments reduced the incidences of occupational fraud.

Oluwatuyi and Akinwumi (2019) carried out a research study on the effect of forensic accounting

on the detection of fraud risk indicators. He used analytical and descriptive research survey whilst

studying the indicators in public enterprises in Ondo State in Nigeria. He found that forensic

accounting had a significant effect with regards to the detection of fraud risk. The study also

concluded that the effective use of forensic accounting could help in the detection of fraud risk

indicators.

Kultanen (2017 carried out a study and found out that people commit fraud because of low incomes

their social class. The research study was carried out from randomly selected employees at a

Ugandan university. He used interviews as a research instrument.

Su Myint Mho (2019) carried out a research study on the effects of internal controls in reducing

fraud in SMEs. He used questionnaires as a research instrument. The conclusions of the study were

that small and medium enterprises should maintain internal controls in order to reduce fraud.

Aladejebi and Oladimeji (2019) gave questionnaires to 200 small and medium enterprise owners

when he was studying the effects of fraud risk management in Lagos, Nigeria. His study concluded

that firms should implement fraud prevention measures such as societal values to reduce fraud.

Davis and Harris (2020) carried out a research study on the strategies which could be employed to

detect and prevent occupational fraud in small retail businesses. He used multiple case study

30
research design and interviews and observations. The study found out that the owners could reduce

fraud by using video monitoring, employee identification cards and separation of duties to deter

and reduce fraud.

Ozlem (2018) carried out a research study comparing whether recent proactive approaches and

credible control frameworks are superior to traditional methods for fraud examination. The

findings were that developments in technology made hard controls obsolete. He carried out a

research involving using questionnaires which were filled in by randomly picked employees.

Akuh (2017) carried out a study on the strategies which can be used by small retail businesses to

detect and prevent employee fraud. He used multiple case study and interviews and found out that

small retail businesses lacked the strategies to minimize or eliminate risk.

Chakabva (2015) carried out a study on the effectiveness of risk management practices in SMEs

in Cape Town .He issued questionnaires to microfinance providers and the study concluded that

risk management frameworks which provide an all-inclusive approach to risk management are

generally absent in microfinance providers.

Drabkova(2018) used a case study the look at the fraud risk management from the percepective of

the CFEBT Risk Triangle. The study concluded that there was an interconnection between certain

risk areas information capability of accounting records with regards to receivables,

31
2.5 Research gap

There have not been much research on the effects of fraud risk management on small and

medium enterprises in rural areas or growth points. The researcher also noted that there few

researches done on the level of awareness of fraud management practices in small and medium

enterprises in Zimbabwe,

2.6 Chapter Summary

The next chapter looks at the research methodology. This encompasses the research philosophy

and research design used in the study. The chapter will also look at the research instruments and

data collection procedures amongst others.

32
 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

Chapter three presents the methodology used in the study in order to achieve research objectives.

This chapter will look at the research philosophy and design. In this chapter the researcher will

look at the research methods used, and how the population was sampled. The data sources, research

instruments, the data collection procedures and data validity and reliability are also covered in this

chapter.

3.1 Research Philosophy

A research philosophy is defined as the belief the way in which data or information about a

phenomenon should be gathered, analysed and used. Tsung E.W.K (2016) The researcher opted to

use the Positivist research philosophy. The researcher chose the positivist because the social world

which was observed can be understood in an objective manner. In this research the assumption is

that the effects of fraud risk management practices on fraud risk can be observed in an objective

manner.The researcher chose the positivist research philosophy because it enables him to be

objective and he was able to dissociate himself from his personal views and was able to work

independently. Nickerson (2022)The belief by positivists that the reality is stable and can be

observed described objectively made the researcher to choose the philosophy. Zukauskas (2018)

33
3.2 Research design

Tsung (2016) defined a research design as a plan and way of how the questions in the study will

be answered. The researcher used descriptive survey research design. This method is ideal as the

researcher could gather information and summarise the information. The information summarized

was then presented and interpreted in order to explain the trends in the population.The advantage

of the descriptive survey design is that it allows the researcher is to study a number of variables to

determine the current position of the population.

3.3 Research Method

The quantitative method was used in the research rather than the qualitative method. It was chosen

because it is objective when we tabulate the results of the survey from the questionnaires. The

reactions of people during the interview and on questionnaires can be tabulated and a conclusion

reached. The quantitative method facilitates comparison and aggregation of data from the research.

The findings can be presented clearly and economically if the quantitative method is used. The

quantitative approach provides the foundation for testing the research hypothesis,

The research used descriptive in this study is explanatory as it seeks to investigate the effects of

fraud management practices in small and medium enterprises.

3.4 Population and Sample

3.4.1 Research population

Shukla (2020) defined as a set or group of all the units on which the findings of the research

are to be applied. The entire number of SMEs operating in the retail sector in Mupandawana

growth point is the population. The researcher carried out a census of all the trading entities in the

growth point. There are more than 77 small and medium enterprises in Mupandawana , Gutu

District. The retail sector covered grocery shops, hardware shops, leisure spots and repair shops.

Grocery shops sell fast moving foodstuffs and small household goods. The hardware shops sell

34
mostly building materials and small tools. The table below shows the population of shops in

Mupandawana.

Target population

Category Number of Average number of Total number of

businesses employees per firm employees

Groceries 50 7 350

Hardware 20 4 80

Supermarkets 2 10 20

Construction 5 10 50

Total 77 154

Source: Researcher compiled

3.4.2 Research Sampling

The whole population or items of interest cannot be studied due to legal, time, financial and other

resource constraints. The existence of these constraints necessitated the researcher to study a

sample of the population rather than the whole population. Shukla (2020 defined a sample as a

subset of the population which represents all the elements and characteristics of the population.

The results of the sample can then be generalized over the whole population. A properly selected

sample will be representative of the population it represents. However there is a possibility that

the sample may not be a true reflection of the population due to factors such as bias in the selection

process and failure to recognize underlying factors such as the population subgroups for example

the subgroup may be on religious grouping.

Sampling technique

There are two main types of sampling, probability sampling and non-probability sampling.

Probability sampling is a sampling method, in which subjects are selected without any bias and

all the units of population have equal or predetermined and certain probability to be

35
selected in a sample. Non-probability sampling results in bias when selecting the sample and tends

not to be representative. The researcher used a census sampling technique .In census survey, the

researcher uses all people in the target population as the sample. The researcher had to use random

sampling in choosing the respondents for the survey. There are 430 employees in the groceries and

hardware small and medium enterprises to choose from. The researcher took 10% of the employees

as a sample. There were 43 employees who were interviewed and were given questionnaires.

3.5 Research Instruments

The researcher gave the sampled respondents questionnaires. The questionnaire was deemed

appropriate because of time constraints and was deemed inexpensive. The questions in the

questionnaire were closed ended. These questions provided optional answers for easy to fill so as

to get as many responds as possible. The questionnaire comprised of four sections. The first section

requires demographic information about the respondents. The background on demographic details

were required in order to understand the respondents. The other sections contains questions

relating to fraud management, internal control, employee collusion with outsiders and the

whistleblower system. The researcher used questionnaires as they were not time consuming and

didn’t cost much in monetary terms.

The use of the questionnaires was used because it has the following advantages:

 The interviewer cannot induce a respondent to respond in a biased way

 Anonymity enables the respondents to freely respond and fill the questionnaire freely

 The use of close ended questions allows uniformity of responses which makes data analysis

easier

 The use of questionnaires enables respondents from distant places to fill in the

questionnaires. In this case Mpandawana covers a total of roughly 5 kilometers from the

36
 Central Business District in all directions. This means that the respondents were covering

all areas at Gutu Mupandawana.

Disadvantages

 The questionnaires are mainly meant for literate people who can easily decipher and answer

the questions on them

 The use of closed questions in the questionnaire limited the alternative responses to be

given by the respondents. The respondents were unable to explain some of their responses.

The use of questionnaire allowed the researcher to allow standardization of answers which

enables speedy capture of data information. The use of close-ended questions reduced respondent

bias and allowed the researcher to limit the number of answers to only those relevant for the study.

3.6 Data Sources

The researcher in this study used information from other sources which is secondary data as

guideline to the research.

The primary data from the questionnaires was also used to carry out research which relates to the

local situation. Primary data means that the data is being collected for the first time and will be

relevant to the current situation and area.

The researcher used secondary data sources such as the internet to make an assessment by looking

at past related literature. The different secondary sources allowed the researcher to identify bias

and errors done by previous researchers.

3.7 Data Collection Procedures

Dudovskiy (2022) defined data collection as a process whereby information is collected from all

relevant sources in order to find answers to the research problem, hypothesis testing and outcome

evaluation. The questionnaires were distributed to group of respondents randomly selected for the
37
study. The researcher made the appointments with research respondents by personal contact or

through Whatsapp. He had to visit the respondents and hand in the questionnaires personally after

explaining the purpose of the study. The respondents were given ample time to complete the

questionnaire on their own.

The self-completion technique allows the participants to fill out the questionnaire at their own

convenient time and also to adequately answer all questions on the research instrument. The

questionnaires were retrieved from the participants personally for sorting and data analysis.

3.8 Data validity and reliability

3.8.1 Reliability

Reliability is the extent to which the research results are consistent over time and it provides an

accurate representation of the population under study.

The researcher subjected the study’s research instruments to a pilot study to establish their

reliability. In this pilot study, the research instruments were subjected to the test-retest method.

The research instruments were tested and retested on a sample of 12 respondents. It was

administered twice to the same people in a space of a fortnight and their responses were checked

for agreement of responses and stability.

3.8.2 Validity

Validity is done in order for a data collection instrument in this case questionnaire to see whether

it accurately measures what it was intended to measure as per objectives b89 the current study.

38
The researcher applied content validity to determine the extent to which the different items in the

instruments measured the trait or phenomenon they are meant to.

The researcher in this study checked the validity of the instrument, by preparing the first instrument

for trial and sought opinion on content, format of the questionnaire from the supervisor and fellow

students.

Internal validity

Internal validity is the extent to which the study design, conduct and analysis answer the research

questions without bias. In this study the researcher had also to seek opinion from the supervisor

and fellow workmates on the questionnaire design.

External validity

External validity refers to extent to which results from a study can be applied or generalized to

other situations. Chitaranjan (2018) In this study fraud risk management practices can be applied

to other businesses operating in growth points.

Face validity

Face validity refers to the extent to which the study appears to measure what it is expected to

measure. Cornell (2022) The use of the questions which require Agree Strongly Agree, Disagree

helps in limiting the number of answers to what exactly should be measured.

3.9 Data Presentation and Analysis Procedures

3.9.1 Data Analysis

The researcher made use of both descriptive and inferential statistics to analyse data. The

frequencies, standard deviation and mean are some of the descriptive statistics used in presenting

the findings of the study. The average response of all the respondents on the ranking scale is mean

value.

39
The spread of the responses on the scale is represented by standard deviation whilst the profile of

the respondents is represented frequency.

Standard deviations and mean were used to present the level of exposure of small and medium

enterprises to fraud, the fraud risk management practice and effectiveness of level of small and

medium enterprises and factors affecting the effectiveness in fraud risk management.

3.9.2 Data Presentation

The researcher used pie charts to show the demographic factors such as age, education level and

the gender of the respondents. The pie chart is eye catching and it simplifies the presentation of

the data. Pie charts are easily constructed by using Microsoft Excel program.

Frequency tables were used because they are relatively easy to read and interpret. The data fits

when a frequency table is used. The use of bar graphs will congest the page which will make it

difficult to interpret the information. Frequency tables will show the different types of scales in

the study.

3.10 Ethical Considerations

The researcher undertook the study after getting approval from both Midlands State University

and employees and owners of small and medium enterprises. The study was explained to all

potential respondents and the researcher sought a written consent from respondents before their

participation. He advised the participants of their right to opt out of the study.

The researcher assured the respondents of their anonymity and confidentiality during the course

of study. The names of the participants were not to be written on questionnaire. The data collected

was securely stored by the researcher under lock and key. The researcher assured the participants

that the information obtained was for the purposes of learning only.

40
The researcher ensured honesty and sincerity throughout the research process by upholding

integrity. This will ensure that the Midlands State University receive an ethically conducted

research and research report.

3.11 Chapter Summary

The fraud risk statistics are increasing in Zimbabwe. This can be attributed to several factors

among them according to the Fraud Triangle and the Fraud Pentagon Theories. There is need to

have mitigating factors in place. The establishment of fraud risk management is one of the

measures used to mitigate fraud risk.

41
 CHAPTER 4

DATA PRESENTATION, ANALYSIS AND DISCUSSION

4.0 Introduction

This chapter is concerned with the presentation and analysis of data collected from sample subjects

using research questionnaire and document analysis. The chapter also discusses the findings in

relation to existing literature on the effects of fraud risk management and whistle blower system

on small and medium enterprises. The chapter provides the response rate attained on the

questionnaires which were issued out by the researcher. Reliability and demographic analysis are

also done in this chapter. Reliability was done using Cronbach’s alpha. The chapter also covers

findings on the effects of whistle blower effects on employee fraud in small and medium

enterprises.

4.1 Response rate

The researcher issued 53 questionnaires to small and medium enterprise owners, employees both

shop floor and managerial. The results are tabulated below in Table 4.1

Table 4.1

Respondent class Questionnaires issued Questionnaire Response rate

Owners 20 15 75%

Managers 15 10 66,67%

Employees 18 16 88,8 %

53 41 77,36%

Source: Survey 2022

42
Table 4.1 above shows that out of 53 questionnaires given to the sample subjects 15 were received

from the small and medium enterprise owners out of 20. The managers returned 10 questionnaires

with 16 being returned by the general workers. A total of 49 questionnaires were received giving

a response rate of 77,36% . The response rate according to Saleh (2017) is deemed to be acceptable.

The researcher therefore concluded that 77,36% could be relied upon for the purposes of this study

and could be generalised to apply to the whole population.

4.2 Reliability analysis

The researcher carried out a pilot study to pre-test the data collection instrument for validity and

reliability. The pilot study was carried out with 10 people who were not part of the study. The

researcher assessed the reliability of the questionnaire using Cronbach’s Alpha.

Cronbach’s Alpha measures the internal consistency and checks whether items within a scale

measures the same construct. The SPSS was used to compute the index alpha.

Table 4.2

Case processing summary

Number Percentage (%)

Case valid 53 100

Excluded 0 0.0

Total 53 100

Source: Survey 2022

43
Reliability statistics

Table 4.3

Cronbach’s Alpha Number of items

0.813 53

Source: Survey 2022

The results show that 0,813 as the Cronbach’s index and is considered good. Sekaran and

Bougie(2017). This demonstrated high reliability in the measurement scales for the constructs.

4.3 Social and demographic information

4.3.1 Gender of the respondents

Table 4.4

Gender Frequency percentage

Male 25 47

Female 28 53

Source: Survey 2022

The results in Table 4.4 show that 53% of the respondents were female of the respondents were

female and 47% of the respondents were male. This result shows that there were more females

than males. The difference is marginal and therefore appropriate for the current study.

44
4.3.2 Age of respondents

Table 4.5

Frequency Percentage Valid percentage Cumulative

percentage

Below 20 years 5 11,32 11,32 11,32

20-30 years 16 30,18 30,18 41,50

31-40 years 18 33,96 33,96 75,46

Above 40 years 14 26,42 26,42 100,00

Source: Survey 2022

Table 4,5 show that the majority of the respondents are aged between 20 and 40 years. These

classes accounting for 64, 14 % percent of the respondents. This represents the economically active

part of the population and therefore tends to be representative of the population. The respondents

below 20 years of age account for 11, 32 % which means that the age group are still not

economically active and are still pursuing education.

45
4.3.3 Respondents’ qualifications

Table 4.6

Frequency percent Valid percent Cumulative

percent

Certificate 6 11,32 11,32 11,32

Diploma 25 47,17 47,17 58,49

Undergraduate 20 37,74 37,74 96.23

Masters 2 0,04 0.04 100.0

Source: Survey 2022

In Table 4.6 the majority of the respondents have either Diploma or an undergraduate degree

accounting for 84,91 % of the respondents. This shows from the researcher’s point of view that

the respondents are educated and therefore the respondents were answering from the informed

and knowledgeable point. Their results can therefore be relied upon by the researcher.

4.3.4 Work experience

The Table 4.7 below shows the work experience of the respondents of the study.

Table 4.7

Number Minimum Maximum Mode Mean

Years 53 1 month 20 years 10 9,4

46
In table 4.7 the mode is 10 years and the mean was 9,4 years meaning that the majority of the

employees have served their respective firms for long periods and therefore have sufficient

knowledge relating to the firms. The researcher concluded that their knowledge can be relied upon.

The respondents are also likely to be involved in fraud because they are educated and experienced.

ACFE (2020) stated that 51% of the occupational fraud perpetrators were educated and

experienced.

4.3.5 Main activities of the business

Small and medium enterprises in Mpandawana

40

35

30

25

20

15

10

0
Groceries Hardware Supermarket Construction

Figure 4.1

Source : Survey 2022

In Figure 4.1 above shows that the majority of the businesses are in the retail business with 35

firms in the groceries sector and 10 firms selling hardware. This represents the majority of firms

operating in Mupandawana and the researcher consider these firms to be appropriate for the

purposes of this study. Retails business tend to handle a lot of fast moving goods and cash and

47
they are therefore susceptible to fraud. They are likely to suffer from theft of cash according to

the Fraud Tree (ACFE (2020) The small and medium enterprises because there are numerous

opportunities to commit fraud. Cornish (2014) who cited the fraud triangle.

4.3.6 Fraud Risk Management Department

Fraud Risk Department Presence

NO
9%

Yes
NO
Yes
91%

Figure 4.2

Source: Survey 2022

Figure 4.2 above shows that 91% (48 respondents) of the firms had a Fraud Risk Management or

equivalent department whilst the remaining 9% had no such department. This will enable the

researcher to find whether those firm with these department have low fraud incidences. The

existence of the fraud risk management department tend to reduce the opportunity to commit fraud.

The small and medium enterprises employ relatives and friend and they are therefore bound to act

ethically. Bartels (2018)

48
4.3.7 Fraud Risk exposure and prevalence

The table 7.8 shows the prevalence of fraud in small and medium enterprises at Mupandawana

Table 4.8

N Minimum Maximum Mean Std. Deviation

misuse of assets 53 1 4 1.91 1.114

Theft of cash 53 1 5 2.45 1.381

Accounts receivable fraud 53 1 5 3.72 1.321

Electronic transfer fraud 53 1 5 4.1 1.287

Theft of inventory 53 1 5 1.85 1.116

Valid N (listwise) 53

Source: Survey 2022

The research sought to rate the sentiments on employee fraud from 53 respondents. The prevalence

of employee fraud was rated using a scale of 1 to 5 on a Likert scale. If the mean was close to 5,

the study regarded the statement as to a very large extent and when the mean is close to 4 it is

regarded as to a large extent and 3 is regarded as neutral. In the question regarding misuse of assets

the mean is close to 2 (1,91) which means the majority of the respondents believe that misuse of

assets occur to a small extent. In accounts receivable fraud the respondents believe that the

respondents believe that to a large extent, this type of fraud occurs at a Likert scale of 4 (mean

3,72) ACFE(2020) cited the misappropriation of assets as the most common method of fraud. In

this study there were high incidences of theft of electronic funds transfer and accounts receivable.

The theft of electronic funds include mobile transfer monies which one of the most common

method of payment in Zimbabwe.

49
4.3.8 Effectiveness of Fraud risk management practices in SMEs

In table 4.8 below it refers to questions relating to the effectiveness of fraud risk management

practices in small and medium enterprises based on a Likert scale of 1 to 5.

Table 4.8

N Minimum Maximum Mean Std. Deviation

The firm has been able to 53 1 5 2.98 1.896

prevent fraud incidences and

occurrences

The firm is able to predict 53 2 5 4.15 .899

fraud occurrences

There are measures in place 53 1 5 3.81 1.210

to deal with employee fraud

The firm has been able to 53 1 5 3.89 1.187

recover losses due to fraud

Valid N (listwise) 53

Source : Survey 2022

The research sought an assessment by employees and owners on their assessment of the fraud

risk management practices in their organisations. The majority of the respondents on the question

regarding whether their firms have been able to prevent fraud occurrences and incidences were

neutral with a mean of 2,98.

The respective firms have been able to predict fraud occurrences according to the respondents who

completed the questionnaire with a mean of 4,15 ( Likert scale 4 – large extent)

50
The majority of the 53 respondents felt that their organization have adequate measures in place to

deal with employee fraud. The mean scale was 3,81 (4 = large extent) There is a standard deviation

of 1,21 which means the result is acceptable.

The majority of the firms have been able to recover losses which had previously occurred

according to the results of the survey at a mean of 3.89. The use of control systems and other fraud

risk management systems reduced the incidences of fraud. COSO (2016) recommends the

implementation of internal controls to mitigate the effects of fraud.

4.3.9 Whistle blower protection practice

Table 4.9 below shows the respondents’ responses to questions relating to whistle blowing.

The respondents according to the answers in the questionnaire believed that employee fraud

occurred due to the ineffectiveness of the whistle blower system.

The mean regarding the question on the ineffectiveness of the whistle blower system was 3.6

which is close to 4 on the Likert scale used by the researcher where the majority of the 53

respondents believed that “to a large extent” employee fraud occurred because of the

ineffectiveness of the whistle blower system.

The respondents believed that the small and medium enterprises lacked internal mechanism to

protect whistle blowers. The mean was 3.62 with a standard deviation of 1.304 which means the

results can be relied upon.

The whistle blowing system has not been working for the majority of the small and medium

enterprises because employees have no confidence because whistle blowers are harassed by

fellow workers according to the respondents. The mean was 3,70 which means the majority of the

51
 Table 4.9

Ther

e is

Ineff lack

ectiv of

eness inter

of the nal Lack Lack

whist mech of of

le anis financ knowle

blow ms ial dge of

er whic incenti the

has h Inactio ves whistle

contr prote Whistle n by contri blowin

ibute ct blowers manage buted g Threats of

d to whist being ment to reporti expulsion and

empl le harassed for fraud ng termination of

oyee blow by fellow reporte occurr proced employment to

fraud ers workers d cases ing ure whistle blowers

N Valid 53 53 53 53 53 53 53

Missing 1 1 1 1 1 1 1

Mean 3.60 3.62 3.70 3.89 3.11 3.75 3.62

Standard 1.485 1.30 1.280 1.204 1.476 1.239 1.348

deviation 4

Minimum 1 1 1 1 1 1 1

Maximum 5 5 5 5 5 5 5

Source : Survey 2022

52
53 respondents believed that to a large extent (4 on the Likert scale) whistle blowers are harassed

by fellow workers. The respondents felt that to a large extent (3,89 mean and standard deviation

of 1.204) there was management inaction for reported fraud cases. The respondents were neutral

or indifference regarding the view that the lack of financial incentives contributed to fraud in the

small and medium enterprises. The mean was 3,11 with a standard deviation of 1.476 .

Employees lack knowledge of the whistleblowing reporting procedure to large extent according to

the majority of the 53 respondents to the questionnaire. The mean was 3.75 with a standard

deviation of 1.239. The results can therefore be accepted.

There are threats of expulsion and termination of employment to whistle blowers to a large extent

according to the respondents with a mean of 3.62 ( Likert scale 4). Kusumasari and Nurkidayat

(2017) defined whistleblowing as an ethical act or action of reporting a violation. There is need to

teach employees about ethics which will enhance whistleblowing. The threats of expulsion and

retaliation corroborates the view that employees prefer to whistle blow anonymously. Brenkert

(2010)

4.4 Chapter summary

The chapter provided the findings of the study carried in Mupandawana on small and medium

enterprises. The response rate according to the questionnaires, Cronbach’s alpha reliability

analysis and the demographic characteristics such as gender of the respondents were covered in

this chapter.

The chapter provided findings of the following areas: fraud prevalence in small and medium

enterprises, how effective are the fraud risk management practices for small and medium

enterprises also looks at the whistle blower system. The next chapter provides the conclusions and

recommendations based on the key findings.

53
 CHAPTER 5

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.0 Introduction

The chapter gives a summary of the study’s major findings, the conclusions and the

recommendations arising from the study. The researcher summarised the findings and conclusions

of this study in line with the objectives of the study as stated in Chapter One of this study.

5.1 Executive summary

The study is organised into five chapters: Chapter One introduced the research study with detailed

information on the research problem, research background, and the objectives of the research

together with the research objectives. The specific study objectives, the significance of the study

and definition of terms are also covered in Chapter One.

Chapter Two within the study relates to literature review from related scholars. There is an

extensive of the literature which relates to this study. Chapter Three looked at and justified the

methodology adopted in this study. Data presentation and analysis was done in Chapter Four as

well as discussions on the major findings of the research study.

5.2 Summary of major findings

This study examined was to assess the effects of fraud risk management practices and whistle

blower system on fraud detection in small and medium enterprises in the retail sector in Gutu.

54
The specific objectives were : to explore the amount of exposure to fraud risks in small and

medium enterprises; to identify the fraud risk management practices in small and medium

enterprises ;to ascertain the effectiveness of fraud risk management practices and to investigate

the effect of whistleblower policies on employee fraud among small and medium enterprises.

The population for this study was drawn from small and medium enterprises operating in the retail

sector in Mupandawana growth point in Gutu. The respondents included employees and owners

of small and medium enterprises both gender. Data was collected from respondents using a self-

administered questionnaire with the respondents being given ample time to fill and return the form

to the researcher. The researcher carried out a desk review for document analysis. The researcher

used IBM SPSS version 29.0 to analyse quantitative data captured from the respondents’

questionnaires. The following key findings were established on the study on the study objectives

set in Chapter One.

5.2.1 The amount of exposure to fraud risks in small and medium enterprises

Small and medium enterprises besides them being small and therefore easy to manage still are

exposed to fraud risk. The research found out the small and medium enterprises are exposed to

a large extent to electronic transfer fraud and accounts receivable fraud. The misappropriation

or misuse of assets affects the small and medium enterprises to a small extent. The respondents

were indifferent or neutral with regards to theft of cash in hand in small and medium enterprises.

Theft of inventory occur to a small extent in small and medium enterprises operating in the retail

sector.

55
5.2.2 The effectiveness of fraud risk management practices among small and medium

enterprises

The respondents believed that the fraud risk management practices in small and medium

enterprises are effective in preventing fraud from occurring both from internal and external

sources. The small and medium enterprises in retail sector have been able to prevent the

commission of fraud within the respective firms according to the respondents. The fraud risk

management practices in small and medium enterprises are so good that they have enabled small

and medium enterprises to predict the occurrence of fraud beforehand and allow the small and

medium enterprises to respond accordingly. The respondents have pointed out that the firms in

which they work for or own have measures in place to deal with employee fraud when it occurs.

The small and medium enterprises have been able to recover fraud losses to a large extent.

5.2 3 the effect of whistleblower policies on employee fraud

The respondents believe that where fraud occurs there is bound to be someone who can whistle

blow but the whistle blower system is ineffective. Small and medium enterprises have no internal

mechanisms to protect whistle blowers to large extent. Inaction by management to reported fraud

cases have to a large extent made the whistle blower practice ineffective. Respondents were

indifferent on the view that the lack of financial incentives contributed to fraud occurring in their

firms. Respondents to a large extent blame the lack of knowledge of the whistleblowing reporting

procedure to be the main reason why fraud goes unreported. There is threat of expulsion and

termination of employment to whistleblowers in firms where there is whistleblowing policy in

place.

56
5.3 Conclusions

The research study carried out in small and medium enterprises operating in the retail sector

raised the following possible conclusions: The small and medium enterprises are susceptible to

electronic transfer fraud and accounts receivables fraud. They are least exposed to theft of

inventory and misappropriation of assets. The fraud risk management practices done by small and

medium enterprises are effective in mitigating fraud. There are whistle blowing protection policies

in place which are ineffective because potential whistle blowers will be harassed and management

won’t take action.

5.4 Recommendations

The researcher recommends the following based on the conclusions made:

(i)The small and medium enterprises should reduce their exposure to electronic transfer fraud

and accounts receivable fraud. They should put in place fraud risk management practice will

deter the occurrence of fraud on time.

(ii) The researcher found out that the fraud risk management policies in place are quite effective

and therefore they should look at further strengthening the policies in place and improve their

monitoring in areas where they are susceptible to risk.

(iii)The researcher found out that the whistle blower system is ineffective and offers no

protection to whistle blowers. The firms are urged to have strong whistle blowing procedures

in place and they should protect the whistleblowers. The whistle blowing procedures should

be published so that all the employees are aware of the procedures.

57
5.5 Areas of further study

The researcher recommends further studies to be done on the effects of whistle blowing on

other sectors of the economy. Further studies can be made on the effects of non-conventional

methods such as black magic as a fraud risk management tool.

58
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International Review of Management and Business Research. 2(1):12-16.

ACFE, (2020.) Report To the Nations On Occupational Fraud and Abuse 2020, Association of

Certified Fraud Examiners.

Basri S.A,Marsam A.D et al (2017) Reinforcement tool of whistleblowing to eradicate fraud in the

Public Sector SHS Web of Conferences

Brenkert,G.G.(2010)Whistleblowing, moral integrity and organizational ethics. In

Brenkert,.G.,&Beauchamp. Oxford printing press

Bunn, E., Ethridge, J., & Crow, K. (2019). Fraud in small businesses: A Preliminary Study. Journal

of Accounting and Finance, 19(3), 24–32.

Chittaranjan A (2018) Internal, external and ecological validity in Research Design, Conduct and

Evaluation. Indian Journal of Psychological Medicine

Cornwell D (2022) Face validity examples. https://helpfulprofessor.com/face-validity-examples

COSO, 2016. Fraud Risk Management Guide - Executive Summary. In: Committee of

Sponsoring Organizations of the Treadway Commission. Committee of Sponsoring

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Cornish, Derek B and Clarke Ronald V(2014): The Reasoning Criminal: Rational Choice

perspectives Transaction Publishers

Deloitte. (2016). Fraud in the banking industry. Nairobi: Deloitte

Deloitte (2021) Fraud policies: Why you need one and what it should look like .

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Erbuga, G., S. (2020). Rationality in decision-making and deterring corporate fraud. Contemporary

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Karanja, N. N. (2018). Effect of fraud risk management practices on level of activity by agent

banks in Nairobi County (Thesis). Strathmore University. Retrieved from http://su-

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Gathu, T. G. (2018). Effects of fraud risk management practices on net incurred medical claims in

Kenyan insurance industry (Thesis). Strathmore University. Retrieved from http://su-

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(A Field Study) Journal of Positive Science

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Criticism, 43(7), 669–684

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Said, J., Alam, M.M., Ramli, M., Rafidi, M., 2017. Integrating ethical values into fraud triangle

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APPENDIX

APPENDIX A

Research instruments

(1) Letter of Consent

Recall Jirivengwa

Registration Number R2117455Q

School of Accounting Sciences

Midlands State University

Dear Respondent

RE: Letter of transmittal of data collection

My name is Recall Jirivengwa, a student studying towards a Master of Commerce in

Forensic auditing and accounting with Midlands State University. I am undertaking a study

on “the effects of fraud risk management on fraud detection in small and medium

enterprises”.

Your assistance on the provision of data will be highly appreciated. I would like to conduct

a few interviews and distribute questionnaires to employees or owners in your organisation.

Assurance is given that the information will be for the above purpose and will be treated

in confidence and will only be used for academic purposes.

The research study is done for the purposes of fulfilling the university department and also

as a source of literature for further studies by other students.

I am looking forward to hearing from you.

Yours faithfully

Recall Jirivengwa

63
APPENDIX B

QUESTIONNAIRE FOR SAMPLED EMPLOYEES OF SMALL AND MEDIUM

ENTERPRISE IN MUPANDAWANA GROWTH POINT

TOPIC: The effects of fraud risk management practices and whistle blower system on fraud

detection in small and medium enterprises in the grocery sector in Mupandawana

Please tick the appropriate answer in the space provided.

Section A: Background Information of respondents

1. Kindly indicate your gender Male { } Female { }

2. Please indicate your age group

Below 20 years { } 20-30 years { } 31-40 years { } above 40years { }

3. Please indicate your highest education level

Certificate { } Diploma { } Bachelors { } Masters { } Other specify_________________

4. What is your position in the organisation ?_ __________________________________

5. How long have you been working in this organisation?

Below 5 years { } 6-10 years { } 11-20 years { } above 20 years { }

Section B: Background information of the business

This section covers the general background information about your organisation that relates

to the objective of the study.

6. What are the main activities of your organisation?

Groceries { } Hardware { } Supermarkets { } Construction { } Other specify _____________

7 .Is there a fraud risk management or equivalent department in charge of fraud incidents?

Yes { } No { }

8. How long has this department been working?

64
Below 1 year { } 1-3 years { } 4-6 years { } above 6 years { }

Section C: This part seeks information on the various aspects of fraud risk management.

Fraud is defined as the intentional use of deception to gain a financial advantage.

9. How many fraud cases has your organisation suffered in the past five years?

None { } 1-5 { } 6-11 { } above 11 { }

Please indicate the extent of fraud prevalence in your organisation, Use the following scale

and tick the appropriate scale . The Scale is 1 to 5 where 1= to lesser extent 2= small extent

3 =Neutral 4 = large extent 5 = very large extent

1 2 3 4 5

(10) Misappropriation or misuse of assets

(11)Theft of cash in hand

(12)Accounts receivable fraud

(13)Electronic transfer fraud

(14 ) Theft of inventory

Section D: The effectiveness of the fraud risk management practices in small and medium

enterprises in Mupandawana. This section’s purpose is to evaluate the effectiveness of fraud

risk management practice. Please tick the appropriate scale using the following scale. 1=

lesser extent 2= small extent 3 = Neutral 4= large extent 5= very large extent

1 2 3 4 5

(15)The organisation’s fraud risk management practices are effective

(16)The firm has been able to prevent fraud incidences and

occurrences

65
 (17 ) The firm is able to predict fraud occurrences

(18)There are measures in place to deal with employee fraud

(19)The firm has been able to recover losses due to fraud

Section E: Whistle blower protection practice.

20. To what extent do you believe the ineffectiveness of the whistle blower system has contributed

to employee fraud? 1 lesser extent { } 2 small extent { } 3 Neutral { } 4 large extent { } 5

To a very large extent { }

Use the above Scale to answer the question below

1 2 3 4 5

(21)There is lack of internal mechanisms which protect whistle blowers

(22)Whistle blowers being harassed by fellow workers

(23) Inaction by management for reported cases

(24)Lack of financial incentives contributed to fraud occurring

(25 ) Lack of knowledge of the whistle blowing reporting procedure

(26 )Threats of expulsion and termination of employment to whistle blowers

66
67
68