Analyzing Internal Controls of SMEs in the Retail Sector: A Case Study of Grocers in the Caribbea

A descriptive qualitative design based on a single study, this research utilized similar operations of supermarkets throughout the Caribbean to provide a better understanding of the growing impact of fraud on small to medium business enterprises (SMEs). More specifically, fraud statistics revealed that an inadequacy in controls and fraud prevention measures resulted in higher occurrences of fraudulent activities in SMEs versus their larger counterparts. As a result, a general business problem surrounding the enormity of losses due to occupational fraud resulted in a 90% chance of business failure within the first five years of existence. The purpose of the study was to increase the body of knowledge and fill a gap in scholarly research on the presence and effectiveness of internal control systems within the retail business segment. The research questions guiding the study were (a) how are internal control measures used in the organization, and how effective are the implemented controls; (b) how do the applied antifraud measures impact the deterrence and detection of fraud; (c) how was the implemented approach measured, regarding value to or from the business operations; and (d) what control methods have been used and considered cost prohibitive to the value of the store's ongoing operations. Based on the transformational development of Cressey's fraud triangle theory (1953), the study sought to augment limited research on assessing the relevance of existing processes in minimizing occupational fraud. Twenty-three owner/managers in a leadership role exercising final authority in creating a documented process for independent supermarkets employing a minimum of 100 or fewer employees served as the participants of the study. As a result, study findings revealed fraud specific internal control initiatives implemented as an essential component in detecting and deterring fraud that could prove beneficial to management and stakeholders of SMEs alike. This study enhanced the body of knowledge and filled a gap surrounding scholarly research on the presence and effectiveness of internal control systems within the retail business segment. Recommendations for future research that addresses a more in-depth exploration of shrinkage exhibited by the data site compared to the national average would provide a greater sense of the value of implemented measures to store operations.