OTW To Hardbind

RISK MANAGEMENT ON FRAUD DETECTION AND PREVENTION
OF COFFEE SHOPS IN LAS PINAS CITY

Bueron, Louise Jill S.
Galvez, Glennizze M.
Rovillos, Kenneth Martin D.
Rubillar, Patricia Nicole T.
Sabater, Liezel E.

A Thesis Prsented to the
College of Business Administration and Accountancy
University of Perpetual Help System DALTA
In Partial Fulfillment
Of the Requirements for the Degree

Bachelor of Science in Accounting Technology

Las Piñas City
2018

RISK MANAGEMENT ON FRAUD DETECTION AND PREVENTION
OF COFFEE SHOPS IN LAS PINAS CITY
Quantitative researches are usually easy to present, summarize, and
compare. The way you design and plan your research will have significant
implications for the success of your project. The methodology that you use
underpins your entire project, and flawed assumptions or flawed methodology
will result in questionable integrity of the results and may lead to biased results
as well (Davies, 2013).
CHAPTER 1
INTRODUCTION
Risk is something every organization deals with, even if it is uncertain as
to whether or not it will happen. To avert this from taking place,
countermeasures will be needed; this is where risk management comes in. Risk
management is about understanding the nature of such events, where they

represent threats, and making positive plans to mitigate them (Chartered
Institute of Management Accountants, 2008). Risk management entails
forecasting and evaluating possible risks and coming up with ways on how to
minimize the impact of it on the business. Fraud happens to fall under the
scope of risks that businesses face, as it is also uncertain as to when this could
happen. Fraud implies deceiving another individual by altering or making a
false representation of an important information (Hall, 2011). As a preventive
measure against fraud it is important that the business implements fraud
detection and prevention methods to avoid, if not lessen the chances of
fraudulent acts from happening. Fraud detection involves the process of
minimizing the probability and intensities of risks by intelligently analyzing
the vast records on individual as well as business transactions. While Fraud
prevention includes informing the company on how to handle fraud, supporting
the supervision of preventive controls or suggesting when such controls are
ineffective, and also testing procedures which ensures adequate operations of
preventive controls and their results (Dimitrijevicet al., 2015).

A vast majority of coffee shops, not just in Las Piñas City, have adopted
the practice of staying open up until the wee hours of the night; this puts a lot
of responsibility on the employees that are assigned on those shifts and
demands a lot of trust from the employers as well. Even if they are working
within the normal working hours, they still have to live up to the business
owner’s faith and confidence in them. Yet some cases of deceit may still occur
within the organization: one of these may include fraud. This study will help
the coffee shops, specifically those within Las Piñas City, since it is closer to
our campus and we are familiar with the location, assess the types of frauds the
company may experience and the extent of how they utilize their risk
management and how effective it is in terms of fraud detection and prevention;
by means of surveillance, monitoring, IT control, physical control, accounting
records, risk assessment, segregation of duties, supervision, and independent
verification.
BACKGROUND OF THE STUDY

Several coffee shops have been established around our campus and it’s
no secret as to why this has been a growing trend. For those needing their
caffeine fix either to re-energize from a long day or to stay up finishing some
school project; coffee shops may be considered as overpriced for majority of
us students who are on a budget and can instead opt for another one of those
convenient 3-in-1 coffee sachets but still students lounge around in coffee
shops during their leisure time. Aside from the obvious promise of free Wi-Fi,
coffee shops have been considered as a place for socializing, a place to spend
leisure time with friends and it has been claimed that the ambience of coffee
shops encourages productivity (Nguyen, 2013). As Accounting Technology
students we were curious to know as to how they handle fraud in terms of
detection and prevention , how they operate on managing these risks, policies
they implement with regards to risk. Risk management aids in determining and
analyzing the risks throughout the course of business operations for the
purpose of minimizing them from occurring in the future, detecting the
possible risks and providing a coherent basis for better decision making, and
providing steps on how to manage and create solutions for it. In this case, fraud
is one of the risks that falls under the scope of risk management, as there is no
guarantee that it would happen but there is a possibility that it could; hence the
need to take countermeasures in avoiding it. Moreover, it also helps in
analyzing the status of the risks, the vulnerability of their fraud preventive
measures and how to develop their approach on this matter.
In 2011, a study was conducted that analyzed fraud risk assessment and
management. The purpose of this study, as described by the author, was to
describe and evaluate the historical trends of the fraud management in
organizations. The argument raised by the study was that today’s fraud risk
management importance is different because it involves not only detection, but
also fraud prevention (Powell, 2011). The role of risk management on fraud is
not just a one-time implementation, instead a continuous process. Based on the
outcome of the research, we would then endorse constant development
methods with regards to the risk management strategy. In which it
encompasses an even measurement of where the businesses is and where it

wants to be in terms of effectively preventing, detecting, and deterring fraud
(Deloitte, 2011).
The purpose of this study is to know the relevance of risk management in fraud
detection and prevention; it aims to know what and how the existing practices
are being implemented in the coffee shops in Las Piñas City, the frequency of
their risk management practices and how to improve in these areas.
OPERATIONAL FRAMEWORK
This conceptual framework shows the inputs and outputs of the study,
with the aid of the data obtained from the respondents in the questionnaires, we
can assess the demographic profile, types of fraud and the extent of practice
used in the risk management of fraud detection and prevention of the selected
coffee shops. After analysing the necessary data we will evaluate the efficiency
and effectively of the businesses’ fraud detective and preventive measures
against fraud by means of risk management and how to maintain the effective
practices and to identify in which aspect requires improvement and provide
possible solutions.
With the aid of a descriptive survey we will obtain necessary data for our research.
For instance, on what types of fraud are the coffee shops subject to experience, these
include: accounting fraud, asset misappropriation, payroll fraud and vendor fraud. We
would then assess the extent of their risk management for fraud detection in terms of
surveillance, monitoring, IT control, physical control, accounting records and risk
assessment. Another assessment would be on the extent of their risk management for
fraud prevention in terms of segregation of duties, supervision, and independent
verification.
STATEMENT OF THE PROBLEM

The purpose of this research study is to assess the risk management on fraud
detection and prevention of coffee shops in Las Piñas City. Specifically, it aims to
answer the following questions:
1.) To know the profile of the coffee shops based on their:
a) Years of existence
b) Annual net income
c) Number of employees
2.) To know the types of fraud the business is may have experienced in
terms of:
a) Asset misappropriation
b) Vendor fraud
c) Accounting fraud
d) Payroll fraud
3.) To know the extent of the practices of risk management for fraud
detection that is being implemented by the coffee shops based on:
a) Surveillance
b) Monitoring
c) IT control
d) Physical control
e) Accounting records
f) Risk assessment
4.) To know the extent of the practices of risk management for fraud
prevention that is being implemented by the coffee shops based on:
a) Segregation of duties
b) Supervision
c) Independent verification
5.) To know the significant difference in the extent of the practices of risk
management for fraud detection when grouped according to the profile.
6.) To know if there is a significant difference in the extent of the practices
of risk management for fraud prevention when grouped according to the
profile.
OBJECTIVES OF THE STUDY
The researchers consider the following as the objectives:
1.) To determine the demographic profile of the coffee shops in terms of:
a) Years of existence
b) Annual income
c) Number of employees
2.) To determine what type of fraud did the company encountered in terms
of:
a) Asset misappropriation
b) Vendor fraud
c) Accounting fraud
d) Payroll fraud
3.) To determine as to what frequency of the following risk management
for fraud detection is being practiced in terms of:
a) Surveillance
b) Monitoring
c) IT control
d) Physical control
e) Accounting records
f) Risk assessment
4.) To determine as to what frequency of the following risk management
for fraud prevention is being practiced in terms of:
a) Segregation of duties
b) Supervision
c) Independent verification
5.) To determine if there is a significant difference in the frequency of the
practices of risk management for fraud detection when grouped according to
the profile.
6.) To determine if there is a significant difference in the frequency of the
practices of risk management for fraud prevention when grouped according to
the profile.
HYPOTHESIS
Based on the research objectives and questions, the hypotheses have
been developed as followed:
Null hypothesis (H01): There is no significant difference in extent of the
practices of risk management for fraud detection when grouped according to
the profile.
Alternative hypothesis (Ha1): There is a significant difference in the
extent of the practices of risk management for fraud detection when grouped
according to the profile.
Null hypothesis (H02): There is no significant difference in the extent of
the practices of risk management for fraud prevention when grouped according
to the profile.
Alternative hypothesis (H ): There is a significant difference in the extent of

a2
the practices of risk management for fraud prevention when grouped according to the
profile.
SCOPE AND LIMITATION

The limitation of our study is the consistency of the result of this
research that is limited to the respondent's personal thoughts and insights with
relation to their management. The scope of the study is the personnel working
in coffee shops in Las Piñas. For each of the aforementioned coffee shops there
will be approximately 3 respondents each, resulting in a total of 30
respondents. For the purpose this research we will be using a descriptive
research as it is used to describe a population with respect to important
variables. With regards to the sensitivity of this study that involves business
policies and practices, we adopted the use of quantitative data collection
methods since this is easier to present, summarize, and compare. Our study
adopted the non-probability sampling type, specifically random sampling.
SIGNIFICANCE OF THE STUDY
The significance of the study is to be able to improve risk management so that
fraud will be detected and prevented and to provide possible solutions. Those who will
benefit from this study include:

1. The owners of the coffee shops. This is beneficial for the owners to know the
status of how the business is in terms of safeguarding it from any potential
loss, by the evaluation of how well their risk management is and how
effective it is in preventing and detecting fraud, and to be able to avoid it from
recurring in the future.
2. The management of the coffee shops. This is beneficial for the management
so that they can pinpoint or reevaluate on any overlooked or ineffective
practices in fraud prevention, reassess how well they manage their risks and to
provide solutions on how to improve.
3. Customers. This is beneficial for the customers of the aforementioned coffee
shops because they can be rest assured that the said coffee shops have
undergone an investigation or study that involves their fraud risk
management, and they can have the confidence to know that the
organizations are assessed with better risk management and business
practices.
4. Future researchers. This is beneficial for the future researchers who
desire to further this study and create a more in-depth or updated
research on this matter.
DEFINITION OF TERMS
his is the deliberate and intentional manipulation of

Accounting fraud. T
accounting records by means of overstating or understating revenues or
expenses, or even excluding other important financial data
Accounting records. Important financial data pertaining to the business on
which their decisions over the course of the business are based upon.
Asset misappropriation. It is a kind of fraud that involves manipulating or
altering accounts, or even misuse of the company’s resources that could harm
the business that would only benefit the fraudster.
Fraud. The act of deceiving another party solely for the purpose of personal gain
which involves dishonest acts that could harm the business and its operations.
Fraud detection. The process of identifying, examining, or noticing any irregular
or unusual acts of fraud or deception occurring within the business.
Fraud prevention. The process of assessing, strategizing and even mitigating
risks of fraud that may occur within the course of the business operations, and coming
up with ways to avoid the chances of this from happening again in the unforeseeable
future.
Independent verification. This involves having a separate person to
authorize and verify certain documents to ensure the authenticity of the
documents.
IT control. This involves the proper practice of ensuring that the
computers, devices, or digital data of the company is secure and reliable by
means of having proper internal controls and procedures in terms of their
storage of information.
Monitoring. This is the process of keeping a careful watch or observing the
ways the procedures and policies of the business are being carried out or
implemented.
Payroll fraud. It is a kind of fraud that is mainly done by means of the
payroll system, it could involve altering of employee attendance or even false
records of salary requests.
Physical control. This involves the proper practice of ensuring that the
physical resources of the company, such as equipment, inventory, etc. are
secure and accurately accounted for by means of having proper internal
controls and procedures.
Risk. It refers to the uncertain probability of damage that could harm the
business. It could be detected or sometimes even undetected for the period of
the business operation.
Risk assessment. It is a thorough look at the workplace to identify those
things, situations, processes, etc. that may cause harm, particularly to people.
After identification is made, you analyze and evaluate how likely and severe
the risk is, followed by deciding on what measures should be in place to
effectively eliminate or control the harm from happening.

Risk management. It involves strategizing, analyzing, and mitigating risks
in a way that will benefit the business or help in the decision making process of
the company.
Segregation of duties. This is delegating or distributing tasks and
responsibilities to the staff members, by means of allocating the duties to
ensure that there is no bias in the way they handle their tasks and to ensure the
authenticity and reliability of their task.
Supervision. It is the process of watching over and guiding the personnel to
ensure that they adhere to company policies and procedures and that the tasks
are carried out accordingly.
Surveillance. This involves watching over what happens during the course
of the business by means of CCTV footages, to check how the business runs
during the normal day-to-day operations.
Vendor fraud. This involves altering or changing the accounts payable
which sometimes involve employees creating fake suppliers or suppliers
deceiving the business management.

CHAPTER 2
RELATED LITERATURE
2.1 Introduction
This chapter reviews the definitions and expounds more information about
the variables of our research; it provides existing knowledge of literature on
risk management, fraud prevention and fraud detection. It provides an
overview of the probable influences these have on the coffee shops in Las
Piñas and the research gap in fraud risk prevention and detection.
2.1.1 Risk Management

Risk is the foremost reason of ambiguity in any organization, Thus,
companies progressively focus more on finding risks and working them before
they even distress the business. The aptitude to handling risk will aid
companies act more assuredly on future business decisions. Their knowledge
of the risks they are facing will give them various options on how to deal with
potential problems (Mutetwa, 2015). Although it might seem like a classless
topic, its principles and concepts however are crucial to the survival of your
business. Successful risk management affords a small business an opportunity
to thrive, grow and ultimately enjoy the fruits of success (Brokerage, 2013).
2.1.2 Types of Risk Management
There are various types of risks that a business will experience but this
study focused on specific types which are: operational risk, compliance risk,
and reputational risk.
Operational risk is the potential of failures related to the day-to-day
operations of an organization such as a customer service process. Some

definitions of operational risk claim that it is the result of insufficient or failed
processes. However, even operational processes that are deemed to be
competent and successful also has the possibility of generating risk (Spacey,
2015). It summarizes the risks a company shoulders when it tries to operate
within a given field or industry. Operational risk is the risk not essential in
financial, systematic or market-wide risk. It is the risk remaining after
determining financing and systematic risk, and includes risks resulting from
breakdowns in internal procedures, people and systems (Investopedia, 2018).
Compliance risk is the probable for losses and legal penalties due to failure
to fulfil with laws or regulations. In many cases, businesses that fully intend to
comply with the law still have compliance risks due to the possibility of
management failures (Spacey, 2015).
Reputational risk is the chance of losses due to a declining reputation as a
result of practices or incidents that are perceived as dishonest, disrespectful or
incompetent. The term tends to be used to describe the risk of a serious loss of
confidence in an organization rather than a minor decline in reputation

(Spacey, 2015). It is a threat or danger to the good name or standing of a
business or entity. Reputational risk can occur through a number of ways: directly as
the outcome of the actions of the company itself; indirectly due to the actions of an
employee or employees; or indirectly related through other peripheral parties. In
addition to having good governance practices and transparency, companies
need to be socially responsible and environmentally conscious to avoid or
minimize reputational risk (Investopedia, 2018).
2.1.3 Methods or Techniques of Risk Management
There are four techniques of risk management namely: avoidance,
reduction, transfer, and acceptance.
Avoidance is one of the easiest ways to mitigate risk is to put a stop to any
activities that might put your business in jeopardy. However it's crucial to
remember that with nothing ventured comes nothing gained, and therefore this
is often not a realistic option for many businesses (Elders Insurance, 2013).
Avoidance is when you have the option not to take on the risk by avoiding the
actions that cause the risk (Spacey, 2015).
Reduction is the second risk management technique, essentially, taking the
steps required to minimize the potential that an incident will occur. If the cost
of risk reduction outweighs the potential cost of an incident occurring, you will
need to decide whether it is really worthwhile (Elders Insurance, 2013).
Transfer is one of the best methods of risk management; it is transferring
that risk to another party. It is a realistic approach to risk management as it
accepts that sometimes incidents do occur, yet ensures that your business will
be prepared to cope with the impact of that in the event that it would actually
happen (Elders Insurance, 2013).
Acceptance involves weathering the impact of an event. This option is
often chosen by those who consider the cost of risk transfer or reduction to be
excessive or unnecessary (Elders Insurance, 2013).
2.1.4 Effects of Poor Risk Management

These are the effects of poor risk management: poor user adoption,
unrealized benefits, late-running project, and overspent budgets.
Poor user adoption is when the subordinates or personnel fail to adhere to
company policies and procedures, or when they don’t follow the guidelines
expected for them to commit to (Ten Six, 2017).
In unrealized benefits, is when the team is unable to perform to the
standards that the business management requires and in turn incurs costs and
time that could affect the business (Ten Six, 2017).
Late-running projects pertains to the delays that occur when risk
management activities extends the expected time and delays in projects also
affects the business (Ten Six, 2017).
An overspent budget is a setback because this would mean that the
company is spending way more money than they can afford (Ten Six, 2017).
2.2.1 Fraud
Fraud is an issue that is dealt with by various organizations regardless of
the size, industry or country. As long as the organization possesses property
that is of value such as cash, goods, information or services; then fraud may be
attempted (Accountants, 2008).
There is no specific reason as to why fraud occurs, but there are factors as
to why this happens, this can be thoroughly illustrated using the fraud triangle.
The fraud triangle is built on the assumption that the possible combination of
factors that results to fraud are situational pressure, opportunity and ethics
(Hall, 2011).
● Situational pressure refers to the burden of physical or mental distress that

results from various situations that leads an individual to commit a criminal
act. These pressures could include financial constraints, debts, alcohol or drug
addiction, etc. (Brumell Group, 2015). For instance an employee who is
struggling with money problems made tend to go to extreme lengths just to
escape that situation.

● Opportunity, as stated in the Merriam-Webster dictionary, is an amount of

time or a situation in which something can be done. In cases like these, the
individual wouldn't have been able to commit fraud if it weren't for a
momentary chance that allowed them to accomplish such an act, with minimal
possibility of them being caught.
For instance when an employee who happens to be struggling with money
problems is left unattended with the cash register or the safe where the
company's daily revenue is kept.
● Ethics the moral fitness of a decision, course of action, etc. So when a

person has a blurred moral compass of what is right or wrong then tend to
make unwise decisions.
We all know that fraud is a crime which is deceiving or misrepresenting
documents, files and etc. We must avoid, stop and prevent it for the business to
continue the operation and lasts longer.
2.2.4 Types of Fraud

The truth of the matter is that no business is exempted from the possibility
of fraud. In order to detect and prevent fraud from happening it is also vital to
be aware of and have a clear understanding of the various types of fraud that
could take place in their business.
2.2.4.1 Asset Misappropriation
Asset misappropriation is the most common fraud scheme in which the
assets are obtained solely for the fraudster’s personal gain (Hall, 2011).
Merely, it’s the theft of company assets by an employee, also identified as
insider fraud.
Asset misappropriation schemes include check tampering and forgery,
inventory theft, cash theft, service theft, expense account fraud, procurement
fraud, worker’s compensation fraud, and commission fraud (Lomer, 2017).
In check tampering, it occurs when an employee physically manipulates
checks so that they can be deposited into a bank account under his control.
This could involve forgery, altering payee information, or issuing inappropriate
manual checks (Bush, 2017), whereas check forgery is when the signature of
the drawer is copied without his consent or knowledge. Inventory theft is when
an employee steals products from the company. Cash theft and service theft are
pretty much self-explanatory; these involve the actual stealing of cash and
stealing services intended for business purposes for personal gain by misusing
company-funded services (Lomer, 2017).
Under expense account fraud, this is where the employee either forges
receipts by altering or inflating the supposed amount of the expense, or using
false submitting receipts that personal expense but claim that they are
business-related (Lomer, 2017).
Procurement fraud includes schemes involves an employee order goods
that exceed what is needed and is unknowingly being paid for by the company
but it actually just benefits the fraudster (Lomer, 2017).

In workers’ compensation fraud, fakes an injury or ailment or even
exaggerates their circumstance so that all the expenses will be paid for by the
company (Lomer, 2017).
In commission fraud, alters the sales to increase their commission for the
sole purpose of their personal gain that will affect the business (Lomer, 2017).
2.2.4.2 Vendor Fraud
Vendor fraud involves altering or changing the accounts payable which
sometimes involve employees creating fake suppliers or suppliers deceiving
the business management. (Bush, 2017). The following types of fraud can also
be committed by vendors on their own.
Examples of vendor fraud are billing schemes, bribery and kickbacks (Lomer,
2017).
In a billing scheme, an employee creates false receipts or source
documents pretending to be paying towards a made up supplier but in reality,
they are obtaining the money being paid for by the business.
In bribery and kickbacks, an employee accepts payment from a supplier to
order from them, this involves bias and double standards which is not ideal for
the company.
2.2.4.3 Accounting Fraud
This is when an employee alters or creates a false representation of the
financial standing of the business. They could either understate or overstate the
amounts or even exclude some of the supporting data (Lomer, 2017).
Some examples of accounting fraud includes accounts payable fraud,
embezzlement, fake supplier and personal purchases (Lomer, 2017).
Embezzlement, also called larceny, is when a person misuses the trust the
company gives to him or her when he or she has complete access to the funds
and resources of the business. Accounts payable fraud encompasses
specifically the suppliers or the accounts payable function wherein they alter
the amounts or source documents from suppliers.
The fake supplier scheme is when the employee creates a false supplier
and allows the
2.2.4.4 Payroll Fraud
Payroll fraud is a theft by means of a company’s payroll system and it is
also one of the most common types of employee fraud (Bragg, 2018). Payroll
fraud schemes include: timesheet fraud and pay check theft (Lomer, 2017).
Timesheet fraud is when an employee alters the details on his or her
timesheet in order to increase his or her wages, whereas the pay check theft
involves an employee getting the pay check of a fellow employee and cashing
it out claiming that it is the formers without the consent or knowledge of the
latter (Lomer, 2017).

2.3.1 Fraud Prevention
Prevention is the first line of defense in the control structure. Preventive
controls are passive techniques premeditated to diminish the frequency of
incidence of undesirable events. Preventive controls force compliance with
prescribed or anticipated actions and thus screen out abnormal events. When
designing internal control systems, an grain of prevention is most definitely
worth a pound of cure. Preventing errors and fraud is far more cost-effective
than detecting and altering problems after they arise. The vast majority of
unwanted events can be impassable at this first level. For example, a
well-designed source document is an example of a preventive control. The
logical layout of the document into zones that comprise specific data, such as
customer name, address, items sold, and quantity, forces the clerk to pass in the
necessary data. The source documents can consequently prevent needed data
from being omitted. However, not all problems can be predicted and prevented
(Hall, 2011).
2.4.1 Fraud Detection
Even if certain fraud prevention takes place, it isn’t a guarantee that fraud
can completely be avoided; therefore a highly effective fraud detection system
must be in place to detect frauds as they occur (Crain, 2018).
As with all other components of the fraud risk management system, fraud
detection processes and techniques must be carefully documented for most
desirable results. Documentation ought to generally exist for all detection
controls and processes and must explicitly exist for monitoring processes and
results; for testing measures used to assess controls; and for the roles and
responsibilities that backing fraud detection.
Continuous monitoring of fraud detection is essential. The organization
must develop continuing monitoring and measurements to assess, remedy, and
improve the organization’s fraud prevention and detection techniques.

Detective controls form the second line of defense. These are devices,
techniques, and procedures designed to identify and expose undesirable events
that evade preventive controls. Detective controls expose specific types of
errors by equating actual occurrences to pre-established standards. When the
detective control identifies a departure from standard, it sounds an alarm to
attract attention to the problem (Hall, 2011).
2.1.5 Methods and Approaches of Fraud Detection and Prevention
These are the methods commonly used to detect and prevent fraud: risk
management, monitoring, IT controls, physical controls, transaction
authorization, segregation of duties, supervision, accounting records and
independent verification.
Risk assessment is used to identify, analyze, and manage risks relevant to
financial reporting (Hall, 2011). It is the process of evaluating the risk resulting
from a hazard (Costard, 2008).

Monitoring is the progression by which the value of internal control design
and operation can be evaluated. This may be accomplished by separate
procedures or by ongoing activities (Hall, 2011). This is conducted after a
program has begun and continues throughout the program implementation
period. It is sometimes referred to as process, performance or formative
evaluation ( Gage & Melissa, 2009) .
IT controls relate specifically to the computer environment (Hall, 2011).
IT controls are procedures, policies and activities that are conducted to meet IT
objectives, manage risks, comply with regulations and conform to standards
(Spacey, 2016) .
Physical Control relates primarily to the human activities employed in
accounting systems. These activities may be purely manual, such as the
physical custody of assets, or they may involve the physical use of computers
to record transactions or update accounts (Hall, 2011). Physical access control
limits access to buildings, rooms, areas and IT assets, logical access control
limits connections to computer networks, system files and data (Scheafer,
2017).
Transaction Authorization is to ensure that all material transactions
processed by the information system are valid and will be counterchecked by
the management before being approved (Hall, 2011).
Segregation of Duties can take many forms, depending on the specific
duties to be controlled (Hall, 2011) . It is the assignment of various steps in a
process to different people that the intent behind doing so is to eliminate
instances in which someone could engage in theft or other fraudulent activities
by hindering them from having an excessive amount of control over a process.
As for the segregation of duties it split the general functions through the
physical custody of an asset, record keeping for an asset and also the
authorization to acquire of asset (Bragg, 2018).
Supervision in small organizations or in functional areas that lack
sufficient personnel, management must compensate for the absence of
segregation controls with close supervision. For this reason, supervision is

often called a compensating control (Hall, 2011). It is being responsible in
assisting the business process owner on setting up business process disorder
and ensure the effective and efficiency practices being applied within the
operation (Danone, 2018). As of the fraud prevention supervisor job
description it includes details about being able to lead cross-functional drives
in order to discover fraud and prevent it from happening. This will include a lot
of research of data, as well as documenting procedures which may currently
have an impact on fraud (Education Career, 2014).
Accounting records of an organization contain of source documents,
journals, and ledgers. These records capture the economic essence of
transactions and provide an audit trail of economic events (Hall, 2011). When
there are unusual differences in the accounting records, there are two possible
reasons for the discrepancy: error or fraud. An error is unintended and
frequently arises due to computer failure or human error, such as inaccuracy or
lack of knowledge. In contrast, fraud is purposely committed in order to extract
some gain for the perpetrator. The two means through which fraud is
committed include the misappropriation of assets and the misrepresentation of
financial statements (Kennedy, 2012).
Independent verification is the quality of information the accounting
information system generates impacts management’s ability to take actions and
make decisions in connection with the organization’s operations and to prepare
reliable financial statements (Hall, 2011).
2.6.1 Effects of Poor Fraud Detection and Prevention
These are the effects of poor fraud detection and prevention: failure of
detection and prevention leads to financial loses, negative impact on the
business’ reputation, and lack of preventive measures.
A research study published by the Association of Certified Fraud Examiners
(ACFE) in 2008 estimates losses from fraud and abuse to be seven percent of
annual revenues. The actual cost of fraud is, however, tough to quantify for a
number of explanations: not all fraud is detected; of that detected, not all is
reported; in many fraud cases, incomplete information is gathered;

information is not properly distributed to management or law enforcement
authorities; and too often, business organizations decide to take no civil or
criminal action against the perpetrators of fraud. Which in turn shows that
failure of detection and prevention does eventually lead to financial loses.
Another effect of poor fraud detection and prevention involves negative impact
on the business’ reputation; not implementing proper fraud prevention
practices will result in lack of trust and confidence of your investors, customers
and auditors in your ability to control the fate of your business. The
consequences of large failures can enforce financial, reputational, loyalty, and
other brand-related costs that will keep on for a very long time. The cost of a
fraud prevention program is tiny associated to a major failure (Lowers, 2014).
Lack of preventive measures of fraud can lead to vulnerability to future frauds
that could go unnoticed by the businesses.
2.5 Synthesis
Companies must have sufficient knowledge of the risks they are facing to
give them various alternatives on how to deal with potential problems to be
able to detect and prevent fraud. There are various types of risks that a
business will experience but this study focused on specific types which are:
operational risk, compliance risk, and reputational risk. Fraud denotes a false
representation of an important fact made by an individual to another individual
with the intention of deceit. There is no specific reason as to why fraud occurs
but there are three factors that play a part in its occurrence: opportunity,
situational pressure, and ethics. There are vast examples of frauds that take
place some of these examples include asset misappropriation, payroll fraud,
accounting fraud, and vendor fraud. Continuous monitoring of fraud detection
is essential. The organization should develop ongoing monitoring and
measurements to evaluate, remedy, and improve the organization’s fraud
prevention and detection techniques because even if certain fraud prevention
takes place, it isn’t a guarantee that fraud can completely be avoided; therefore
a highly effective fraud detection system must be in place to detect frauds as

they occur. In a certain practices on some fraud would be found and be able to
prevail from getting worsening in the operation of the company. Prevention is
the first line of defense in the control structure. Preventive controls are passive
techniques premeditated to diminish the frequency of incidence of undesirable
events. Preventing errors and fraud is distant more cost-effective than detecting
and correcting problems after they transpire.
2.6 Gap Analysis
Based on the articles, related studies, books and other sources we’ve read, we
have come to realize that there is a wide variety of frauds that could easily go
undetected if the organization is not aware of such and doesn’t have any form
of preventive measurement to ensure that it doesn’t happen. We also realized
that frauds don’t just happen due to mere opportunity or because of the less
likelihood of being caught but it also involves a moral battle. Fraud is
definitely something that can’t completely be avoided but the chances of it
from occurring can be minimized with proper and effective practices of risk
management that could be adopted or implemented by a company. Hence the

need to raise awareness about it to more businesses to prevent the chances of
fraudulent acts from occurring. Based on the research we made regarding fraud
detection and prevention and risk management practices in Las Pinas, we
found out that there is very limited techniques or methods being applied by the
coffee shops within the vicinity, therefore we opted to further assess and to
evaluate the efficiency and effectivity of the businesses’ current fraud detective
and preventive measures against fraud by means of risk management and how
to maintain the effective practices and to identify in which aspect requires
improvement and provide possible solutions.
CHAPTER 3
RESEARCH METHODOLOGY
3.1 Introduction
This chapter identifies the methodology for conducting this research. The areas
to be covered are research design, sampling population, sample size, sampling
method, data collection methods, data instruments, data gathering, and data
analysis.
3.2 Research Design
In our research, we are going to use descriptive research, in which it is used to
describe a population with respect to important variables (W.G. Zikmund, 2010). It is
concerned with the conditions or relationships that exist, opinions that are held,
processes that are going on, effects that are evident, or trends that are developing
(Prado et al., 2010). Due to the sensitivity of this study that involves business policies
and practices, we adopted the use of quantitative data collection methods as it focuses
on gathering numerical data in addition take a broad view it transversely groups of
people or to explicate a precise phenomenon (Babbie, 2010). This is chosen because
quantitative studies are usually easy to present, summarize, and compare. The way
you design and plan your research will have significant implications for the success of
your project. The methodology that you use underpins your entire project, and flawed
assumptions or flawed methodology will result in questionable integrity of the results
and may lead to biased results as well (Davies, 2013).
3.3 Sampling Design
3.3.1 Sample Population
The study population refers to the range of locations or places as to which the
organizations in this study are situated, these are the coffee shops particularly located
within the vicinity of Las Piñas City.
3.3.2 Sample Size
We, the researchers, chose one representative per coffee shops. They are of no
particular age, gender, race or ethnicity but are qualified as a respondent due to
their employment in the said coffee shops.
The sample size refers to the group of individuals or entities from which the sample
might be drawn (McLeod, 2014). For the purpose of this study, the chosen
respondents from each coffee shop would be the managers, supervisors, accounting
staff, and cashiers. We, the researchers, chose these particular personnel for the
following reasons:
Managers – since they are responsible for maximizing revenue and profit
opportunities for the business (Firth, 2017).
Supervisors – since they are the ones that are responsible the hiring, training,
supervising and terminating staff; in charge of the distribution of schedules of the
employees; overseeing if the operations live up to the standards of customer
satisfaction; and for budgeting and efficient resource utilization (Kokemuller, 2018).
Accounting staff - since they are primarily in charge of managing the payroll and
other necessary payments of the business (Lee, 2017).
Cashiers – since they are assigned to take customers’ payments and balancing of
books at the end of the business day (Lee, 2017).
3.3.3 Sampling Method
For the purpose of this study, the non-probability sampling type was adopted,
specifically random sampling. This type of sampling can be very useful in situations
when you need to reach a targeted sample quickly (Crossman, 2018). One major
advantage of purposive sampling is that it ensures that some information from
respondents that are difficult to locate and can be vital to the study can be obtained
(Prado et al., 2011).
3.7 Data Collection Sources
3.7.1 Primary Data
A primary data is an original data or information obtained directly by the
researchers who analyze the data and information. It is collected for the first time
since it has not been published before collection. This is more accurate since you get
the actual response and opinions of the respondents. The information is expected to be
unbiased since it will be collected and processed by the researchers (Salkind, 2010).
For the purpose of this study, we used survey questionnaires as primary data.
3.7.2 Secondary Data
A secondary data is simply data collected by someone else for some
other purpose (Salkind, 2010). In this research we used several accounting
books that focused on fraud, risk management, fraud prevention and detection.
We also derived information from online articles that expounds more on our
topic.
3.8 Data Collection
3.8.1 Data Instrument
For the purpose of this study, a questionnaire was utilized because it provides
a relatively cheap, quick and efficient way of obtaining large amounts of information
from a large sample of people. Data can be collected relatively quickly because the
researchers would not need to be present when the questionnaires are completed
(McLeod, 2018). We adopted the in-house survey, wherein we actually approached
the said respondents in their workplace. The questionnaire consists of multiple choice
questions, meaning there are a selection of possible answers that they get to choose
from. This method was chosen because it would narrow down the answers and would
be easier to understand for the respondents.
Data collection is a way to describe a process of preparing and collection data
and it is an important aspect of any type of research study. Any inaccurate data
collection may lead to invalid result and affect result of study (UK Essays, 2017).
3.8.2 Data Gathering
The following steps are how the researchers gathering the necessary data:
1.) A
dopt the questionnaire
2.) D
istribution of the questionnaire
3.) C
ollection of data
4.) D
ata analysis
3.8.3 Data Analysis
Data analysis is a process used to transform, remodel and revise certain
information or data with a view to reach to a certain conclusion (Johnson,
2011).
Frequency means generally what frequency means everywhere: a count
of how often something occurred. This could be how many times an event
happened, or happened within a given time frame. It could be how often a
continuous variable, such as a stock price, was in a certain range in a given
amount of time. It also comes up in a statistical area dealing with the effects of
time called time series analysis. (Veenstra, 2017)

Descriptive research describes what is. . It involves the description,
recording, analysis, and interpretation of the present nature, composition or
processes of phenomena. The concentration is on prevailing conditions, or how
a person, group, or thing purposes or acts in the present. It frequently involves
some type of comparison or contrast. (Medel, 2014)
One-way ANOVA is a type of statistical test that associates the
variance in the group means within a sample whilst considering only one
independent variable or factor. It is a hypothesis-based test, meaning that it
objects to evaluate multiple mutually exclusive theories about our data.
(Mackenzie, 2018)
CHAPTER 4:
DATA ANALYSIS
4.1 Demographic Profile
Table 1: Years of Existence
Frequency Percent
4 1-5 years 17 81
3 6-10 years 2 9.5
1 More than 10 years 2 9.5

Total 21 100
Based on the table above majority of the coffee shops have existed for at
least 1-5 years. This shows that most of the coffee shops in Las Piñas have just
started out in venturing in the coffee shop business. Coffee is enjoyed no
matter what age, race or background. In this day and age, the coffee industry
has been slowly growing and increasing in number, which shows that a lot of
people have been seeing large business opportunities in the coffee business
(2016)
Table 2: Annual Net Income
Frequency Percent
4 Less than P100,000 13 61.9
3 P100,000-P300,000 3 14.3
1 More than P300,000 5 23.8
Total 21 100
Based on the table above, 61.9% of the respondents have an annual net income
of less than P100,000, this is possibly due to the fact that majority of the coffee
shops have only started less than 1-5 years.
It’s difficult to stand out in the coffee industry if you have a lot of competitors
in the area, especially for business that just started. There is a lot of start-up
costs involved in starting a new business such as rent, equipment, etc. (Tashia,
2015).You may say that you are a very small business and cannot afford to
have many employees (Williams, 2015)
Table 3: Number of Employees
Frequency Percent
4 2 to 3 7 33.3
3 3 to 5 6 28.6
2 5 to 10 4 19
1 More than 10 4 19
Total 21 100
Based on the table above majority of the coffee shops only have at least 2-3
employees, this is probably due to the fact that since the selected coffee shops
have just started their businesses and still have insufficient budget to provide
salaries for more employees, as they only have an annual net income of less
than P100,000.
Small-scale businesses still can’t afford hiring more employees with a tight
budget especially since they have just started out in their business venture
(LaMarco, 2018).
4.2 Types of Fraud
This indicates the rank of frauds in which the coffee shops are aware of
or have policies and practices against, it does not necessarily imply that these
are the specific frauds that the companies are experiencing. This just shows
their level of awareness to these types of fraud in terms of accounting fraud,
asset misappropriation, payroll fraud, and vendor fraud; and if they have
methods or procedures against these.
Table 4: Asset Misappropriation
Frequency Percent
6 Cash Theft 16 76.2
2 Worker’s Compensation Fraud 2 9.5
7 Inventory Theft 2 9.5
8 Check Tampering and Forgery 1 4.8
Total 21 100
Based on the table these are the types of fraud under asset misappropriation,
ranked according to what most of the coffee shops are aware of or have
policies against. They probably have experience these in the past which made
them implement policies against those types of fraud.
Most of the respondents have selected cash theft as the common type of fraud
in which they have implemented policies and practices against in terms of asset
misappropriation. This could mean that the selected coffee shops may not have
experienced an instance where they didn’t have a very secure method of
keeping their cash, lack of supervision of superiors, and possibly failed to
segregate duties among the staff. (Lomer, 2017)
Table 5: Vendor Fraud

Frequency Percent
3 Billing Schemes 18 85.7
2 Bribery and Kickbacks 2 9.5
1 Others 1 4.8
Total 21 100
Based on the table above these are the types of fraud under vendor fraud,
policies against. Most of the respondents have selected billing schemes as the
common type of fraud in which they have implemented policies and practices
against in terms of asset misappropriation. This could be because there have
been cases of counterfeit money being distributed and circulated, also some
employees have the tendency to get a share of profit from some suppliers, or
some even go as far as to creating fictitious vendors in which the orders will be
paid for by the company without them knowing that it was all a ruse. (Lomer,
2017)
Table 6: Accounting Fraud

Frequency Percent
3 Fake Supplier Fraud 9 42.9
5 Accounts Payable Fraud 4 19
6 Embezzlement 4 19
4 Accounts Receivable Fraud 3 14.3
2 Personal Purchases 1 4.8
Total 21 100
Based on the table above these are the types of fraud under accounting fraud, ranked
according to what most of the coffee shops are aware of or have policies against.
Most of the respondents have selected fake supplier fraud as the common type
of fraud in which they have implemented policies and practices against in
terms of asset misappropriation. Especially in small businesses with only few
employees with less supervision, accounting fraud could take place. Financial records
could easily be altered, source documents could be tampered with, etc. (Lomer, 2017)
Table 7: Payroll Fraud
Frequency Percent
2 Timesheet Fraud 11 52.4

3 Cash Advance Fraud 10 47.6
Total 21 100
Based on the table above these are the types of fraud under payroll fraud,
policies against. Most of the respondents have selected Timesheet Fraud as the
common type of fraud in which they have implemented policies and practices
against in terms of asset misappropriation. Just like accounting fraud, if there is
lack of supervision and segregation of duties, it is easy to manipulate records
such as payroll. (Lomer, 2017)
4.3 Risk Management for Fraud Detection
Legend:
1.00-1.49 = Never (Not practiced)
1.50-2.49 = Rarely (Poorly practiced)
2.50-3.49 = Often (Moderately practiced)
3.50-4.00 = Always (Highly practiced)
Table 8: Descriptives for Fraud Detection Practices

Fraud Detection Practice Mean Standard Verbal
Deviatio Interpretation
n
CS1: 3.71 0.900 Highly practiced

Positioning CCTVs within the premises
CS2: 3.62 0.810 Highly practiced

Viewing or utilizing the use of the CCTV
footage on a scheduled basis
CS3: 3.48 1.120 Moderately

Allowing authorized people to handle and practiced
check the monitoring of the CCTVs
Based on the gathered data, the average results of the answers from the
respondents is that they always have CCTVs positioned within the premises
and utilizes the use of CCTV footage on a scheduled basis. most of the
companies make use of the surveillance policies that they implemented to
ensure that they can monitor the actions of the personnel during working hours.
This helps reduce the possibility of asset misappropriations such as inventory
theft, cash theft, using company assets for personal use, etc as well as the
selected companies really maximize the CCTV footage obtained to check for
any suspicious occurrences happening without supervision. This helps keep
track of the activity of both customers and employees in the company during
work hours and makes employees less prone to doing anything illegal or
against company policy knowing that there is a possibility that the
management might see it happening. the management often allows authorized
people to handle and check the monitoring of the CCTVs. the coffee shops do
take their surveillance practices seriously so that no one could tamper with the
CCTV footage.
Fraud Detection Practice Mea Standard Verbal

n Deviatio Interpretation
n
CM1: 3.81 0.402 Highly practiced

Verifying the authenticity of the supplier
by checking the important details before
making a purchase

Counterchecking if the inventory
received reflects what is stated in the
source documents (receipts, order forms,
etc.)
Conducting unannounced visits by the
management to check if the standards of
business operations are being met
Based on the gathered data, The average results of the answers from the
respondents is that they always verify the authenticity of the suppliers by
checking the important details before making a purchase and counter check if
the inventory received reflects what it states in the source documents by also
conduct unannounced visits by the management to check if the standards of
business operations are being met. Where the companies ensure that they are
making purchases to legitimate suppliers by checking their details to check for
their authenticity before committing to place an order. the companies regularly
double-check the number of items received from the supplier to make sure that
it is equivalent to the number of items ordered which was stated in the source
documents. This helps identify if the supplier either committed fraud or error
in terms of their services, or one of the employees made an incorrect count of
the physical inventory or if inventory theft has taken place. the coffee shops
want to see how the business operates during normal working hours to catch
them off guard and check what they normally do during business hours without
supervision, because some employees have the tendency of slacking off during
the job or doing things that are not related to their work.

n Deviatio Interpretatio
n n
CIC1: 3.48 0.928 Moderately

Restricting admittance to company practiced
registered data except for those
personnel that have authorized access
and need it in the course of their job.
CIC2: 3.71 0.784 Highly

Securing passwords for databases or practiced
any important files or documents
saved in computers
Setting up controls in the computer practiced
system that will alert management if
there are unauthorized attempts of
accessing important documents

Having a system software that guards practiced
company’s suspicious events in the
operation of network.
respondents is that they limit admission to company important information
eventually for its people that have authorized access only and is needed in the
course of their job by also setting up controls in the computer system that will
alert management if there are unauthorized attempts of accessing important
documents and having a software that warns management of doubtful activity
on a company system. The selected companies strictly limit the people who
handle confidential information found in their databases or computers, so that
no one could easily change the data that has been encoded such as the revenue
for the day, current inventory count, etc. although majority do try to set up
controls to alert management if an unauthorized person has been trying to
access the system, but not all of the coffee shops are aware of these kinds of
controls or they are not able to provide these yet because of insufficient
resources. Some do try to make use of software’s and programs to better secure
their information, but not all of the coffee shop management are aware of these
kinds of software’s or how to use them.
Somehow the result of the answers from the respondents is that they
always have a secure password for the databases or any important files or
documents saved in computers. Based on the gathered data, the companies take
their security procedures seriously to ensure that only restricted people can
access the files or confidential data, so that no one could easily alter the data
that has been encoded.

n Deviatio Interpretatio
n n
CPC1: 3.67 0.730 Highly

Practicing regular inventory checks practiced
CPC2: 3.62 0.740 Highly
Consistently counterchecking for the practiced
invoice of the inventory bought if it
matches the actual inventory count
CPC3: 3.1 1.136 Moderately

Disposing of private information practiced
appropriately, by cutting documents and
formatting the printed data from the
system before presenting it to them.
CPC4: 3.76 0.700 Highly

Keeping the cash and checks in a locked practiced
cabinet or safe that can only be accessed
by authorized or assigned personnel
respondents is that they always practice regular inventory checks and
consistently countercheck for the invoice of the inventory bought if it matches
the actual inventory count furthermore keep the cash and checks in a locked
cabinet or safe that can only be accessed by authorized or assigned personnel.
the companies do give importance in checking their inventory to make sure
that there is no occurrence of theft or human error in the physical count. the
selected coffee shops regularly recounts and monitors to see whether the
supplier delivered equivalent to a number of items ordered which was stated in
the receipt, orders, etc. This helps identify if the supplier either committed
fraud or error in terms of their services, or one of the employees made an
incorrect count of the physical inventory or inventory theft has taken place. the
companies maximize the use of locked cabinets or safes to ensure that their
cash, checks or other assets are secure, limited to very few with access, to
avoid the chances of theft from taking place.
The average results of the answers from the respondents is that they often
dispose of confidential information properly, by shredding documents and
completely removing printed data from electronic devices before deploying or
disposing of them. Based on the gathered data, most companies do practice
properly disposing of confidential information but not all opt for this kind of
method because it is time consuming and sometimes costly to buy a shredder
since majority of the coffee shops have just started their business.
n
CAR1: 3.33 1.017 Moderately

Assigning a trusted outside practiced
contractor to review and reconcile
accounts at regular intervals
CAR2: 3.76 0.539 Highly

Updating and reviewing the practiced
financial records (source
documents, journals, ledgers) on a
regular basis
CAR3: 3.24 1.136 Moderately

Having automated means of practiced
checking the attendance and
number of hours worked by an
employee
CAR4: 3.62 0.805 Highly

Reconciling the balance sheets and practiced
payroll accounts for each quarter
respondents is that they often assign a trusted outside contractor to review,
reconcile accounts at regular intervals and have automated means of checking

the attendance and number of hours worked by an employee the companies are
not always consistent in hiring a trusted outside contractor probably because
most coffee shops are still too small to go to such extreme and costly
precautions to ensure the safety and accuracy of their accounting records.
majority of the coffee shops have automated machines to check the attendance
and number of hours of an employee, such as biometric scanners but it is not
always practiced regularly and it is also quite pricey for a business that is still
growing. Having an automated eme provides a more efficient way of
monitoring the attendance and schedule of employee and has less chances of
alterations since it cannot easily be changed like a written form of attendance.
The average result of the answers from the respondents is that they always
update and review the financial records on a regular basis.
Based on the gathered data, the coffee shops regularly update their
financial records to make sure that it is up-to-date and accurate, decreasing the
possibility of backlogs or having to search for details when it needed.

reconcile the balance sheets and payroll accounts for each quarter. Based on
the gathered data, the companies regularly ensure their balance sheets and
payroll accounts are updated so that they can have a quick view of their
business’ financial standing, without this business owners and accountants
might not be able to draw accurate or effective plans for the company.

n
CRA1: 3.43 0.978 Moderately

Conducting meetings to discuss about practiced
adhering to the policies against possible
threats or risks to the company
CRA2: 3.29 1.102 Moderately

Conducting meetings to discuss the practiced
consistent checking of vulnerabilities,
blind spots, or areas of improvement in
the company
CRA3: 3.52 0.814 Highly practiced

Conducting meetings to discuss the
effectivity of existing practices in the
business operations
Based on the gathered data, The average results of the answers from the
respondents is that they often conduct meetings to discuss adhering to the
policies against possible threats or risks to the company and the consistent
checking of vulnerabilities, blind spots, or areas of improvement in the
company. the companies’ management isn’t able to regularly discuss how they
comply with the policies against threats or risks of the company. The
companies’ management don’t regularly check or assess their weakness, areas
they need to improve, etc. to ensure that they anticipate and are prepared for
certain scenarios that could take place.
conduct meetings to discuss the effectivity of existing practices in the business
operations. Based on the gathered data, the companies’ management regularly
analyzes the extent of how effective they are in their practices during the
course of the business to know what they should start doing or stop doing that
will benefit the company’s operations.
4.4 Risk Management for Fraud Prevention

Legend:
1.00-1.49 = Never (Not practiced)
1.50-2.49 = Rarely (Poorly practiced)
2.50-3.49 = Often (Moderately practiced)
3.50-4.00 = Always (Highly practiced)
Table 9: Descriptives for Fraud Prevention Practices
Fraud Prevention Practices Mea Standard Verbal

n Deviation Interpretation
DSD 3.19 1.123 Moderately

Assigning and distributing the practiced
responsibilities of the staff to avoid
unauthorized access to certain
resources, sensitive information, etc.
respondents is that they often assign and distribute the responsibilities of the
staff to avoid unauthorized access to certain resources, sensitive information,
etc. the companies don’t regularly practice delegating tasks to different staff to
ensure the accuracy and authenticity of the records, amount of financial
resources, inventory count, etc. Especially since most companies have just
started and usually only have at least 2-3 employees it is hard to distribute
tasks to others to ensure that segregation of duties are met.
Fraud Prevention Practices Mea Standard Verbal

n Deviation Interpretatio
n
DS1 3.81 0.512 Highly

Conducting thorough background practiced
checks on new employees
DS2 3.9 0.301 Highly

Ensuring that all the employees are practiced
oriented and briefed on the
company policies, rules and
regulations
DS3 3.33 0.913 Moderately

Rewarding employees for ethical practiced
behavior
DS4 3.62 0.669 Highly
Disciplining the employees who practiced
breach the company’s code of
ethics
DS5 3.52 0.928 Highly

Implementing an ‘open-door practiced
policy’ for the staff to allow them to
share their opinions or concerns
with regards to business operations
DS6 3.67 0.796 Highly

Requiring staff to immediately practiced
report their injuries or accidents and
requiring medical certificates or
proof of hospitalization or medical
treatment
respondents is that they always conduct thorough background checks on new
employees, ensure that all the employees are oriented and briefed on the
company policies, rules and regulations by also discipline the employees who
breach the company's code of ethics and implement an 'open-door policy' for
the staff to allow them to share their opinions or concerns with regards to
business operations. The companies’ management regularly assesses and
checks every individual that they hire to know if they have had any issues in
the past that could affect their performance in the coffee shops, and how they
were with their previous employer. By regularly ensures that their employees
are made aware of the rules & regulations of the company as so that they could
adhere to the policies of the business and be able to know the consequences if
ever they fail to comply. The coffee shops regularly adheres to disciplinary
actions for those who fail to comply to company rules and policies, this is to
ensure that the employees don’t take company regulations lightly. It is where
the coffee shops’ management encourages the staff to share their opinions and
comments to their superiors or to the management, which makes the staff feel
like their inputs are valued.
The average result of the answers from the respondents is that they often
reward employees for ethical behavior. Based on the gathered data, the
companies’ management doesn’t regularly reward their employees for ethical

behavior which is sometimes beneficial to encourage employees to do their
best.
require that injuries or accidents of staff be reported to them immediately. And
require medical certificates or proof of hospitalization or medical treatment.
Based on the gathered data, the companies’ management wants to make sure
that they are spending their money on the welfare of their employees, as it is
their responsibility. Since health hazards and accidents are inevitable, the
company also has the right to request for proof to ensure that the money does
go to the hospitalization or medical treatment of their staff.
Mea Standard Verbal

Fraud Prevention Practices n Deviation Interpretation
DIV1 3.62 0.805 Highly practiced

Cross-checking copies of source
documents to see if it agrees with
other proof documents
DIV2 3.71 0.561 Highly practiced
Verifying signatures before
releasing or distributing a said
document
DIV3 3.48 1.03 Moderately

Requesting for authorized practiced
signatures from managers or
supervisors before approving
timesheets and overtime claims
respondents is that they always cross-check copies of source documents to see
if it agrees with other proof documents and verify signatures before releasing
or distributing a said document. the company verifies the authenticity and
accuracy of the source documents and financial records, it doesn’t just pass
through or authorized by just the same personnel. the selected coffee shops
double-checks the signatures of important documents to ensure that there is no
attempts of forgery.
The average results of the answers from the respondents is that they often
request for authorized signatures from managers or supervisors before
approving timesheets and overtime claims. Based on the gathered data, the
companies’ management usually makes a point to have their superiors such as
managers or supervisors to ensure the authenticity and accuracy of the number
of hours the employees worked, their attendance, and if they indeed worked
overtime. This reduces the chances of employees to alter their timesheets or
make false claims for overtime pay.
4.5. Fraud Detection Practices with regard to Years of Existence

Table 10: Differences in the extent of practice for surveillance with regard to
years of existence
Variable F Value Sig. Value Decision on H 01 Interpretation

CS 1 .229 .798 Accept H01 Not Significant
4.5.1 Surveillance
Based on the table above, the researchers compared differences in the evaluation of
the respondents on the extent of risk management practices on fraud detection,
specifically surveillance, when grouped according to years of existence using
One-way ANOVA. The results show that the fraud detection practices of surveillance
obtained f-values greater than the 0.05 level of significance set by the study, thus the
null hypothesis is accepted. This means that there is no significant difference between
the practice of surveillance and the years of existence of the business.
Regardless of how long the coffee shops have been operating, it does not affect their
methods and procedures of surveillance. Over the course of a couple of years,
surveillance methods have evolved as this generation becomes more technologically
advanced. Surveillance aims to increase productivity and monitor the employees
during working hours, so this does not in any way relate to the existence of the
business. (Solon, 2017)
Table 11: Differences in the extent of practice for monitoring with regard to
years of existence

CM 1 .810 .460 Accept H 01 Not Significant
4.5.2. Monitoring
Regardless of how long the company has been operating, it does not affect how the
company keeps track of business operations, inventory, etc. Monitoring is
accomplished through recurring operating activities of an entity and other actions
personnel take in performing their duties. It happens over time to observe and gauge
the progress of a business, and it does not take into account how long a business has
existed because this mostly involves how the management and staff carries this out.
(Ibraahim, 2014)
Table 12: Differences in the extent of practice for IT control with regard to years
of existence

CIC 1 1.787 .196 Accept H01 Not Significant
CIC 2 .306 .740 Accept H01 Not Significant
4.5.3. IT Control
Regardless of how long the business has been operating, it does not affect the way
they handle and secure their digital data found in computers or databases. IT
organization and management controls are dependent on how the management
implements them and how the employees comply with the methods, it does not need
to take into consideration how many years a company has existed. (Gatto, 2016)
Table 13: Differences in the extent of practice for physical control with regard to
years of existence

CPC 1 .488 .622 Accept H 01 Not Significant
4.5.4. Physical Control

Regardless of how long a business has been operating, it does not affect how they
handle and secure their tangible assets and resources. An effectively implemented
physical control results in employees and management being able to maintain
competence in this area with the foundation of ethical values to maintain the integrity
of the work of each and every employee is doing. It is more of an ethical or habitual
factor and does not matter how long a company has been operating. (Koranteng, 2011)
Table 14: Differences in the extent of practice for accounting records with regard
to years of existence

CAR 1 1.070 .364 Accept H 01 Not Significant
CAR 2 .456 .641 Accept H 01 Not Significant
4.5.5. Accounting Records
Regardless of the number of years the company has been operating, it does not affect
how the company records, updates, or check their financial records and other source
documents. They still maintain proper accounting procedures and practices even if
they the company just started or has been ongoing for quite some time. (Australian
Government, 2018)
Table 15: Differences in the extent of practice for risk assessment with regard to
years of existence

CRA 1 1.295 .298 Accept H01 Not Significant
CRA 2 .922 .416 Accept H01 Not Significant
4.5.6. Risk Assessment
Regardless of how long the business has been operating, the way they assess and
mitigate risks or the methods and procedure they implement since risk assessment is
an ongoing cycle of identifying and preparing for any internal or external risk due to
changes in business environment. So over the years it is an ongoing process, and it
doesn’t take into account how long a company has existed. (Tan, 2013)
4.6. Fraud Detection Practices with regard to Annual Net Income
annual net income
CS 1 .714 .557 Accept H 01 Not Significant
CS 2 1.494 .252 Accept H 01 Not Significant
4.6.1. Surveillance
Regardless of how much revenue the company earns, it does not affect their methods
and procedures of surveillance. Over the course of a couple of years, surveillance
methods have evolved as this generation becomes more technologically advanced.
Surveillance aims to increase productivity and monitor the employees during working
hours, so this does not in any way relate to how much the business earns. (Solon,
2017)
annual net income

CM 2 1.169 .351 Accept H 01 Not Significant
4.6.2. Monitoring
Regardless of how much revenue is being earned by the company over the course of a
year, it does not affect how the company keeps track of business operations,
inventory, etc. Monitoring is accomplished through recurring operating activities of an
entity and other actions personnel take in performing their duties. It happens over time
to observe and gauge the progress of a business, and it does not consider how much
the business earns because this mostly involves how the management and staff carry
this out. (Ibraahim, 2014)
Table 18: Differences in the extent of practice for IT control with regard to
annual net income

4.6.3. IT Control
Regardless of how much the company earns, it does not affect the way they handle
and secure their digital data found in computers or databases. IT organization and
management controls is dependent on how the management implements them and
how the employees comply with the methods, it does not need to take into
consideration how much is the company’s yearly revenue. (Gatto, 2016)
annual net income
CPC 1 1.041 .400 Accept H 01 Not Significant

CPC 2 1.686 .208 Accept H 01 Not Significant
4.6.4. Physical Control

Regardless of how much the company earns, it does not affect how they handle and
secure their tangible assets and resources. An effectively implemented physical
control results in employees and management being able to maintain competence in
this area with the foundation of ethical values to maintain the integrity of the work of
each and every employee is doing. It is more of an ethical or habitual factor and does
not matter how much a company earns. (Koranteng, 2011)
to annual net income

CAR 1 1.411 .274 Accept H01 Not Significant
CAR 2 .855 .483 Accept H01 Not Significant
Regardless of how much the company earns, it does not affect how the company
records, updates, or check their financial records and other source documents. They
still maintain proper accounting procedures and practices even if they gain more
revenue or less. (Australian Government, 2018)

annual net income

CRA 2 1.125 .367 Accept H01 Not Significant
Regardless of how much the company earns, it does not affect the way they assess and
mitigate risks or the methods and procedure they implement since risk assessment is
an ongoing cycle of identifying and preparing for any internal or external risk due to
doesn’t take into account how much a business earns. (Tan, 2013)
4.7. Fraud Detection Practices with regard to Number of Employees
number of employees

4.7.1. Surveillance
Regardless of the number of employees the coffee shops have, it does not affect their
methods and procedures of surveillance. Over the course of a couple of years,
surveillance methods have evolved as this generation becomes more technologically
advanced. Surveillance aims to increase productivity and monitor the employees
during working hours, so this does not in any way relate to the number of employees.
(Solon, 2017)
number of employees

CM 1 2.176 .128 Accept H 01 Not Significant
CM 2 4.571 .025 Reject H01 Significant
4.7.2. Monitoring
Due to lack of personnel, since the majority of the coffee shops usually have at least 2
or 3 employees, they are not able to allow time to double-check or recount the items
delivered from suppliers, considering they have other tasks during their day-to-day
operations that demand their attention. By implementing an inventory software
system, you are able to hold onto a closer eye on the movement of your products
deprived of making your employees feel like you’re watching their every move.
Having an automated inventory system reduces the risk of fraudulent reporting by
having multiple users review and update inventory details..
Table 24: Differences in the extent of practice for IT control with regard to
number of employees

CIC 1 .201 .894 Accept H 01 Not Significant
4.7.3. IT Controls
Regardless of the number of employees hired by the business, it does not affect the
way they handle and secure their digital data found in computers or databases. IT
organization and management controls is dependent on how the management
implements them and how the employees comply with the methods, it does not need
to take into consideration how many number of employees there are. (Gatto, 2016)
number of employees

4.7.4. Physical Controls
Regardless of the number of personnel hired by the business, it does not affect how
they handle and secure their tangible assets and resources. The employees handle
these the same way they were trained or instructed, regardless of how many they are
they go through the same training and orientation. An effectively implemented
physical control results in employees and management being able to maintain
competence in this area with the foundation of ethical values to maintain the integrity
of the work of each and every employee is doing. It is more of an ethical or habitual
factor and does not matter how many employees are there. (Koranteng, 2011)
to number of employees

CAR 2 5.161 .017 Reject H01 Significant
Keeping track of the financial standing of the business helps make sound business
decisions, manage your cash flow, demonstrate your business’s financial position to
suppliers, accountants and prospective buyers, protect your business and minimize
costs. Due to lack of employees, they haven’t been able to regularly update and review
financial records or source documents, since they also have other tasks that require
their attention. Hence, they won’t be able to fully assess or prepare for any risks that
are financially related. (Australian Government, 2018)
number of employees

CRA 1 .454 .718 Accept H 01 Not Significant
Regardless of how many employees they hire, it does not affect the way they assess
and mitigate risks or the methods and procedure they implement since risk assessment
is an ongoing cycle of identifying and preparing for any internal or external risk due to
doesn’t take into account how many staff are employed. (Tan, 2013)
4.8. Fraud Prevention Practices with regard to Years of Existence

Table 28: Differences in the extent of practice for segregation of duties with
regard to years of existence

DSD .441 .650 Accept H 02 Not Significant
4.8.1. Segregation of Duties
Regardless of the amount of revenue earned by the company within a year, it does not
affect the way they distribute workload or responsibilities among the staff or how they
maximize the delegation of task. When an organization set an opportunities for the
employees through uses delegation to develop them at a better placed and to know
who has the competencies in place to take on higher duties. It does not matter how
long a business has been operating as long as the management distributes
opportunities evenly. (Lewis, 2014)
Table 29: Differences in the extent of practice for supervision of duties with

DS1 .484 .624 Accept H 02 Not Significant
DS3 1.429 .265 Accept H 02 Not Significant
4.8.2. Supervision
Regardless of how long the business has been operating, it does not affect how the
management supervises the employees or the steps taken into ensuring how well they
handle their staff. They are responsible for the establishment of internal control
policies and procedures and responsible for providing governance, guidance and
oversight and all personnel are responsible for reporting problems, such as policy
violations or illegal actions. It has nothing to do with how long a company has been
operating because it depends on the management. (Siayor, 2010)
Table 30: Differences in the extent of practice for independent verification with

DIV1 .527 .599 Accept H 02 Not Significant
4.8.3. Independent Verification
Regardless of how long the business has been operating, it does not affect the methods
or procedure of how they verify important documents. Independent verification will
be unbiased as there will be no emotional ties or hidden agendas to the operation of
the business. This would depend on the assigned people carrying out this task and not
the number of years a company has existed. (Kuman, 2016)
4.9. Fraud Prevention Practices with regard to Annual Net Income
regard to annual net income

DSD .780 .521 Accept H 02 Not Significant

Regardless of the amount of revenue earned by the company within a year, it does not
affect the way they distribute workload or responsibilities among the staff or how they
maximize the delegation of task. When employees are getting opportunities to develop
and to challenge themselves, their loyalty and productivity will most likely improve,
or at the least, not decrease. When an organization uses delegation to develop their
employees they are better placed to know who has the competencies in place to take
on higher duties. It does not matter how much the business earns as long as the
management distributes opportunities evenly. (Lewis, 2014)
Table 32: Differences in the extent of practice for supervision with regard to
annual net income

DS1 .300 .825 Accept H02 Not Significant
4.9.1. Supervision
Regardless of how much the business earns annually, it does not affect the methods of
supervision taken by the management on how they handle their employees. They are
responsible for the establishment of internal control policies and procedures and
responsible for providing governance, guidance and oversight and all
Personnel are accountable for reporting problems, such as policy violations or illegal
actions. It has nothing to do with the net income of the company because it depends
on the management. (Siayor, 2010)
regard to annual net income

DIV1 .502 .686 Accept H02 Not Significant
DIV2 .886 .468 Accept H02 Not Significant
DIV3 1.058 .393 Accept H02 Not Significant
Regardless of the amount of net income, it does not affect the methods or procedure of
how they verify important documents. Independent verification will be unbiased as

there will be no emotional ties or hidden agendas to the operation of the business. This
would depend on the assigned people carrying out this task and not how much a
company earns annually. (Kuman, 2016)
4.10. Fraud Prevention Practices with regard to Number of Employees
regard to number of employees
DSD 1.238 .327 Accept H02 Not Significant
Regardless of how many employees they hire, it does not affect the way they
distribute workload or responsibilities among the staff or how they maximize the
delegation of task. When employees are getting opportunities to develop and to
challenge themselves, their loyalty and productivity will most likely improve, or at the
least, not decrease. When an organization uses delegation to develop their employees
they are better placed to know who has the competencies in place to take on higher
duties. It does not matter if the company only has few staff as long as the management
distributes opportunities evenly. (Lewis, 2014)
Table 35: Differences in the extent of practice for supervision with regard to
number of employees

4.10.2. Supervision
Regardless of how many employees they hire, it does not affect how the management
supervises the employees or the steps taken into ensuring how well they handle their
staff. It is their obligation for the occurence of internal control policies and
precautions and responsible for providing governance, guidance and oversight and all
Personnel are in charge for reporting problems, such as policy violations or illegal
actions. It has nothing to do with the number of employees because it depends on the
management. (Siayor, 2010)
regard to number of employees

DIV1 2.642 .083 Accept H 02 Not Significant
DIV2 1.057 .393 Accept H 02 Not Significant
DIV3 3.925 .027 Reject H02 Significant
Due to the fact that majority of the coffee shops only have at least 2 to 3 employees
make it difficult to have some other personnel to verify important documents without
any bias. Specifically in terms of verifying the authenticity of the approval of
managers or supervisors of employee timesheets and overtime claims, due to the lack
of staff, the current employees have no other alternative but to have to verify it
themselves. (Kuman, 2016)

5.2. Conclusion
Based on the findings of the study, the researchers therefore conclude the following:
1. The demographic profile:
a. Majority of the coffee shops have only existed for at least 1-5 years. This is
because most of the coffee shops in Las Piñas have just started out in venturing
in the coffee shop business. Coffee is enjoyed no matter what age, race or
background. In this day and age, a growing market of people who enjoy
espresso based drinks is increasing – and continues to remain a growing
industry. In addition, providing a welcoming social space for people in your
community never really goes out of style. Which explains why a lot of
entrepreneurs have decided to start opening up coffee shops over the past
couple of years?.
b. Majority of the coffee shops have an annual net income of less than P100,
000. The café and bar industry is saturated with choice, so it can be hard,
especially for a new, small business, to stand out in an overcrowded market.
The start-up cost involved in opening up a café or bar is high because
equipment, produce, and licensing are all large and ongoing expenses. You
may say that you are a very small business and cannot afford to have many
employees.
c. Majority of the coffee shops have at least 2 to 3 employees in the company
(branch). This is probably due to the fact that since the selected coffee shops
have just started their businesses and still have insufficient budget to provide
salaries for more employees, as they only have an annual net income of less
than P100,000. They can’t employ workers with the same level of skill at the
required starter salaries, inhibiting their ability to grow and offer the same
quality of products and services to their consumers as large businesses.
2. The types of fraud that the coffee shops may have experienced:
This indicates the rank of frauds in which the coffee shops are aware of or
have policies and practices against, it does not necessarily imply that these are the
specific frauds that the companies are experiencing. This just shows their level of
awareness to these types of fraud in terms of asset misappropriation, vendor fraud,
accounting fraud, and payroll fraud, and if they have methods or procedures against
these.
a. In terms of asset misappropriation, majority of the coffee shops are aware and
have policies or practices against cash theft. Most of the respondents have selected
cash theft as the common type of fraud in which they have implemented
policies and practices against in terms of asset misappropriation. This could
mean that the selected coffee shops may not have experienced an instance
where they didn’t have a very secure method of keeping their cash, lack of
supervision of superiors, and possibly failed to segregate duties among the
staff.
b. In terms of vendor fraud, majority of the coffee shops are aware and have
policies or practices against billing schemes. Most of the respondents have
selected billing schemes as the common type of fraud in which they have
implemented policies and practices against in terms of asset misappropriation.
This could be because there have been cases of counterfeit money being
distributed and circulated, also some employees have the tendency to get a
share of profit from some suppliers, or some even go as far as to creating
fictitious vendors in which the orders will be paid for by the company without
them knowing that it was all a ruse.
c. In terms of accounting fraud, majority of the coffee shops are aware and have
policies or practices against fake supplier fraud. Most of the respondents have
selected fake supplier fraud as the common type of fraud in which they have
implemented policies and practices against in terms of asset misappropriation.
Especially in small businesses with only few employees with less supervision,
accounting fraud could take place. Financial records could easily be altered, source
documents could be tampered with, etc.
d. In terms of payroll fraud, majority of the coffee shops are aware and have
policies or practices against timesheet fraud. Most of the respondents have selected
Timesheet Fraud as the common type of fraud in which they have implemented
policies and practices against in terms of asset misappropriation. Just like
accounting fraud, if there is lack of supervision and segregation of duties, it is
easy to manipulate records such as payroll.
3. The extent of the practice for fraud detection that is being implemented by the
coffee shops:
a. With regard to surveillance, it is highly practiced. The average result of the
answers from the respondents is that they always have CCTVs positioned
within the premises and utilizes the use of CCTV footage on a scheduled basis.
Most of the companies make use of the surveillance policies that they
implemented to ensure that they can monitor the actions of the personnel
during working hours. This helps reduce the possibility of asset
misappropriations such as inventory theft, cash theft, using company assets for
personal use, etch as well as the selected companies really maximize the
CCTV footage obtained to check for any suspicious occurrences happening
without supervision. This helps keep track of the activity of both customers
and employees in the company during work hours and makes employees less
prone to doing anything illegal or against company policy knowing that there
is a possibility that the management might see it happening. The management
often allows authorized people to handle and check the monitoring of the
CCTVs. the coffee shops do take their surveillance practices seriously so that
no one could tamper with the CCTV footage.
b. With regard to monitoring, it is highly practiced. The average results of the
answers from the respondents is that they always verify the authenticity of the
suppliers by checking the important details before making a purchase and

counter check if the inventory received reflects what it states in the source
documents by also conduct unannounced visits by the management to check if
the standards of business operations are being met. Where the companies
ensure that they are making purchases to legitimate suppliers by checking their
details to check for their authenticity before committing to place an order. The
companies regularly double-check the number of items received from the
supplier to make sure that it is equivalent to the number of items ordered which
was stated in the source documents. This helps identify if the supplier either
committed fraud or error in terms of their services, or one of the employees
made an incorrect count of the physical inventory or if inventory theft has
taken place. The coffee shops want to see how the business operates during
normal working hours to catch them off guard and check what they normally
do during business hours without supervision, because some employees have
the tendency of slacking off during the job or doing things that are not related
to their work.
c. With regard to IT control, it is moderately practiced. the average results of
the answers from the respondents is that they often restrict access to company
proprietary information to only those who have authorized access and need it
in the course of their job by also setting up controls in the computer system
that will alert management if there are unauthorized attempts of accessing
important documents and having a software that alerts management of
suspicious activity on a company network. The selected companies strictly
limit the people who handle confidential information found in their databases
or computers, so that no one could easily change the data that has been
encoded such as the revenue for the day, current inventory count, etc. although
majority do try to set up controls to alert management if an unauthorized
person has been trying to access the system, but not all of the coffee shops are
aware of these kinds of controls or they are not able to provide these yet
because of insufficient resources. Some do try to make use of software’s and
programs to better secure their information, but not all of the coffee shop
management are aware of these kinds of software’s or how to use them.

d. With regard to physical control, it is highly practiced. the average results of
the answers from the respondents is that they always practice regular inventory
checks and consistently countercheck for the invoice of the inventory bought if
it matches the actual inventory count furthermore keep the cash and checks in a
locked cabinet or safe that can only be accessed by authorized or assigned
personnel. The companies do give importance in checking their inventory to
make sure that there is no occurrence of theft or human error in the physical
count. The selected coffee shops regularly recounts and monitors to see if the
number of items received from the supplier is equivalent to the number of
items ordered which was stated in the receipt, orders, etc. This helps identify if
the supplier either committed fraud or error in terms of their services, or one of
the employees made an incorrect count of the physical inventory or inventory
theft has taken place. the companies maximize the use of locked cabinets or
safes to ensure that their cash, checks or other assets are secure, limited to very
few with access, to avoid the chances of theft from taking place.
e. With regard to accounting records, it is highly practiced. the average results
of the answers from the respondents is that they often assign a trusted outside
contractor to review, reconcile accounts at regular intervals and have
automated means of checking the attendance and number of hours worked by
an employee the companies are not always consistent in hiring a trusted
outside contractor probably because most coffee shops are still too small to go
to such extreme and costly precautions to ensure the safety and accuracy of
their accounting records. Majority of the coffee shops have automated
machines to check the attendance and number of hours of an employee, such as
biometric scanners but it is not always practiced regularly and it is also quite
pricey for a business that is still growing. Having an automated me provides a
more efficient way of monitoring the attendance and schedule of employee and
has less chances of alterations since it cannot easily be changed like a written
form of attendance.
f. With regard to risk assessment, it is moderately practiced. The average
results of the answers from the respondents is that they often conduct meetings
to discuss adhering to the policies against possible threats or risks to the
company and the consistent checking of vulnerabilities, blind spots, or areas of
improvement in the company. The companies’ management isn’t able to
regularly discuss how they comply with the policies against threats or risks of
the company. The companies’ management don’t regularly check or assess
their weakness, areas they need to improve, etc. to ensure that they anticipate
and are prepared for certain scenarios that could take place.
4. The extent of the practice for fraud prevention that is being implemented by the
coffee shops:
a. With regard to segregation of duties, it is moderately practiced. the average
results of the answers from the respondents is that they often assign and
distribute the responsibilities of the staff to avoid unauthorized access to
certain resources, sensitive information, etc. the companies don’t regularly
practice delegating tasks to different staff to ensure the accuracy and

authenticity of the records, amount of financial resources, inventory count, etc.
Especially since most companies have just started and usually only have at
least 2-3 employees it is hard to distribute tasks to others to ensure that
segregation of duties are met.
b. With regard to supervision, it is highly practiced. the average results of the
answers from the respondents is that they always conduct thorough
background checks on new employees, ensure that all the employees are
oriented and briefed on the company policies, rules and regulations by also
discipline the employees who breach the company's code of ethics and
implement an 'open-door policy' for the staff to allow them to share their
opinions or concerns with regards to business operations. The companies’
management regularly assesses and checks every individual that they hire to
know if they have had any issues in the past that could affect their performance
in the coffee shops, and how they were with their previous employer. By
regularly ensures that their employees are made aware of the rules &
regulations of the company as so that they could adhere to the policies of the
business and be able to know the consequences if ever they fail to comply. The
coffee shops regularly adheres to disciplinary actions for those who fail to
comply with company rules and policies, this is to ensure that the employees
don’t take company regulations lightly. It is where the coffee shops’
management encourages the staff to share their opinions and comments to their
superiors or to the management, which makes the staff feel like their inputs are
valued.
c. With regard to independent verification, it is highly practiced. the average
results of the answers from the respondents is that they always cross-check
copies of source documents to see if it agrees with other proof documents and
verify signatures before releasing or distributing a said document. The
company verifies the authenticity and accuracy of the source documents and
financial records, it doesn’t just pass through or authorized by just the same
personnel. The selected coffee shops double-checks the signatures of important
documents to ensure that there is no attempts of forgery.

5. There is a significant difference in the extent of the practice for fraud detection
when grouped according to the profile, specifically the practices of monitoring and
accounting records when grouped according to number of employees:
There is a significant difference between the numbers of employees and
counter-checking if the inventory received reflects what it stated in the source documents. Due
to lack of personnel, since majority of the coffee shops usually have at least 2 or 3
employees, they are not able to allot time to double-check or recount the items
delivered from suppliers, considering they have other tasks during their day-to-day
operations that demand their attention. By executing an inventory software system,
you be able to have a closer eye on the movement of your products without making
your employees feel like you’re watching their every move. Having an automated
inventory system reduces the risk of fraudulent reporting by having multiple users
review and update inventory details.
There is a significant difference between number of employees and updating and
reviewing the financial records (source documents, journals, ledgers) on a regular basis. Due
to lack of employees, they haven’t been able to regularly update and review financial
records or source documents, since they also have other tasks that require their
attention. Hence, they won’t be able to fully assess or prepare for any risks that are
financially related.
6. There is a significant difference in the extent of the practice for fraud prevention
when grouped according to the profile, specifically the practice of independent
verification when grouped according to number of employees:
There is a significant difference between number of employees and requesting for
authorized signatures from managers or supervisors before approving timesheets and overtime
claims. Due to the fact that majority of the coffee shops only have at least 2 to 3
employees make it difficult to have some other personnel to verify important
documents without any bias. Specifically in terms of verifying the authenticity of the
approval of managers or supervisors of employee timesheets and overtime claims, due
to the lack of staff, the current employees have no other alternative but to have to
verify it themselves.
5.3. Recommendation
According to the findings and analysis from the data gathered, And therefore
commend some tips to minimize fraud.
1. The coffee shop management should implement an automated inventory
system to help track or monitor the inventory, without the hassle of physically
counting it every now and then. This inventory system would be accessible to
management or even the business owner without having to check in on the employees
or the inventory. They could also assign specifically someone to counter-check the
inventory on a regular basis. This will ensure an accurate count of the company’s
resources.
2. The coffee shop management should set a scheduled day during the week
where they could update and review all of the financial records that accumulated over
the course of the week. They could also make it a policy to update the sales, expenses,
budget tracker, etc, before the business day ends to ensure the accuracy of the
financial records and be aware of the real time standing of the business.
3. The coffee shop management should assign specific people to a
specific task, taking into consideration the fact that there is a limited number of
employees, they could segregate duties and distribute the tasks among the
available staff. With each one of them assigned to a certain task that does not
involve the other, especially with regards to sensitive tasks like updating
timesheets, counter-checking cash sales, updating sales, inventory counts, etc.
This would help ensure the authenticity and accuracy of the records.
4. To the owners of the coffee shops, they should take into consideration to
implement the recommendations mentioned above to ensure that they are
indeed doing the best that they can to prevent and detect risks that may occur
during the course of the business.
5. To the management of the coffee shops, they should implement the
suggested procedures as mentioned above to improve the weaknesses of their
risk management. Since they play a role in ensuring that the business carries
out the processes smoothly and orderly, they would have to be hands on and
involved in the actual implementation of the risk management practices.
6. To the customers of the coffee shops, they can be assured that the coffee
shops that they are buying from have secure and effective risk management
methods. They could also check the extent of their surveillance, physical
controls, etc.
7. To the future researchers, they could further this study and research more
about the significant relationship between the risk management on fraud
detection and prevention when grouped according to the business’
performance.

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RISK MANAGEMENT ON FRAUD DETECTION AND PREVENTION

OF COFFEE SHOPS IN LAS PINAS CITY

OF COFFEE SHOPS IN LAS PINAS CITY

Quantitative researches are usually easy to present, summarize, and

underpins your entire project, and flawed assumptions or flawed methodology

as well (Davies, 2013).

Risk is something every organization deals with, even if it is uncertain as

to whether or not it will happen. To avert this from taking place,

management is about understanding the nature of such events, where they

Institute of Management Accountants, 2008). Risk management entails

happen. Fraud implies deceiving another individual by altering or making a

false representation of an important information (Hall, 2011). As a preventive

measure against fraud it is important that the business implements fraud

detection and prevention methods to avoid, if not lessen the chances of

fraudulent acts from happening. Fraud detection involves the process of

minimizing the probability and intensities of risks by intelligently analyzing

the vast records on individual as well as business transactions. While Fraud

prevention includes informing the company on how to handle fraud, supporting

the supervision of preventive controls or suggesting when such controls are

ineffective, and also testing procedures which ensures adequate operations of

preventive controls and their results (Dimitrijevicet al., 2015).

of responsibility on the employees that are assigned on those shifts and

management and how effective it is in terms of fraud detection and prevention;

by means of surveillance, monitoring, IT control, physical control, accounting

records, risk assessment, segregation of duties, supervision, and independent

BACKGROUND OF THE STUDY

school project; coffee shops may be considered as overpriced for majority of

shops encourages productivity (Nguyen, 2013). As Accounting Technology

students we were curious to know as to how they handle fraud in terms of

purpose of minimizing them from occurring in the future, detecting the

need to take countermeasures in avoiding it. Moreover, it also helps in

measures and how to develop their approach on this matter.

management. The purpose of this study, as described by the author, was to

describe and evaluate the historical trends of the fraud management in

management importance is different because it involves not only detection, but

not just a one-time implementation, instead a continuous process. Based on the

outcome of the research, we would then endorse constant development

methods with regards to the risk management strategy. In which it

encompasses an even measurement of where the businesses is and where it

their risk management practices and how to improve in these areas.

and effectively of the businesses’ fraud detective and preventive measures

surveillance, monitoring, IT control, physical control, accounting records and risk

fraud prevention in terms of segregation of duties, supervision, and independent

STATEMENT OF THE PROBLEM

answer the following questions:

1.) To know the profile of the coffee shops based on their:

a)​ Years of existence

b)​ Annual net income

c)​ Number of employees

a)​ Asset misappropriation

b)​ Vendor fraud

c)​ Accounting fraud

detection that is being implemented by the coffee shops based on:

e)​ Accounting records

f)​ Risk assessment

prevention that is being implemented by the coffee shops based on:

a)​ Segregation of duties

c)​ Independent verification

management for fraud detection when grouped according to the profile.

6.) To know if there is a significant difference in the extent of the practices

of risk management for fraud prevention when grouped according to the

The researchers consider the following as the objectives:

a)​ Years of existence

a) Years of existence

b) Annual net income

c) Number of employees

a) Asset misappropriation

b) Vendor fraud

c) Accounting fraud

e) Accounting records

f) Risk assessment

a) Segregation of duties

c) Independent verification

a) Years of existence

b) Annual income

c) Number of employees

a) Asset misappropriation

b) Vendor fraud

c) Accounting fraud

e) Accounting records

f) Risk assessment

a) Segregation of duties

c) Independent verification

Null hypothesis (H01): There is no significant difference in extent of the

Alternative hypothesis (Ha1): There is a significant difference in the

Null hypothesis (H02): There is no significant difference in the extent of

Alternative hypothesis (H ): There is a significant difference in the extent of

research as it is used to describe a population with respect to important

adopted the non-probability sampling type, specifically random sampling.

3. Customers. This is beneficial for the customers of the aforementioned coffee

desire to further this study and create a more in-depth or updated

his is the deliberate and intentional manipulation of

Accounting records. Important financial data pertaining to the business on

Asset misappropriation. It is a kind of fraud that involves manipulating or

or unusual acts of fraud or deception occurring within the business.

Fraud prevention. The process of assessing, strategizing and even mitigating

Independent verification. This involves having a separate person to

IT control. This involves the proper practice of ensuring that the

Monitoring. This is the process of keeping a careful watch or observing the

Risk assessment. It is a thorough look at the workplace to identify those

Segregation of duties. This is delegating or distributing tasks and