BINDURA UNIVERSITY OF SCIENCE EDUCATION

FACULTY OF COMMERCE

DEPARTMENT OF INTELLIGENCE AND SECURITY STUDIES

THE EFFECTS OF EMPLOYEE FRAUD ON THE OPERATIONAL

ACTIVITIES OF RETAIL SHOPS IN HARARE CBD.

BY

RUFARO NKHOKWE (B190273A)

A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE

REQUIREMENTS FOR THE BACHELOR OF COMMERCE HONOURS
DEGREE IN FINANCIAL INTELLIGENCE OF BINDURA UNIVERSITY OF
SCIENCE EDUCATION.

JUNE 2023

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 APPROVAL FORM

Title: The effects of employee fraud on the operational activities of retail shops in
Harare CBD.

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 RELEASE FORM

NAME OF STUDENT: Rufaro Nkhokwe.

DISSERTATION TITLE: The effects of employee fraud on the operational activities

of retail shops in Harare CBD.

DEGREE TITLE: Bachelor of Commerce (Honours) degree in Financial

Intelligence.

YEAR GRANTED: 2023.

Permission is hereby given to the Bindura University of Science Education Library to

produce single copy of this dissertation and to lend or sell such copy for private,
scholarly or scientific research purpose. Only the author reserves the other publication
rights and; neither the dissertation nor extensive extracts from it may be printed or
otherwise reproduced without the author’s permission.

SIGNED .......................................................

PERMANENT ADDRESS: 507 Houghton Park Road

Houghton Park, Harare.

TELEPHONE: +263785653919

EMAIL: [email protected]

DATE: ............/………….../.............................

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 DEDICATION FORM

MOM AND DAD

The support I got from my late mom, Pastor Nyasha Munditi and my dad Mr G
Nkhokwe elevated me to dizzy heights. Not to be overlooked is the unwavering support
from my aunties (Joyce, Naomi and Marie Munditi) and all my uncles from the Munditi
family. My siblings and the rest of family members deserve my gratitude, too. It's
important to acknowledge the ongoing assistance I had from my supervisor from the
beginning up to the successful accomplishment of this project. Without doubt, I agree
that without his constant, steadfast, and wise counsel, my academic attempts would not
have been as successful. I am most grateful to Almighty God, who created and perfected
knowledge, wisdom, and faith, for His love, compassion, mercy, and kindness toward
me as well as for guiding me through the academic environment. I gave Him the glory
for this study.

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 ABSTRACT

Employee fraud is an ill which affects the operations of retail businesses. This research
sought to explore the effect of fraud on the operational activities of retail shops, using
retail businesses in Harare CBD as the case study. The research was guided by the
following objective; to identify the types of employee fraud within retail businesses in
Harare CBD, to investigate the causes of employee fraud in retail businesses in Harare
CBD, to determine the impact of employee fraud in the operational activities of retail
businesses in Harare CBD and to recommend strategies to curb employee fraud in the
operations of retail businesses in Zimbabwe. On a sample size of 54, the researcher
employed a descriptive case study research design. The main data gathering tools used
were the questionnaire and the interview. The study's respondents were chosen using
stratified random sampling and purposive sampling methods. Data was analysed using
Microsoft Excel 2016 and the Statistical Package for Social Sciences (SPSS) version 20
before being shown in tables and bar graphs. Asset misappropriation, procurement fraud
and corruption were identified as the dominant types of fraud affecting operations of
retail businesses in Harare CBD. Identified as the major causes of fraud were financial
pressure, poor/inadequate internal controls, inadequate remuneration and inadequate
and ineffective internal audit. It was also discovered through the research that employee
fraud had the biggest effects on the operations of retail shops in Harare CBD in the form
of direct financial losses, increased security expenses, loss of credit worthiness and
reputational damage. As successful safeguards against employee fraud in retail stores,
the study strongly advised harsh sanctions for disloyal workers, tight recruitment
procedures, and target hardening.

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 ACKNOWLEDGMENTS

Hearty thanks to my supervisor, for giving me the golden opportunity to carry out this
brain-teasing research. I lost hope along the way but he would not allow me to quit,
thank you very much for your able guidance, wisdom, encouragement and patience; for
I would not have completed this project within this semester without an empathetic
supervisor like you. I would also like to appreciate the support and commitment I
witnessed from the retailers in Harare CBD for their ideas, feedbacks and advice during
the data collection process.

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 Table of contents.

APPROVAL FORM .................................................................................................................ii

RELEASE FORM ....................................................................................................................iii
N.................................................................................................................................................iii
DEDICATION FORM ............................................................................................................ iv
ABSTRACT ...............................................................................................................................v
ACKNOWLEDGMENTS ....................................................................................................... vi
Table of contents. .................................................................................................................... vii
List of tables.............................................................................................................................. xi
List of figures ........................................................................................................................... xii
1.0. INTRODUCTION............................................................................................................. 1
1.1. Background of the study.............................................................................................. 1
1.2. Statement of the problem. ........................................................................................... 2
1.3. Research Objectives. .................................................................................................... 3
1.4. Research Questions ...................................................................................................... 3
1.5. Justification of the study.............................................................................................. 3
1.6. Assumption of the study. ............................................................................................. 4
1.7. Delimitation. ................................................................................................................. 4
1.8. Limitation of the study. ............................................................................................... 5
1.9. Organization of the study. ........................................................................................... 5
1.9.1. Summary. ....................................................................................................................... 6
CHAPTER II ............................................................................................................................ 7
LITERATURE REVIEW........................................................................................................ 7
2.0. Introduction. ...................................................................................................................... 7
2.1 Purpose of Literature Review ........................................................................................... 7
2.2.0. Conceptual Framework ................................................................................................. 7
2.2.1. An overview of fraud ..................................................................................................... 7
2.2.2. Categories of fraud......................................................................................................... 8
2.2.2.1. Asset misappropriation/embezzlement ..................................................................... 8
2.2.2.2. Corruption ................................................................................................................... 8
2.2.2.3. Financial statement fraud .......................................................................................... 9
2.2.2.4. Payroll fraud................................................................................................................ 9
2.2.2.5. Procurement fraud. ................................................................................................... 10
2.2.3 Causes of employee fraud. ............................................................................................ 10
2.2.3.1. Greed. ......................................................................................................................... 10

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2.2.3.2. Poor internal controls. .............................................................................................. 10
2.2.3.3. Financial pressure. .................................................................................................... 11
2.2.3.5. Inadequate remuneration. ........................................................................................ 11
2.2.4. Effects of employee fraud. ........................................................................................... 11
2.2.5. Measures to prevent and detect employee fraud. ...................................................... 12
2.3. Theoretical framework. .................................................................................................. 13
2.3.1. The Fraud Triangle Theory. ....................................................................................... 13
2.3.2. The Fraud Diamond Theory. ...................................................................................... 15
2.3.3. The Routine Activities theory. .................................................................................... 16
2.4 Empirical evidence. .......................................................................................................... 17
2.5. Summary of previous researches and justification of the current study. .................. 21
2.6. Summary .......................................................................................................................... 23
CHAPTER III ........................................................................................................................ 24
RESEARCH METHODOLOGY ......................................................................................... 24
3.0 Introduction ...................................................................................................................... 24
3.1. Research Design and Justification ................................................................................. 24
3.2. Target population............................................................................................................ 25
3.3. Population sample ........................................................................................................... 25
3.3. Sampling techniques ....................................................................................................... 26
3.3.1. Purposive sampling ...................................................................................................... 26
3.3.2. Stratified sampling method ......................................................................................... 26
3.4.0. Data collection instruments ......................................................................................... 27
3.4.1 Questionnaires ............................................................................................................... 27
However, the low return rate was the main disadvantage of using the questionnaire. The
sample may not be representative of the people the researcher was seeking to contact because
so few people answered to the survey. Due to the researcher and respondent's lack of
communication, issues with the questionnaire went unaddressed, leading to some skewed
responses. The researcher ran a pilot test before to the main poll in order to reduce skewed
responses. Additionally, the questionnaires were hand-delivered and collected by the
researcher. ................................................................................................................................ 27
3.4.2 The interview ................................................................................................................. 28
3.5 Data collection procedures .............................................................................................. 28
3.6. Validity and Reliability................................................................................................... 29
3.7.0 Data presentation, analysis and interpretation of data ............................................. 29
3.9. Ethical considerations ..................................................................................................... 29
3.10. Summary ........................................................................................................................ 30
CHAPTER IV......................................................................................................................... 31
DATA PRESENTATION, ANALYSIS AND DISCUSSION............................................. 31

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4.0. Introduction ..................................................................................................................... 31
4.1. Questionnaire response rate ........................................................................................... 31
4.1.1 Interview response rate ................................................................................................ 31
4.2 Demographic characteristics of respondents ................................................................. 32
Research Findings .................................................................................................................. 34
4.3. Types of fraud ................................................................................................................. 34
4.3.1. Asset misappropriation/Embezzlement ..................................................................... 34
4.3.2. Procurement fraud....................................................................................................... 35
4.3.3. Corruption .................................................................................................................... 36
4.3.4. Financial Statement fraud ........................................................................................... 36
4.4.1. Causes of fraud ............................................................................................................. 37
4.4.1.1 Greedy ......................................................................................................................... 37
4.4.1.2. Financial pressure ..................................................................................................... 38
4.4.1.3. Poor internal controls ............................................................................................... 38
4.4.1.4. Inadequate remuneration ......................................................................................... 38
4.4.1.5. Inadequate and ineffective internal audit ............................................................... 39
4.5.1. Impact of fraud....................................................................................................... 39
4.5.1.1. Loss of inventory ....................................................................................................... 39
4.5.1.2. Direct financial loss ................................................................................................... 40
4.5.1.3. Increased security costs ............................................................................................ 40
4.5.1.4. Loss of credit worthiness .......................................................................................... 41
4.6.1.1. Stiff penalties to errant employees........................................................................... 41
4.6.1.2. Strict recruitment procedures.................................................................................. 42
4.6.1.3. Installation of security cameras ............................................................................... 43
4.6.1.4. Other measures ......................................................................................................... 43
4.8. Summary .......................................................................................................................... 44
CHAPTER V .......................................................................................................................... 45
SUMMARY, CONCLUSION AND RECOMMENDATION ............................................ 45
5.0 Introduction ...................................................................................................................... 45
This chapter's goal was to summarize the research's findings. It also concentrated on the
study's conclusions and recommendations. .............................................................................. 45
5.1 Summary of the Study ..................................................................................................... 45
5.2 Summary of research findings ........................................................................................ 46
5.3. Conclusion ....................................................................................................................... 47
5.4.1 Stiff penalties to errant employees............................................................................... 48
5.4.2. Improve remuneration practices ................................................................................ 48

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5.4.3 Target hardening........................................................................................................... 49
5.4.4 Fraud awareness campaigns and seminars................................................................. 49
5.5 Recommendations for further study .............................................................................. 50
List of references .................................................................................................................... 51
APPENDICES .................................................................................................................... 55
APPENDIX 1: RESEARCH ASSISTANCE LETTER ...................................................... 55
APPENDIX 2: QUESTIONNAIRE ...................................................................................... 56
Section D: Measures to curb fraud. ...................................................................................... 58
APPENDIX 3: INTERVIEW GUIDE .............................................................................. 59

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 List of tables

Table 3.1: Sample constituency. ............................................................................... 26

Table 4.2: Questionnaire response rate. .................................................................. 31
Table 4.3: Interview response rate. .......................................................................... 32
Table 4.4: Demographic distribution of questionnaire respondents. .................... 33
Table 4.5: Types of fraud in Harare CBD. .............................................................. 35
Table 4.6: Major causes of fraud in retail businesses in Harare CBD. ................. 37
Table 4.7: Impact of fraud on operational activities of retailers in Harare CBD.40

xi
 List of figures

Figure 1: The Fraud Triangle ................................................................................... 14

Figure 2: The Fraud Diamond Theory. ................................................................... 15
Figure 3: Measures to fight employee fraud in the retail sector. ........................... 42

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 CHAPTER I

INTRODUCTION

1.0. INTRODUCTION.

This project sought to explore the effect of fraud on the operational activities of retail
shops, using retails shops in Harare CBD as the case study. This chapter looked at the
background of the study, statement of the problem and research objectives. It also
covered the assumptions, the limitations and significance of the study.

1.1. Background of the study.

High-profile companies from all over the world, including Enron, WorldCom,
Adelphia, AIG, and others, engaged in financial statement fraud which saw their
bankruptcy (Awolowo, 2019). It is quite worrying that a few of the companies who
committed financial statement fraud fully failed (Wolfe & Hermanson, 2004). Fraud
has detrimental repercussions on other stakeholders in addition to endangering the
company's capacity to continue operating, such as job losses, decreased shareholder
value, and damage to the company's reputation (Colby, 2013).

Corporate fraud cost firms a lot of money on a global scale (Awolowo, 2019). The
Association of Certified Fraud Examiners estimated that corporate fraud cost the
world's businesses more than $3.7 trillion in 2018. Financial statement fraud is
unquestionably detrimental to the safety, soundness, and efficiency of both financial
markets and retail businesses worldwide (Rezaee & Wang, 2017).

According to the findings of ACFE Global's 2018 Report to the Nations, it is very
alarming to notice that from 2012 to 2018, there were more instances of asset misuse
than of financial report fraud and corruption. In 2018, cases of asset misappropriation
suffer an 80% or even 89% impact. These results demonstrate an increase in the annual
percentage of asset misuse cases (Utami et al., 2021). Since it is very likely to be carried
out by those in positions of responsibility, asset misappropriation could occur in any
division of a corporation (Utami, 2021).

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The KPMG Fraud Barometer (2019), which covered 102 examples of alleged insider
fraud, also found that management fraud and embezzlement cases rose in 2019. A six-
fold increase in the number of alleged procurement fraud cases that were brought up in
court, usually with false invoices, was another development. In 2019, six cases totalling
over £16 million were heard in court, compared to just £2.9 million in 2018 (Utami et
al., 2021).

According to Rezaee (2005) cited in Mawanza (2014), the prevalence and consequences
of fraud have an effect on the public's confidence in the financial system, including the
veracity of the financial accounts, as well as creditors, auditors, and shareholders. Since
no company is immune to this growing problem, acknowledging and admitting that the
risk is real and relevant is one of the first steps in fraud prevention (Mawanza, 2014).

Zimbabwe's commercial sector is extremely vulnerable to fraud and its disastrous

effects, just like in any other nation. Basing on this context, the researcher deemed it
imperative to undertake a study that looks at the consequences, nature, and causes of
employee fraud in the Zimbabwean retail sector with specific reference to Harare CBD.

1.2. Statement of the problem.

Employee fraud is a practice that is disrupting several businesses’ operations in

Zimbabwe. Particularly alarming is the ZIMRA case, in which ZIMRA's workers were
accused of defrauding the company of almost $ZWL50 million (Dzoma, 2021). This
level of fraud was only discovered during an audit that uncovered the threatening
fraudulent behaviour that plagued the organization. More recently, Ncube (2023)
reported on two men who were accused of defrauding an insurance company of about
$US80,000. Similalrly, a critical analysis of Mawanza (2014)’s submission reveals that
fraud is a major concern to the operational activities of businesses in Zimbabwe.

It is especially alarming that the majority of businesses that encounter fraud do not take
the time to fully understand the risks involved and do not take steps to detect and prevent
fraud before it really occurs. Dishonest personnel continue to find ways to circumvent
systems or defraud their employers of their resources and assets despite all efforts to
stop them. The researcher's interest to probe more on the subject of fraud was therefore,
influenced by the rise in fraud cases, which are poised to significantly undermine
business operations in Zimbabwe. The researcher is aware that the retail sector is failing
to find lasting solutions to the challenges posed by fraud on their operations. Therefore,

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in order to suggest on potential workable solutions, it is necessary to understand the
nature, causes, and effects of fraud in Zimbabwe's retail sector.

1.3. Research Objectives.

1. To identify the types of employee fraud within retail businesses in Harare
CBD.
2. To investigate the causes of employee fraud in retail businesses in Harare
CBD.
3. To determine the impact of employee fraud in the operational activities of retail
businesses in Harare CBD.
4. To recommend strategies to curb employee fraud in the operations of retail
businesses in Zimbabwe.
1.4. Research Questions

The study sought to answer the following research questions:

1. What is the nature of employee fraud in the operational activities of retailers in

Harare CBD?
2. What are the causes of employee fraud in Harare CBD retail businesses?
3. What are the effects of employee fraud in the operational activities of retail
businesses in Harare CBD?
4. What are the strategies that can be implemented to curb employee fraud in
operational activities of retail businesses in Zimbabwe?

1.5.Justification of the study.

The goal of the study was to compile data on how fraud impacts the operational
activities of retail businesses in Harare CBD. According to Denscombe (2002), a study
is relevant if it contributes to existing knowledge, addresses practical needs, and is
relevant to current concerns. The study should therefore be helpful to a variety of
parties, including students, retailers, institutions, and all national policy makers.

1.5.1. To the student.

Further to providing the researcher with the chance to progress this issue of economic
importance, it also allows the researcher to gain a deeper understanding of the
detrimental consequences fraud has on the retail industry. Also, the research was
beneficial in that it enabled the researcher to finish the requirements for the Bachelor of

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Commerce Honours Degree in Financial Intelligence. The study provided a solid
foundation for the researcher's personal growth and taught him how to conduct effective
investigations into fraud in Zimbabwe's retail industry.

1.5.2. To the retailers.

The study was valuable because it increased retailers' awareness of their vulnerability
to the potential of fraud. As theory has been shown through empirical research to assist
policymakers, this study will aid businesses in creating fraud management plans.

1.5.3. To the nation.

For policymakers, the general public, security experts, and other academics seeking
knowledge on how to combat various types of fraud in Zimbabwe's retail industry, the
research on fraud should be the primary source of information.

1.5.4. To the university.

The study ought to be quite intriguing to future fraud management scholars who are
interested in the same issue. The study will be consulted as a source of literature for
research on topics related to fraud. If the university decides to publish this research, it
might also attract a lot of attention.

1.6. Assumption of the study.

i. There is a rise in employee fraud which affects the operational activities of retail
businesses.
ii. Current measures to fight fraud in the retail sector are less effective.

1.7. Delimitation.

The general rise in various sorts of fraud in retail stores served as the impetus for the
study. Time was allotted for the study. The time period covered was from January 2022
until June 2023. A sample of 54 respondents who worked as cashiers, store managers,
or businesspeople in the Harare CBD were surveyed for the study, which was limited
to that area. The town of Harare was chosen as the investigation's location since it is
where the researcher lives and has the most time and money.

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1.8. Limitation of the study.

The primary drawback of this study was the inability to get some crucial data because
some interviewees were unavailable during interview sessions. Similarly, several
respondents had trouble completing the questionnaires. The lack of sufficient time and
money to support data collection further restricted the investigation. The researcher
used the necessary effort, tenacity, and patience to get around these obstacles and
achieve the objectives of the study.

Information confidentiality presented a challenge for the researcher during the

investigation. Many survey participants were reluctant to divulge information for fear
that their rivals might find out about it. To overcome these issues, the researcher did not
request the respondents' identities, and as a result, the data was captured in a secret
manner in order to safeguard the respondents' confidentiality and privacy. Additionally,
the voluntary nature of the survey and the fact that the research was only done for
academic purposes were assured to the respondents.

1.9. Organization of the study.

The study's first chapter included a general summary of the entire analysis, which
intended to gauge how fraud affected Harare CBD's retail industry. The context of the
study, the research topic, the research objectives, the research questions, the scope,
restrictions, and delimitations of the investigation were all covered in the chapter, along
with a summary.

The study's second chapter analysed the literature on the topic of fraud in the retail
industry, along with its conceptual foundations, theoretical reasons, and empirical
evidence. In this chapter, the causes, types, and repercussions of employee fraud in the
retail sector were thoroughly addressed.

In Chapter III, it was highlighted how the study's methodology and research strategy
were used. In Chapter IV, the facts were presented, the research findings were analysed,
and they were discussed. In this chapter, the acquired data on cybercrime in the retail
sector was also analysed. A summary of all the research was given in the fifth chapter.
Conclusions, ideas, and recommendations were provided in this chapter to stimulate
potential future study.

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1.9.1. Summary.

The chapter provided an overview of the study's objectives, historical context, problem
statement, and significance. The chapter also focused on the study's assumptions,
boundaries, and limitations. The chapter after this one, Chapter Two, was devoted to a
literature study. Chapter II covered the philosophical and theoretical underpinnings of
the study as well as empirical data on employee fraud.

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 CHAPTER II

LITERATURE REVIEW

2.0. Introduction.

The study's background, statement problem, goals, and research questions were all
explored in the preceding chapter, along with its importance, presumptions,
delimitations, and limits. This chapter includes a discussion of the theoretical
underpinnings, empirical support, and an analysis of earlier research findings that are
related to the study on the impact of fraud on the day-to-day operations of retail stores
in the Harare CBD. Review of the literature includes research that has been done in the
past on the origins, kinds, and impacts of fraud on the daily operations of retail stores.
As a result, the researcher read material on fraud from different authors and researchers
in order to have a thorough comprehension of the phenomena.

2.1 Purpose of Literature Review

According to Saunders, Lewis, & Thornhill (2016:74), literature review is of paramount

significance in research as it lays the foundation on which the research is hinged. Thus,
literature review helped in the development of a thorough understanding of previous
research on the subject of fraud and its consequences (Zikmund, 2005). The proceeding
section of literature review focused on the conceptual framework that underpinned the
study.

2.2.0. Conceptual Framework

2.2.1. An overview of fraud

According to the Association of Certified Fraud Examiners (2018), fraud is any

purposeful act or omission intended to deceive others that causes a loss for the victim
and/or a gain for the perpetrator. The intentional misappropriation of resources or assets
belonging to the employing organization in order to enrich oneself through one's
employment (Mawanza, 2014). (Wilson 2004) recognized employee dishonesty as a
serious concern that has grown since corporate dishonesty wreaked havoc on the U.S.

7
financial markets starting in January 2000, and was thought to be expanding annually.
Fraud is grouped into three categories which are: financial statement fraud, corruption,
and asset misappropriation (Awolowo, 2019). Below was a discussion of these
classifications.

2.2.2. Categories of fraud

2.2.2.1. Asset misappropriation/embezzlement

Asset misappropriation schemes are those in which a criminal uses deceit or trickery to
steal or abuse the resources of an organization for their own gain (Awolowo, 2019).
According to Utami (2021), misappropriation of assets is a type of fraud that includes
stealing money, illegally possessing items or assets belonging to an organization, and
embezzling products to benefit oneself or others. According to ACFE Global (2018),
asset misappropriation can be classified into two categories: cash and inventories, and
all other assets. Cash assets are misappropriated through a number of techniques,
including skimming, thievery, and fraudulent payout. A billing system, payroll scheme,
expense reimbursement scheme, check tampering, and register disbursement are just a
few of the methods available to accomplish this. In the meantime, misusing assets refers
to taking advantage of, stealing, or embezzling resources other than cash within the
business, including inventory and all other types of resources. The plan entails theft and
fraud (Utami, 2021).

2.2.2.2. Corruption

According to ACFE (2014), corruption is a scheme in which an employee violates his

or her duty to the employer by abusing their influence in a business transaction in order
to get a direct or indirect advantage. Corruption, according to Transparency
International (2016), is "the abuse of entrusted power for private gain." The definition
of corruption given by Transparency International seems to be more inclusive and
covers all contexts in which corruption might occur. According to Transparency
International (2016), corruption can be divided into three categories: political, petty,
and big. However, these classifications vary depending on the amount lost and the
industry where corruption occurs.

Grand corruption refers to actions taken at the highest levels of government to corrupt
laws or the government's core functions so that officials can profit at the expense of the

8
general welfare. Petty corruption is the routine abuse of authority by low- and mid-level
public officials when dealing with regular people, who frequently seek out basic goods
or services at institutions like hospitals, schools, police stations, and other organizations
(Transparency International, 2016). Political corruption refers to the exploitation of
political decision-makers' positions to maintain their riches, influence, and prestige
through the manipulation of institutions, laws, and norms of procedure in resource
distribution and funding. According to the ACFE, corruption can be divided into four
types. Conflicts of interest, bribery, unlawful gratuities, and economic extortion fall
under these headings (ACFE, 2018).

2.2.2.3. Financial statement fraud

According to the ACFE (2018), financial statement fraud is a type of "occupational

fraud" that entails "deliberate misrepresentation of an enterprise's financial condition
accomplished through the intentional misstatement or omission of amounts or
disclosures in the financial statements to deceive financial statement users" (ACFE,
2016). Financial statement fraud is more common than other types of fraud. Financial
and non-financial financial statement fraud can also be separated into two types. The
financial and non-financial may include, to name a few, incorrect asset valuation,
inaccurate disclosures on financial statements, manipulation of liabilities, manipulation
of expenses, and erroneous revenue recognition. Businesses falsify financial statements
in order to attract investors, win financing from banks, justify bonuses and pay raises,
and satisfy shareholders' expectations. Because financial statements are created at the
management level, upper management is typically at the center of financial statement
fraud (Awolowo, 2019).

2.2.2.4. Payroll fraud.

Another typical way that workers of businesses deceive their employers is through
payroll fraud (ACFE, 2018). According to Okagu et al. (2020), any arrangement
wherein an employee induces the business to pay money via false claims is deemed
payroll fraud. Payroll fraud, according to Kelly (2016) is the theft of money from a
company via its payroll system. Both management and normal staff are capable of
committing payroll fraud. Employees either boost the gross or net compensation in
payment vouchers or insert phantom names or salary rates in this situation. The goal of

9
doing this is to profit financially from the discrepancy following payment. Deloitte
(2014) asserts that there are numerous ways to commit payroll fraud. Some of tactics
include falsifying working hours on time sheets, manipulating overtime, using "ghost"
employees, and falsifying personnel records (Deloitte, 2014). A business's financial
performance suffers from this kind of fraud.

2.2.2.5. Procurement fraud.

According to AQUIFAX (2017) procurement can be perpetrated through bid rigging

and manipulation of the procurement processes. In addition, employees in procurement
departments may collude with suppliers. In addition, unethical buyers may supply false
invoices or invoices with unauthorised additional costs (ACFE, 2018). Similarly, Staff
may divert legitimate payments intended for the suppliers to themselves (AQUIFAX,
2017). These kinds of fraudulent acts undermine operations of retailers as they interfere
with the finances of an organisation.

2.2.3 Causes of employee fraud.

2.2.3.1. Greed.

Mabika (2014) contends that fraud may be committed by perpetrators out of greed when
they wish to rise in social standing. For instance, when money is tight, someone can
desire to buy a house, go on vacation, or get a nicer car. Such offenders contend that
they will make restitution later only to be caught before making a payment or making
amends.

2.2.3.2. Poor internal controls.

Weak internal control is also an opportunity for fraud to occur. Most frauds occur in
outlets do not have an integrated operating system which causes internal control not to
be optimal due to lack of supervision (Abdullahi and Mansor, 2018). Management not
monitoring routinely considering the travel costs. Weak internal control at the outlet
causes fraud opportunities both in the department of sales and department of finance &
administration in receiving customer deposits and the department of aftersales in
obtaining customer service activities (Setiawan et al., 2022). They further lament
another internal control weakness in the form of poor stock-taking monitoring. That is,

10
stock taking not done on a routine basis and by independent parties increases the chance
of theft of inventory (Setiawan et al., 2022).

2.2.3.3. Financial pressure.

Mawanza (2014) asserts that under pressure, people commit fraud. He goes on to say
that the strain may be from a serious financial necessity or issue. For instance, it might
be almost anything, like high-priced tastes or addiction issues. an office According to
Mawanza (2014), the primary causes of fraud in Zimbabwe are pressure and opportunity
factors. Employee fraud, according to Omar et al. (2016), is a result of high lifestyle
pressure that surpasses the salary earned. Similar to this, Klein (2015) discovered that
supermarket retail employee fraud occurred as a result of need-driven pressure, attitudes
toward stealing, and an unethical work environment.

According to Mawanza (2014), companies should make sure that when they work
toward internal control systems, they are able to recognize any potential pressure factors
and be able to resolve them so that they do not negatively impact the organization's
climate for fraud. Therefore, problems like poor pay, pay delays, employee social lives,
or the employee's wheel of life should be considered key components of people
concerns in fraud prevention. But alcoholism and drug addiction, as well as a lifestyle
of greed, were the main causes of strain.

2.2.3.5. Inadequate remuneration.

Employee fraud, according to Abdullahi and Mansor (2018), is caused by insufficient

pay that does not cover their basic necessities. Sithole (2013) argues that when the
potential rewards of corruption are considerable in the wake of poverty and inadequate
compensation, it follows that individuals will engage in corrupt activities. In order to
reduce the likelihood of employee fraud, organizations must ensure that they pay their
workers’ salaries that allow them to maintain their standard of life.

2.2.4. Effects of employee fraud.

The significant impact of fraud is financial loss which is the priority for companies to
investigate when facing fraud cases. employee fraud has a significant impact on the
company's operations, such as disrupted business operations, spending extra time on the

11
settlement process, and damaging its image (Setiawan et al., 2022). They further state
that in some extreme instances, f an employee is suspected of committing fraud, the
employee may not continue his work process. As such This process causes an
abandoned job, thus requiring the company to find a replacement. It does not
immediately work smoothly when it gets relief because it requires a training process
(Setiawan et al., 2022).

In agreement with Hollow (2014), Omar et al (2016) bemoans that fraud damages the
business’ reputation could decrease sales to customers, thereby reducing the company's
performance. According to AQUIFAX (2017), fraud costs organisations in the form of
resources needed for investigations once potential fraud has been detected, and to take
any subsequent legal action. In addition, fraud also increases The risk of reputational
damage and at the same time lower staff morale which is undermines the operational
activities of retailers.

2.2.5. Measures to prevent and detect employee fraud.

According to Davis & Harris (2020), preventive fraud measures transpire prior to the
occurrence of any fraudulent act, taking place as such, the most effective and common
strategies implemented to prevent employee fraud are the use of adequate internal
controls that cannot be overridden by management (Hollow, 2014). Implementation of
controls that management cannot override is critical because management is generally
responsible for monitoring internal controls and is familiar with how the controls
function. separation of duties and improved internal communications can go a long way
in preventing fraud (Hollow, 2014). The separation of duties is one of the most
important internal control mechanisms, as one individual is not performing two
conflicting duties such as cash receipts and invoicing. Kazemian et al., (2019) echo
similar sentiments stating that internal controls are imperative for retail businesses in
preventing employee fraud.

Davis & Harris, (2020) further argue that fraud prevention measures alone are
inadequate to thwart fraudulent acts as there will be internal fraudulent occurrences that
bypass the prevention control systems. As such, they recommended Whistleblowing to
be the most effective fraud detection mechanism and could possibly end an ongoing
fraud scheme such as that at Enron (Davis & Harris, 2020).

12
Whistleblowing is one of the most important outlets for reporting organizational fraud
according to Ahmad et al. (2014). However, the most effective channels, such as
anonymous hotlines should be available for employees to be able to report fraud without
fear of repercussion. While whistleblowing is not obligatory, it is strongly encouraged
as an internal control mechanism to detect and deter fraudulent organizational activity.
Blowing the whistle on colleagues or managers is difficult and burdensome; as such, it
would take an individual with strong ethical beliefs, courage, and morals to blow the
whistle (M. Zakaria, 2015 cited in Davis & Harris, 2020). Some individuals are
concerned with their personal reputation as others may condemn them for
whistleblowing; accuse them of disloyalty to their organization by potentially ruining
the organization’s reputation, and having exposed insider wrongdoing (M. Zakaria,
2015).

On the other hand, Abdullahi and Mansor, (2018) suggested that organisations should
increase the salary earning of employees and provides fringe benefits to improve
employees’ standard of living. On the same note, they added that scheme such as
workshop, seminar and conferences should be carried out to enhance the employees’
moral behaviour and understand the negative impact of fraud on their behaviour
(Abdullahi and Mansor, 2018). A policy has to be formulated which will state a severe
punishment on the fraudsters and way to ensure a complete recovery of the money
defrauded (Abdullahi and Mansor, 2018). There have also been moves to implement
more robust procurement processes such as centralised procurement, fraud training and
education, and benchmarking against ‘similar’ organisations (AQUIFAX, 2017).

2.3. Theoretical framework.

According to Saunders, Lewis, and Thornhill (2016), theoretical framework is used in

research to explain different course of action or to suggest a preferred method of
approaching a concept or idea. Among the theories which informed the objectives of
the research were the fraud triangle theory, fraud diamond the routine activities theory.

2.3.1. The Fraud Triangle Theory.

To explain the idea of fraud, numerous ideas have been proposed. Cressey's Fraud
Triangle Theory is one of the theories that fraud studies use most frequently. It outlines
a triangle-shaped link between chance, pressure, and justification in the commission of

13
fraud. Most of the time, all three conditions must be met for fraud to occur (Wells,
2004). The fraud triangle is depicted in the diagram below.

RATIONALISATION

PRESSURE OPPORTUNITY

Figure 1: The Fraud Triangle

Source: Mawanza (2014).

Wilson (2004) defines opportunity as a situation or transitory context that permits fraud
to be committed, usually with minimal expectation of being discovered or punished.
The ability to perpetrate fraud is actually made possible by weak governance or control
measures. According to Abdullahi and Mansor's (2018) hypothesis, the idea of
perceived opportunity implies that people will exploit their circumstances in order to
commit fraud. As a result, when businesses have inadequate internal controls, lax
processes and procedures, unapproved or uncontrolled employee access to assets, or a
lack of management review and oversight, there are windows of opportunity for
wrongdoing. Fraud will very certainly be committed once these three fraud-related
conditions have been established.

Mawanza (2014) claims that pressure served as the impetus for the fraudulent act. It
does not matter whether or not the motivation makes sense to others or is grounded in
reality; like with rationalization, the crucial element is the impression of a need or
pressure. Usually, pressure is what pushes someone to commit fraud. This could be the
result of financial strains, such as the inability to pay for medical expenses or other
expenses, a gambling, drug, or alcohol addiction, or a craving for pricey luxury products
(Abdulahi and Mansor, 2018).

14
Finally, rationalization is the rationale and justifications that immoral behavior will not
appear to be criminal activity. Making justifications for why fraud is allowed under
particular conditions in this situation entails rationalization. Albrecht, Kranacher, &
Albrecht (2008) made it very apparent that the term "rationalization" refers to the moral
and ethical justification put up for the deed. According to this definition of
rationalization, the offender must have a morally sound belief before acting unethically.
It is rare that a person will commit fraud if they cannot defend their dishonest behaviour.
Therefore, from this perspective, rationalization actually plays a role in the
circumstances that lead to fraud (Mabika, 2015). In light of the tenets of the fraud
triangle theory, a good foundation for understanding the causes of fraud is well set. As
such this theory was chosen for the current study as it fully informed the objectives and
questions of the study.

2.3.2. The Fraud Diamond Theory.

Wolfe and Hermanson introduced the Fraud Diamond Theory for the first time in
December 2004. This hypothesis was seen as an extension of the Fraud Triangle Theory.
They suggested that although while the three factors pressure, opportunity, and
rationalization coexist, fraud is unlikely to occur without the presence of a fourth factor,
capability (Wolfe and Hermanson, 2004). In this instance, they added capabilities to the
Fraud Triangle Theory and extended and enhanced it. In other words, they stated that
the deception must be capable of being committed by the potential offender. According
to Mawanza (2014), not everyone who has motivation, opportunities, and realization
will engage in fraud since they lack the skills necessary to carry it out or cover it up. In
this instance, the Fraud Diamond Theory truly explains what is necessary for fraud to
occur. The diagram for the Fraud Diamond Theory is shown in Figure 2.

RATIONALIZATION

MOTIVATION OPPORTUNITY

CAPABILITY

Figure 2: The Fraud Diamond Theory.

Source: Wolfe and Hermanson 2004.

15
Regarding the issue of capability, there are other crucial elements that must be taken
into account in order to draw the conclusion that the fraudster is capable of committing
fraud, including position, creativity and ego, compulsion, dishonesty, and stress
(Abdullahi and Mansor, 2018). The role or position a fraudster holds within an
organization is the first factor that gives him or her the potential to conduct fraud. Wolfe
and Hermanson (2004) made a point of emphasizing how an employee's position and
function might help him develop a strategy to violate company trust. Therefore, in this
instance, the perpetrator's position actually influences his or her ability to conduct fraud
in an organization.

An individual's cost-benefit analysis of engaging in fraudulent actions may be impacted

by such confidence or arrogance. A good fraudster can force others to commit fraud or
cover it up, according to Rudewicz (2011). A person with a strong ability to persuade
others may be able to persuade others to support a scam or to just turn a blind eye
(Abdullahi and Mansor, 2018).

The fraudster must convincingly lie to the auditors, investors, and others in order to
escape being caught. So that the entire narrative is constant, the fraudster should also
have the ability to keep track of the lies. The ability to endure stress is another important
trait of fraudsters (Wolfe and Hermanson, 2004). Since committing frauds requires
effort and requires managing them over time, it can be stressful. The risk of being
discovered and the associated personal repercussions exist in addition to the ongoing
requirement to keep the fraud a secret on a daily basis. The person must be able to
manage their stress because carrying out the deception and keeping it a secret can be
very difficult (Rudewicz, 2011). As such the Fraud Diamond Theory was very useful
in explaining the motivations behind fraudulent behaviour among employees. On the
same note, by understanding the motivations, it allowed the researcher to develop
solutions to deal with fraud in the retail sector.

2.3.3. The Routine Activities theory.

Cohen and Felson (1979) presented the Routine Activity Theory, which is of much
significance in the analysis of criminal behaviour. Three elements cited as promoting
criminality when combined were identified as the motivated criminal, suitable targets,

16
and absence of guardianship (Felson, 2013). Felson (1980) submits that opportunity is
the major factor of crime. As such, crimes are perpetrated in people's routine activities
as they create conducive environments to commit crime (Tibbets, 2012).

In order to prevent crime opportunity should therefore be eliminated (Cohen and Felson,
1979). Since the criminal environment is complicated by the fact that the criminal is no
longer constrained by a physical location, it presents a good opportunity to motivated
cybercriminals in absence of control measures. The routine activities theory was
therefore very important for this study as it informed retailers to work on their internal
controls so as to minimise losses associated with fraud. Thus, The Routine Activity
Theory was therefore, relevant for this investigation since it captured all the
fundamentals which informed the research’s objectives.

2.4 Empirical evidence.

Mawanza (2014) summed up the main causes of fraud in the research,” An Analysis of
the Main Forces of Workplace Fraud in Zimbabwean Organisations: The Fraud
Triangle Perspective”. The questionnaire served as the study's main research
instrument. Red flags of fraud have been noted to include changes in lifestyle,
friendliness, refusal to take time off, objections to job rotation, incomplete returns,
frequent hotel stays, customer complaints, altered vouchers, overstaying at work after
hours, reluctance to share work, spending binges, resignation, erratic behaviour, and
being overly protective of an organization's finances.

In addition to Mawanza’s research above, Koomson, Owusu and Bekoe (2021)

undertook an enquiry into the “Determinants of asset misappropriation at the
workplace: the moderating role of perceived strength of internal controls.” People
working for various Ghanaian organizations responded to a self-administered
questionnaire. According to the findings of the structural model study, people
misappropriate resources at work as a result of the pressures they face, their ability to
defend their actions, their talents, and their egos. The results, however, demonstrate that
an individual's perception of the efficiency of internal control mechanisms at work plays
a substantial role in the potential amount of asset misappropriation.

In the research titled “Asset Misappropriation Employee Fraud: A Case Study on

an Automotive Company”, Setiawan, Tarjo and Haryadi (2022) explored on asset

17
misappropriation employee fraud and its prevention program on an automotive
company in Indonesia. Data was acquired through document analysis and interviews
with ten informants from various departments to understand more about the incidence
of fraud. The most frequent types of fraud on vehicle companies, according to this
survey, include inventory theft, skimming of client deposits that aren't deposited to the
business, and manipulation of customer account payments. The factors that drive fraud
include financial pressure an ostentatious lifestyle, the potential for deception, and a
lack of knowledge of dishonest behaviour. Employee fraud disrupts business processes,
uses up time and resources, and damages the reputation of the company. Fraud causes
the company to incur unnecessary costs and financial losses, which will have an effect
on its long-term profitability.

Through the research titled “Fraud and Fraud Prevention Strategies in Zimbabwe
Local Authorities.” Mabika (2015) explained the modus operandi of fraud and lined
up some measures to deal with it. According to the study, pressure, opportunity, and
rationalization, the three components of the fraud triangle were the main reasons why
fraud occurs in municipal governments. Fraud has been linked to greed as a factor.
According to the research, management must become involved, develop processes,
disseminate information about the systems, and oversee the local authority in order to
lower the level of fraud. Entities must also hire the right personnel for the positions they
have open and provide timely salary and allowance payments.

In the study titled “The Causes and Consequences of Accounting Fraud”, Geretya
and Lehn (1997) summed up the causes and consequences of accounting fraud. They
claimed that rational decision-making controls the commission of accounting fraud. The
study's findings indicated that whether or not to commit accounting fraud is influenced
by the cost of valuing assets. Evidence also reveals that accounting fraud does have an
immediate influence on stock values, while the SEC's announcement of charges results
in a considerable decline in stock prices. According to the research, accounting fraud is
less likely when ownership is concentrated in the hands of a single person. Finally, it
appears that directors of companies that engage in accounting fraud are penalized on
the managerial job market.

Another research by Krambia-Karpardis and Zopiatis (2010) “Investigating incidents

of fraud in small economies: Case of Cyprus.” was aimed at investigating the extent

18
and types of fraud victimization in small economies or specific industries in different
economies. To accomplish the goal, the research used survey as a research
methodology. Both primary and secondary sources of information were used to gather
the data. No business sector or size was found to be immune from fraud. No industry or
size of business was discovered to be immune from fraud. The fraud varieties that are
least accepted and those that represent the biggest threat to the local economy were also
discovered. The report looks into what neighborhood businesses do when fraud is
found. According to this study, smaller economies are just as likely as larger ones to
experience fraud. The publication also looked at what local businesses do when fraud
is discovered.

In addition to Krambia-Karpardis and Zopiatis (2010) above, Tak ISA, (2011)

undertook the research titled “Impacts and Losses Caused by the Fraudulent and
Manipulated Financial Information on Economic Decisions”. The researcher was
able to determine the effects that financial information manipulation has on economic
decisions from a survey she did on the 12 businesses that were forced to close owing to
financial statement falsification. The researcher discovered, using data acquired over a
ten-year period, that the financial losses brought on by false and altered financial
information were considerable, particularly when it came to revenue manipulation.
According to the research, the global financial markets were all impacted by the
collapses of the large corporations in the USA, the world's most powerful economy. An
estimated $460 billion in market capitalization was lost as a result of the suspected
financial statement fraud by Enron, WorldCom, Qwest, Tyco, and Global Crossing.

Research was conducted by Ziegenfuss (1996) to ascertain the scope and nature of fraud
in state and local government. According to the report, asset misappropriation, theft,
fraudulent representation, and false invoices were the most common types of fraud.
Poor management practices, economic pressure, weakening society values, people not
being held accountable for their acts, and insufficient training for those in charge of
fraud prevention and detection are the causes of the rise in fraud in state and local
governments. Weaknesses in internal control, ignoring audit reports, inventory losses,
relying too heavily on internal/external audit reports, ignoring employee feedback, and
actual spending exceeding budgeted amounts are the most frequently cited "red flags."

19
In the study, “Effects of Fraud on corporate companies in Nigeria”, Obanda (2010)
noted that fraud can increase operating expenses and audit expenses for a business or
corporate body since additional resources must be incurred for installing the equipment
required for its prevention, detection, and asset protection. More importantly,
management becomes diverted if too much time is spent protecting company assets
from fraudsters. Additionally, the company's asset quality suffers as a result. Financial
loss is yet another outcome that may be impacted by dishonest business activities. The
amount of money lost to a fraudster is the same amount a firm loses in the event of
fraud, and it will be challenging to recover from the lost revenues and losses sustained.

The research titled “Asset misappropriation tendency: rationalization, financial

pressure, and the role of opportunity (study in Indonesian government sector)”
was undertaken by Yusrianti , Ghozali & Yuyetta (2020) and the purpose of the study
was to analyse the relationship between rationalization and financial pressure on asset
misappropriation tendency by mediating opportunity in the Indonesian government
sector based on the Fraud Triangle perspective. Direct, postal, and online questionnaires
were used to collect the research's data, which was then analyzed using a structural
equation model with AMOS-based covariance. The findings demonstrated that asset
misappropriation tendency was significantly positively impacted by financial pressure,
rationalization, and opportunity. Opportunity also mediates the association between
justifications and the tendency to misappropriate assets; however, it does not mediate
the relationship between financial pressure and the tendency to misappropriate assets.

Abdullahi, & Mansor (2018) lined up fraud prevention initiatives in the research,
"Fraud prevention initiatives in the Nigerian public sector: understanding the
relationship of fraud incidences and the elements of fraud triangle theory. The
findings revealed that pressure/incentive to commit fraud has a significance relationship
with fraud incidences in the Nigerian public sectors. They emphasized that pressure,
opportunity, and justification must all be present at the same moment for fraud to occur.
The study recommends that the Nigerian government execute Salary Scale Reform
(SSR) to increase the salaries of public servants and provide ancillary benefits to
improve workers' living standards. To boost employee morale and aid them in
understanding the negative consequences that fraud has on both their behaviour and the
country's economy, the Nigerian government might also launch a training program,
such as a workshop, seminar, or conference. A plan that outlines severe punishments

20
for fraudsters must be devised in order to guarantee the complete recovery of the stolen
money.

Davis & Harris (2020) undertook the study titled “Strategies to Prevent and Detect
Occupational Fraud in Small Retail Businesses” whose objective was to explore
internal control strategies owners of small retail businesses in south eastern
Pennsylvania used to prevent and detect occupational fraud. Small retail business
owners were contacted through interviews to provide information for the study. The
results of the study demonstrated that there are things small retail store owners may do
to prevent and uncover occupational fraud. To protect their businesses from
occupational fraud, business owners can utilize a variety of strategies, including
monitoring, employing employee identity documents to track employee activity,
segregation of duties, and interacting with personnel. By focusing on wealth distribution
and supporting local groups that support economic stability and have a positive impact
on the community, small business owners give back to their communities.

Akur (2017) conducted the research titled, “Small Retail Business Strategies to Detect
and Prevent Employee Fraud “which explored strategies used by managers and
owners of small retail businesses to detect and prevent employee fraud. Ten people,
representing five small retail firms, took part in the survey. During the interview,
information was gathered from the chosen managers and business owners. Themes
from the research findings related to dealing with fraud included controls and
communication, cash register responsibility, segregation of roles, monitoring, and
action against violators.

2.5. Summary of previous researches and justification of the current study.

Although a number of researches on the subject of fraud have been carried out,
empirical literature linking employee fraud to operational activities of retailers
especially in Zimbabwe is still meagre. Despite efforts by Mawanza (2014) and Mabika
(2015) on the subject, their focus was mainly on the motivations of fraud in state
organisations without particular focus on retailers in Zimbabwe. Thus, they did not
consider the effects of fraud in the retail sector. Given the time lag and technological
progress, recommendations by Mawanza (2014) and Mabika (2015) may no longer be
effective enough to fight the impending effects of employee fraud in the contemporary
business environment.
21
More interestingly, a close analysis of submissions by Koomson, et al, (2021), Yusrianti
et al, (2020); Geretya and Lehn (1997) and Setiawan et al, (2022) reveals that the
researchers paid much attention to the causes and types of fraud in organisations.
However, they did not put enough emphasis on the effects of fraud on operations of the
organisation. Although these studies create a concrete foundation on the study of fraud,
their findings might be difficult to apply to a Zimbabwean context. This is because most
of these researches were done in Europe, USA and Asia where technology is by far
different with that in Zimbabwe hence the findings might be different due to
jurisdictional differences and technology.

Obanda (2010) and Tak ISA, (2011) highlighted on the effects of fraud on the operations
of organisations. These studies were much influential in understanding the effects of
fraud and their findings can be very useful in understanding employee fraud in the
contemporary business environment. However, due to the lapse of time, the effects of
fraud might no longer be the same. As such the current study sought to find out on the
possible effects of employee fraud in the wake of technological progress.

Although Davis & Harris (2020) and Abdullahi & Mansor (2018) immensely dwelt on
the measures to curb fraud in organisations, their studies were less focused on activities
of retailers. Although their recommendations are very useful in the fight against fraud,
some of the recommendations may not be tailor made for the retailers. In addition, from
a Zimbabwean perspective, retailers may not be in a good position to employ some of
the measures. As such the current research sought to provide measures which are
specific to the Zimbabwean retail sector.

Given the groundwork laid by the empirical studies mentioned above, there is still a
significant gap on the subject of fraud and how it affects retailers’ operational activities
in Zimbabwe. Concerns about fraud have been a major subject of many studies,
especially in the United States, Asia, and Europe. Furthermore, a large portion of the
studies on fraud that were published in the past were concerned with fraud in state-run
institutions. Employee fraud can take many various forms depending on the jurisdiction.
The researcher realized that the topic of fraud is still up for debate, especially in the
retail sector where technology is always changing. The goal of the current study was to
advance previous investigations by introducing fresh information and new research

22
questions concerning the nature of employee fraud as well as workable solutions that
could be applied to minimise the consequences of fraud in Zimbabwe's retail industry.

2.6. Summary

This chapter laid out the important theories, conceptual framework, and empirical data
from the study's linked literature regarding the effects of fraud on the daily operations
of retail stores in the Harare CBD. This chapter highlighted prior research results, case
studies, and investigations carried out by other researchers that support the current
study. The researcher's approach for gathering data for analysis and producing the
study's findings will be discussed in more detail in the following chapter.

23
 CHAPTER III

RESEARCH METHODOLOGY

3.0 Introduction

This chapter was set out to present the methodology of the study. In this case the
researcher spelt out how the study was executed, embracing all the activities and
procedures which were undertaken during study. This chapter also sought to explain the
selection of the research instruments and the research methods that were used in data
gathering. It also describes how the data was presented and analysed. Thus, this chapter
dwells much on the research design, research instruments, data collection procedures,
data presentation and analysis procedures.

3.1. Research Design and Justification

A research design, according to Kothari (1990:31), is a set of guidelines for data

collecting and analysis that seeks to balance procedural economy with relevance to the
research's goal. As a result, the design includes a description of what the researcher will
do, from formulating the hypothesis and its implications to data analysis (Kothari,
1990). For this study, the researcher used quantitative and qualitative research design
strengths. The researchers consequently employed a descriptive case study research
style.

According to Saunders et al. (2016), a descriptive case study research design is a method
of analysis that involves a detailed assessment of a particular modern marvel in its
natural environment and makes use of a variety of data sources. Case study research is
typically used to focus a broad area of research on a single, manageable problem. Using
a descriptive case study research methodology has the advantage of enabling
researchers to take into account the unpredictable nature of the link between fraud, its
environment, and its victims.

The best research design for this study was a descriptive case study since it allowed for
the collection of both qualitative and quantitative data. With the use of these

24
technologies, sufficient pertinent data about cybercrime in the retail sector was
gathered. Also, the descriptive research design was suitable for this study since it
allowed the researcher to investigate issues including why, where, and how cybercrime
was occurring. This makes it easier to comprehend fraud thoroughly and how it affects
the day-to-day operations of shops. To further aid the reader in understanding the
prevalence of fraud in the retail industry, the descriptive case study research approach
includes visual aids like charts.

3.2. Target population

The term "population" refers to the entire group of items or persons that the study is
focused on and that the researcher is interested in learning more about (Kothari, 2004).
Owners and employees of retail establishments in the Harare CBD provided the
information. The CBD is home to retail businesses that sell groceries, furniture,
computers and accessories, household electrical equipment, clothing, and other goods
(CBD). Also, since employees of the aforementioned merchants are directly exposed to
the dangers of fraud as part of their jobs, they served as trustworthy sources of
information for the study. As a result, they provided accurate information about the risks
of fraud in the Harare CBD retail sector.

3.3. Population sample

A sample is a portion or tiny fraction of a large population that is chosen to represent
the entire population and shares characteristics with the entire population being studied
(Creswell, 2013). The choice of retail establishments in the Harare CBD for the
experiment was the first sample component of the study. The study's conclusions helped
researchers gain a better knowledge of the impact of fraud on the operational operations
of retail stores in the Harare Central Business District, and the findings were applied to
other retail firms in Zimbabwe. Table 3.1 provides an overview of the population
constituency.

For this study, grocery stores, hardware stores, and clothes stores were the retail outlets
where shop managers, internal auditors, financial officers, and other staff members were
chosen. Among the 54 responders, 11 were picked from furniture stores, 10 from clothes
stores, 12 from grocery stores, and 11 and 10 each from electronics and electrical

25
appliance stores. Thirteen were shop managers, fourteen were internal auditors, thirteen
were financial officials, and fourteen were other employees.

Table 3.1: Sample constituency.

Category Managers Auditors Finance officers Others Total

Furniture shops 2 3 3 3 11
Clothing 3 3 2 2 10
Grocery 3 3 3 3 12
Electronics shops 3 3 2 3 11
Electrical appliances 2 2 3 3 10
Total 13 14 13 14 54
Participants were chosen using both probability and non-probability sampling
techniques. Using stratified random sample techniques and purposive sampling,
individuals were selected from the Harare Downtown. The sections below covered the
two sampling strategies.

3.3. Sampling techniques

3.3.1. Purposive sampling

Purposive sampling is a non-probability sampling technique that enables researchers to

use their discretion in choosing instances that will help them most effectively respond
to their research questions and realize their objectives (Saunders et al., 2016). The
researcher used this method to gather information from retail businesses in the CBD of
Harare. The interviewees were important sources of information about fraud in the retail
sector. In order to accurately reflect the whole retail business, representatives for the
survey were specifically picked.

3.3.2. Stratified sampling method

By stratifying the entire population into several groups, the researcher can then
randomly choose the final participants from the various subgroups (Bryman & Bell,
2015). This sampling technique was adopted since the research population was diverse.
The population was divided into strata, with sample units that were largely
homogeneous within each stratum.

26
The respondents were divided into groups based on the type of goods they sold, such as
groceries, hardware, electronics, clothes and shoes, and electrical appliances. The
respondents were picked at random based on the product lines they sold to complete the
surveys.

3.4.0. Data collection instruments

Kothari (2004) defined an instrument in research as a tool or piece of equipment used

to collect data, such as through surveys, interviews, or observation. The tools used to
gather the data and information required to address a problem under investigation are
known as research instruments. To gather empirical data from retail shop managers,
internal auditors, finance officers, and other staff members, a questionnaire and
interview guide were employed. Journals, theses, and newspaper articles were analysed
in order to supplement the research with secondary data.

3.4.1 The questionnaire

The questionnaire is composed of a number of questions that are printed or typed in a

particular order on a form or collection of forms (Kothari, 2004). The questionnaire was
the main research method used to gather information from respondents in the retail
sector in the central business district of Harare. The questionnaire was regarded ideal
for data gathering since it was adaptable and could be used to gather information from
either a large or small number of people.

The fact that the questionnaire could be completed at home or at the office made
participants feel more secure, which allowed the researcher to take advantage of its
higher level of privacy and flexibility. Or, to put it another way, the questionnaire was
available for participants to complete at their own convenience. However, the
questionnaire was also reasonably priced to conduct, and the researcher's absence
reduced bias. The questionnaire required less time because the researcher had fewer
resources and time available. The researcher also found non-response bias to be one of
the biggest benefits of using self-administered questionnaires.

However, the low return rate was the main disadvantage of using the questionnaire. The
sample may not be representative of the people the researcher was seeking to contact
because so few people answered to the survey. Due to the researcher and respondent's

27
lack of communication, issues with the questionnaire went unaddressed, leading to
some skewed responses. The researcher ran a pilot test before to the main poll in order
to reduce skewed responses. Additionally, the questionnaires were hand-delivered and
collected by the researcher.

3.4.2 The interview

Cooper and Schindler (2003) assert that the interview method of data collection
comprises the presentation of oral-verbal stimuli and responding in terms of oral-verbal
responses. The retailer's management gave the researcher permission to conduct
interviews for this study. In semi-structured and unstructured interviews, twelve
representatives from the twenty-eight (28) selected retail establishments in the Harare
CBD were questioned. A semi-structured interview is one technique for gathering data
by starting a conversation that offers the intended respondents the time and space to
voice their opinions on a certain issue.

To reduce the chance of victimization, the interviews were conducted in private, and all
interview records were handled with confidentially. The researcher's ability to gather
detailed information and justifications that were impossible to gain through the
questionnaire was the primary advantage of conducting interviews during the research.
As themes and subjects emerged, the researcher was able to investigate them by
responding to the interviewees' comments.

Face-to-face interactions had numerous advantages, but theY took a long time because
the researcher had to first establish relationships with the participants before starting the
interviews. Additionally, a number of respondents were unable to speak candidly due
to privacy and confidentiality issues, which restricted the depth of the interviews. To
get beyond these challenges, the researcher needed to build rapport with the interview
subjects and reassure them that the information they provided would be kept private and
only used for the research's objectives.

3.5 Data collection procedures

To ensure that the intended participants got the questionnaires, the researcher directly
handed in the questionnaires. The personal distribution of the instruments had the
advantage of building a good rapport with the respondents and helped to achieve a high

28
response rate. The personnel at the 28 chosen shop locations in the Harare CBD received
42 copies of the questionnaire. The questionnaire was delivered to the respondents with
one week to complete it entirely. The researcher then collected each questionnaire
separately. For the interviews, 12 participants were specifically chosen. Of the 12
interviewees, 5 were internal auditors, 3 were shop managers, and 4 were finance
officers.

3.6. Validity and Reliability

Zikmund (2005) defined reliability as an instrument's capacity to generate repeatable

results. By assuring meticulous design of each questions revised following a pilot test,
data reliability issues were mitigated. A pilot test ensured that the target group was
accurately identified and offered recommendations on how to adjust the data gathering
tools to match the study's objectives. In order to estimate the amount of time and
resources needed for the examination and to identify sampling issues, the interview
guide and the questionnaires were initially pre-tested. Additionally, both the supervisors
and the peers gave the research tools a close look. Through this activity, the researcher
was able to fix errors in the questionnaires and made sure that it conveyed the required
information.

3.7.0 Data presentation, analysis and interpretation of data

Both quantitative and qualitative analysis were performed on the survey-gathered data.
The data collected through surveys was analysed using SPSS software version 20.0, and
Microsoft Excel was used to add tabular and graphical displays. Additionally, thematic
analysis was used to examine the interview data. The researcher collected responses,
scrutinized them for insight and meaning, compared and contrasted the different
responses from the respondents, and finally evaluated the meaning to provide useful
data.

3.9. Ethical considerations

According to Saunders et al. (2016), ethics refers to a researcher's behaviour that is

appropriate in light of the rights of persons who are the subject of the survey. Before
and after data collection, as well as throughout the entire research process, ethical
concerns were taken into account. The owners and managers of retail shops were asked
29
for their approval before conducting interviews. The researcher made it clear that
participation was optional and that individuals had the right to opt out of the activity at
any time. More importantly, all study volunteers received respectful, equitable, and
dignified treatment.

3.10. Summary

The following chapter (chapter IV) focused on collecting, analysing, and presenting of
data. This chapter laid out the research methodology that was used in the study,
including the research design, sample population research instruments, data collection,
and reliability procedures.

30
 CHAPTER IV

DATA PRESENTATION, ANALYSIS AND DISCUSSION

4.0. Introduction

The major focus of this chapter was on discussion, presentation and analysis of the
major findings of the survey. As such, questionnaire and interview response rates were
presented and analysed in this chapter.

4.1. Questionnaire response rate

Data for the study was gathered through the questionnaire and the results were
summarised in the table below.

Table 4.2: Questionnaire response rate.

Category Questionnaires issued Questionnaires returned Response rate (%)

Furniture shops 8 7 87.5
Clothing 9 9 100
Grocery 9 7 77.8
Electronics shops 8 8 100
Electrical appliances 8 8 100
Total 42 39 92.9

Fourty-two questionnaires were given out to various sorts of merchants, as indicated in

Table 2. 39 responses were received for a response percentage of 92.9% out of the 42
sent. This demonstrates that most of the questionnaires received responses. According
to Creswell (2014), a response rate of above 50% is necessary for the researcher to
acquire objective data; nevertheless, the response rate for this study was significantly
higher than 50%, fully supporting the research aims.

4.1.1 Interview response rate

Some of the data for the research was also gathered through the interview and the
findings were summarised in table 4.3.

31
Table 4.3: Interview response rate.

Category Scheduled interviews Successful interviews Response rate (%)

Furniture shops 2 2 100
Clothing 3 2 66.7
Grocery 3 2 66.7
Electronics shops 2 2 100
Electrical appliances 2 1 50
Total 12 9 75

The researcher purposively scheduled to conduct 12 interviews picking 2 respondents

from Electronics and accessories, 3 from Grocery shops, 2 from electrical appliances, 3
from clothing and 2 from electrical appliances shops. Of the 12 scheduled interviews, 9
succeeded giving a 75% response rate as shown in table 4.2.

4.2 Demographic characteristics of respondents

The information acquired included demographic details including gender, age,

educational background, job title, length of employment, and industry. As may be seen
in the table below, these factors were illustrated.

Table 4.4. depicts that male respondent dominated the surveys as they constituted 59%
with respect to gender whilst women constituted only 41%. Questionnaire distribution
was based on gender sensitivity, and no bias in all sorts was shown.

The age range of every participant who took part in the research study is also shown in
the table. The age range 25–35 years had the highest frequency in the age distribution,
as shown by 48.7% of the respondents, while the age range 35–45 years was represented
by 25.6%. Just 15.4% of respondents overall were under 25 years old, and 15.4% of
respondents over 45 years old. This age distribution demonstrates that the survey was
primarily taken by young people who are more informed fraud and aware about it.

The participants’ academic backgrounds spanned from postgraduate to ordinary and

advanced levels, abbreviated as O & A. 35.9% of the 39 survey participants were
undergraduates, compared to 43.6% of O and A level certificate holder. 30.8% of the
responders were postgraduates and certificate holders combined. This suggests that a

32
sizable number of the respondents were mature enough and informed enough to
comprehend issues related to fraud in the retail industry.

Table 4.4: Demographic distribution of questionnaire respondents.

Demographic category Demographic variable Frequency Percentage (%)
Gender Male 23 59
Female 16 41
Total 39 100

Age Less than 25 years 6 15.4

25-35 years 19 48.7
36-45 years 10 25.6
Above 45years 6 15.4
Total 39 100

Level of education Post Graduate Degree 3 7.7

Undergraduate degree 14 35.9
Ordinary and Advanced
17 43.6
Level
Other qualification 5 12.8
Total 39 100

Position of occupied Manager 11 28.2

Internal auditor 12 30.8
Finance officer 8 20.5
Other 8 20.5
Total 39 100

Period of employment less than 1 year 7 17.9

1-3 years 10 25.9
4-6 years 14 35.8
6 years and above 8 20.4
Total 39 100

Type of business Clothing 8 20.5

Grocery 8 20.5
Hardware 8 20.5
Electronics 8 20.5
Electrical appliances 7 18
Total 39 100

With a share of 30.8%, internal auditors made up a sizable number of the respondents,
followed by shop managers with a share of 28.2%. Furthermore, taken into account as
research participants were other employees and finance officials, who each made up

33
20.5% of the sample. The length of time the respondents had been associated with their
particular retail stores was also taken into account in the demographic distribution. The
bulk of employees had been with their employer for 4-6 years, as evidenced by the
highest proportion of 35.8% for this time frame. Following this, 25.9% of respondents
said they had stayed with their respective organizations for more than one to three years.
This demonstrates that the research's participants were knowledgeable about the
difficulties facing their organizations, with fraud being the main worry. Only 17.9% of
the respondents were employees who had been with their companies for less than a year.

Also, a range of retail businesses, including hardware stores and grocery stores, were
considered in the study. Retailers of apparel, hardware, electronics, and electrical
appliances made up 20.5% of the respondents apiece, while respondents who purchased
electrical appliances made up 18% of the respondents.

Research Findings

4.3. Types of fraud

The results summarized in table 4.5, were based on questions asked to the respondents
requiring them to identify the forms of fraud that were common in their organizations.

4.3.1. Asset misappropriation/Embezzlement

According to 46.2% of the respondents, asset misappropriation/embezzlement was the

most common kind of employee fraud in the retail sector in Harare CBD, as shown in
table 4.5. The retail sector in the Harare CBD shows a high rate of asset
misappropriation/embezzlement with a mean statistic of 3.21 and a standard deviation
of 0.894. The remaining 33% of respondents affirmed that asset theft and embezzlement
are common in the retail industry. These results demonstrate that, despite efforts to stop
it, corporate activities still involve embezzlement.

Similarly, the vast majority of interview participants noted that asset theft and
embezzlement were frequent occurrences in their companies. In an interview, one
internal auditor stated that asset misappropriation/embezzlement has a significant
impact on their business in the form of loss of competitive advantage.

34
Table 4.5: Types of fraud in Harare CBD.
N=39

1 2 3 4 Statistics
Type of fraud Freq % Freq % Freq % Freq % Mean St. Dev
Asset misappropriation/Embezzlement 2 5.1 6 15.4 13 33 18 46.2 3.21 0.894
Payroll fraud 12 30.8 13 33.3 8 21 6 15.4 2.21 1.056
Corruption 4 10.3 7 17.9 17 44 11 28.2 2.9 0.94
Procurement fraud 2 5.1 4 10.3 20 49 13 35.9 3.15 0.812
Financial statement fraud 11 28.2 15 38.5 8 21 5 12.8 2.38 1.227
Key: 1-less than prevalent; 2-not prevalent; 3-prevalent; 4-very prevalent; Freq-frequency; %-
percentage
(Source: Primary data, 2023).

4.3.2. Procurement fraud

Procurement fraud was identified as prevalent in Harare CBD as 49 % of the

respondents inclined to agree that it was prevalent and 35.9 % affirmed that it was most
prevalent. Procurement fraud had a mean of 3.15 and a standard deviation of 0.812. this
points to the fact that retail outlets have poor internal control syst ems which allow
employees to pilfer without any detection.

Through the interviews, two shop managers alluded to the fact that unscrupulous
employees sometimes swindle business resources for their own benefit. Only 15.4 % of
the respondents indicated that procurement fraud is not prevalent in Harare CBD retail
sector. One internal auditor had this to say, “Yes as a business we are not spared by
corruption. The challenge is that the buyers are colluding with suppliers to defraud
businesses through authorising inflated invoices. At the end the business is found on the
losing end.” These findings are in line with the AQUIFIX report (2017), which
highlighted that procurement fraud is costing entities huge sums of money. These
findings indicate that the rise in procurement fraud is exposing the retailers to
devastating consequences which impacts the sustainability of their businesses.

Dangers are that retailers are at high risk of fraud given their poor controls on
procurement. Nowadays retail employees collude with suppliers to charge inflated
invoice.

35
4.3.3. Corruption

According to table 4.5, the majority of respondents (44%) tended to agree that
procurement fraud is common in the retail sector in Harare CBD, while 28.2% of the
respondents said corruption was rife in the area. Although a combined 10.3% of the
respondents stated that corruption is not extremely widespread in Harare retail
establishments, the mean statistic of 2.9 and the standard deviation of 0.94 indicate that
corruption is increasingly becoming a common phenomenon in the industry.

Similarly, majority of interview respondents inclined to agree that corruption exists in

the retail sector. One interviewee remarked that corruption is everywhere in the country
and the retail sector is not immune. However, majority of the respondents inclined to
point that corruption is less pronounced in the retail businesses as compared to public
sector. They attributed corruption to public entities due to their bureaucracies involved
in their processes unlike in the retail sector where some businesses are family owned.
However, we cannot completely underestimate the effects of corruption in the retail
sector as buttressed by (Mabika, 2015).

4.3.4. Financial Statement fraud

Majority (38.5%) of respondents inclined to point out that financial statement fraud was
less prevalent as compared to corruption and embezzlement. This type of fraud had a
mean of 2.38 and a standard deviation of 1.227. Of all the nine interviewees, only four
inclined to agree that financial statement fraud exists in the retail sector in Harare CBD
although at a smaller magnitude as it is more complex to commit.

Commenting on the existence of financial statement fraud, one manager remarked,

“incidences of financial statement fraud are less pronounced in our retail sector.
However, we cannot clearly omit its existence. It exists on a lesser scale as compared
to other sectors.” As such minimal existence of financial fraud as indicated by the
respondents is attributable to close supervision of the accounting function by the
internal audit function as alluded to by one auditor. In line with these results, retailers
should be alert on possibility of financial statement fraud perpetration as they are not
immune to fraud in these hard economic times.

Also considered less common in the Zimbabwean retail sector was payroll fraud as
indicated by the least mean of 2.21 and a standard deviation 1.056. Although some of

36
the respondents admitted it existence mentioning existence of ghost workers on
payrolls, it is not much pronounced in the retail sector which is mostly constituted of
family-owned businesses. However, as Buttressed in Deloitte (2017), payroll may cause
more harm on operations of retailers, it is imperative that retailers be on alert of its
possibility as employees may be capable of committing in it should they get an
opportunity as buttressed by the Fraud Triangle Theory.

4.4.1. Causes of fraud

Participants were asked to provide their views on how far they agree on the causes of
fraud by rating between 1-5. Their responses were summarised as shown in the table
below.

Table 4.6: Major causes of fraud in retail businesses in Harare CBD.

N=39

1 2 3 4 Statistics
Causes of fraud Freq % Freq % Freq % Freq % Mean St. Dev
Ineffective internal audit 4 10.3 8 20.5 19 49 8 20.5 2.79 0.894
Poor internal controls 1 2.6 4 10.3 21 54 13 33.3 3.18 0.721
Greedy 0 0 0 0 25 64 14 35.9 3.36 0.486
Inadequate remuneration 3 7.7 5 12.8 20 51 11 28.2 3 0.858
Financial pressure 0 0 2 5.1 24 59 13 35.9 3.31 0.569
Key: 1-strongly disagree; 2-disagree; 3-agree; 4-strongly agree; Freq-frequency; %-
percentage.

(Source: Primary data, 2023).

4.4.1.1 Greedy

Of all the respondents, 64% agreed that greedy as the main cause of fraud in the retail
sector. On the same note, 35.6% of the respondents indicated that was the main cause
of fraudulent activities in the retail sector. The highest mean statistic of 3.36 and
standard deviation of 0.486 supported the fact that many employees commit fraud due
to greedy. This points to the fact that despite other factors such as poor controls,
motivated offenders as submitted by Cohen and Felson (1979) may commit fraud just
to satisfy their greedy. Similar findings were observed through the interviews in which
the majority of interviewees admitted that some fraudsters just steal as a result of

37
greedy. One internal auditor remarked, “sometimes criminals steal to satisfy their
greedy. As such it is very difficult to deal with such kind of employees”. these findings
resonate with the findings of Mabika (2015) in which it was found that people commit
fraud due to greedy.

4.4.1.2. Financial pressure

Apart from greediness, financial pressure was also found to be among the major causes
of fraud in the retail sector. As revealed by the second highest mean of 3.31 and standard
deviation of 0.569, financial pressure contributes to many incidences of fraud. This
pressure is a result of such addiction aspects such as gambling and drug abuse by
employees. This is well supported by Cressy’s fraud triangle theory which identifies
pressure as one major cause of fraud. commenting on financial pressure as a cause of
fraud, one shop manager revealed that there are instances where financial pressure
pushes someone to indulge into fraudulent acts. He had this to say, “When a person
needs money to buy drugs and he doesn’t have the money at the time, he may end up
stealing from the business. We at some point had such kind of encounter”. These
remarks are also supported by Wolfe and Hermanson’s Fraud diamond theory which
adds capability as one factor leading to employee fraud.

4.4.1.3. Poor internal controls

About 54% of the respondents agreed that poor internal controls contribute to the fraud
in the retail sector while 33.3% strongly agreed. Only 2.6% of the respondents strongly
disagreed that poor internal controls fuel incidences of fraud. However, the mean
statistic of 3.18 and standard deviation of 0.721 fully support that poor internal controls
promote fraudulent behaviour in the retail sector. Of those who denied poor internal
controls as major cause of fraud, it seemed that some of them were not well aware of
what actually internal controls are. Also, some did not want to comment much on the
issue as some of them were the ones responsible for designing them. Some remarks
from interviewees vehemently confirmed that their organisations had poor internal
controls and as a result they had been victims of costly fraudulent acts.

4.4.1.4. Inadequate remuneration

Also, among the causes of fraud in the retail sector was inadequate remuneration. About

38
59% of the respondents agreed that poor remuneration may force employees to steal
from the employer while 35.9% strongly agreed. Given a mean statistic of 3 and
standard deviation of 0.858, it points to the fact that poor remuneration contributes to
fraud commission in the retail sector. After being quizzed on whether poor salary
promotes fraud, one hardware employee inclined to accept that poor salary contributes
to fraudulent acts by employees. As such she suggested that employers should pay
salaries which can sustain their employees to avoid such criminal acts.

4.4.1.5. Inadequate and ineffective internal audit

Majority of the respondents (49%) agreed that inadequate and ineffective internal audit
promotes fraudulent behaviour in retail business activities. Most of the retailers
especially family businesses seemed to lack well defined audit functions hence creating
loopholes for fraud.

4.5.1. Impact of fraud

The respondents were asked to rate the impact of fraud on operational activities of retail
businesses in Harare CBD and the results are summarised in table 4.7.

4.5.1.1. Loss of inventory

Of all the respondents, 51.3% admitted that their businesses had lost inventory for their
daily operations. Only 26 % of the respondents indicated that they were not sure whether
their business had suffered any loss due to fraud. Theft of physical assets appeared to
be the most common effect of fraud in the retail sector with the highest mean of 1.74
and a standard deviation of 0.85. of those who confirmed not sure if their businesses
had suffered any loss due to fraud, it could be that they did not want to disclose their
business affairs in fear of tarnishing their reputation. On the same note, some of the
responses proved that some of the participants were not well informed about fraud.

Of the nine successful interviews, 6 interviewees lamented that fraud has ballooned
their operational costs as stolen stocks needed replacement. One shop manager had this
to say, “fraud is so bad to our operations. Once property is stolen it needs replacement
and the obviously, we dig into the business coffers.” Similar sentiments were echoed in
an interview by one internal auditor who mourned that employees may steal business

39
assets for their consumption and it has long term effects to the operations of the
business.

Table 4.7: Impact of fraud on operational activities of retailers in Harare CBD.

N=39

Yes No Not sure Statistics

Impact of fraud
Freq % Freq % Freq % Mean St. Dev
Loss of credit worthiness 35 89.7 4 10.3 0 0 1.1 0.307
Increased security costs 34 87.2 3 7.7 2 5.1 1.72 0.887
Reputational damage 25 64.1 5 12.8 9 23 1.18 0.506
Direct financial loss 22 56.4 9 15.4 8 28 1.72 0.887
Loss of inventory 20 51.3 8 23.1 11 26 1.74 0.85
Key: freq-frequency; %-percentage, St Dev-standard deviation
(Source: Primary data, 2023)

4.5.1.2. Direct financial loss

Responding to the questionnaires, 56.4% of the respondents agreed that they their
businesses had lost considerable sums of money through embezzlement and direct
financial theft by unethical employees. This is supported by the mean statistic of 1.7 2
and standard deviation 0.887. Around 15.4% of the respondents indicated that they had
never incurred financial loss due to fraudulent activities in their organisations. Of those
who indicated no financial losses, it points to the fact that they their businesses have
better internal control systems which limit access to cash hence making it difficult for
offenders to swindle funds. On the same note, some didn’t want to disclose their internal
matters in fear of misuse of the information could they give the correct information
relating to fraud in their operations. Of particular interest were the remarks made by one
shop manager in an interview. He remarked, “At one point we lost a lot of money after
a one of our cashiers stole a huge amount of money. It took us a lot of time to realise
that we had been defrauded and the cost of recovering the money impacted our
operations very much.”

4.5.1.3. Increased security costs

In addition to loss of funds, 87.2% of the respondents as shown in table 4.5 admitted
that they had incurred additional security costs to safeguard their business assets. Only
40
7.7 % of the respondents indicated that they had not suffered any additional costs while
5.1% were not sure. The mean statistic of 1.72 and standard deviation of .887 indicates
that fraud increases security costs in the form of security camera installation and other
security measures. However, some of the responses proved that some participants could
not comprehend some of the matters very well or they maintained their confidentiality
for business’s sake. One shop owner lamented that, “Fraud affects our operations very
much. We have to buy expensive cameras so as to monitor criminal behaviour from
our insiders. We also suffer costs of hiring specialists to install the systems so as to
ensure that our assets are safe.”

4.5.1.4. Loss of credit worthiness

As shown in the table 89.7% of the participants indicated that their organisation fraud
costs them in the form of loss of credit worthiness from their lenders. Loss of credit
worthiness had a mean of 1.1 and a standard deviation of 0.307. Similar findings were
revealed through the interviews as six interviewees supported that fraud discredits them
especially when they seek to source funds from lenders.

Reputational damage was also among the effects of fraud in the operational activities
of retailers in Harare CBD. With a mean statistic of 1.18 and a standard deviation of
0.506 majority of the respondents admitted that fraud costs them in the form of
reputational damage. Some of the respondents lamented that fraud had cost them a lot
as they had lost quite a number of customers and consequently lost their competitive
advantage and market share. As a result, their revenues were being undermined. One
shop supervisor “Our organisation’s reputation is in jeopardy should our staff chose to
steal from the organisation. Fraud erodes customer loyalty and confidence.”
Nonetheless, the survey revealed that reputational damage was not much pronounced
as compared to other consequences of fraud among retailers in Harare CBD.

4.6.1.1. Stiff penalties to errant employees

Stiff penalties to errant employees were also recommended as an effective measure to

fight fraud in the retail sector. This is confirmed by 53.3% of the respondents who
indicated that stiff penalties to fraudsters is an effective measure which can deter
criminal activity at work place. In addition, 10.3% also highlighted that stiff penalties
are very effective although 10.3% indicated that it is somewhat effective. Only a small
41
percentage of the respondents (10.7%) highlighted that stiff penalties were not effective.
Through the interviews, it was also vehemently confirmed that stiff penalties could be
effective in deterring criminals from committing fraud. One auditor remarked, “If those
fraudsters are caught and given tough penalties which are deterrent enough, it creates
an environment where other employees are afraid to steal. I recommend tough
punishments to those with deviant behaviour so that they fear committing fraud.” These
findings are in line with the recommendations made in research by Mawanza (2014)
that punishment should outweigh the benefits of committing a crime.

4.6.1. Measures to fight employee fraud in the retail sector.

N=39

60.00% 51.30% 53.30% 50.90%

50.00%
39.10% 38.50%
40.00% 31.10%
30.00%
20.50% 10.70% 20.50%
18.20% 19.40% 17.90%
20.00% 15.60% 10.30% 15.60%
12.80%10.50% 12.80% 12.40% 10.30% 7.70%
10.30%
10.00% 5.30%
2.00%
0%
0.00%
Code of ethics Whistleblowing Strict Stiff penalties to Installation of
recruitment errant security cameras
procedures employees

Very ineffective ineffective Somewhat effective Effective Very effective

Figure 3: Measures to fight employee fraud in the retail sector.

(Source: Primary data, 2023)

4.6.1.2. Strict recruitment procedures

Majority of respondents (51.3%) indicated that strict recruitment procedures could go a

long way in minimising fraud risk in the retail sector while 31.1% indicated that it is
very effective despite the 2% who denounced the effectiveness of tight recruitment
procedures. Most of the interviewees recommended strict recruitment procedures based
on merit and qualification. “The problem is that businesses employ basing on nepotism.
This results in employment of the wrong personnel who may end up defrauding the
business. I recommend that businesses employ their personnel basing on merit” she
said.

42
4.6.1.3. Installation of security cameras

Installation of security cameras was also among the measures to fight fraud in retail
businesses in Harare CBD. Of the thirty-nine who responded to the questionnaire,
50.9% indicated that installation of security cameras was an effective way of addressing
the issue of employee fraud. 20.5% also recommended the measure as a very effective
one to curb fraud in the retail sector. However, 7.7% of the participants inclined to
suggest that installation of security cameras is not an effective measure while 5.4%
indicated that it is very ineffective. These findings revealed that installation of security
cameras could help the retailer to quickly track and detect fraudulent behaviour before
it gets out of hand. These findings were also supported by interview responses which
were also in favour of security cameras as a measure to prevent fraud. However, one
shop manager lamented the costs involved in installation of the cameras and he argued
that some small retailers could not afford to install cameras at their premises.

4.6.1.4. Other measures

In addition to installation of security cameras, 39.1% of the participants recommended

the use of code of ethics to deter fraud in the retail business activities while 19.4%
indicated that the use of code of ethics could be very effective. On the other hand, 18.2%
of the participants purported to suggest that code of ethics was not an effective measure.
However, despite the disapproval by a smaller fraction, the findings of the study
revealed that using a code of ethics could foster integrity among employees and reduce
the chances of committing fraud. When quizzed on the effectiveness of code of ethics,
one respondent remarked, “It is very important for every retail business to have a clearly
displayed code of conduct to guide employee behaviour at the work place. It should not
be difficult to understand and employees should be encouraged to adhere to the
requirements of the code.

On the same note, 38.5% of the respondents indicated that whistleblowing is an

effective measure in fighting fraud in the retail business activities. On the same note
10.3% confirmed whistleblowing as a very effective measure against fraud despite
12.8% who indicated that it is very ineffective. Of those who downplayed
whistleblowing as an effective measure, their argument was that it is an unethical way
of conducting business. in an Interview session with one of the interviewees, it was also

43
mentioned that whistleblowing could be an effective measure against fraud in the retail
sector. However, the respondent expressed fears that whistleblowing could be a source
of hatred should the whistle-blower’s identity gets known.

4.8. Summary

This chapter highlighted on the findings of the research. Questionnaires and interviews
were used to gather data while bar graphs and tables were used to present the data. The
subsequent chapter (Chapter V) focused on the conclusions, recommendations, and a
summary of the entire study.

44
 CHAPTER V

SUMMARY, CONCLUSION AND RECOMMENDATION

5.0 Introduction

This chapter's goal was to summarize the research's findings. It also concentrated on
the study's conclusions and recommendations.

5.1 Summary of the Study

The study focused on the effects of employee fraud on the daily operations of retail
stores in the central business district of Harare. The researcher emphasized in the first
chapter that employee fraud in the retail industry is on the rise and has terrible effects
on the operations of shops. The background of the study, the problem statement, the
research aims, the research questions, and the significance of the study were all
underlined in chapter one as well. Additionally, chapter one provided an overview of
the study's assumptions, delimitation, limits, and organizational structure. The study's
direction was determined by the following goals in order to achieve this goal:

1. To identify the types of employee fraud within retailers in Harare CBD.

2. To investigate the causes of employee fraud in retail sectors in Harare CBD.
3. To determine the impact of employee fraud on the operational activities of retail
sectors in Harare CBD.
4. To recommend strategies to curb employee fraud in the operations of retailers
in Zimbabwe.

The researcher gave a thorough examination and review of the pertinent literature
regarding the study of fraud in the second chapter of the study. the study employed a
range of information sources, including books, articles, and journals, to understand
employee fraud. The conceptual framework, theoretical literature, and empirical
evidence were also articulated and critically assessed in this chapter.

The research approach that served as the study's foundation was the subject of the third
chapter. This chapter provided an overview of the research design, study population,

45
sample size, sampling strategies, research tools, data collection protocols, and data
presentation and analysis procedures. In Chapter IV, the information acquired from the
questionnaires and interviews was examined, explored, and presented.

5.2 Summary of research findings

One of the main objectives of the study was to find out on the prevalent types of fraud
common in retail shops in Harare CBD. The researcher discovered that asset
misappropriation/embezzlement and corruption were the two main types of employee
fraud dominant in retail stores in Harare CBD. The prevalence of these types of fraud
is mainly attributable to poor internal controls on stocks and other assets of retailers.
Given the fact that some of the retailers do not have proper/adequate internal audit and
surveillance systems, employees may pilfer without being detected. Although it was
discovered that financial statement fraud was less frequent, its effects could not be
understated. Weaknesses in internal controls may present them with opportunities to
falsify their records for their personal benefits as buttressed in the fraud triangle theory.
The more they see opportunity to manipulate financial statements in their routine
activities the better they develop means to exploit the opportunities as is supported by
the fraud diamond theory and the routine activities theory. The study also discovered
that procurement fraud was a concern in the retail sector in Harare CBD. Also
considered less common in the Zimbabwean retail sector was payroll fraud. Just like
financial accounting fraud, weaknesses in controls may promote pay roll fraud. As such
retail shops should make sure that their controls are more compact to prevent chances
of pay roll fraud and associated losses.

With respect to the causes of employee fraud in the retail sector, it was discovered
through the research that greedy, financial pressure and poor internal controls were the
major factors. Financial pressure can come as a result of different aspects on
employees’ daily lives. For instance, gambling, addiction and desire for fancy life may
create some pressure which then forces the employee to defraud the employer.
Considering the laxity in internal controls and inadequacy of internal audit in some of
the retailers, those responsible for financial statements may end up capitalising on
loopholes in the system should they get overwhelmed by financial pressure. In addition,
ineffective and inadequate audit was among the motivations of employee fraud in
Harare CBD. Some of the retailer did not have internal audit functions which left them

46
at very high risk of fraud. Poor remuneration practices were also identified as causes of
fraud in the retail sector. For employees to meet their daily needs they rationalise by
stealing from the employer. As such, the employer should consider remuneration as
vital to minimise the chances of employee fraud. In light of these contributory factors,
retailers should take long strides to concretise their security systems. Thus, they should
sacrifice to install surveillance systems and promote close monitoring of employees at
the work place. Another contributing factor is opportunity hence the retailers should
eliminate opportunity by target hardening the assets which are at risk of being stolen.

Regarding the effects of employee fraud, it was discovered that the retailers in Harare
CBD could lose their physical stocks/assets/ inventory through direct theft by their
employees. In addition to that, direct financial loss was also regarded as a major cost
suffered by retailers through fraud. On the same note, retailers confirmed losing credit
worthiness and at the same time get their reputation tarnished as a result of fraud in their
organisations. The overall result of it was loss of industrial competitiveness. To
minimise these costs, the retailers have to bolster their fraud prevention and detection
measures. Thus, they should deal with the elements of pressure and opportunity and
secure their assets.

The final objective of the research was to suggest on the measures that could be used to
curb employee fraud in the retail sector. Among the suggestions were stiffening
penalties to errant employees, tighten recruitment procedures, installing security
cameras and whistle blowing. Propagation of a clear code of ethics was also mentioned
as an effective measure to thwart fraudulent behaviour in the retail sector. At the same
time, it was also recommended that retailers reasonably remunerate their employees to
keep them motivated and discern from criminal acts. Overall, retailers should invest in
their security system to deter, detect and prevent fraud. However, the challenge is that
some small retailer may not be in a good position to afford adequate technology which
may help deal with fraud. It is therefore imperative that the retailers engage other
stakeholders to denounce fraud as it impairs their operations and their overall
profitability.

5.3. Conclusion

The primary form of employee fraud in the Zimbabwean retail sector is embezzlement,
which includes outright asset theft, procurement fraud, and corruption. According to the
47
research, financial pressure and inadequate internal control mechanisms in shops have
greatly encouraged fraudulent behaviour, which continues to jeopardize the operational
activities of merchants in Zimbabwe. Employee fraud has numerous dimensions in the
ever-evolving technological environment, which some Zimbabwean shops are finding
difficult to manage. This necessitates the implementation of sensible prescriptive
remedies while the issue is still manageable. On the same vein, it is crucial that
merchants enhance internal procedures to thwart dishonest employee behaviour. The
main recommendations for addressing staff fraud in the retail sector also include tight
personnel selection procedures, target hardening, and awareness programs on the
impacts of fraud.

5.4 Recommendations

Given the research's prediction of the effects of staff fraud, merchants must act
decisively to combat employee fraud now, before the issue worsens to alarming
proportions. The study produced the suggestions listed below in order to reduce fraud
in the retail industry.

5.4.1 Stiff penalties to errant employees.

It is essential that stores take decisive action against irresponsible personnel who
support fraudsters. In reality, stores should impose severe penalties that are strong and
effective enough to stop their staff from collaborating with cybercriminals. For instance,
unethical employees should be held liable for their actions should they be caught. In
extreme cases, they have to be arrested for their fraudulent behaviour. This would work
as a good deterrent measure to other potential fraudsters.

5.4.2. Improve remuneration practices

It is equally effective to ensure that the remuneration given to employees is adequate

enough to meet their daily needs. Thus, the level of remuneration should not be lower
than the poverty datum line and should meet remuneration practices stipulated in the
industry of concern. Thus, better salaries will minimise the chances of employees
stealing from their employers.

48
5.4.3 Target hardening

Through target hardening, retailers can restrict employees from accessing valuable
assets of the organisation. For example, cash should be kept in safe and only authorised
personnel should have access to it and held responsible in the event of cash
discrepancies. On other physical assets, stock rooms should be kept under lock and key
in order to minimise un authorised access to stocks. This would help minimise the risk
of theft of physical assets. In a similar vein, Target Penetration Tests should be
performed to evaluate the systems by analysing and testing for loopholes that could be
manipulated by fraudsters. These exercises might be useful as they facilitate target
hardening process and minimise system vulnerabilities. The targets include warehouses
where inventory is kept and cash safes. These places should be kept secure by doing
vulnerability tests and apply measures such as restricting access to everyone except
authorised personnel.

5.4.4 Fraud awareness campaigns and seminars

Within their organisations, retailers should organise seminars and engage other fraud
management specialists law enforcement agencies to preach on the danger of engaging
in fraud and their consequences to the perpetrators. The dangers include losing their
jobs and getting arrested. Doing awareness campaign may go a long way in instilling
integrity and develop a culture of honesty among employees as they would feel
belonging to the success of the organisation.

5.4.5. Routine monitoring and checking of all company assets

Retail shops have many assets that must be protected from potential theft and misuse,
such as cash on hand, inventories, consumables and tools. Another thing that needs to
be maintained is official company documents in the form of receipts, orders, so that
unscrupulous employees do not misuse them to transact with customers to benefit
personally on behalf of the company. Monitoring resources and documents by routinely
verifying to make sure everything is present and accounted for in accordance with
system records. Monitoring processes are carried out on a regular basis according to an
ad hoc timetable by a third party.

49
5.5 Recommendations for further study

Employee fraud has damaging consequences to the operations of retailers and other
sectors at large. Despite a lot of measures being developed against fraud, little empirical
work has been done to ascertain their effectiveness. Hence it is worthwhile for further
researchers to undertake studies which examine the effectiveness of measures against
fraud specifically in the retail businesses. Understanding the effectiveness would help
develop measure which are more specific to each kind of employee fraud and cut the
associated losses.

50
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 APPENDICES

APPENDIX 1: RESEARCH ASSISTANCE LETTER

Bindura University of Science Education

P. Bag 1020
Bindura
Zimbabwe

To whom it may concern.

RE: REQUEST FOR RESEARCH ASSISTANCE.

My name is Rufaro Nkhokwe, an undergraduate student at the Bindura University of

Science Education, studying for a Bachelor of Commerce (Honours) Degree in
Financial Intelligence. As a requirement of my studies, I’m carrying out research titled
“THE EFFECT OF FRAUD ON THE OPERATIONAL ACTIVITIES OF
RETAIL SHOPS IN HARARE CBD.” I would be much thankful if you could
participate in this process by sharing your experiences pertaining to fraud. May you
kindly assist me by completing the attached questionnaire.

Your participation in this study is voluntary and should you at any moment decide to
withdraw your participation, you are free to do so without any prejudice. You are also
advised that no financial or any other benefit will accrue to you for your participation
the study. I provide assurance that the data gathered will be only used for the purpose
of this research and will be treated with utmost confidentiality.

Yours Faithfully
Rufaro Nkhokwe

55
 APPENDIX 2: QUESTIONNAIRE

Section A: Demographic Data

Please indicate by putting a tick below

1. Gender male [ ] female [ ]

2. Age below 25 [ ] 25-29 [ ] 30-34 [ ] over 35 [ ]
3. How much time have you spent working in your organisation?

Less than 1 year 1-3 years 4-6 years Above 6 years

4. Type of business.
Please indicate below
Clothing & footwear [ ]
Food court [ ]
Grocery shop/Supermarket [ ]
Hardware [ ]
Computers, cell phone & accessories [ ]
Electrical appliances [ ]

5. Please indicate your category below

Shop Owner [ ] Shop manager [ ] Auditor [ ] Other [ ]

Section B: Types fraud.

6. Below are some of the common forms of cybercrime in business. Please indicate their
prevalence rates in your organisation:

Less
Doesn’t than Very
Type of fraud occur prevalent Prevalent prevalent
Corruption
Financial statement fraud

56
 Procurement fraud
Payroll fraud
Asset
Misappropriation/Embezzlement

7. What other types of fraud are prevalent in your organization. Please indicate below
if there are any.
…………………………………………………………………………………………
…………..........................................................................................................................
..........................................................................................................................................
Section C: Causes of fraud
8. Please indicate the extent to which you agree that each of the listed below are causes
of fraud.

Strongly
Causes of fraud Strongly disagree disagree agree agree
Ineffective internal audit
Poor internal controls
Greedy
Inadequate remuneration
Financial pressure

9. Apart from the causes above, what are other causes of fraud in your organisation?
…………………………………………………………………………………………
…………………………………………………………………………………………
Section D: Impact of cybercrime.

10. Has your organization suffered any of the below due to fraud?

Impact Yes No Not sure

Direct financial loss
Increased security costs
Loss of inventory
Reputational damage
Loss of credit worthiness

57
11. What other effects has your organisation suffered due to fraud?
…………………………………………………………………………………………
…………………………………………………………………………………………
……………………………………………………………………………..

Section D: Measures to curb fraud.

12. Below are some of the strategies that companies adopt to curb fraud. Please indicate
whether the measures are available in your organisation.

Measure Yes No Don’t know

Code of ethics
Whistleblowing
Strict recruitment procedures
Stiff penalties to errant employees
Installation of security cameras

13. In addition to the measures above, what other measures has your organization put
in place to fight fraud? Please indicate below:
..........................................................................................................................................
..........................................................................................................................................
........................................................................................................................................
14. What is your overall comment on the internal control system in your organization?

Very ineffective Somewhat effective Very

ineffective effective effective

Section E: Measures that can be taken to minimise employee fraud.

15. What other measures can be taken to minimise fraud in the retail
sector?...............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................

End of Questionnaire
Thank you for your cooperation.

58
 APPENDIX 3: INTERVIEW GUIDE

Interview questions.
1. what is your understanding on fraud?
2. What is the nature of fraud affecting your organisation?
3. in your own understanding what do you think are the causes in your organisation?
4. How much has your organisation lost because of fraud?
5. What other effects has your organisation suffered due to fraud?
6. What measures has your organization implemented to curb fraud?
7. In your view, how effective are the current measures to deal with fraud?
8. What other measures can your organization adopt to curb fraud?

59