Internal Controls and Fraud in Small Businesses: A Qualitative Case Study

摘要

Various financial crimes occur in small businesses. The specific business problem is that small business leaders lack internal control strategies to minimize fraud in small businesses. The purpose of this qualitative multiple case study was to explore internal control strategies that small business leaders used to minimize fraud in small businesses. The guiding theoretical framework in the study was fraud triangle theory. In-person interviews was performed with 10 business leaders that own small businesses in the United States. Four research questions were used in the study, as specified in the implications section. The design used was qualitative multiple case study. In the data analysis, responses from the participants were grouped into themes with codes. The results included the following themes: deterrence of internal controls, no absolute assurance for absence of fraud because of strong internal controls, internal controls fail to prevent fraud, diminishing opportunity to perpetrate financial crimes because of strong internal controls, detection of fraud because of strong internal controls, reduction of fraud because of strong internal controls, inefficiency of internal controls, improper application of internal controls, expensive of internal controls, whistle blower policy, bank accounts reconciliation, and anti-financial crime training. The implications of the results were strong internal controls deter fraudulent workers to commit fraud, strong internal controls do not guarantee absolute assurance for zero fraud, internal controls have failed to prevent fraud, diminishing opportunity occurs because of adequate internal controls, strong internal controls detect and reduce fraud, internal controls are inefficient, entrepreneurs apply internal controls incorrectly, and internal control are expensive to adopt. Recommendations for practice included enhancement of internal controls. Recommendations for future research focus on exploration of more internal control strategies, internal control measures, and improvement of the study.