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1. Introduction
Employee theft can be one of the most devastating crimes committed against a business of any size. These crimes are particularly distressing for small businesses because they create greater financial and operational harms relative to the harms created by thefts that occur in larger firms (Association of Certified Fraud Examiners, 2010, 2012, 2014, 2016). For example, employee theft can significantly affect a small business’ ability to pay current employees, hire new employees, invest in new equipment and purchase needed materials and services (Kennedy, 2014). In addition, when employee theft negatively affects business operations, employee morale may suffer, outputs and quality can decline and revenue may be lost (Payne and Gainey, 2004). These and other negative consequences can exacerbate any financial issues that result from insider thefts.
According to the Association of Certified Fraud Examiners’ (2010, 2012, 2014, 2016) (ACFE), biannual Report to the Nations, the most commonly occurring form of insider financial frauds is asset misappropriation. The ACFE data make it clear that small businesses are routinely and significantly harmed by insider financial frauds, and that small businesses suffer greater losses and are victimized more regularly than businesses of any other size. Yet, the data they report may not be applicable to all small businesses. This is because the ACFE data only take into account financial thefts where the business seeks the services of a certified fraud examiner (CFE). Given the significant costs associated with hiring a CFE to investigate employee thefts, the ACFE data may not appropriately account for small businesses that cannot afford, or are unwilling, to hire a CFE. It is, therefore, possible that the picture of insider financial frauds painted by the ACFE data may misrepresent what is actually taking place within small businesses.
This study attempts to increase the understanding of the types of insider financial frauds that occur within small businesses by focusing on a sample of businesses that have not employed a CFE in response to employee theft. To accomplish this goal, data from a study of employee theft within small businesses are used to investigate the experiences of businesses that did not hire a CFE; experiences that are not represented in the ACFE data. This paper begins with a brief review of the literature...