Misappropriation of organizations’ assets


Background of the Study

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Misappropriation of organizations’ assets has raised a lot of concern for the corporate governance. To begin with, previous studies on organizational fraud have shown less concern on the assets misappropriationthus increasing market insecurity for the investors. Therefore, this idea formed the basis of study for the present research. Thestudy is geared towards introducing a framework of guiding corporate governance when it comes to detecting cases of assets misappropriation.Corporate governance is the system of rules, practices and processes by which a firm is directed and internally controlled. It essentially entails balancing the interests of a firm’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. In addition, corporate governance provides the framework for attaining a firm’s objectives, encompassing every sphere of management with transparency and accountability(Jackson, Sawyers and Jenkins, 2008). On the other hand, corporate roles are the firm’s managerial positions which are entrusted to the intelligent, well rounded individuals who possess strong problem solving skills, a history of leadership and teaming, a track record of success and the passion to make an impact. Asset misappropriation occurs when people entrusted to manage the assets of an organization steal from it, making the companyincur unexpected losses.Assets misappropriation is categorized under, schemes of skimming, cash larceny and reimbursementschemes which are fraudulent in nature (Wells 2005).




Significance of the study

Many organizations worldwide have faced the cost of fraud where they have found themselves incurring losses in terms of finance, failed productivity, heightened levels of insecurity and misplacement of confidence by the investors to the audit profession. This  makesthe act of fraud a main concernto the organizations’ investors, external auditors and the controllers. Fraud can be classified under many categories, but the present research study focuses on the internal fraud because it is the kind of fraud thatdwells on assets misappropriation which forms the basis of our research study. In particular, internal fraud is carried out within the organization (Wells 2005).

The present research study is majorly concerned with assets misappropriation due to a number of reasons. To begin with, misappropriation of assets is the highly catastrophic category of fraud that regularly occurs in an organization (ACFE 2010). The second reason is that, following the previous literature on fraud studies, assets misappropriation has not been given much consideration(Brazel et al 2010). The study was also supported by Shelton et al (2001) who argued that there are limited guidelines on how external auditors should respondin cases of intensified risk indicators of assets misappropriation. Shelton et al also argued that the corporate governance, especially the auditing department is characterized by inefficiency and ineffectiveness when it comes to responding to risk indicators of assets misappropriation because auditors tend to view all risk indicators as equal. This is because no weights are assigned besides each risk indicator.

Yemen became the major interest in studying the issue of assets misappropriation because it was found out that there was lack of study about the general fraud as well as studies concerning assets misappropriation. This may be because Arabs, by nature, are discreet and therefore, the organizations’ management applies that culture in running the information of the organizations hence making assets fraud to be undisclosed in the public domain. Meanwhile, Yemen auditors are compelled to use ISA no. 240 in carrying out the process of auditing. Despite the set standards, it cannot be proven that the set standards are executed by the Yemen auditors because cases of assets misappropriation have been rampantof late (Brazel et al 2010). Questions concerning the degree in which the Yemencorporate governance is conversant with the assets misappropriation indicators and the ways in which it can respondto them encouraged the present research study to be carried out, with an aim of providing knowledge to the external auditors concerning assets misappropriation.In addition, the present research study aimed at establishing a framework for the auditors to help them respondto risk indicators for assets misappropriation despite the fact that the proposed framework was to be based on the auditors’ perception. The list of the risk indicators was obtained from other countries’ professional guidelines on risk indicators,e.g. Wells (2005) on Principles of Fraud Examination,meaning that the framework may be applicable in any audit firm.

In achieving the aim of the present research study, two types of research methods were used; questionnaire and interview,conducted amongst the Yemeniinternal and external auditors as well managers of the organizations.


Developing a theoretical model

In developing the nature of the theoretical model, the study looked at the nature and the categories of assets misappropriation.  To begin with, the study defined assets misappropriation as a situation where the organization’s employee steals or misuses the assets of the organization for personal gain. This situation entails the management or the employees involved forging information to hide the act of stealing (KPMG 2006). According to Majid et al (2010), misappropriation of assets is far beyond stealing an organization’s assets since it also entails misuse of the company’s assets by the employees. Nevertheless, the organization management involves itself in assets misappropriation in a way that cannot be easily identified.

In accordance with the ACFE (2012) reports, assets misappropriation is the most available type of fraud which is rated at 90 percent of the cases of fraud researched in their study although it gave the least impact to the corporation indicating a loss of less than $ 150,000. In the year 2010, the ACFE carried out a worldwide research on fraud, Yemen being one of them and only three cases of assets misappropriation were identified. The research was repeated in the year 2012 and this time round no cases of fraud wereindicated and this could be linked to the privacy culture found in Yemen. The ACFE findings were supported by reports published by KPMG in the year 2006 that indicated misappropriation of asset to be the most prevailing form of internal fraud.

Category level of assets misappropriation isdivided into three othercategories which include; schemes of fraudulent disbursements, skimming and cash larceny.


Skimming is defined as a theft act whereby money is stolen from the company just before being accounted hence making it hard for the professional audit to track the amounts. Skimming is reported to be hardly recognized for investigation thus making it hard to prove whether money was stolen. Therefore, standardized audit procedures should be put in place to help track down such kind of a theft (ACFE2010). It is argued that organizations should depend on deploying protective measures that would prevent the employees from stealing since it is so difficult to detect the act of skimming (Coenen 2009).Mini organizationsin the healthcare, banking and manufacturing industries with 100 or lessemployees are the ones which were foundto be prone to such kind of theft (Zweighaft 2004). The act of stealing money before it is accounted was divided into two sub categories; the skimming of sales, which essentially means stealing money from sales made to an irregular customer. The second sub category was skimming of receivablesand this entails stealing money which is being expected by the organization, hence it can be easily detectable if the transaction does not read in to system (Buckhoff 2006). According to Wells (2005), skimming can also entail substituting cheques for cash or manipulating the assets price so as to pocket the excess money. Coenen (2009) also argues that the employee can carry out scheming by changing the statements of accounts which involves altering the clients’ details so that the money can be directed to the employee.

The second category of assets misappropriation entails stealing of already accounted money (cash larceny). According to Sheetz (2007), the employee committing the act accomplishes the mission by entering the wrong information into the cash register, making a transaction look void and making unique changes in the financial records. Wells (2005) argues that stealing of already accounted money takes place at the time of making sales where the employee can use another employee’s access code. Wells (2005) also argues that the stealing is done in bits over a long period of time so that employee can report it as an error. Hopwood et al (2008) argues that cash larceny entails destruction of the cash register tapes or registering false refunds so that the cash register tape can match the intended records.Hopwood et al also argued that cash entry can be reversed to balance the accounts.

The third category of assets misappropriation is schemes of fraudulent disbursement where the employee causesthe organization to pay out undue money (Silverstone and Sheetz 2007).  Under this scheme, there are five subcategories which include; schemes of billing where the employee intentionally makes the organization make payments for forged purchases or the employee fakes a non-existing company so that the employee’s company can make cheques and invoices for the employer’s benefit(Wells 2005).In addition schemes of billing could also include altering the invoice of the client so that once the organization pays out the cash the employee can contact the client and explain the transaction mistake whereby once the cash is given back by the client, the employee pockets it (Vona 2008).The second sub category is tampering of chequeswhereby the employer steals money from the organization by forging or adjustingchequesdrawn from the company’s bank account(Diagle et al 2009).It may seem awkward for this kind of scheme to happen because with the modern technology, mobile banking is better but it was found that most Yemeni corporations still usecheque transactions.

The third sub category of schemes of fraudulent disbursement is payroll manipulation whereby the employee tricks the organization to issue a payment of false transactions (ACFE 2010). In addition, the employees can steal the organization’s money in the payroll by either colluding with their boss to earn more than the expected salary (Coenen 2009). The fourth sub category is forged payout for expenses by the employee. In this case, the employee alters the expected organization expenditure so that he or she can pocket the excess payments.

The fifth sub category is the cash records payout where the employee falsifies the entries to the cash records so as to cover the stolen money (Buckhoff 2006). According to ACFE (2010), this is the easiest fraud to be detected though it is less costly to the organization. It was also indicated that destruction of financial records is commonly found in this category as a measure for hiding the facts.Buckhoff (2006) argued that asset misappropriation has a relationship with the environment of the corporate governance. Organizations basically prefer to abide by ASX suggestions for best practice regarding the rule of disclosure (ASX, 2003). Following this logic, the depth of cooperation with the governance set up within the organization proposes a tradition of cooperation in the organization.

According to Warren (2014), most of the organizations are faced with the problem of asset misappropriation due to the fraudulent nature of the company’s management and this has seen most of the companies make huge losses and others going to an extend of running bankrupt.Asset misappropriation does include straight theft such as stealing physical company assets and ultimately, it is the company’s cash flow that suffers.In response to that, some states like America have adopted strict corporate governance wherebythe main aim is to minimize cases of financial incompetency in their companies (Krus, 2005). The financial scandals caused by  fraudulent management have imposed a lot of challenges in the audit sector,forcing the corporate governance to realign itself on the financial sector by putting up asset fraud indicators(Véron, Galichon and Autret 2006).

It is crucial to study corporate governanceand corporate roles,especially the auditing sector, in developing a framework for detecting asset misappropriation in an organization so that the role of auditors in examining the quality of the firm’s financial report can be upheld (Xie, Rezaee, Dadalt 2003).In addition, according to the American Securities and ExchangeCommission, asset misappropriation has a great impact on the company’s reputation and organization morale hence driving the quest to know how the impact can be addressedso that the business can run successfully(Mitchell and Wilmarth 2010).

Research objective

The present research study aimed at providing knowledge to the external auditors concerning assets misappropriation which had not been investigated earlier in Yemeni context. In addition, the present research study also aimed at establishing a framework for the external auditors to help them respondto risk indicators for assets misappropriation despite the fact that the proposed framework was to be based on the auditors’ perception.

Objective summary

  • Toachieve a clear understanding of the lists of risk indicators of assets misappropriation based on the constructed framework.
  • Tocategorize each list of risk indicators of assets misappropriation under the main categories of the red flags.
  • To understand the way external auditors can respond to the risk indicators of assets misappropriation in case they arise.

Analysis of the theoretical basis for the study

The theoretical basis of the study is to give a clear understanding of the role of corporate governance and corporate roles.This majorly entails involving the external auditors in developing a framework for detecting asset misappropriationand establishing ways to prevent it given the outstanding cases of assets misappropriation. The research study also aims at providing confidence in the security markets through revised and up to date financial recordsvalidated by the auditors.

Cresseyin studyingthebehavior of assets misappropriation fraudsters, reported that three conditions must exist;the force behind,opportunity and the rationalization of the individual carrying out the misappropriation. To prevent asset misappropriation, the crucial aspect to consider is the opportunity to commit asset misappropriation. It is clear that the more the number of internal controls a company has put into place, the fewer the chances for the asset fraud to occur.

Rationale and scope of the Study

Previous research studies on organization fraud have concentrated on the international problems like the effect of corporate roles and governance on value of the company and its performance (Denis and McConnell, 2003). On the contrary,the present research study focuses on establishing detecting mechanisms to support corporate governance,especially external auditors guidelinesin examining how the company’s accounting statements are in terms of quality(Xie, Davidson, Dadalt, 2003) or ways in which assets misappropriation occurs in a firm by listing them under the three major categories(Dunn, 2004; Rezaee, 2005; Farber 2005). Having the strength of the firm’s loss linked to the assets misappropriation especially in Yemeni context(Apostolou and Crumbley, 2005), the validity of the corporate mechanisms efficiency in minimizing the occurrence of assets fraud gives the company the stronger accounting performance. In addition, assets misappropriation emerges due to improper guidelines on choosing the people to run the corporate roles and this greatly affects the general corporation welfare (Klein 1998). This is because may be no unified goals and objectives set in place and therefore, every agent is directed by their own motive, which is basically personal utility maximization,in running the organization(Jensen andMeckling, 1976). To be specific, assets misappropriation involves stealing of the company’s assets by the employeesin little amounts that cannot be easily detected by the management. On the other hand, the corporate role holders stand a better chance to commit assets fraud because it is not easy to detect unless strict financial audit is done to reveal the misappropriation.


Corporate governance and assets misappropriation is catalyzed by a number of corporate breakdowns. Hence there is a need for corporate governance to reconstruct market confidence for the potential investors to invest;corporate governance mechanisms are put in place to regulate management and employee problems and ensure that every corporate role is enacted for the benefit and the interests of the company.

Problem statement

Assets misappropriation is more likely where there isa lack ofrelevant auditing guidelinesemployed in the corporate governance mechanisms.

Research questions and Hypotheses

  1. Doexternal auditors perceive indicators of assets misappropriation as efficient measures to detect assets misappropriation in an organization?


  • External auditors perceive risk indicators of assets misappropriation as a way of indicating the act of assets fraud
  • External and internal auditors are aware of the list of assets misappropriation indicators


  1. Are the risk indicators of assets misappropriation perceived as equally important in detecting misappropriation of assets in an organization by the external auditors?


  • The corporate governance mechanism especially the external and the internal auditors view the listed risk indicators of assets misappropriation as equally important


  1. Are there particular ways in which the corporate governance mechanisms especially the external auditors should act in case of intense risk indicators of assets misappropriation arise in an organization?


  • There are ways in which the corporate governance mechanisms can trigger responses to assets misappropriation in an organization
  • With proper background checks for the employees concerned with financial preparation and reporting, an organization can reduce assets misappropriation.








The prior literature on assets misappropriation is very limited in that no research study gave guidelines on how the external auditors can detect cases of misappropriation in an organization.According to Kassem (2014), assets misappropriation is the most common fraud in many organizations especially those related to occupation. It results ina negative impacton investors, the shareholders and external auditors whenever it happens. This triggered a study to be done in Yemen where data collection involved use of prior literature, semi- structured interview and a questionnaire. Three different methods of misappropriation of assets were identified; skimming, cash larceny and fraudulent disbursements. Skimming includes two types;sales skimming, which happens mostly when one has access to incoming funds, and, receivable skimming which happens when one laps customers’ accounts. The results from the questionnaires suggesteda method of detecting misappropriation, i.e. the use of red flags or risk indicatorswhich included the review of entries and physical examination, stated that the method was appropriate in dealing with most of the misappropriations. However, there was an increased customer complaint therefore suggesting that the method had not yet perceived all the skimming schemes as supported by ACFE Reports, (2010).

According to Lea (2016), assets misappropriationcan be reduced through the implementation of corporate governance compliance mechanisms. Different dimensions were used in the corporate governance which included transparency of the financial data entered, the structure of ownership, corporate social responsibility, a committee involved in auditing and also including managing directors. For transparency to be evident in data recording there is a requirement that all the transactions of a certain organization are well recorded however small so that the stakeholders of that organization can easily comprehend the company’s financials. This helps to play a great role in the retrieving of capital and creating a sense of ownership to the employees thus reducing misappropriation of assets. The directors should be involved in overseeing of the functions of a company and regulate them towards its prosperity. The board has a role inpreventing the misappropriation of assetsby implementing risk control programs. A CEO should be elected to hire and supervise the transactions of different staff members. The ownership structure may involve the distribution of shares to the directors togive them an incentive to follow up transactions accurately due to their sense of ownership(Heubischl, 2006). The corporate responsibility in which a certain firm is required to undertake so as to suite a social life with people is the responsibility of the company to take care of the environment as it derives its products such as recycling thus being ecofriendly as supported by Huang, (2010).On the contrary there have been suggestions that of ignoring the responsibility since it has no direct benefit to the company as affirmed by Kim; Park and Weir, (2011).The audit committee is derived from the members of the board of directors for reviewing the financial statements, thus increasing the credibility and quality of auditing.

According to Chapple; Ferguson and Kang (2014), more executive managers in a firm and also having a CEO who also has the position of chairperson, increases the cases of fraud. In addition, information technology has resulted in increased fraud due to easier access of data information. Intoducing an IT strategy committee with monitoring powersis anecessity. IT strategies would help to reduce fraud in an organization through effective internal controls as derived by an IT committee. In order to decrease the level of frauds, there should be different intensities of IT governance mechanisms employed, such as the commonly used three intensities; higher tier, medium tier and the lower tier as explained by Solar and Fitzpatrick, (2002). The CEO duality should be determined as per the levels employed from the ASX Corporate Governance Council so as to subsequently reduce the fraud cases.

Ferguson; Coram and Moroney, (2006) prove that there is a value which is brought by internal auditing in an organization as a major consideration in the detection of asset disoperation. Internal audit is part involved in corporate governance and involves overseeing the directors to develop integrity in a certain organization especially inthe financial reporting process. There have been three monitoring mechanisms which are bound in the audit which involve internal auditing, external auditing and directorship as further explained by Anderson; Francis and Stokes, (1993). However, of the three mechanisms, internal auditing happens to be the one that adds value to most organizations as supported Goodwin and Kent, (2004). Results of a current study done by survey across Australia and New Zealand involving 480 organizations provides evidence to support auditing as most organizations give a positive reflection towards it. The study includes a unique measure of fraud since it uses self-reported fraud which is brought up from the 2004 KPMG fraud survey. However, the internal auditing mechanism has a weakness since it only focuses on the integrity of the committee members of an organization as the only cause of misappropriation and therefore leaving the other factors involved unattended.

According to In’arait, (2015), misappropriation of assets has been a major financial scandal which affects most organizations in the recent years as also recorded by Bunget, (2009). There has been a study in which the aim was to make a determination of the support given by corporate governance in the reduction of the cases involving fraud. The research was done in Saudi Arabia and sampling and model developing process were used as the methods of data collection. There were four components which were deduced which included the internal audits, external audits, directorships and audit committees. For the internal checks they were to ensure that the day-to-day routines of that certain organization which were personal would also be complimentary to those of others as per Coram, (2008). This would therefore mean that the transactions would no longer need much supervision since there is the involvement of many people in them leading to more accurate data entry (Tunji, 2013). The external audits help in the judgment of the level of one’s profession reminding on the certain specific areas to be privileged. It was found that they both work hand in hand with the external audits in the regulation of frauds which is one of the regulations of the external audits when alone. After the employment of the components, it was found that there was a significant standard deviation depending on the analysis given in the Saudi business environment.

Gutpa, (2015), examinedthe nature of different frauds in India and their economic (Fraud Risk, 2015).Research was conducted which combined literature reviews, case studies, questionnaires and interviews involving the management and corporate professionals. At the end of the research, it was found that the auditory system was weak and the role of the auditors had to be redefined and the coordination among different regulatory authorities was poor. In addition the banks and the other institutions were quite ineffective and therefore calling for the need of retaining their effectiveness. However, the different investigators relied on the honesty of the interviewees and the respondents therefore leading to the weakness of the study. As the completion of the study, there was the suggestion that all the affected companies and firms should increase their corporate governance in order to clearly detect the frauds and control them. The major suggestion was that the firms should rely on the rules which are set to govern the organizations and to establish the techniques to be used in their enforcement as supported by Reiss and Tonry, (1993) which in turn would reduce fraud cases significantly thus reducing the unnecessary loss incurred by the different firms.

According to Cowan, Gutenski& Co., P.A. (2014), fraud can be detected through regular scheduling of a day’s activities which can be achieved by making the policies set by the directors towards the company well known to the employees so as to deter the fraudulent behaviors. The consequences for the illegal acts should also be well explained to them and an enforcement policy introduced thus keeping a business safe from the fraud. The corporate governance is involved in the development of different mechanisms used by the `stakeholders of a firm in the control of corporate insiders and hence protecting the interests as per Levrau, (2007). The relationship between the board of directors and the performance outcomes of a certain firm has been proven direct by many. In another perspective there is an explanation of the responsibilities of auditors in the regulation of fraud. For the internal audits, there must be the evaluation and the potential involved in the occurrence of fraud in an organization therefore deciding on the measures to use to deal with it accordingly. Porter, (1997), explains on the responsibility of the external audits as the detection of frauds over a couple of years mostly a century. To sum up the whole response, the auditors must compile all the principles involving integrity and make up decisions on how to regulate the levels of fraud in their disciplines.

Managers need to focus on their management of the infrastructure asset as a way of managing the resources and in the target of reducing the asset misappropriation of that certain firm. This can be done through the synthesis of the different means of infrastructure that the company has access to and the possibility they have to develop cheaper one which can be used as a means of reducing the expenses as explained Too; Betts and Kumar, (2006) in a study involving a strategic approach towards infrastructure. Hence the need to consider infrastructure asset in the asset misappropriation of a certain organization should analytically be targeted to the acceptable levels through the incorporation of the best means possible (Government of South Africa, 1999). The infrastructure asset management done by a board is one the physical asset management which needs to be overlooked upon in a cost effective way towards the achievement of the annual reduction of the expenses. The resource allocation the board of a certain firm involved should involve the transparency in the equitability in the allocation to the physical asset management in considerate of the reduction of the fraud cases at the end of the performance of that specific firm and increase the profits gained. This is gained through the strategic approaches which consider the costs and henceforth ensuring that present needs and requirements are easily met without the compromise of the generation to take over in the future as supported by the NSW Treasury, (2004).

Many firms set and use visions and missions which they hopefully succeed in as a way of giving a threat attitude towards the fighting of the asset misappropriation among their officials as explained by Majid; Basri; Mohamed and Ahmad, (2014).  They further evaluate that the visionary statements would be the guidelines to the officials to the responsibilities they are to undertake with respect to their positions. The visions and missions go hand in hand with the rules set by the governing directors to control the employees of the company. The misappropriation is mostly caused by the misconduct of the employees in their roles out of some findings analyzed and concluded from problems discovered in asset misappropriation from a study in Malaysia.  The study was about the search for integrity levels of the employees and the data was collected from the websites. At the end of the research, it was concluded that the stakeholders of most firms did not adhere to the governing rules of the firm giving a proof that they were not ready to involve themselves in the fight against misappropriation. The local governments therefore find it very hard to control the misappropriation especially those related to misconduct as supported by Aquinas, (2016). The key role of the policy of the missions and visions is the promotion of an ideology to the employees and providing guidance to the stakeholders to comprehend to the roles associated to their different titles and positions (Davey, 2012).

According to Petrascu and Tieani, (2014), the premise of audition is a governing function which helps in the betterment of management of different activities carried out in a firm and expresses them to the leaders. Fraud was a major cause of huge losses and nowadays it is considered as a risk which is faced and should be overcome by companies as expressed by Munteanu and Zuca, (2010). The responsibilities of detecting the misappropriations are divided to the executives who now implement on the mechanisms to use to deal with them. Although there can be no complete elimination of frauds in a company, the executives have a role of maintaining appropriate accounting and internal control system depending on their role as governed by the corporate roles. The members of the audit committee which is formed are responsible for supervising the directors’ board towards the achievement of the goals set to be achieved and the monitoring plays a great role in the efforts towards the curbing of frauds. Auditors must have quite considerable knowledge of the theoretical basis of the fraud cases to be in the best position of carrying out their role effectively. They can develop their own ways of dealing with the cases where some people are caught involving themselves in fraud cases which may include public annunciation which can be a thread to others planning to do so (Petrascu, 2012). A careful planned program should also be set towards the regulation of the codes which drive the employees and the follow up of individual employees.

The corporate governance works towards the resolving of different issues which may arise in between principle and the stakeholders since the stake holders mainly focus on the personal gains using the resources provided by a firm which would result to fraud in that certain company. Since the company is mainly focused on the maximization of the output and profits, and on the other hand there are selfish personal gainers, there tends to be a misunderstanding between both of them as affirmed by Musalem and Palacios, (2004). Towards the corporate governance, some measures have to be employed which can be the involvement of auditors. Although in most organizations the internal audits are given more priority than the external audit, there should also a necessity of considering the external audits as well. The external audits are basically carried on by independent and qualified auditors whose main aims are the establishment of financial statements and reports which are accurate and complete through the use of technology or any other means which can suite it as explained by Bucher, (2006).

The corporate governance brings the balance between the board members and their benefits which include the benefits of the shareholders and the stake holders without having a compromise in any of the sides. Upon this, there would be a retained competitive value of a firm since both the shareholders and the stakeholders are all considered. In accordance to Bainbridge, (2006), the policy strengthens the rights of both the shareholders and the stakeholders of a firm without constraining any of the parties and therefore reducing the proxy fights involved. The corporate roles can suggest the use of analyses which are of different types to determine the case whether there have been misappropriation of assets in a certain firm in the aim of determining the level of frauds and manipulations done by those involved as per Omar; Kunji; Sanusi and Shaffie ,(2014).

Misstatements can occur whenever there is a fraudulent reporting of financial information which possibly can omit some amounts of certain earnings or even lack of disclosing of the accurate values in the aim of deceiving the stakeholders, investors and the government (Pickett, 2013).  According to Rezaee (2002), management and executives may be required to assume some deliberate actions as a way of meeting the objectives of earnings that lead to fraudulent reporting of finances due to lack of integrity in the reporting of the financial statements. Quite a number of the studies on the cases of asset misappropriation been done by some organizations with a professional knowledge aiming towards the detection of frauds (Gupta and Sharma, 2009). A report is established by the Association of Certified Fraud Examiners once in every two years and submitted to the Nation on Occupational Fraud and Abuse as one of the instances used in its description. The publishing of the findings which concern the fraud cases is done by other organizations which include KPMG and Deloitte LLP in the body of Integrity Survey (KPMG, 2006).

As a way of reducing frauds, a board formed should typically involve independent members who are not regulated by the firm as this would be more effective than a body comprising of members chosen from the board of directors which is an indigenous selection (Hermalin and Weisbach, 1998). This would be effective every time since they are not governed by the regulations given by the firm upon the roles they have to partake. The financial and the governance crisis of a firm led to the strengthening of the development of independent boards especially on the follow of the WorldCom and Enron scandals which happened back in 2002. The fact that the directors of an organization do not have much information about the dealing with fraud cases would result to strained relationships with the management thereby supporting the independent board establishment. In another study, Ravina and Sapienza, (2009) support the establishment of the independent boards as they in the make corporate decisions to be involved in the control of asset misappropriation. However, there is a contrast in another study that there was a failure to recognize the relationship between the independent boards and higher firm value as per Bhagat and Black, (1999; 2002).

The nature of the governance problems are not the same in all companies whether with or without a shareholder controlling the firm in accordance toBebchuk and Hamdani (2009). Whenever there is a controlling shareholder, there is no opportunism in the governance of the executive directors over the public shareholders and thus having a priority to the minority shareholders as affirmed by Bebchuck;Kraakman and Triantis, (2000). The introduction of a shareholder controlling the firm would reduce the cases where there would be the misappropriation of assets by the majority executives towards their own personal gains at the expense of the minority. However, at another perspective, it is affirmed that the contribution of the minority shareholders increase the agency cost and hence depreciating the firm value.

Good corporate governance has adhered to the attention needed by the public and regulatory in considerate of some decades ago even though the issue has been present for a long time (Okpara, 2011). In the role of detecting the asset misappropriation, it is made clear by the International Standards on Auditing as supported by ISA (240) that the major responsibility is within the people who are involved in the management and have been charged with the governance of entity. The internal control in the internal assets were to assist in the production of accurate information and data entry thus encouraging reliable information in the basis of accounting which would result to appropriate decisions being made to the well being of a company as explained Ebaid, (2011). The internal auditing improves the corporate governance in a firm thus bringing the evolvement of professional activities which increases the efficiency in the operations carried out by a company thus targeting the reduction of asset misappropriation as per Zarksyi, (2006).

Corporate governance is a detailed disclosure of information of an organization’s financial situation, its performance, the commitment of the firm in business theory and its ownership and governance (Al-Azam; Al-Quara’an and Al-Mohammed, 2015). The governance has a broad social and institutional dimensions which help it better the access to the capital and aiding in the economic growth of the firm. The corporate roles have to develop different rules in the focus on the factors involving fairness, accountability and responsibilities involving both the shareholders and the stakeholders. A business needs both internal and external governance to thrive to its best and their failure reflect on the inability to meet the standards of that organization and therefore the making it unable to reach the competitive markets as affirmed by Tura, (Tura, 2012). Weak corporate governance leads to mismanagement and increases the risks of corruption within the firm leading to poor performance whereas only good governance can be able to deliver good performance (Chen and Lee, 2012). According to the study carried out by Al-Sa’eed, (2013) in the banking sector, he found that the principles of corporate governance were used as the basis of controlling oversight and reducing of the fraud cases.

Corporate governance is a major concern to the government in a number of countries and targets on the raising of the firm standards. Some rules have therefore been deduced to monitor and organize relations between the management and audits especially in the companies undertaking frauds. Audits cater for one of the main requirements in the establishment of an efficient market through obtaining of fair and rightful view of the financial position of a firm. Through following of well designed measures and methodologies in the development of the different stages required in the process of detection and prevention of asset misappropriation as affirmed by Martens, (2008). The external auditors involved have an incentive in the increment of the efficiency of the corporate governance which can be achieved by monitoring the managerial behavior to the aim of considering all the stakeholders without any compromise in accordance to Kueppers and Sullivan, (2010). The Audits also have a role of increasing the confidence of a company by providing the essential requirements in a timely manner and in accordance to the corporate roles governing them (Fulop, 2013).

There are no benefits to either of the sides involved in the misappropriation of assets but only losses which affect them drastically (Carmichael and Lynford, 2012). Often, whenever the perpetrators involved in the cases are caught, they suffer some consequences which may either be personal or profession related in accordance to the rules set in that particular firm. Some of them lose their positions and employment while others face legal justice which includes serving a particular jail term prison as decided. For the firms which end up being victimized, their morale is negatively affected due to the loss incurred and a negative publicity accompanied by the incident. Zack, (2013) affirm that the result of asset misappropriation can be reduced output from the workers as expected. External auditors have another role of assisting in the evaluation of control structures and systems to prevent asset misappropriation by presenting figures which are accurate to the stakeholders responsible, investors and the government (Holtfreter, 2004).




In this section, various methods that were used in conducting the study of the research project are explained in details. This includes the participants which are basically the population used in conducting the study, instruments, materials and the procedure used to carry out the study and the procedure of the data analysis.

Research Design

Questionnaires and interviews were used in carrying out the research study because the project was dealing with a wide field on assets misappropriation and the corporate governance especially the internal and the external auditors. The benefits of using questionnaires and interviews are that, important and the whole characteristics of life are able to be retained by the researcher (Mgenda 2008). Moreover, questionnaires and interviews enable the person carrying out the research to be very careful in ensuring that a full study is done on the samples selected through random stratified method. The questionnaire and the interview were conducted with the aim of showing the relationship between corporate governance especially the external auditors and corporate roles in detecting assets misappropriation in a firm. The sample design was used to collect data from the public corporations in Yemen, both local and international and it involved asking relevant questions to the internaland the external auditors by use of a structured questionnaires.

Research Context

In conducting the research study, the literature that will be used shall be drawn from the literature done by scholars on internal and external auditors’ mechanisms in detecting assets misappropriation, following the causes and how to prevent the issue. The instrumentalities public corporations rely on to manage assets fraud. Specifically, the literature shall relate on the role of external auditors’ mechanisms in detecting and managing misappropriation of firm’s assets. The relationship between corporate governance and corporate positions will make part of the informing literature.

Ethical Requirement

According to the American Psychological Association Ethics Code, the researchers’ ethical guidelines must be followed in any research study. This entails the researcher to discuss and pay attention to the rules governing the intellectual property that governs the information that the researcher intends to use. Primary information can only be used if the owner agrees. On the other hand, secondary information does not need owner’s consent because the information has already been interpreted by someone else. In the course of carrying out the research, the participants play various major roles and therefore, it is ethical for the researcher to avoid any kind of relationships or behavior that impairs the participants’ performance during the research process. The researcher should concentrate on the main concerns of the research collection, analysis and logical conclusion in line with the study objectives.

The research respondents must act on informed consent. The researcher has the responsibility to inform the person or the institution before using their data so that approval can be done prior to the research. Researchers should prior inform the respondents of the research study so that they can have enough time to consider giving reasonable facts and response concerning the questions being asked. In the course of seeking data collection approval, the researcher should explain to the individuals or the institution the purpose of the research study,   the official way to carry out the study, expected time to be taken, the right of the respondents to decline to participate, motivation for participation, rules of  confidentiality and any advantages of the research. Privacy and confidentiality are important and should be strictly adhered to during the data collection process because the researcher will be dealing with public corporation information and exercises which are mostly targeted by the corporate roles and employees to carry out assets misappropriation.

Methods of Data Collection

The research method to be used is quantitative research method. The study will be carried out by employing a close examination of literature on corporate governance mechanisms in detecting assets misappropriation. There will be notes-taking, reflection making on the data and also making data interpretations. Other researchers on the same topic will be involved in the discussions and in cases of doubts, primary data will be involved so as clear the doubts of the secondary information.

After making a clear definition of the research problem, the design of the research will be established paving way for the data to be collected and this entails considering both primary and secondary sources. The researcher will obtain primary data majorly through questionnaires and interviewsinvolving the external and the internal auditors.The secondary data will be obtained from sources such as literature articles done by other scholars, journals and books. It is of benefit to use secondary sources because the data obtained has a pre-established degree of validity and reliability, in addition, it is also time saving when it comes to filling the primary data gaps and cost efficient as the data on the same research topic was collected by someone other than the researcher thus giving better knowledge of the research project.

Limitations of previous studies in assets misappropriation, fraudulent audit levels mostly when it came to guidelines for the  internal and external auditors in auditing assts misappropriation, motivated the current research study in the Yemeni context on exploring the role of corporate governance mechanisms especially the internal and external auditors in detecting assets misappropriation emanating from material misstatements.A list of indicators on misappropriation of assets was a suggestion by the current research study and ranking was done in accordance with their importance based on the proposed procedures of auditing which are important in assessing and responding to assets misappropriation.

The research study is guided by the objective of broadening the knowledge of the external auditors concerning the nature and classification of assets misappropriation. In addition, the study aims at giving the auditors a framework that will help them detect cases of assets fraud and give a worthwhile reciprocity to the issue. The strategy of the framework developments took place in three phases as detailed below-:


  • The first strategy was based on constructing a list of factors that are linked with assets misappropriation.

Based on secondary information, a list of risk indicators was developed by 50 Yemeniauditors both internal and external where a list of 52 indicators was obtained. Later on, other 10 auditors cross checked the list to enhance clarity of the expected response and came up with a refined list consisting of 42 risk indicators of assets misappropriation (Kassem 2012). This list was made in creating the questionnaire on categories of risk indicators of assets misappropriation as perceived by the internal and external auditors. The refined list is given below-:

List indicators for asset misappropriation

  • Indicators for asset misappropriation in schemes of skimming.
  • Increased rates of changes, discounts, incomes and cancellation from an account
  • Similarity between clients’ personal address and those of attendants working in the financial department
  • Mismatch of money details with those in the deposit tickets
  • Decreasing income from cash sales
  • Manipulated financial refund documents
  • Mismatch between cash receipts and statements of bank deposits
  • Difference in the amount of cash deposited and the expected returns
  • Questionable petty cash usage
  • Abnormal entries to the journal
  • A negligible increase in number of the delayed accounts
  • Personal cheques being exchanged for cash
  • Indicators for assets misappropriation through cash larceny
  • Destructions of records indicating sales transaction
  • Mismatch between sales records and the cash at hand
  • Situations where there are delayed transaction process for deposits
  • Similar entries made in the journal
  • Indicators for assets misappropriation in schemes of billing
  • Unexplained increases in expenditures
  • Non traceable purchases in the inventory
  • Negligible increment in the price average unit of the goods
  • Similarity between client and the employees physical address
  • Suppliers with corporations registered using initials only
  • Poor systems of internal control with an individual employee assuming more than one role in the financial department mechanisms
  • Invoices being broken into many billings
  • Cases where actual expenditure exceeds the budgeted expenditure
  • Alarming increment of expenses as compared to the previous
  • Consistent expenditure on one supplier for a long time
  • Indicators for assets misappropriation through tampering of cheques
  • Cancellation of cheques with many approvals
  • Issuance of cheques in to cash has a higher chance of fraud
  • Mismatch of the cheque sequence with that of the organization
  • Gaps in the sequence of cheques as seen in the register
  • Unintended signatories for the approval date


(e) Indicators for assets misappropriation through schemes of payrolls

  • Non- existing employees with no physical address
  • Detectable budget storms
  • Mismatch between expenditure on payroll and the actual expenditure on payroll
  • Different cheque faces as observed in the  system and the management

(f) Indicators for assets misappropriation through schemes of pay outs

  • Overdue submission of receipts from restaurants
  • Non professional documents which lack the suppliers’ physical address
  • Non-recorded claims on transactions by the employee
  • Increased rates of credit usage by particular employees
  • Estimations of expenditure totals to the nearest whole numbers
  • Expenses of the same amount that are taking a consistent pattern
  • Untraceable refund documents
  • Unconfined clients’ detail on transactions where sales are not posted in the same card
  • Increased rates of refund transaction by particular employee



  • The second strategy in developing the framework was mainly concerned with the creating the second questionnaire on how important the risk indicators were in detecting misappropriation of assets as perceived by auditors. This was based on the list created in the first strategy.

In this category, the research study aimed to answer these questions;

(a) Are indicators of fraud efficiently perceived capable of detecting misstatements of materials emerging from assets misappropriation by the external auditors?

(b) Are the risk indicators within different categories of assets misappropriation perceived to be equally detrimental by the external auditors?

In developing the third category of the suggested framework, the research study aimed at determining how the external auditors inYemen can react to assets misappropriationemanating from the assets misappropriationrisk indicators given, based on their work experience and also type of audit office they worked for.

Pre-Testing of the Questionnaires

The clarity and time to be taken in filling the questionnaires was tested amongst 7 participants who were given the questionnaires to fill and it was found out that, the clarity of the questionnaire was recommendable, moreover, the questionnaire could be easily understood and it would take an average of 20 minutes to complete the questionnaire filling.



These questionnaires were to be majorly administered to70 Kenyaninternal and external auditorsboth local and international with sufficient years of experience and professional qualifications because the researcher believed that reliable data that will help achieve the research objective would be obtained (Fisher 2004). There was one week training for the research assistants on how to collect data by the researcher. The questionnaires were delivered by hand Participants were given a duration of two weeks (from 27th March to 9th April) to complete the questionnaire fillings.


The questionnaire was six paged, inclusive of a cover letter addressing the respondent and the significance and the aim of the research, request of cooperation from the respondents andalso confidentiality of the respondents during the research study. The questionnaire was structured in three major categories. Thefirst category was made to answer the first research study question on how efficient the list of risk indicators of assets misappropriation was in detecting the act. The questions were closed ended where the respondents were only required to answer “yes” or “no”.The responses expected were pre-coded thus minimizing the chances of coding errors and also reduce the chances of explanation ambiguity caused by variability of the respondents as well as time saving (Bryman 2012).  In the second research question, the respondents were expected to give a response on whether the list of risk indicators of assets misappropriation had similar importance in detecting the given type of fraud.In this case, a list ranking of the risk indicators was to be developed and where a scale of 1 to 4 was to be used.1 represented the least important risk indicator while 4 represented the most significant risk indicator.The third question was based on the respondents’ background.The tables below show the respondents distribution on the basis of the auditors’ work experience in years. Table 1 shows that, all the auditors declared their audit office type but in table 2, it shows that out of 70 respondents, the respondents who filled the part of experience were 64


Table 1 Respondents’ audit office type

Local office International office
60 10



Table 2 Respondents’ work experience in years

Years of experience 0-4years 5-9years 10-14 years More than 15 years Non-indicated years of experience
Number of auditors 20 30 10 4 6


The third strategy of the framework development was to give an answer to the question of how external auditors would react to intense cases of assets misappropriation risk indicators. This was based on interview where 10(3internal and 8external)auditors working in a Yemen international audit firmwith sufficient and professional qualifications were interviewed so as to obtain audit guidelines. Open ended questions were used based on the assets misappropriation risk indicators listed in stage two so as to get any possible procedure which could be used by the auditors incase of increased levels of assets misappropriation. The purpose of the interview was explained to the interviewees; in addition, the intended information to be gathered was mentioned with the interviewees being assured of confidentiality. The interview process was noted in a handbook to enhance reliability. The interview process took 30 minutes for each interviewee and procedural cooperation was employed.


Data Analysis

In this section, analysis of the data obtained from the research study is carried out. The techniques used to analyze the data are both qualitative and quantitative. The objective of the research study was to show the corporate governance in detecting assets misappropriation. To analyze the question on “Are risk indicators of assets misappropriation efficient in detecting cases of assets fraud?”, frequency table consisting the occurrence of the lists of assets misappropriation was formed to enhance better understanding of the data under analysis since the table gives a good ground for the database preparation hence setting ground for data analysis (Fraenkel and Wallen 1993). SPSS was used to do an analysis on the second question concerning how the external auditors respond tointense risk indicatorsof assets misappropriation.The number of observations was collected for every question and the response was given in form of percentages.





On the first research question concerning risk indicators and their perception on efficiently detecting assets misappropriation, descriptive statistics which entailed use of frequency tables and median was used. The results indicated that 50 percent to 90 percent of the respondents acknowledged that the proposed risk indicators of schemes of skimming were efficient in detecting assets misappropriation. Using median, the percentage was 53 percent meaning that the scheme was significant in detecting assets fraud.

For the schemes of cash larceny, results indicated that 70 percent to 96 percent of the research respondents acknowledged the proposed list of risk indicators in cash larceny as efficient in detecting assets misappropriation. This was an equivalent to a median of 60.2 percent, hence more 60.2 percent or more of the cash larceny schemes listed was significant in detecting such misappropriation. Moreover, results for the fraudulent disbursement schemesshowed that 56 percent to 95 percent of respondents believed that the proposed risk indicators for billingschemes are important; this gave a median score of 55 percent. Findings also indicated that 58 percent to 93 percent of the research respondents acknowledged tampering of cheques as important factor in assets misappropriation detection with a median score of 67.7 percent. In the case of schemes of payroll, 63 percent to 94 percent of the researchrespondents acknowledgedthe risk indicatorsin this scheme as necessary for detecting assets misappropriation. The corresponding median score was 64.5 percent. For the case of reimbursement of expenditure, the risk indicators indicated a median score of 51.4 percent since the respondents who acknowledged it ranged between 51 percent to 88percent. For the case of paying out money for registration, 84 percent to 93 percent the respondents acknowledged the scheme as significant for detecting assets misappropriation and this was equivalent to a median score of 59. 1 percent .The observedresults shows that external and internalauditors in Yemen perceive risk indicators as an efficient tool in detecting assets misappropriation. This also shows that external and external auditorsin Yemen are aware of the risk indicators of assets misappropriation.

In the research question two, which aimed at determining if the external auditors viewed the risk indicators in all as categorized in the list as equally significant in detecting assets misappropriation, the results were obtained after the data analysis was done using frequency tables and SPSS. The results did not match those of Gullkvist and Jokipii(2012) as it was found out that the perception of the red flags being equally significant was not acknowledged by the external auditors. Example of the findings is that, unrecorded transactions, high rates of customers complaining  and missing account records was the most preferred indicator for assets fraud as supported by  KPMG 2006 reports on assets misappropriation indicated by high cases of customers complaining on fraudulent means involved in the transactions.

Contrary, declining transaction payments on the accounts which were received and large margins present in the cash totals were acknowledged to be the less significant risk indicators because it was perceived to be as a result of poor organizational policies or cases where the customers are experiencing economical crisis subjecting them to be in a position of not paying off their debts in time. In addition, mismatch between cash deposit totals could be as a result of firm’s high use of cash in conducting transactions rather than a fraud case.For the case where theft of cash after it has been accounted for is carried out, it was found out that the act was dominant in the organization because the slip indicating total cash in the bank, the bank withdrawal list and the book indicating the daily receipts did not correlate.Nevertheless, the lowest fraud indicator which was acceptable was the cash deposits in the process because it is only able to be traced in the bank in the first two days of deposit.

For the cases of schemes of billing, it was found out that the most outstanding indicator of assets fraud is the inefficient systems of internal control, it was found out that many transactions which involved customer purchase of items could not be tracked to the inventory as well as double records for the same asset where in the first it is recorded as an asset and the second time it is recorded as a liability. The lowest significant risk indicator for fraud was the correlation between the customers’ address and that of the employees and high rates of transaction especially purchases from one supplier. The findings were supported by research reports of ACFE 2010 and the 2007 Fraud Survey which reported that inefficient systems of internal control contributed significantly to assets misappropriation. The findings are also supported by Chapple et al (2007) who reported that efficient and effective internal control systems reduce the chances of assets misappropriation.

For the case of tampering with cheques it was reported that presence of cheques with questionable signatories, issuing of cheque to cash and missing cheques on the supplier register were the highest indicators for assets misappropriation. On the other hand, the lowest significant fraud risk indicators were reported to be cancellation of cheques with many approvals or employee approval of cheques which are not in the payroll. The respondents argued out that it is possible for the organization not to keep track of all cancelled transactions. Surprisingly, some of the fraud risk indicators like failure of presenting receipts of transaction would have been recorded as the detrimental factors for the scheme of tampering with cheques but the auditors did not give much attention to that. This could be because the modern forms of payment transaction do not involve use if cheques therefore making auditors not to be in a position to thoroughly audit them.

For the cases concerning schemes of payroll, the respondents acknowledged that the highest fraud indicators were cases of employees being paid unrealistic amounts in terms of the salaries, expenditures on transport and housing allowance whereby the real payment went to the pockets of others. It was also reported that payment of salaries was made to non existing employees who had undocumented personal details.It was also reported that within the organization, employment kept changing and this was also accompanied by presence of high levels of casual employment. However, low indicators of assets misappropriation were reported to be huge overrun levels of budget, the non-matching faces from the system and those presented by management for endorsement, and overstatement of salaries paid to the employees in the sheet of organization payroll as indicated by non-matching values between the exact salary and the payroll salary.

For the cases of the other fraudulent pay out schemes, the highly acknowledged fraud indicator was unprofessional documents and also transactiondocuments which do not provide the required information concerning the supplier. In addition, using of invoice duplicates instead of the originals when paying out expenses was also listed as a very significant factor in detecting assets fraud.The respondents reported that the low fraud risk indicators in this scheme included increased rates of credit card use unlike other employees in the same department, payout appeal by an employee that concurrently lies under the company’s cash payout limit. Also it was reported that cases of having many liabilities being rounded off to the nearest whole value indicated assets misappropriation.

For the cases of schemes involving disbursements of the register, the respondents acknowledged that untraceable or empty payback documents were high risk indicators. Moreover, lack of supervision in transacting payouts by the cashier and also some organization agencies recording high transaction corrections. However, the lowest recorded fraud indicators were high rates of empty transactions being carried out by the employees as well as uncombined vendors’ transaction details.

The respondent to the interview gave the following results on perception of risk indicators level of significance in detecting assets misappropriation as analyzed by SPSS (Note that:  a scale of 1 to 4 was used where 1 represented the least significant risk indicator while 4 indicated the most significant risk indicator)

Interview findings showed out that the internal and external auditors in Yemen proposed that procedures which areanalytical should be used. Also, cross check of the balanced items, making management consultation, employees, customers, and scrutiny of the ledger materials and making impromptu visits to carry out auditing should be employed. In addition, documentation was done to respond to the fraud risk indicators on assets misappropriation. The respondents also proposed detailed procedural analysis that involved comparing and use of analysis on the list of risk factors for detecting assets misappropriation (Red Flags).

On the case of schemes of skimming, three respondents were interviewed and they proposed that the total number of receipts should be compared with those of everyday count and bank deposits by the auditor on cases where the cash deposited exceeds or does not match the expected patterns of deposits, or in cases of untraceable slips of deposits. Five of the respondents being interviewed also proposed that the auditor should conduct a master file comparison using automated systems for the client and the employee working in the department of receiving accounts so as to find out whether the two transaction details matches together.

Two respondents of the interview proposed the following;thatsummarizing of reports giving the discount numbers should be regularly done, also changes made during transaction should be indicated clearly and write offs which were provided by the location should be recorded by the auditor with an help of automated systems. In addition, five respondents to the interview proposed that the act of analyzing trends on the age of accounts for the customers should be adopted to track down the number of unpunctual accounts.

For the cases of schemes of billing, procedural analysis was proposed where three respondents to the interview proposed that auditing should be done to compare the number of recorded billings with the inventory additional slips in situations where there are huge billings separated into many invoices. Two of the respondents proposed that the auditor should do a comparison between the trending lists of price and the suppliers’ price with the previous lists of prices so as to indicate hikes in the price average unit for the items being bought. Three respondents to the interview also proposed that procedural analysis should be done to maintain satisfaction in the income from goods sold and also make a review on the levels of expenditure. One of the respondents to the interview proposed that the management should make inquiry in cases of questionable invoices whereby there are no details on the purchases already done.

No respondent to the interview who acknowledged procedural analysis for the cases of stealing already accounted money and the tampering of cheques. However, all the respondents to the interview proposed that the management should do a regular inquiry and also audit documentation in situation of cash larceny.The interviewees argued that the act of stealing already accounted money is done after the transactions are already recorded and hence it makes sense to cross check the documents so as to spot the disparities in the process.One respondent to the interview proposed that auditing should be done to scrutinize the overall details of the ledger book and the entries made in the journal so as to spot any idiosyncratic changes. The respondent also proposed that the management enquiry should be done to ensure that there is no stealing of already accounted money since preparation of the financial documents is done by the management. The respondent also suggested that this kind of auditing could give a leeway of understanding the philosophy used by the management as well as the style of operation in times of financial documentation and its safety. Five respondents to the interview proposed that inquiries to the management should be encouraged by the auditing department so as to understand the reasons leading to too much time being taken on deposits in the transaction process or in cases where income and the expenses do not balance.

The respondents also proposed that in cases where records indicating sales transactions are destroyed, inquiries should be done in the management because that could indicate a sign of cash theft. Two respondents of the interview proposed that the auditing department should encourage the department concerned with financial preparation to recover the damaged records for the purpose of scrutinizing the transactions. Most of the respondents suggested that clear documented financial information should back up the management inquiries.

All respondents to the interview proposed that in cases of management tampering with cheques, the only acceptable procedures for auditing should entail preparing financial documents and scrutinizing them physically. On the same note, three of the respondents proposed that auditing should be done suppliers cheque file to highlight gaps in the cheque issuance into cash or which could be a signal for cheque theft reflecting a misappropriation of tampering with cheques. Three respondents proposed that thorough auditing should be done to identify the cause of double approval of cheques by making inquiries to the management or looking at the policies being followed by the organization.Four respondents of the interview proposed that the management should present the supporting documents for review in cases of cheques being cancelled.

For the cases of schemes of payroll, five respondents of the interview proposed the scrutiny of payroll registers as well as the human resource department data to ascertain the employees’ legal details. One respondent to the interview proposedthat calculations should be redone to ensure that the gross pay of the employee after deductions have been made, matches the organizations’ payment records.Two respondents of the interview proposed that procedural analysis, especially analysis on trend should be employed to highlight important budget storms.

For the cases of schemes of reimbursement, all the respondents to the interview proposed a number of guidelines to be followed. They proposed that information on credit summary indicating the credit usage by the employees should be documented. It was also proposed that the kind of transaction involving the use of credit cards should be well analyzed. The auditors should also visit the suppliers’ businesses to ascertain the authenticity of the transaction receipts by doing receipt review. The respondents also proposed that the auditing department should scrutinize the organization’s money pay outpolicy to ascertain the authenticity of the payout expenditures.Two respondents to the interview acknowledged that, in cases of business travel, Yemeni corporations do not mostly use credit cards to cater for the expenses.

All the respondents to the interview agreed that procedural analysis is significant in situations where the organization faces the problems of incorrect refunds. The respondents proposed that scrutiny of the sales files and making of refund summary by the location can help detect refund frauds. Two respondents to the interview proposed that scrutiny of the sales files can be of help to the auditing department in confirming whether a clients’ transaction payment is confined in one transaction card since recording of transaction in different cards is a sign of assets misappropriation.



The research study aimed at providing auditing department with information on misappropriation of assets which was partially discussed in the past literature. The study also helped in giving external auditors a strategy that can help them when it comes to detecting assets misappropriation in terms of misstatement of materials. In coming up with the strategy, three stages were identified.  The first strategy involved listing seventy risk indicators of assets misappropriation based on the category of assets misappropriation (Wells 2005).  The list was then upgraded by ten external auditors a global audit department inYemen resulting to a list of fifty two risk indicators of misappropriation of assets which formed the second stage of the questionnaire used in the research study. In the second stage, the upgraded list of assets misappropriation indicators was ranked in accordance with the views of seventy external and internal auditors in Yemen who had a well recognized work experience in auditing.  The second stage was made to give answers to the first two project questions; the first question on whether risk indicators of assets misappropriation were effective when it comes to assets misappropriation detection, and the second question on whether the risk indicators had similar significance when in all categories of assets misappropriation.Therefore, this stage gave very significant information which was used by the research to gap off the missing literature concerning the ranking and categories of assets misappropriation.

In stage three, the research study focused on the various kind of responses to increased indicators of assets misappropriation by the auditors, this study was of great importance because it giving guidance to external auditors on how to reciprocate in times of increased risk indicators of assets misappropriation. In constructing this stage, the researcher interviewed eight auditors in the global audit firm in Yemen where the respondents to the interview were questioned on how they would respond to the risk indicators of assets misappropriation as categorized in stage two andan analysis of their responses was done. The views were given by the auditors in Yemen but the study can be generalized and made applicable in other continents because the list of risk indicators of assets misappropriation were obtained from instances given by other professional auditors on assets misappropriation committed in other parts of the world. Moreover, most of the information given by the auditors was derived from a scholarly book written by Wells who in his writing, used bona fide case studies that occurred in different nations. Moreover, the researcher aimed at investigating whether Well’s findings could still be applicable in dissimilar environments of auditing.


Assets misappropriation is a great fear by organization’s stakeholders, especially the investors and controllers. This sends signals to the corporate governance mechanisms especially the eternal auditors on their role in detecting assets misappropriation. From the previous literature on assets misappropriation, assets fraud has continued paving its way in many organizations because the guidelines provided to give directions to the external auditors were limited. The guidelines did not give the impact of the risk fraud indicators which resulted to incompetency when it came to responding to the misappropriation risk indicators.The literature review gave limited studies on assets misappropriation and not any of the study paved a way on how the external auditors could detect cases of assets misappropriation therefore, making it a concern for the present research study to fill the missing information.

In filling the gap, the present research study uses the previous literature on assets misappropriation so as to construct a framework that can give guidelines on how the external auditors can answer issues emanating from assets misappropriation by classifying the risk indicators in accordance to their categories.Therefore, the present research study provides knowledge on fraud type that has rarely been studied in the previous literature hence adding up value to the existing literature when it comes to addressing the problem of provision of assets misappropriation byassigning weights to risk indicators and also provision of guidelines to be used by external auditors in detecting assets misappropriation. In return, this research study findings will minimize the expected gap in auditing and also improve the professional profile of auditors when it comes to detecting assets misappropriation.

The suggested strategy in the present research study also indicated that procedural analysis was recommended as being reliable in detecting assets misappropriation in all categories excluding the category of stealing already accounted money and category of tampering with cheques where the interviewees proposed that the reliable method to detect the two kinds of assets misappropriation should employ the technique of management inquiry and use of documents. The respondents to the interview also proposed that scrutiny of payroll registers as well as the human resource department data should be done to ascertain the employees’ legal details.Other proposed procedures involve, reconciliation reviews, scrutinizing journal entries, carrying out cross calculations and also paying non-requested visits to the vendor’s business to carry out investigation.

On the questionnaire, the results indicated that the external auditors perceived the risk indicators to assets misappropriation as efficient when it comes to fraud detection though the list in the each category was given a different degree of efficiency when it comes to detection of assets fraud. In the case of risk indicators forschemes of skimming, the most perceived risk indicator according to the respondents was heightened levels of customers complaining for the kind of services being provided by the organization and this was supported by the findings provided by KPMG 2006 which indicated that customers complaints were found to be a mode of detecting assets misappropriation.This means that, could the external auditors pay more attention to the clients, a lot of information on detecting assets misappropriation could be identified. It was also observed that, malfunctioning of the systems of internal control was the most perceived indicator of assets misappropriation detector as supported by KPMG 2006 findings. The same risk indicator was also found to be very efficient as per the findings reported by Chapple et al (2007) which suggested that any organization with effective and efficient systems of internal control has low chances on assets misappropriation when it comes to schemes of billings. Nevertheless, the research study findings differed from those presented by Gullkvist and Jokipii (2012) which suggested that all risk indicators in each category had the same significance when it came to detecting assets misappropriation.

Limitation of the research study

Despite the success of the present research study in giving guidelines for the auditors on how to detect assets misappropriation in an organization and also listing the possible risk assets fraud indicators in their specific categories, the study faced some limitations which included the following-:

  • The study was faced with a problem of lack of unwillingness by the respondents to share information concerning their inner working of their organization especially when it came to financial matters.
  • Since the research study was an extensive one, a lot of time and expenses were wasted in finding individuals who were ready for the research as well as going to those organizations to ask for permission for the study to be carried out.
  • The suggested framework was constructed basing the views of the internal and external auditors working in Yemen meaning that it was not tested empirical wise. Nevertheless, this was a brainchild idea of the research study to aid in detecting assets misappropriation by the auditors.This presents a task to the forthcoming research in trying to test the empirical efficiency and effectiveness of the proposed framework to be used by the external and internal auditors in detecting misappropriation of assets.
  • The research study employed only usual statistical analysis methods in analyzing the collected data instead of employing much more advanced methods. However, the future research study should employ models and advanced statistical analysis method to confirm the standards of the present research findings.











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El-SayedEbaid, I. (2011), Corporate governance practices and auditor’s client acceptance decision: empirical evidence from Egypt. Corporate Governance, 11, (2), 171-183

Bunget, O. (2009). The Role of financial auditor in detecting and reporting fraud and error.MPRA Paper No. 12888, online at http://mpra.ub.uni-muenchen.de/12888/

Levrau A., Van den Berghe L. (2007). Identifying key determinants of effective boards of
directors, University of Ghent.

Bhagat, S., and Black B. C., (1999), The Uncertain Relationship between Board Composition and Firm Performance. The Business Lawyer 54:921–63.

Government of South Australia, (1999), Strategic Asset Management. Adelaide: Government of South Australia.

NSW Treasury, (2004), Total Asset Management, TAM 2004. Sydney

FHWA, F. H. A., (1999), Asset Management Primer: Federal Highway Administration, US Department of Transportation.

Majid, R., Mohamed, N. &Basri, S. A. (2015).Misappropriation of Assets in Local Authorities -A Challenge to Good Governance.2014 International Conference on Accounting Studies, Kuala Lumpur: Elsevier Ltd.

Aquinas J. P., (2016), Australian local government corruption and misconduct.Journal of Financial  Crime, 23(1), 102-118

Chen, G., Firth, M. (2006). Ownership structure, corporate governance, and fraud: Evidence from China. Journal of Corporate Finance, 12 (3)

Ravina E., and Sapienza P., (2009). What Do Independent Directors Know? Evidence from their  Trading. Review of Financial Studies. Advance Access published April 13, 2009

Hermalin B. E., and Weisbach M. S.. (1998), Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature. Economic Policy Review 9:7–26

Bebchuk L. A., and Hamdan A., (2002), Vigorous Race or Leisurely Walk? Yale Law Journal 112:553–615. ———. 2009. The Elusive Quest for Global Governance Standards. University of Pennsylvania Law Review

Bebchuk L. A., R. Kraakman, and Triantis G., (2000). Stock Pyramids, Cross-ownership, and Dual Class Equity. In R. Morck (ed.), Concentrated Corporate Ownership. Chicago: University of Chicago Press

Bainbridge S. (2006), Directory Primacy and Shareholder Disempowerment. Harvard Law Review

Porter, B. (1997): Auditors’ responsibilities with respect to corporate fraud: a controversial issue, in Sherer, M. and Turley, S. (Eds), 3rd ed., Current Issues in Auditing, Paul Chapman Publishing. London

Al-Sa’eed M. A.,. (2013). ―Compliance with The Principles of Corporate Governance: Different Perspectives from Jordan; Accounting and Management Information Systems

Tura, Hussein Ahmed. (2012). ―Overview of Corporate Governance in Ethiopia: The Role, Composition and Remuneration of Boards of Directors in Share Companies‖. Mizan Law Review

Chen, Ching-Ho and Lee, Yu-Je. (2012). ―Verifying the effects of corporate governance on the organizational performance of Taiwan-listed IC design houses: Using productivity and intellectual capital as Mediators. Research Journal of Business Management and Accounting

Low, M., Davey, H. & Davey, J. (2012), Tracking the professional identity changes of an accountancy institute: The New Zealand experience. Journal of Accounting & Organizational Change

Levrau A., Van den Berghe L. (2007). Identifying key determinants of effective boards of directors. Working Paper. University of Ghent

Sohal, A. S., Fitzpatrick, P. (2002). IT governance and management in large Australian organizations.International Journal of Production Economics, 75, 94-112

Porter, B. (1997): Auditors’ responsibilities with respect to corporate fraud: a controversial issue, in Auditing, Paul Chapman Publishing. London, Ch. 2:31-54

Munteanu V., Zuca M., (2010), Internal Audit in Public Companies and Institutions: Conceps, Methodology, Regulations, Case Studies], Wolters Kluwer, Bucharest, 2010.

KPMG, 2006, Integrity Survey 2005 – 2006, NJ, USA

Lea F. C., (2016), Effects of Corporate Governance on Fraud Prevention: The Case of Lebanon,Lebanese American University

Gupta P. K., and Sanjeev G., (2015),”Corporate frauds in India – perceptions and emerging issues”,
Journal of Financial Crime, Vol. 22

Betts M., Kumar A., (2006),A Strategic Approach to Infrastructure Asset Management,Gardens Point Campus, Queensland University of Technology

Rezaee, Z. (2002). Financial statement fraud: prevention and detection. New York, Wiley. http://public.eblib.com/choice/publicfullrecord.aspx?p=131025.

Pickett, K. H. S. (2013). The internal auditing handbook. Hoboken, N.J., Wiley. http://rbdigital.oneclickdigital.com.

Bucher, J. L. (2006). The quality calibration handbook: developing and managing a calibration program. Milwaukee, Wis, ASQ Quality Pr.

Kassem R., (2014), Detecting asset misappropriation: a framework for external auditors,University of Northampton, Northampton, www.inderscienceonline.com/doi/abs/10.1504/IJAAPE.2014.059181

 ACFE Reports, (2010), The Geoproffesional Business association

Apostolou, N., andCrumbley, D.L. (2005). Fraud Surveys: Lessons for Forensic Accountants.Journal of Forensic Accounting, 6, 103-118.

ASX. (2003). Principles of good corporate governance and best practice recommendations.

Beasley, M. (1996). An empirical analysis of the relation between the board of directorcomposition and financial statement fraud.The Accounting Review, 71(4), 443-465.

Brazel, J.F., Jones, K.L. and Prawitt, D.F. (2010) Improving Fraud Detection: Do Auditors React toAbnormal Inconsistencies between Financial and Nonfinancial Measures?, Working Paper[online] http://www.ssrn.com (accessed 2 July 2012).

Bryman, A. (2012) Social Research Methods, 4th ed., Oxford University Press, New York.

Buckhoff, T. (2006) ‘Fraud detection’, American Accounting Association Conference Proceedings,

August, Washington, DC, USA.

Cressey, D. R. (1973).Other People’s Money: A Study in the Social Psychology ofEmbezzlement. Montclair, NJ: Patterson-Smith.

Cohen, M. A., and Alexander, C. R. (1996). New evidence on the origins of corporate crime.Managerial and Decision Economics.

Coenen, T.L. (2008) Essentials of Corporate Fraud, John Wiley & Sons, Inc., New Jersey.

Coenen, T.L. (2009) Expert Fraud Investigation: A Step-by-Step Guide, John Wiley and Sons,Hoboken, New Jersey.

Denis, D.K., & McConnell, J.J. (2003). International corporate governance.Journal ofFinancial and Quantitative Analysis.

Dechow, P., Sloan, R., & Sweeney, A. (1996). Causes and consequences of earningsmanipulation: An analysis of firms subject to enforcement actions by the SEC.Contemporary Accounting Research, 13, 1-35.

Dunn, P. (2004). The impact of insider power on fraudulent financial reporting.Journal ofManagement, 30(3), 397-412.

Daigle, R., Morris, P.W. and Hayes, D.C. (2009) ‘Small businesses: know the enemy and theirmethods’, The CPA Journal, Vol. 79.(accessed 5 April 2012).

Farber, D. (2005). Restoring trust after fraud: Does corporate governance matter? TheAccounting Review, 80(2), 539-561.

Gullkvist, B. and Jokipii, A. (2012) ‘Perceived importance of red flags across fraud types’, CriticalPerspectives on Accounting, Vol. 1, No. 3, pp.1–18 [online] http://www.elsevier.com

(accessed 28 July 2012).

Hopwood, W.S., Leiner, J.J. and Young, G. (2008) Forensic Accounting, McGraw-Hill Irwin,New York.

Jensen, M. C., &Meckling, W. H. (1976). Theory of the firm: Managerial behaviour, agencycosts and ownership structure. Journal of Financial Economics, 3, 305-369.

Jackson, S., Sawyers, R., & Jenkins, J. G. (2008).Managerial accounting: a focus on ethical decision making. Mason, OH, Thomson/South-Western.

Klein, A. (1998). Firm Performance and Board Committee Structure, Journal of Law andEconomics, 41(1), 275-303.

Krus, C. M. (2005).Corporate secretary’s answer book.New York, Aspen Publishers.

KPMG (2004).Fraud Survey 2004: KPMG

Mitchell, L. E., &Wilmarth, A. E. (2010). The panic of 2008: causes, consequences and implications for reform. Cheltenham, Edward Elgar.

Majid, R.A., Mohamed, N., Abdullah, A. and Mahmud, Z. (2010) ‘An exploratory study on thepossibility of misappropriation of assets occurring in a local authority’, InternationalConference on Science and Social Research, Kuala Lumpur, Malaysia,

Rezaee, Z. (2002). Financial statement fraud: prevention and detection. New York, Wiley.

Sharma, V. D. (2004). Board of director characteristics, institutional ownership and fraud:Evidence from Australia. Auditing: A Journal of Practice and Theory, 23(2), 105-117.

Shelton, S.W., Whittington, O.R. and Landsittel, D. (2001) ‘Auditing firms’ fraud risk assessmentpractices’, Accounting Horizons, Vol. 15.

Silverstone, H. and Sheetz, M. (2007) Forensic Accounting and Fraud Investigation forNon-Experts, 2nd ed., John Wiley & Sons, Inc., Hoboken, New Jersey

Véron, N., Galichon, A., &Autret, M. (2006). Smoke & Mirrors Inc: Accounting for capitalism. Ithaca N.Y., Cornell University Press.

Vona, L.W. (2008) Fraud Risk Assessment: Building a Fraud Audit Program, John Wiley andSons, Hoboken, New Jersey.

Warren, C. S. (2014). Survey of accounting.

Zweighaft, D. (2004) ‘Slicing the salami: small-dollar recurring fraud’, Journal of InvestmentCompliance, Fall, Vol. 1.

Wells, J.T. (1995) ‘Report to the nation on occupational fraud and abuse’ [online http://www.acfe.com (accessed 15 July 2012).

Wells, J.T. (2004) Occupational Fraud and Abuse, Obsidian Publishing, Austin, Texas.

Wells, J.T. (2005) Principles of Fraud Examination, John Wiley and Sons, Hoboken, New York

Xie, B., Davidson III, W.N. &DaDalt, P. J. (2003) Earnings management and corporategovernance: the role of the board and the audit committee.Journal of Corporate Finance, 9(3), 295-316.
























Analysis of the results

Median for risk indicators associated with schemes of skimming

Response Frequency Percentage
Yes 40 57.15
No 30 42.85
Total 70 100


Median for risk indicators associated with schemes of cash larceny

Response Frequency Percentage
Yes 50 71.43
No 20 28.57
Total 70 100


Median for risk indicators associated with schemes of billing

Response Frequency Percentage
Yes 48 68.57
No 22 31.43
Total 70 100


Median for risk indicators associated with tampering of cheques

Response Frequency Percentage
Yes 60 85.71
No 10 14.29
Total 70 100

Median for risk indicators associated with schemes of payrolls

Response Frequency Percentage
Yes 53 75.71
No 17 24.29
Total 70 100

Median for risk indicators associated with schemes of fraudulent disbursement

Response Frequency Percentage
Yes 40 57.14
No 30 42.86
Total 70 100


Median for risk indicators associated with schemes of registry disbursement

Response Frequency Percentage
Yes 52 74.29
No 18 25.71
Total 70 100




Respondents years of experience and schemes of skimming


Years 0-4 5-9 10-14 More than 15 Non-indicated years


10 17 6 3 4
No 10 13 4 1 2
Totals 20 30 10 4 70


Respondents’ years of experience and schemes of cash larceny

Years 0-4 5-9 10-14 More than 15 Non-indicated years


12 20 7 3 5
No 8 10 3 1 1
Totals 20 30 10 4 70


Respondents’ years of experience and fraudulent schemes

Years 0-4 5-9 10-14 More than 15 Non-indicated years


8 12 12 3 4
No 12 18 8 1 2
Totals 20 30 10 4 70



Type of audit office and the importance of risk indicators of cash larceny

Response International office Local office
Yes 35 10
No 20 5
Totals 55 15


Type of audit office and the significance of risk indicators of cash larceny

Response International office Local office
Yes 28 11
No 27 4
Totals 55 15


Type of audit office and the importance of risk indicators of fraudulent disbursement

Response International office Local office
Yes 18 12
No 37 3
Totals 55 15







The questionnaire

Instructions for section one

In this section, your views on whether risk indicators of assets misappropriation are efficient in detecting the kind of fraud in discussion are required. In the list provided below, you are required to denote x for the type of response you have chosen. Kindly pick one option for the response; a yes or a no.

Question 1. Do you view risk indicators of assets misappropriation as being efficient in detecting assets fraud cases?


Categorized Assets misappropriation Indicators

(i) Indicators for schemes of skimming








1Individual cheques recorded in cash

2 questionable data entry into the journal

3 Mismatch of deposited cash from the actual cash

4 Mismatch between income receipts and bank slips

5 Untraceable refund documents

6 Decreasing revenue

7 Mismatch between details of the cheque and the tickets of deposits

8 Matching of clients’ details with those of the employee in the department dealing with receiving accounts

9 Increased rates of financial changes

10 Increased rates in number of delayed accounts

11Unindicated clients’ details in transaction receipts


(ii) Indicators for stealing already accounted money


Yes No
1 Special changes in accounts related to cash

2 A long transaction period in carrying out deposits

3 Mismatch between the organization’s slip and bank slips indicating deposits

4 Mismatch between expected income and the actual cash

5 Destruction of records indicating sales


(iii) Indicators for assets misappropriation in schemes of billing


Yes No
1 High rates of consistent purchases from a particular supplier

2 Too many invoices coming from a single billing

3Malfunctioning in the systems of internal control

4 Suppliers using their initials only to name their corporation

5 Presence of unidentified organization’s suppliers

6 Similar address being shared by the supplier and the employee

7 Detectable inflation in the average unit schemes

8 Untraceable expenditures on the inventory

9Increased current expenditure than the previous


(iv) Indicators for assets misappropriation in tampering of cheques


Yes No
1 Gaps in the sequence of cheques being recorded in the supplier’s file

2 Issuance of cheques into cash Cheques

3 Cancellation of approved cheques

4 Cheques being signed by the unintended person


(v) Indicators of assets misappropriation for schemes of payroll


Yes No
1 Different cheque faces as presented by the management and the system

2 Low levels of payroll expenditure as compared to the actual expenditure

3 Detectable budget storms

4 Non-existing employees without addresses

(vi) Indicators for schemes of expenditure pay outs


Yes No
1 Increased rates of credit cards usage

2 Claims of payment in terms of cash

3 Unprofessional transaction documents

5 Delayed receipts from restaurants

6 Request for pay out of cash which concurrently follows the corporation’s pay out limit

7 Same expenditure levels by the same employee

8 Consistent act of estimating expenditure figures to the nearest whole value


(vii) Indicators for schemes of register pay out

1 Untraceable transaction documents on refunds

2 Issuance of refund by the cashier in absence of surveillance

3 High rates of financial changes within the organization agencies

4 High rates of transaction of refunds by a particular employee

5 Unconfined client’s details on sales and refunds


Yes No


Instructions for section  two

In this section, kindly give a ranking for each risk indicator in accordance with its importance in detecting assets misappropriation based on knowledge and the professional experience.1 denotes the least significant while 4 denotes the most significant.

Categorized Assets misappropriation Indicators


(i) Indicators for schemes of skimming














·         Individual cheques recorded in cash

·         Questionable data entry into the journal

·         Mismatch of deposited cash from the actual cash

·         Mismatch between income receipts and bank slips

·         Untraceable refund documents

·         Decreasing revenue

·         Mismatch between details of the cheque and the tickets of deposits

·         Matching of clients’ details with those of the employee in the department dealing with receiving accounts

·         Increased rates of financial changes

·         Increased rates in number of delayed accounts

·         Non-indicated clients’ details in transaction receipts


(ii) Indicators for stealing already accounted money


1 2 3 4
·         Special changes in accounts related to cash

·         A long transaction period in carrying out deposits

·         Mismatch between the organization’s slip and bank slips indicating deposits

·         Mismatch between expected income and the actual cash

·         Destruction of records indicating sales


(iii) Indicators for assets misappropriation in schemes of billing


1 2 3 4
·         High rates of consistent purchases from a particular supplier

·         Too many invoices coming from a single billing

·         Malfunctioning in the systems of internal control

·         Suppliers using their initials only to name their corporation

·         Presence of unidentified organization’s suppliers

·         Similar address being shared by the supplier and the employee

·         Detectable inflation in the average unit schemes

·         Untraceable expenditures on the inventory

·         Increased current expenditure than the previous


(iv) Indicators for assets misappropriation in tampering of cheques


1 2 3 4
·         Gaps in the sequence of cheques being recorded in the supplier’s file

·         Issuance of cheques into cash Cheques

·         Cancellation of approved cheques

·         Cheques being signed by the unintended person


(v) Indicators of assets misappropriation for schemes of payroll


1 2 3 4
·         Different cheque faces as presented by the management and the system

·         Low levels of payroll expenditure as compared to the actual expenditure

·         Detectable budget storms

·         Non-existing employees without addresses


(vi) Indicators for schemes of expenditure pay outs 1 2 3 4
·         Increased rates of credit cards usage

·         Claims of payment in terms of cash

·         Unprofessional transaction documents

·         Delayed receipts from restaurants

·         Request for pay out of cash which concurrently follows the corporation’s pay out limit

·         Same expenditure levels by the same employee

·         Consistent act of estimating expenditure figures to the nearest whole value


(vii) Indicators for schemes of register pay out

·         Untraceable transaction documents on refunds

·         Issuance of refund by the cashier in absence of surveillance

·         High rates of financial changes within the organization agencies

·         High rates of transaction of refunds by a particular employee

·         Unconfined client’s details on sales and refunds


1 2 3 4


Instructions for section three

In this section, you are required to give your background information which is basically the years of experience and the type of audit office you work for. Your information will be confidential and only used purposely for this research study.

How many years of audit experience do you have? Please denote  (x) in the right box

0-4 years

5-9 years

10-14 years

More than 15 years




What is the type of your audit office? Please tick (x) in the right box


Local audit office


International audit office


Please note if you would accept to be interviewed later to cooperate more in this research. Please

Denote (x) in the right box



Yes, I would like to be interviewed


No, I do not like to be interviewed


Thanks for your cooperation




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SCHOOL Northampton Business School
DIVISION NBS Accountancy & Finance Division
MODULE TITLE Dissertation and Research Methods











DELIVERY MODE(S) Standard, Distance Learning




The module aims to enable students to undertake a substantial piece of scholarly work embodying research skills at the Masters level, and to produce a 15,000-20,000 word dissertation on a topic lying within the scope of Accounting and Finance.


Students are generally encouraged to conduct their research in areas they are passionate about and preferably linked to their current or future careers. This will be subject to the feasibility of the chosen research topics, and the quality of the research proposals submitted by the students.



On completion of the module, students should be able to:


  1. Knowledge and Understanding


  1. Learn about the nature of management research and the different stages of the research process through their active engagement and participation at the research training module.
  2. Identify and explore a relevant area of literature and theory in Accounting and Finance
  3. Critically review prior literature and identify gaps in knowledge and practice in a particular field related to the chosen dissertation topic
  4. Develop and deploy appropriate questions and propositions in the construction of an argument related to the selected dissertation topic.
  5. Demonstrate the ability to plan, design and implement an individual piece of conceptual, applied or work-related research, involving the synthesis of theory and practice, and the selection of appropriate research methodologies and methods of data collection and analysis


  1. Subject-specific Skills


  1. Evaluate empirical evidence and relate it to the available concepts and ideas in an appropriate area of study.
  2. Construct reasoned argument, synthesise relevant information and exercise critical judgement in relation to the chosen dissertation topic.
  3. Reflect on personal learning and make use of constructive feedback
  4. Formulate an academically rigorous and practically feasible research proposal, setting out the detailed parameters for the proposed independent research project
  5. Carry out an independent piece of conceptual, applied or work-related research, synthesising theory with practice in the chosen field, and making use of a theoretical framework based on the relevant academic literature and other appropriate sources of secondary data
  6. Construct and use a research instrument, such as a survey, to collect primary and/or secondary data, and apply appropriate methods of data collection and data analysis in order to make comprehensive and appropriately focused responses to the research questions/issues/problems identified


  • Transferable Skills


  1. Improve their ability to write an academic piece of research and, work independently while demonstrating initiative, self-organisation and time management.
  2. Use SPSS, NVivo, or Datastream for the retrieval and presentation of information, including appropriate statistical or numerical information.






  • All students whether full time or part time students MUST attend the “Research Methods Training”. DL students should continuously familiarise themselves with the module materials and engage in the module through NILE. The research methods training will help you to learn about how to formulate a good research topic, write a research proposal, and write a dissertation. Please see the module page on NILE for more details.
  • Students MUST engage with their supervisors as soon as their supervisors are assigned to them. A form called ‘Dissertation Records of Supervisory Meetings’ has to be filled by the students and approved by their supervisors at every meeting. The forms will be kept with the supervisors as an evidence of students’ engagement. The form is available on NILE. You are not required to submit these forms with your dissertation.
  • Students with an excellent track record of engagement with the supervisor perform better than their peers.
  • Students MUST register their dissertation topics on NILE no later than the due date for topics submission (see the important submission dates section of this guide). Students should also provide a 200-300 summary of their research topic when registering. This should include a brief description of the research aims, questions, and how they intend to conduct their research, including data collection and analysis. A feedback on the topics will be given to students and if the topics were accepted, a supervisor will be allocated to them. For all queries regarding feedback on dissertation topics and allocation of supervisors, please contact Ewan


  • Students MUST submit a research proposal of 2,500 words through Turnitin on NILE. 10% of the module grade is allocated for the proposal. Date of submission is available in the important dates section of this guide. Attend the research methods training or See the module page on NILE to learn more about research proposals and the required format (Important forms folder or module guide section on NILE)
  • Students have to submit an ethics clearance form with both their proposals and dissertations. The form has to be filled by both the students and their supervisors and approved by their supervisors prior to submission. Please refer to NILE to learn more about research ethics and how to address research ethical issues in your research. The ethical clearance form is available on NILE (see the important forms folder).


  • Students MUST submit a dissertation of 15000-20,000 words in length (excluding appendices, footnotes, marking sheet, ethics clearance form, table of contents, and cover page). See Module guide on NILE and research methods training
  • Students MUST ensure their work is free from plagiarism. To avoid plagiarism, make sure to acknowledge all the sources used in your work by following the “Harvard Referencing Guide” which is available on NILE. In the case of plagiarism, the student’s mark will be capped, and the case will be sent to the misconduct committee for a decision (see the penalties section of this guide).





  • The dissertation is about 15000-20,000 words and has to be submitted in an approved form on a topic related to the Master’s programme in Accounting and Finance. The front sheet, table of contents page, references list, cover page, ethics clearance form, and any appendices would not count in the word count of your dissertation.


  • Details about the content of a dissertation is available on NILE in the research methods training folder. See also below a brief description of the content of a dissertation.


The dissertation MUST include the following in the same order:

  1. Cover page (See the cover page template on NILE in the important forms folder)
  2. Assignment submission sheet. The form is available on NILE in the important forms folder.
  3. Research ethics clearance form (see the important forms folder on NILE)
  4. Marking sheet (see the important forms folder on NILE)
  5. Acknowledgement (i.e. It is your appreciation to all the people that helped you in your dissertation)
  6. Structured abstract (see the important forms folder on NILE)
  7. Table of contents (It is a list of all the content of your dissertation and their page numbers. See the table of contents template on NILE in the important forms folder)
  8. Introduction chapter(s) (see research methods training materials on NILE)
  9. Literature review chapter (see research methods training materials on NILE)
  10. Research methodology, design, and methods chapter (see research methods training materials on NILE)
  11. Data analysis, discussion, and research findings chapter (see research methods training materials on NILE)
  12. Conclusion and recommendation chapter (see research methods training materials on NILE)
  13. References or bibliography (see research methods training materials on NILE and the academic integrity folder)
  14. Appendices (This should be placed at the end of your dissertation. e.g. copy of the questionnaire, interview schedule, data set, SPSS or NVivo output)






  • Students are required to submit a dissertation of 15000-20,000 words in length (excluding appendices and footnotes). This is a strict word limit and not a recommended guideline. It counts for 60 credits out of students’ degrees and MUST count towards their degree classification. In the case of failure to meet this requirement or in the case of exceeding the word limit, a penalty will apply (see penalties section).
  • Dissertations MUST be typed on one side of the page on A4 sized paper, font size 12, Times New Roman. The inner margin should be not less than 4cms wide and the outer margin not less than 1.5cms wide. Use 1.5 line spacing.
  • Each chapter in your dissertation should start with an introduction and ends with a summary even the introductory chapters (see the research methods training folder on NILE to learn more about writing your dissertation)
  • All pages should be adequately and consecutively numbered.




You MUST submit the following with your dissertation:

  • Ethics clearance form, assignment submission sheet, and marking sheet (placed at the front in the same order as shown in the Dissertation Content section). The ethics clearance form has to be submitted with both the proposal and the dissertation. The form has to be filled by both the students and their supervisors prior to submission.
  • Proof of data collection technique used (e.g. copy of questionnaire or interview schedule) and the output of statistical analytical software utilised for the analysis (i.e. SPSS or NVivo output) must be supplied in the appendices section at the end of the dissertation.
  • All submissions should be through Turnitin on NILE.
  • Only one final submission is allowed throughTurnitin on NILE, so please don’t submit your work on NILE before making sure it is complete and following all the requirements.
  • No draft submissions will be allowed on NILE. If you wish to get feedback on your dissertation before final submission, please email the draft to your supervisor no later than two weeks of the final submission.
  • No late submissions will be allowed. See the deadline for submission in the important submission dates section of this guide. In the case of mitigating circumstances, please refer to the University policy on mitigating circumstances which is available on the module page on NILE and the University website.
  • The role of Turnitin is to help tutors detect plagiarism by showing the percentage of text matching. However, this is not an indication that a student committed plagiarism. Turnitin creates a report called “the originality report” showing this percentage of text matching in a student’s work. For more information about how to avoid plagiarism and the role of Turnitin, attend the research methods training and see the module page on NILE. Students are allowed to see the originality report only on the due date


Module Map


Week 1

19 Jan




Introduction to module and course timetable

What is a Dissertation and producing a good dissertation

Choosing Your Dissertation Topic

Marking criteria


Week 2

26 Jan




Philosophy of research 

Research design

SMART project management: aims and objectives  and research questions


Week 3

02 Feb


Doing a critical literature review

Working with the Literature


Week 4

09 Feb



Qualitative research overview

Research interviews

Data analysis


Week 5

16 Feb




Quantitative  Research overview:

Questionnaire design – Use of Monkey survey

Introduction to online resources for data collection

Week 6

23 Feb


Primary and secondary research

Mixed methods


Week 7

 02 Mar



Validity and reliability in research

Research ethics

Developing a research proposal

Managing your supervisor and the learning agreement


Week 8

09 Mar


Data analysis and the use of SPSS

Descriptive statistics

Week 9

16 Mar

Data analysis and the use of SPSS

Advanced statistics

Week 10

23 Mar

Datastream use and data downloading


Important  Subimision deadlines

Full -Time

09 March 2017 Submit your research topic on NILE
20 March 2017 Expected date of appointment of supervisors
18 April 2017 Submit Research Proposal and ethics form on Nile

Counts 10% towards the final dissertation   

6 Sept 2017 Suggested date to submit draft dissertation to supervisors for feedback
6 October 2017 Final Dissertation submission on NILE
30 Jan 2018 TBC Dissertation resit submission on NILE



10 April 2017 Submit your research topic on NILE
21 April 2017 Expected date of appointment of supervisors
23 June 2017 Submit Research Proposal and ethics form on Nile

Counts 10% towards the final dissertation   

12 December 2017 Suggested date to submit draft dissertation to supervisors for feedback
12 January 2018 Final Dissertation submission on NILE
May 2018 TBC Dissertation resit submission on NILE




  • All assessments have a word count with a tolerance of 10% only (22,000 words). In case you exceeded or missed the word count, there will be a reduction of one grade point for every 250 words or part thereof. The grade point refers to one grade movement. For example, a one-point penalty when the assessment grade is B+ will result in the downgrading the grade to B. A two-point penalty would downgrade the assessment to B-, and a three-points to C+ grade.
  • If you committed plagiarism or if the references list is missing, your work will be sent to the misconduct committee. The penalty for this varies from a reduction in your grade to failing the module or even the whole programme depending on the nature of the offence. To learn more about how to avoid plagiarism, read the section about academic honesty in this guide and see the materials on NILE about plagiarism.
  • If the table of contents page is missing, there will be a reduction of one grade point
  • Students who do not maintain regular contact with their supervisors and provide regular evidence of progress may be required to attend a viva-voce examination following the submission of their final dissertation or project reports. The Viva is normally attended by the subject leader, the module leader, and the supervisor.
  • If the following if any or more of the following documents are missing from the final dissertation (Ethics clearance form, marking sheet, proof of data collection technique used -e.g. copy of questionnaire or interview schedule, and data output -i.e. SPSS or NVivo output. The student will be required to attend a Viva, and their grade will be suspended until the student submits the necessary documents.



  • Advise on the topic of the dissertation and methodologies used
  • Discuss the progress of students’ work
  • Offer guidance on the structure, content, and presentation of the dissertation
  • Offer feedback on a draft of the dissertation provided this is received two weeks before the submission date.
  • Advice on academic honesty and how students could avoid plagiarism
  • Maintain a regular supervisory contact to monitor students’ engagement




  • The prime responsibility for managing the dissertation lies with the student.
  • Students are expected to register their dissertation online, and the supervisory process will only commence on such registration.
  • Students are expected to comply with submission requirements.
  • Students are expected to comply with the module requirements.
  • Students must agree on a schedule of meetings, ensuring that the agreed schedule is adhered to and deadlines met.
  • Students should use supervisory time allocated effectively.
  • Students should manage the interaction with his / her supervisor.
  • Students should agree to act responsibly and professionally.
  • Students should complete all assessments and follow all guidelines.
  • Students should note clearly submission criteria and penalties, as well as other requirements in this guide.



  • Your dissertation will be marked by your dissertation supervisor in the first instance and second marked by another member of the school. All dissertations are subject to a further process of cross moderation before a final mark is agreed. All grades will not be released until the approval of the examination board. See the grading criteria for level 7 at the end of the guide.


  • Students should get regular feedback from their supervisor during the different stages of their research if they engaged with their supervisors. Written feedback on the final dissertation will be provided to all students under the grade centre.



   Full-Time Students:


Activities Hours Allocated
Lectures and seminars 42
Supervison/student 8
Student preparation for seminars/learning activities 21
Preparation of research proposal 39
Literature Review 100
Data collection 90
Data analysis 100
Writing up 200
Total 600





Part Time & DL Students:


Activities Hours Allocated
Lectures and seminars 21
Supervison/student 8
Student preparation for seminars/learning activities 42
Preparation of research proposal 39
Literature Review 100
Data collection 90
Data analysis 100
Writing up 200
Total 600





Assessment Items                              Units Weighting Learning



DI- Final dissertation or project report
(approximately 15,000-20,000 words)
15 100 All learning outcomes apply











NILE is the University of Northampton’s electronic learning site. You are expected to check your NILE site regularly. Important announcements will be posted on NILE. All the teaching materials including teaching notes, seminars exercises, useful web links, past exams, and videos are available on NILE. You are also required to submit your assessments through Turnitin on NILE.





Accounting and Finance Proposal Grading Sheet




Student Name:


Supervisor:                                      Grade         :                                                                                    

Second Marker:                      Grade         :                  Agreed grade:


Proposal Criteria Weight Grade

Introduction and background (Terms of Reference)


–        Did the student provide the underlying rationale for this research? And research gap?





–        Was the student able to identify how this study will contribute to the literature/ practice? And, what is the research project to achieve?



–        Did the student outline the research question? Alternatively, proposition(s) or hypothesis?

–        Did student clearly indicate the aim and objectives of this research? (Objectives should commence with a verb – to ascertain, to establish, to recommend, etc.)

Research Rationale(Statement of Problem)


The purpose of the Research (What is the study trying to achieve?)


Research question (or propositions or hypotheses)



Critical Literature Review

(Indication of the literature that informs your research)



Theoretical frameworks (Role of theory)























–    #


Did the student provide a preliminary, critical evaluation of seminal and previous research?  Addressing What are the key studies in your topic area and how these are related to the issues you intend to look at in your research?






–    Did the student identify the working concepts/models and theoretical frameworks that are used to guide the research? The student should address

What is the role of the theory in research? Moreover, what ways the theories will be used?


Note: This section provides an introduction to the literature search chapter of the dissertation.


Methodology and methods

–    Did the student provide and outline how they plan to go about doing the research? 30  
Research Design (description of proposed research – type of study)



Methods for data collection



–    Did the student include a justification of the methodological approach they intend to employ? and the implications of this methodology?


–    Did the student include a clear and precise explanation of how the data for the study will be collected, what methods will be utilised?  Support the terms and techniques identified with academic references and explanations. 









Research Context (e.g. industry sector, organisation)






This section should make reference to sampling methods and limitations of the study. Refer to the range and types of data that are available when conducting academic research.


–    Did the student provide the context of thier proposed research? Key features, characteristics! Who will be studied? How many? How will they be selected (i.e. sampling)?

Procedure (i.e. what happened from the participants’ perspective)




Methods for data analysis Ethical considerations






–    Was the student able to anticipate any problem they might have in implementing the methods. E.g How will they will access people? How they collect questionnaire data?


–    Was the student able to ensure that their research meets the ethical standards of the University?  (See the ethics form on NILE site). Did the student address how they will protect confidentiality?


4. Discussion

Significance of proposed research (Research Contribution)




Research limitations and direction for future research




–    Did the student provide a preliminary statement of what they may find or demonstrate by having undertaken the research? Moreover, what is the importance of this work?


–    Was the student able to envisage the study limitations and identify areas for further research development?


Note: All research has limitations, and you will certainly be limited by the time available to do this work. The scope of a dissertation is limited, and there may be an area that would benefit from further research, for example, a different region or business sector might provide different outcomes to strengthen or generate additional insights into your selected area.


Provisional work schedule

–    Did the student include a timetable for completing the research indicating the tasks necessary to complete each segment? Don’t forget to include slippage time. 5  


–    Did the student provide a correct referencing with a comprehensive citation and reference list? 10  



Accounting and Finance Grading Sheet

Post Graduate Dissertations FINM025



Student Name:


Supervisor:                                      Grade         :                                                                                    

Second Marker:                      Grade         :                  Agreed grade:


Dissertation Criteria Weight* Grade
Proposal ·        Does the proposal include a clear introduction to the dissertation topic, including:

–         A research problem (i.e. gaps in the literature)?

–         Aims and objective/ hypotheses?

–         A mini literature review of the of the topic including a review of theories and findings?

–         The methods that will be used for data collection, and how data will be analysed?

–         The outcome of the research and limitation?


Chapter One: Introduction ·        Did the student clearly introduce the topic?

·        Did the student clearly demonstrate the aims and importance and contribution of the study?

·        Did the student briefly describe the methodology used in his/her research?

·        Did the student mention how the thesis will be structured?

Chapter Two: Literature Review ·        Did the student include an overview of the research topic?

·        Did the student properly introduce the topic, its meaning, importance, & theories behind it



·        Did the student critically review the literature?

·        Did the student use sufficient and up-to-date literature?

·        Did the student use academic and credible sources?

·        Did the literature used is related to the research questions?

·        Are the research questions / Hypothesis/ and or interview question clear and appropriately designed ?

·        Are the Hypotheis / Interview questions/ or survery questions aligned with the Literature?


Chapter Three: Research Methodology, Design, and Methods ·        Did the student clearly explain the research aims and questions?

·        Did the student clearly explained and justified their research philosophy, approach and methods for data collection?

·        Did the student properly explain how the research was designed?

·        Did the student define the study population and sample, mention how sample size was determined and what was the sampling technique used?

·        Are the research methods used for data collection valid and relevant to the research aims/questions?

·        Did the student properly describe the methods used for data collection and analysis?

·        Did the student demonstrate an awareness of the different ethical issues in their research and how it was addressed?

 Chapter Four: Data Analysis, Results,  and Discussion ·        Did the student properly analyse, and present the data?

·        Did the student properly discuss and explain the research results?

·        Did the student properly discuss the research findings in accordance to the Literature findings?

Chapter Five: Conclusion and Recommendation ·        Did the student mention the research aims and importance?

·        Did the student properly conclude the findings of the research?

·        Did the student mention the research limitations and how they were addressed?

·        Did the student make any recommendations?



Please keep in mind that academic integrity cannot be compromised. If a student committed plagiarism, his/her work will be submitted to the misconduct committee for a decision. Penalties range from a reduction of the grade to dismissal from the programme of study depending on the degree of the offence.

·        Did the student use credible sources?

·        Did the students use sufficient and up-to-date sources?

·        Did the student follow every aspect of the Harvard referencing guide?

  First Marker Comments







  Aspects of the dissertation that the marker liked







  Aspects of the dissertation that needed improvement








  Second Marker comments