The case studies of fraud prevention mechanisms in the Malaysian medium enterprises

The purpose of this paper is to identify the extent and type of fraud scheme, prevention mechanisms and challenges experienced by the Malaysian medium enterprises.

The multiple case studies approach has been used in this study. The data were collected through interviews with the directors, owners, managers and supervisors of three medium-size enterprises.

The findings suggest that the fraud cases experienced by the enterprises were related to broken trust and non-cash larceny. The implementation of fraud prevention mechanisms in the enterprises seem to be very limited because of resources and budget constraints.

The findings of the study have an alarming implication for the owners and directors of the selected medium-size organizations. They seem to have shown proactivity and to have responded to fraud in their organizations by implementing fraud prevention mechanisms; however, not to the extent that large organizations have done. This fact may expose the companies to the risk of losing their competitiveness and the ability to survive in the marketplace.

This paper contributes to the growing literature on the studies of fraud scheme and the fraud prevention mechanism in the medium-size enterprises, particularly in the context of developing country. Prior studies in these areas have predominantly been undertaken by large organizations of developed countries, which offer different environment, litigation and institutional setting thus limits the generalizability of fraud prevention mechanism to small- and medium-size businesses.