Effect Of Forensic Accounting Practices On Fraud Mitigation Among Commercial Banks In Kenya

Abstract

Banks are one of the critical enablers of development of a country since they facilitate economic progress through formation of new capital and/or provision of saving and lending services. Despite the critical role they play in the economy, financial institutions have been victims of fraud where banks have lost funds running into billions of shillings. Such fraud leads to the loss of colossal sums of money from banks and other financial institutions. The general objective of this study was to analyze the effect of forensic accounting practices on fraud mitigation among commercial banks in Kenya. The specific objectives of the study were to: determine the effect of fraud investigation on fraud mitigation; analyze the effect of litigation support on fraud mitigation; and establish the effect of dispute resolution on fraud mitigation among commercial banks in Kenya. The study adopted the Fraud Triangle Theory, Enterprise Theory of Crime and Routine Activity Theory. This study applied a descriptive survey research design to establish the impact of forensic accounting practices on fraud mitigation. The target population for this study were 41 commercial banks that are currently active as at 31st December, 2019. The study applied census technique since it is possible to access all the commercial banks in Kenya. Structured questionnaires were applied in data collection since the study seeks to solicit for quantitative data. Data Analysis was done using SPSS version 24. Data was analyzed using descriptive statistics, correlation analysis and multiple regression analysis. Analysis of data indicated that there exist a positive and significant association between litigation support and fraud mitigation in commercial banks (p<.05). In addition, the established that there exist a significant and positive relationship between fraud investigation and fraud mitigation in commercial banks (p<.05) in addition to existence of a significant and positive relationship between dispute resolution and fraud mitigation in commercial banks (p<.05). The study recommends the need for proactive measures that identify red flags, such as analysis of unusual activities and the need for capacity building through regular training and the need for commercial banks should go beyond investigating fraud to include process expedition in terms of fact presentation in litigation processes and adoption of alternative dispute resolution mechanisms outside courts since this enhances recovery of the lost funds.