Fraud prevention measures and internal controls to mitigate internal fraud risk within South African retail SMMEs

Fraud prevention, internal controls, internal fraud risk, South African retail

Abstract

Background: SMMEs have been reported to encounter the highest number of fraud instances primarily due to the ineffective use of internal controls within their businesses. Previous research shows that the South African SMMEs are more susceptible to the risk of fraud. It is deemed that there is a lack of effective communication of fraud prevention measures and internal controls, resulting in fraudulent activities.

Objectives: This study sought to evaluate the effectiveness of the communication of fraud prevention measures and internal controls to mitigate the risk of internal fraud within the retail SMMEs located in the Cape Metropole.

Method: This study took the form of a survey research, and it recorded the empirical evidence in terms of a quantitative research approach.

Results: There is a significant progress in retail SMMEs towards communicating fraud prevention measures and internal controls. The majority of retail SMMEs were aware of the risk of internal fraud and communicated with greater emphasis the importance of prevention measures and internal controls with the intention to combat the risk of internal fraud. However, these businesses evident some internal control deficiencies which led the realisation of various risks including internal fraud. Half of these businesses did not attend any anti-fraud awareness or ethics training.

Conclusion: This study served as a basis for future research to improve the communication of fraud prevention measures and internal controls within the South African retail SMMEs to combat internal fraud.