An Exploratory Study of Internal Control and Fraud Prevention Measures in SMEs

Small business and entrepreneurship has emerged as an important area of research over the past 40 years. This paper revolves around the issues of the internal controls and fraud prevention measures on SMEs performance. The level of fraud incidence as reported by owners is still at a very low level and the overall cost incurred is still within expectation. However, there is a question of whether the low reported rate of fraud is due to adequate preventive actions currently employed by owners, or whether the owners are reluctant to reveal the truth in order to portray their efficiency and effectiveness in running their businesses. This conceptual paper attempts to analyze relevant literature on internal control, fraud, current trends on fraud and business crime prevention measure adopted by SMEs. Based on the literature, a future research could be suggested in the context of Malaysia. It is hoped that future research in this aspect will uncover the relationship between the effectiveness of internal control within SMEs and to gauge the adequacy of fraud prevention measure taken by owners of SMEs in Malaysia. It is expected that effective internal control and the presence of appropriate fraud preventive measures will help to improve SMEs performance.