Organizational Intention to Use Forensic Accounting Services for Fraud Detection and Prevention

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ORGANIZATIONAL INTENTION TO USE FORENSIC ACCOUNTING SERVICES FOR FRAUD DETECTION AND PREVENTION BY LARGE MALAYSIAN COMPANIES

By

Gunasegaran Muthusamy
Graduate School of Business
Curtin University of Technology
Western Australia
Tel: +618-92661149

Professor Mohammed Quaddus
Graduate School of Business
Curtin University of Technology
Western Australia
Tel: +618-92662862

Professor Robert Evans
Graduate School of Business
Curtin University of Technology
Western Australia
Tel: +618-92662882

Organizational Intention to Use Forensic Accounting Services for Fraud Detection and Prevention by Large Malaysian Companies

ABSTRACT

Fraud has evidently become one of the most problematic issues faced by companies throughout the world. However, the pervasiveness and seriousness of fraud could not be surmounted with the extant methods used to combat fraud. Recent evidences specify that forensic accounting services (FAS) are the least often used of any anti-fraud methods but had the highest effectiveness rating. The underutilization of this essential service provided the imperative for this study. The multi-phased mixed-method research design utilized a theoretically grounded, parsimonious, yet comprehensive conceptual framework. Quantitative data analysis using Partial Least Square from Structural Equation Modeling confirmed the significant positive influence of attitude, stakeholder pressure, and perceived susceptibility to fraud on the organizational intention to use FAS for fraud detection and prevention. This research has both theoretical and practical significance. Theoretically, the conceptual model contributed a distinctive and refreshing perspective on organizational decision-making. Practically, the research results would facilitate professional bodies, accounting firms, government, and organizational stakeholders to devise practical methods and promotional strategies to increase the awareness, acceptance and ultimately the use of forensic accounting services in the fight against fraud.

INTRODUCTION
Fraud is an omnipresent and debilitating corporate problem. The devastation of Enron and WorldCom in the beginning of the millennium are testaments to this apprehension. Enron’s shares dropped from $90 to $0.25 in the short spate of 14 months, shareholders and debt holders lost tens and billions of dollars whilst 20,000 employees lost their retirement savings (Crumbley & Apostolou 2002). The demise of WorldCom, which holds the record for the largest accounting fraud and bankruptcy in history, caused the loss of hundreds of billions of dollars in stock value and shook the foundations of the Wall Street (Crumbley & Apostolou 2005). The tremors did not stop there. The collateral damages inevitably reverberated to employees who lost their livelihood, debt holders, the local community, and government (Zahra, Priem, and Rasheed 2007).

In addition, the present turbulent economic era has to deal with the ever-changing landscape of fraud that has spawned vast new innovative pathways of opportunities for the fraudsters (PricewaterhouseCoopers 2009). Regrettably, fraud has become the 21st century’s most lucrative crime, with minimal risk of apprehension and even lesser risk of swift and severe punishment (Wells 2004). The chances of actual prosecution for corporate fraud in the U.S according to the FBI are 20,000 to 1 (Lieb 2002). A typical gun yielding bank robber could net less than $5000 but will face at least 5 years of imprisonment, yet, the famous Michael Milkin who embezzled $1.2 billion through junk bonds paid a fine of $600 million and spent only 20 months in jail (Wells 2004). The exacerbating fact is that the potential fraudster believes he can commit fraud and easily get away with it.

The force of the global economic downturn in 2008 has further augmented the threat of fraud. The consensus among experts is that incidents of fraud would escalate...
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