Factors contributing to the existence of undetected fraud within retail SMEs in the Cape Metropole

Abstract

Small and medium-sized enterprises (SMEs) are expected to play a key role within a country's gross domestic product (GDP), economic growth, and job creation. In South Africa, the economic value of SMEs is recognized and supported by the government. However, these smaller entities often have limited internal resources and consequently have a more vulnerable business environment. One such threat is fraud that is committed against these businesses. The focus on the prevention and control of fraud generally tends to be on larger organizations, and research examining fraud within SMEs is limited. This study investigates the factors that may contribute to the existence of undetected fraud within small retail lending to these entities. The study followed a quantitative research methodology classified as survey research as it used a questionnaire to collect and process large amounts of data. The results of this survey indicate that there is a lack of expertise or knowledge, and inadequacy of prioritizing fraud detection by these business owners which could be contributing to a high percentage of undetected fraud within the retail SMEs population. The findings of this study reinforce prior literature highlighting the resource limitation and informal strategies often employed by retail SMEs in managing fraud risks.