t h e da ily gua r dia n

sat u r day | 14 m ay 2 0 2 2
new de l h i comment & analysis 5
Rampant

Understanding misappropriation
of assets at workplaces
Asset misappropriation is the most common type of occupational fraud. It occurs when an employee steals or
misuses the organisation’s resources such as cash, fraudulent billing, inventory, or inflated expenditure reports.
studies. However, according they may feel compelled to successful and unnoticed, sure has a substantial impact they are not found. If they vorable association.
to these different models, engage in fraudulent activ- boosting their ego. As long on asset misappropriation. are caught, they are sure ETHICAL VALUES
Pressure, Rationalization, ity (Cressey, 1953). as they are not caught, such RATIONALIZATION that they will be able to han- Various industries and pro-
capability, opportunity, and Another significant aspect individuals are encouraged AND ASSET MISAPPRO- dle any stress that follows. fessional organizations have
opinion ego are prime elements that
motivate individuals to com-
that motivates persons to
commit fraud is the avail-
to engage in such fraudulent
actions repeatedly. Individu-
PRIATION
Most people who engage in
Existing fraud research has
discovered a positive link be-
adopted codes of conduct
that apply to all companies.
mit any fraudulent behavior. ability of opportunities to en- al ego might thus determine asset misappropriation ex- tween fraud and capability. As a result, most businesses
SHASHANK AGGARWAL However, all these elements gage in fraudulent conduct. whether or not a person will cuse their actions by believ- PERCEIVED STRENGTH adopt these codes of ethics to
may not hold equal weight- Fraudulent activities in the commit fraudulent acts such ing that such activities are OF INTERNAL CONTROL create ethical standards that
age in their relevance behind workplace are frequently the as wealth misappropriation. necessary or do not damage SYSTEMS will guide how their employ-
a fraud. In almost all the outcome of a lack of internal The fraud model others. Misappropriating The strength of a company’s ees behave in the workplace.
studies, the opportunity has controls within the organiza- (S.C.O.R.E.) describes the ef- assets at work is simple for internal control systems can Some people’s activities are
assets belonging to the or- been perceived as the most tion. Hence, the stronger the fect of Pressure, Rationaliza- certain people because they either create opportunities also influenced by their ethi-
ganization for personal use crucial factor behind the entity’s internal control sys- tion, capability, opportunity, fabricate explanations to for fraud in the organiza- cal lookout. What is right or
without authorization, it is fraudulent behavior, which tem, the fewer individuals and ego on asset misappro- justify their acts and main- tion or close loopholes that wrong, good or bad, depends
called Asset misappropria- triggers the lack of internal participating in fraudulent priation while controlling for tain the belief that they have could lead to fraud. Robust entirely on one’s moral per-
tion. Corruption is wrongful controls within the organi- or other illegal activities. If the impact of ethical values done nothing wrong and are internal control systems are spective. According to the
acts by employees designed zation. firms fail to seal possibilities on asset misappropriation still trustworthy. Often, an frequently capable of identi- findings, people commit
to cause unfair advantage As mentioned earlier, asset for fraud due to overtime, from a theoretical perspec- organization’s internal cul- fying wrongdoing, whereas fraud because they lack
to the perpetrator, includ- misappropriation is the most certain employees may see tive. Additionally, the effect ture is a fertile environment poor internal control sys- ethical beliefs or do not fol-
ing bribery, kickbacks, common type of occupation- this as a sign of corporate of these elements on an indi- for some employees’ ratio- tems are not. As a result, low the ethical rules in their
economic extortion, collu- al fraud. It occurs when an culture and eventually take vidual’s propensity to mis- nalizations for committing how personnel within an jobs. Individuals with strong
sion, etc. Corruption is a employee steals or misuses advantage of these opportu- appropriate assets is highly fraud. People defend their organization view the inter- ethical convictions, on the

O
ne of the most signifi- vast term and includes the the organization’s resources nities. dependent on how individu- fraudulent behavior at work, nal control systems in their other hand, rarely perpe-
cant delinquencies wrongful use of influence such as cash, fraudulent bill- Fraudsters frequently have als perceive an organization’s for example, by claiming organizations is critical. trate fraud. Moral principles
many businesses by a person to benefit the ing, inventory, or inflated ex- an outlook that leads them internal control systems. that “bribery is a prevalent This is because a person’s significantly influence asset
face today is the incidences actor or any other person. penditure reports. In almost to fabricate justifications to PRESSURE AND ASSET culture here” and “everyone perception of internal con- misappropriation.
of fraudulent acts commis- On the other hand, financial all such cases, the perpetra- justify their acts. In the fraud MISAPPROPRIATION does it, so why not me?” trol can lead to them engag- PERCEIVED STRENGTH
sioned by employees. The statement frauds are usually tor uses techniques of de- literature, this mentality or As a general tendency, when Several empirical research ing in fraudulent behavior. OF INTERNAL CON-
growing number of reported perpetrated by management ception or trickery to steal attitude is known as Ratio- people are faced with finan- has concluded that ratio- Individuals may, for exam- TROLS SYSTEMS
occurrences of fraud and its against potential users of fi- or misappropriate the orga- nalization and is one of the cial or non-financial difficul- nalization has a significant ple, misappropriate assets Internal controls make or
detrimental impact on cor- nancial statements. Hence, it nization’s assets. According tenets of the fraud models. ties that they do not want to impact on the prevalence of at work if they believe the break a company’s ability
porate subsistence continue is an intentional act whereby to Dr. Steve Albrecht, “Asset Rationalization is defined share, they misappropriate fraud and that people who workplace’s internal control to commit fraud. When in-
to draw the attention of au- the perpetrators usually get theft, concealment, and con- as a person’s mentality that assets. Because these forms cannot justify their wrong- systems are poor and so will ternal controls are tight, all
ditors and fraud examiners little or no financial gain; in- version must all be present allows them to excuse im- of Pressure are non-trans- doings are less likely to com- not be noticed. gaps that could allow fraud-
around the world. Accord- stead, they are committed to for asset misappropriation.” moral behavior as not being ferable, such people will go mit fraud. With first-time On the other hand, internal ulent workplace actions are
ing to the Association of showing the better standing Asset misappropriation is criminal. As a result, Ratio- to any length to get rid of fraud offenders, rational- controls act as a deterrent to closed, lowering the rate of
Certified Fraud Examiners of the company on paper. the most common type of nalization allows fraud per- them, including committing ization is even more promi- fraud when they are strong. fraud in the workplace. Peo-
(A.C.F.E.) report to the na- Despite the importance of fraud because it is usually petrators to justify their acts fraud. Individuals may have nent. According to Donald Individuals do not have the ple can take advantage of the
tions on occupational fraud financial statement fraud in the easiest to commit, albeit to protect their belief and high work expectations and Cressey (1953), most of opportunity to misappropri- opportunity presented by
and abuse 2020, organiza- the fraud discussion, empiri- it does not always result in self-image as honest, inno- targets, putting them under those who engaged in some ate money since they know the loose systems to engage
tions lose roughly 5% of cal studies have shown that significant direct losses. cent people who were unfor- a lot of stress. Organizations deceptive behavior for the that internal procedures will in fraudulent activities when
their revenue to fraud each the frequency with which On the other hand, it de- tunate enough to be caught may also encounter pres- first time justified their ac- expose them. Hence, strong internal controls are insuffi-
year. This is the worldwide employees engage in other prives businesses of re- up in a critical circumstance sures that are passed on tions. As a result, the ability Internal Controls have a neg- cient.
data available. One thing types of fraud, particularly sources that could have rather than criminals. to personnel. Apart from to rationalize wrong actions ative relationship with asset A thief also avoids break-
pertinent to note is that this asset misappropriation, been used to improve their Wolfe and Hermanson this, conditions outside the may be a key predictor of misappropriation. ing into a house that has a
is what is reported. What is dramatically outnumbers productivity and profit- (2004) brought the notion of workplace, e.g., at home why some employees mis- EGO AND ASSET MISAP- watchdog. Internal controls
not reported, obviously, has the former. Asset misap- ability. The A.C.F.E. fur- capability into the fraud the- or family, may cause some appropriate funds at work. PROPRIATION can also be perceived the
not been counted. While the propriation accounted for ther divides asset misap- ory, defining it as persons’ stress. Individuals who have Hence Rationalization has a Because of their ego, an av- same in an organization.
fraud can be perpetrated 86 percent of all reported propriation schemes into characteristics and abilities family and friends who rely significant and positive effect erage person places some Individuals would not mis-
both externally and internal- fraud instances during cash misappropriation and that significantly impact on them financially may on asset misappropriation. importance on what other appropriate assets at work
ly, recent studies show that 2020, according to A.C.F.E. misappropriation involving whether or not fraud occurs. feel under Pressure to meet CAPABILITY AND AS- people think of them. Indi- if adequate internal controls
internally perpetrated fraud Surprisingly, even after the inventory and other assets. For a fraudulent act to occur, their requirements. Some SET MISAPPROPRIA- viduals frequently wish to were in place. Individuals in
by employees, management, incidences of asset misap- Aside from its domination, an individual’s capacity to individuals may exploit the TION establish and maintain social senior positions in compa-
and sometimes owners (oc- propriation continue to rise, asset misappropriation is a detect an opportunity to take organization’s assets as a When the perpetrator is in a standing. People may engage nies, on the other hand, may
cupational fraud) has been most studies have been con- significant phenomenon in advantage of it is critical. As means of lessening or con- position where they have ac- in particular actions solely to not be bothered by internal
more prevalent in recent centrated only on financial the accounting discipline, a result, a fraud perpetrator trolling such demands. Ac- cess to the firm’s resources, it preserve their ego because control measures because
years than the former. The statement fraud. particularly in auditing. In- should be in a position inside cording to Steve Albrecht, is generally easier to commit they value and do not want they can usually circumvent
majority of these researches Why do employees com- ternational Standards on the organization that allows people typically participate fraudulent crimes like asset to lose their status, especially them to hide their transgres-
have primarily focused on mit fraud against the orga- Auditing (I.S.A.) 240 inflates them to commit the fraudu- in fraudulent activities when theft. Individuals must also if it is one of power. Accord- sions. Understanding the
financial statement fraud, nization which provides the auditor’s responsibilities lent act or have the skills and they are under duress. Every possess specific personal ing to the findings of some push factors, i.e., Pressure,
with little attention paid to the bread and butter? What for fraud detection to encom- abilities to execute it. fraud perpetrator must have characteristics and abilities existing studies, fraudsters rationalization, capability,
other types of occupational induces them to do such an pass asset misappropriation. The ego determines what been under Pressure to per- that allow them to misappro- are frequently egoistic, and and ego, is crucial for man-
frauds. An employee com- act? Ultimately, the loss of Hence, asset misappropria- is moral and what is not. Be- petrate fraud. Pressure has priate assets at work without ego appears to be a recur- agement and policymakers
mits occupational fraud the organization is the loss tion is an issue that deserves cause of their ego, people are been discovered to be a sig- being discovered. As a result, rent theme in some of the in developing solutions tar-
during the course of their of an employee. Few theo- the immediate attention concerned about what oth- nificant influencing factor simply recognizing the exis- most recent striking frauds. geted at eliminating work-
occupation. Sometimes, ries have been developed of major stakeholders, i.e., ers think of their behavior. in the occurrence of fraudu- tence of an opportunity is People who have a strong place fraud. Having proper
it is further referred to as over time to understand why management, auditors, and People work hard to estab- lent behaviors. According to insufficient to commit the attachment to their social and robust internal control
employee fraud. According people commit fraud, espe- shareholders. lish a reputation, and they various fraud models, pres- fraud unless the individual standing are more prone to systems in place is one of the
to A.C.F.E., there are three cially occupational fraud. SOME ELEMENTS OF OCCU- do everything they can to sure is a factor that causes is well-positioned to take engage in wrongdoing such most effective approaches to
categories in which an em- However, these theories PATIONAL FRAUDS ARE: retain it. Some people engage persons to engage in fraud. advantage of it. As a result, as misappropriation of their reducing the occurrence of
ployee may commit fraud on have also undergone many Pressure or stimulus is a in various actions, includ- According to these studies, a fraud perpetrator must organization’s funds. This is asset misappropriation.
an employer or organization developments, e.g., the fraud non-shareable problem that ing deception, to maintain individuals misappropriate possess the skills and abili- because such persons may The writer is a finance and fo-
viz, Asset misappropriation, triangle with three elements motivates a person to engage their egos. Vousinas (2019) assets at work when under ties to conduct the deception. be willing to participate in rensic accounting professional
Corruption, and Financial to the S.C.O.R.E. model with in acts that would help alle- demonstrates that some strain, whether personal or Individuals misappropriate potentially fraudulent con- and is currently associated with
Statement fraud. Briefly five elements. Different so- viate such pressures. When people enjoy the feeling work-related, financial or assets when they can com- duct to maintain their social the education industry in the
speaking, when an employee ciologists have asserted dif- individuals face financial of outsmarting the world non-financial, to alleviate prehend and exploit internal lifestyle. The ego and asset capacity of a finance officer. The
swindles with cash or other ferent rudiments in their and non-financial pressures, when their initial crimes are such stresses. Hence Pres- control mechanisms so that misappropriation have a fa- views expressed are personal.

PERSPECTIVE
ALTERING THE STORY

Renaming of stReets and places cannot alteR histoRy

Earlier this week, certain Therefore, even if one was throne of Delhi for several arrested and externed to like so many other impor- governments that have singer Mohammad Rafi possible unless, the entire
right-wing activists demon- to change the names of ev- centuries? Red Fort, Jama Burma. Similarly, Tughlaks tant landmarks, it is also a been there in the past 50 when the fact is that it was University system, the rail-
strated in the Mehrauli area ery monument or street, Masjid and Hamayun’s played a major part in the heritage monument. It hon- years. Congress made the in memory of Rafi Ahmed ways, the English language
of South Delhi demanding one would not be able to Tomb are a part of their evolution of the city. Tu- ours the Slave dynasty and biggest folly when it re- Kidwai, a nationalist and etc gets changed also? I am
that the historic Qutab erase historical facts. Suc- legacy and attract a large ghlakabad Fort and Feroze also reminds people of In- named Connaught Place freedom fighter who was a not a supporter of colonial
Minar should be renamed cessive governments have number of tourists every Shah Kotla are monuments dia’s first woman empress, as Rajiv Chowk. Although part of Jawahar Lal Nehru’s powers but India was a Brit-
Vishnu Sthambh. Simul- resorted to this futile ex- year. The Mughal Gardens that cannot be wished away. Razia Sultana. Yes, some this name has gained accep- Cabinet. ish-ruled colony is undeni-
taneously another group ercise of renaming places, at the Rashtrapati Bhawan In fact, one of the three dispute that many of these tance, thanks to the Metro Delhi has also gone by able. When we celebrate
of people wanted that the which other than adding recognise their stamp over Ashoka Pillars in the city is structures were originally services which stop at this several names in its hoary Independence Day, it is to
names of Shah Jahan Road to the confusion has served the city and the special Del- located at Ferozeshah Kotla Hindu and thus should be station, yet for Delhiites, history. Hastinapur, Rai- mark our freedom from the
and Tughlak Road in the no other purpose. Being a hi cuisine from Karim to and the famous Cricket recognised as such. Connaught Place would al- sina, Indraprastha, Shah- British, an acknowledg-
Lutyens zone to be changed. Delhite from my birth till Jawahar eateries is a part of ground in the capital where P.N.Oak was the first ways be CP. St Mary’s road jahanabad, Tughlakabad ment of sorts. Let us spend
Everyone is aware that now, I can tell you that such what they have left behind. Sunil Gavaskar scored his right-wing historian who was over 60 years ago re- are some of these names. more time strengthening
Delhi is amongst the oldest initiatives undermine real- The first war of Indepen- 29th century to surpass Sir spoke on these lines in the named as Rafi Marg. Most There has been an attempt our country and its econo-
capitals of the world and ity. How can anyone ever dence in 1857 resulted in Don Bradman’s record was late 1960s. If his thesis was people who live in the city by governments to also my rather than indulging in
there is history buried un- wish away the Mughals for the last Mughal Emperor, also a part of this stadium. right, he should have been believe that this road was erase the British imprint on divisive politics.
der every brick and stone. instance who were on the Bahadur Shah Zafar being As far as Qutab Minar goes, honoured by the central named after the legendary the capital. How can this be Pankaj Vohra