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Article
Publication date: 18 June 2020

Zulkarnain Yusuf, Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

The purpose of this paper is as follows: first, to analyze the opinion of the civil servant or payroll personnel towards the payroll system that currently used by the government…

1623

Abstract

Purpose

The purpose of this paper is as follows: first, to analyze the opinion of the civil servant or payroll personnel towards the payroll system that currently used by the government. Second, to investigate the control measures currently exist in the payroll system and third, to examine any loopholes that may create opportunities for fraud to occur in that payroll system.

Design/methodology/approach

This study involves a survey of questionnaires to the department’s personnel that act as respondents. One government department has been selected as a case study in this research. This study was focussing on the payroll administration unit that responsible for all personnel payroll operation and administration.

Findings

The study concludes that payroll system has equipped with the security and control characteristic. However, there is still a risk of fraud due to some internal control weaknesses in the system. Thus, the awareness about the control and security of the system should be given priority so that the staffs will understand and aware about it.

Research limitations/implications

The study provides some evidence to indicate a weak and ineffective control measure in the payroll system that may lead to the fraud. Thus, by detail examination of the problems, the prevention and corrective action can be done in combating fraud. However, this study suffered from the small number of samples and limited access to the relevant documents due to confidentiality of the data.

Practical implications

This study reveals that there are a few key internal control points that can be enhanced to facilitate better protection of payroll expenses in combating fraud in the government department. These include clear segregation of duties, stricter approval process and highly protected personnel information. In addition, adoption of whistleblowing channel, established internal audit function and severe punishment to the wrongdoers also can be implemented.

Originality/value

This study is original as it examines fraud and malpractices issues that specific for payroll department in the government department that rare in literature.

Details

Journal of Financial Crime, vol. 30 no. 2
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 10 September 2018

Norazira Abd Karim, Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

The purposes of this study are to examine the standard operating procedure (SOP) on inventory management practices, identify any weaknesses in inventory management and examine its…

5412

Abstract

Purpose

The purposes of this study are to examine the standard operating procedure (SOP) on inventory management practices, identify any weaknesses in inventory management and examine its impact on the performance of the company. Inventory management is important because it ensures smooth production and prevents loss of sales because of stockout and/or customer dissatisfaction.

Design/methodology/approach

This study selects one manufacturing company as a case study and uses the mixed data collection method of document analysis and observation. The research analysis was conducted by using COSO Internal Control – Integrated Frame work 2013 as guidance.

Findings

It is revealed that a company practices risky inventory management in keeping stock, as it relies heavily on third-party warehousing services beyond the control of the company. This study also reveals that the SOPs are too general and lack specificity. However, poor inventory management has a modest influence on the financial performance of the company.

Research limitations/implications

In completing this study, some limitations are experienced such as changes on the management structure of the company as well as the department itself. Frequent changes on several procedures also may influence this study to obtain accurate information. In addition, some highly confidential documents such as detailed information and minutes from management meeting were not permitted to be examined.

Practical implications

This study provides recommendations to improve weak internal controls particularly on SOPs, so that fraud and mismanagement opportunities can be reduced.

Originality/value

This study makes an original contribution, as it enhances the theoretical and practical understanding on inventory control and management systems, particularly for a manufacturing company in the emerging market environment. In addition, it examines various internal financial reports and directly observes the process in supply change management, which are generally difficult to be accessed by academic researchers.

Details

International Journal of Law and Management, vol. 60 no. 5
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 10 September 2018

Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

Most organizations are fully aware of the misconduct that occurs within their company but take a soft-handed approach attending to the problems. Consequently, misconduct that at…

1358

Abstract

Purpose

Most organizations are fully aware of the misconduct that occurs within their company but take a soft-handed approach attending to the problems. Consequently, misconduct that at the beginning is just a mere incompliance may become a corporate scandal involving a substantial amount of money. This paper aims to examine the factors that influence whistleblowing intentions of employees that work in one big corporation, ABC Berhad, which experienced a corporate scandal.

Design/methodology/approach

A survey questionnaire is used in which the respondents from the various departments of the selected study case, ABC Berhad, were required to indicate the seriousness of the wrong-doing cases and their intention to whistleblow based on the given vignette. A total of 70 survey questionnaires were distributed. Out of these, 63 questionnaires were returned, for a response rate of 90 per cent.

Findings

The result of the study shows that gender did not have any significant influence to the likelihood to whistle blow. However, the job position of the respondents has a significant result as it can influence the likelihood to whistle blow. The study also found that the more serious the wrongdoing, the higher the likelihood to blow the whistle.

Research limitations/implications

The results provide further confirmation of the determinants that influence employees to report wrongdoings in the organizations. This study, however, may be subject to self-reported data biasness due to the sensitivity of the topic. In addition, respondents may not give responses or answers based on the actual situation but be tempted to response based on socially desirable which is to please their peers and others.

Practical implications

This study shows ABC Berhad whether its employees are ethical in carrying their duties and indicates their levels in ethical reporting. In addition, the study helps the company generally and ABC Berhad particularly to understand the working culture in the company so that they can identify the areas of the governance that need improvement such as protection to the employee that blew the whistle.

Originality/value

This study is original as it focuses on the employees in a big organization such as government-linked companies (GLCs) that have experienced corporate scandals although they have a whistleblowing mechanism in place.

Details

International Journal of Law and Management, vol. 60 no. 5
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 2 July 2018

Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

The purpose of this study is to investigate the weaknesses of internal control in expenditure claim procedure and to identify the opinions of employees regarding an occupational…

3028

Abstract

Purpose

The purpose of this study is to investigate the weaknesses of internal control in expenditure claim procedure and to identify the opinions of employees regarding an occupational fraud. This study also attempts to examine the most popular occupational fraud committed by the employee and whether a company’s working environment contributed to the fraud.

Design/methodology/approach

A case study approach was adopted to investigate and analyse the weaknesses of the internal control and occupational fraud incidents. A mixed method of data collection, specifically, survey questionnaire and document analysis were used.

Findings

This study found that the internal control of the expenditure claim procedure was weak and needed improvement. This study also found that a strong internal control and a better remuneration paid to the employees could reduce the risk of the occupational fraud committed in the company. In terms of fraud types, this study discovered that claims on mileage, followed by petrol, accommodation and suppliers’ invoice were the most popular occupational frauds committed by the employees. Finally, employee dissatisfaction and poor working-environment culture influence occupational fraud’s level in the organizations.

Research limitations/implications

The results provide further confirmation of the fraud triangle theory on the causes of fraud, i.e. opportunity because of a weak internal control and financial pressure because of low and non-standardized salary. This study, however, was conducted only on one company.

Practical implications

This study provides some recommendations to overcome the weak internal control and improve employees’ satisfaction which lead to better working environment. Thus, opportunities for fraud in the company can be reduced.

Originality/value

This study is original, as it focusses specifically on occupational fraud which is rare in fraud literature, particularly for a study that is conducted in developing markets like Malaysia. It also has examined various related sensitive documents and reports of employee frauds that are generally difficult to be accessed by researchers.

Details

Journal of Financial Crime, vol. 25 no. 3
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 10 September 2018

Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

The purpose of this study is to determine the suitability of capital statement analysis in assisting tax investigation to combat tax evasion, measured by the time taken in proving…

870

Abstract

Purpose

The purpose of this study is to determine the suitability of capital statement analysis in assisting tax investigation to combat tax evasion, measured by the time taken in proving the under-declared income by the tax evader. A weakness in the investigation process that may contribute toward the delay of the tax investigation completion was examined.

Design/methodology/approach

Five investigation cases were randomly selected from the tax investigation organization for detailed and in-depth analysis on the whole process of reconstruction of capital statement analysis. Document analysis technique was used to analyse the data.

Findings

This study found that the capital statement analysis can be an effective tool in detecting under-reported income and tax evasion. However, the cooperation from the taxpayer is the most important factor, because if taxpayers do not cooperate, the investigation officer needs to find other informant such as third party as a source of information which usually time-consuming.

Research limitations/implications

This paper selected only a small number of tax fraud cases for examination. Many other cases were not accessible due to confidentiality and considered as high-profile cases.

Practical implications

The outcome of this paper contributes in the way it can be used and applied by the revenue authority in implementing more practical and effective capital statement analysis technique to deter tax evasion. The investigation activities can be improved so that more cases can be covered in shorter time period.

Originality/value

The paper is novel and original, as it focuses on the investigation of tax fraud cases’ which is difficult to access and rare in tax literature, particularly in emerging markets. The findings of this study are inferred from direct examination of the actual cases documents that are private and confidential.

Details

International Journal of Law and Management, vol. 60 no. 5
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 8 May 2018

Norazira Abd Karim, Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

For a manufacturing company, inventory control and management is crucial to ensure smooth production and sustainable sales performance, as well as preventing stockout that will…

4189

Abstract

Purpose

For a manufacturing company, inventory control and management is crucial to ensure smooth production and sustainable sales performance, as well as preventing stockout that will result in customer switch to competitors. This paper aims to examine the effectiveness of cycle count activities, one of the inventory control tools to manage inventory. Beside, this study also wishes to identify any loopholes in practices and procedures in inventory control of companies.

Design/methodology/approach

One of the lubricant manufacturing companies in Malaysia was selected as a case study and mixed method data collection of document analysis and observation were used. The analysis and examination was conducted by using Committee of Sponsoring Organization of the Treadway Commission Framework 2013 as guidance.

Findings

This study found that problems in inventory control can be caused by inconsistency of practices due to incomplete or absent standard operating procedures. Furthermore, no segregation of duties and excessive reliance on one person to conduct many tasks will lead to human error and fraud.

Research limitations/implications

This paper enhances the theoretical understanding on the inventory control and management system applied in the manufacturing organization particularly. However, frequent changes of the management in the organization of the case study make the study difficult to obtain consistent information. Not all standard operating procedures were revised or updated and available for examination. In addition, some of the reports needed for investigation are confidential and requests to observe and scrutinize information from those documents are denied by the company. Thus, more in-depth analysis and verification on the issues of interest were unable to be conducted.

Practical implications

This study provides an indicator that cycle count activities need to be conducted frequently on a regular basis so that the physical inventory and recording system are accurate. Cycle count activities also must involves various related departments in the company in which regular training is essential to ensure employees are aware and understand their responsibility and accountability on the inventory.

Originality/value

This study is original as it focuses on the inventory control management of one of the largest lubricant manufacturing in Malaysia, particularly on cycle count activities which is scare in literature. Furthermore, the company allows research access to the documents and operations conducted in the company, which is usually difficult to obtain from many companies.

Details

Journal of Financial Crime, vol. 25 no. 2
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 7 January 2019

Noor Furzanne Alias, Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

The purpose of this study was to determine the professional competency levels acquired by internal auditors in detecting unethical behaviour, to evaluate the position of internal…

2238

Abstract

Purpose

The purpose of this study was to determine the professional competency levels acquired by internal auditors in detecting unethical behaviour, to evaluate the position of internal auditors on objectivity and integrity in dealing with unethical behaviour and to examine the extent of their awareness on ethical issues in government-linked companies (GLCs).

Design/methodology/approach

Data were collected via questionnaires that were randomly distributed to the internal auditors of the selected GLS in Malaysia. These questionnaires were constructed from the Certified Internal Auditor (CIA) Examination Paper and The Institute of Internal Auditors (IIA) Competency Framework.

Findings

This study found that internal auditors of the GLCs had a high level of competency in performing audit engagements and were able to detect unethical practices in the companies. The majority of the internal auditors also had a high level of objectivity and integrity when faced with unethical behaviour during audit engagements.

Research limitations/implications

This study provided strong evidence that the internal auditors of Malaysian GLCs strongly complied with IIA Code of Ethics. Besides, they were also aware of the unethical behaviour which occurred within their organizations. However, this study is limited to the internal auditors in GLCs, while the questions of the survey instrument are restricted to the elements of integrity, objectivity and professional competencies of internal auditors.

Practical implications

This study highlights the level of internal-auditor competency and adherence to the IIA’s International Standards for the Professional Practice of Internal Auditing (ISPPIA) and IIA’s Practice Guide to identify unethical behaviour within the Malaysian GLCs.

Originality/value

This study is original as it focusses on GLCs which did not get much attention from previous researchers, particularly the GLCs that operate in a developing country such as Malaysia.

Details

Journal of Financial Crime, vol. 26 no. 1
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 7 January 2019

Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

Many corporate scandals that occurred recently have indicated the importance of a whistle-blowing mechanism in preventing fraud and malpractices from damaging the organizations…

1467

Abstract

Purpose

Many corporate scandals that occurred recently have indicated the importance of a whistle-blowing mechanism in preventing fraud and malpractices from damaging the organizations. By selecting one organization that has experienced a corporate scandal, this study aims to examine factors that influence employee’s intention to blow the whistle to prevent malpractices in the company. In addition, this study also examines the perceptions of employees regarding the business culture in their organization and how this culture impacts their intention to whistle-blow.

Design/methodology/approach

This study engages in a mixed method of data collection, namely, survey questionnaire and interviews to gather the data.

Findings

It is found that retaliation is the most important factor that influences the employee’s intention to whistle-blow, followed by the burden to prove the malpractices, cost implications as a result of the wrongdoing and the action taken by the authority as a result of the fraud reporting. In terms of business culture, a large number of employees are reluctant to become a whistle-blower, although a secured and safe whistle-blowing mechanism is in place, indicating that Asian customs of collectivism and assertiveness play a major part in shaping the whistle-blowing mechanism in Malaysian organizations.

Research limitations/implications

The results provide further confirmation of the determinants that influence employees to report wrongdoings in the organizations. This study however may subject to self-reported data biasness because of sensitivity of the research that related to fraud and immoral behaviours that occur in the company. Owing to this sensitivity, the study only focuses on employees’ internal whistle-blowing intentions rather than their actual intentions.

Practical implications

This study helps the management to understand the working culture in the company so that they can identify the weak area of governance which needs improvement such as whistle-blower protection.

Originality/value

This study is original, as it focuses on the employees in a big organization such as government link companies that have experienced corporate scandals albeit having whistle-blowing mechanism in place. In addition, the finding of this study contributes to the theory and body of the literature on the whistle-blowing determinants, currently scarce in the context of a developing country like Malaysia.

Details

Journal of Financial Crime, vol. 26 no. 1
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 20 January 2020

Nurul Ain Shahar, Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

This paper aims to examine the extent of the Shari’a corporate governance disclosure in the annual report of Islamic financial institutions (IFIs) in Malaysia to determine the…

1278

Abstract

Purpose

This paper aims to examine the extent of the Shari’a corporate governance disclosure in the annual report of Islamic financial institutions (IFIs) in Malaysia to determine the significant differences in this disclosure between the local and foreign-owned IFIs, small and large size IFIs and IFIs belong to Islamic and conventional holding companies.

Design/methodology/approach

All 16 IFIs in Malaysia were selected to analyse the extent of disclosure in their annual reports on issues related to Shari’a corporate governance. For this purpose, an index of Shari’a corporate governance disclosure for IFIs was created based on adapting Sulaiman et al. (2015). The index consists of 127 items classified into 14 dimensions. The scoring of the disclosed items is binary, where a score of “1” if disclosed and “0” if it was not disclosed in the annual report.

Findings

The result shows no significant differences in the Shari’a corporate governance disclosure between the local and foreign-owned IFIs, small and large size IFIs and IFIs belonging to Islamic and conventional holding companies. However, further examination shows that there was a significant difference in the disclosure of the risk management committee dimension between the large and small IFIs and investment account holders dimension between the conventional and Islamic holding companies.

Research limitations/implications

The results provide new emerging evidence that deviates from many prior empirical research studies, which document the domination of Islamic-based IFIs in the corporate governance practices, as compared with their conventional financial institutions that venture into Islamic finance. This study, however, was conducted on only 16 IFIs in a one-year period, i.e. 2013. Future research should consider data from a larger number of IFIs that involve a number of countries with more than one year of data to have a better understanding of the extent of Shari’a corporate governance disclosure.

Practical implications

This study provides an indicator to the stakeholders of Islamic finance that the Islamic-based IFIs and conventional IFIs are equal and cannot be differentiated based on the Shari’a corporate governance disclosure. For Islamic-based IFIs, as a pioneer in Islamic banking and finance industry, they need to take more efforts in adopting the Shari’a governance framework issued by the Central Bank of Malaysia (BNM), namely, the Shari’a review, audit and risk management.

Originality/value

This study is original, as it includes the latest requirements by the Shari’a governance framework issued by the BNM, namely, the Shari’a review, audit, risk management and research functions in its research instrument. In addition, this research also scrutinised the disclosure in detail of all the dimensions constructed in the governance index.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 4
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 7 October 2019

Ahmad Saiful Azlin Puteh Salin, Zubaidah Ismail, Malcolm Smith and Anuar Nawawi

The purpose of this study is to examine the relationship between board ethical commitment and the performance of the company. When directors embed ethics in discharging their…

993

Abstract

Purpose

The purpose of this study is to examine the relationship between board ethical commitment and the performance of the company. When directors embed ethics in discharging their duty, it will prohibit frauds, unnecessary actions and decisions that are detrimental to the company.

Design/methodology/approach

This study collected data for two years i.e. 2013 and 2014 from the annual report of the biggest 500 companies by market capitalisation as of 31 December 2013 listed under Bursa Malaysia stock exchange. Board ethical commitment is measured based on the Malaysian Code of Corporate Governance (MCCG) and various international best practices while corporate performance is measured based on return on equity, return on assets, net profit margin, market to book value and TobinQ.

Findings

This study found that ethical commitment by the board has a significant positive relationship with corporate performance. The findings are robust to the alternative performance measurements and lagged one-year corporate performance.

Research limitations/implications

This paper enhances the theoretical understanding of the contribution of the board of ethical commitment to the sustainable performance of the company. However, this study suffered from a limited data collection period of two years only from the annual report of the company.

Practical implications

This study provides an indicator that the directors need to provide a good ethical leadership example to the employees and committed to built a good ethical work culture in the organisation via establishment of code of ethics. In addition, this code needs to be promoted, enforced and embedded in the operations of the organisation.

Originality/value

This study is original as it not only examines board ethical commitment from MCCG 2012 but also international best practices from various countries such as UK, USA and Europe. It also contributed to the literature and theoretical understanding of the importance of board ethical commitment specifically in developing countries like Malaysia that scarce in the literature.

Details

Journal of Financial Crime, vol. 26 no. 4
Type: Research Article
ISSN: 1359-0790

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