The examination of asset misappropriations in managers’ workplaces using hexagon’s fraud and the moderating impact of perceived strength of internal control

Abstract

Purpose This study aims to investigate the prevalence of asset misappropriation in managers’ workplaces. Relying on fraud hexagon theory as the theoretical framework, the study examines the effect of pressure, opportunity, rationalization, capability, ego and collusion on asset misappropriation while controlling for the impact of the perceived strength of internal control (PSIC). Design/methodology/approach This study used a quantitative method through a survey administered to finance managers working at multinational companies in Indonesia. A total of 173 respondents participated in this study. The analysis was conducted using structural equation modeling-partial least squares. Findings The findings show that the six elements of Hexagon’s fraud do not fully trigger asset misappropriation; only pressure, capability and ego significantly influence it. Additional evidence suggests that the PSIC weakens the impact of three components of Hexagon’s fraud – pressure, capability and ego – on asset misappropriation. This shows that internal control can be used as an anti-fraud strategy in managers’ workplaces. Originality/value Theoretically, this study represents a pioneering effort in empirically confirming the relevance of the fraud hexagon theory within the field of fraud research. Moreover, it enhances the understanding of occupational fraud by investigating the less-explored domain of asset misappropriation. Additionally, the study underscores the crucial significance of internal controls in reducing occurrences of asset misappropriation in managers’ workplaces.