Effect of forensic accounting techniques on fraud detection among commercial banks in Kenya

Abstract

This study investigated the effect of forensic accounting techniques on fraud detection among commercial banks in Kenya. The specific objectives were to determine the effect of forensic data analysis on fraud detection, examine the role of financial document verification in enhancing fraud detection, and evaluate the effect of forensic investigation on fraud detection among commercial banks. The study was anchored on the Routine Activity Theory, Rational Choice Theory, and Fraud Triangle Theory, which provided a strong theoretical framework for understanding the dynamics of fraud and the role of forensic accounting in combating financial crimes. The target population comprised all 43 registered and licensed commercial banks in Kenya as listed by the Central Bank of Kenya. Data were collected through structured questionnaires administered to senior finance, audit, and risk officers with at least two years of continuous service. Since the population was fewer than 100, a census approach was adopted to ensure comprehensive coverage and eliminate sampling bias. The data were analyzed using descriptive and inferential statistics with the aid of SPSS Version 26.0. The analysis indicated that forensic data analysis had a strong positive relationship with fraud detection, while financial document verification showed a moderate positive relationship. Further examination revealed that both forensic data analysis and financial document verification significantly enhanced fraud detection among commercial banks. In contrast, forensic investigation did not appear to have a meaningful effect. Overall, the combined forensic accounting techniques were found to play a substantial role in explaining variations in fraud detection, highlighting their importance in improving banks’ ability to identify and prevent fraudulent activities. The study concluded that forensic data analysis and financial document verification significantly enhanced the detection and prevention of fraudulent activities in commercial banks. However, forensic investigation was found to be less effective, possibly due to inadequate investigative tools and limited personnel training. The study recommended that commercial banks strengthen their forensic data analysis systems by investing in advanced data analytics software and continuous staff training. In addition, banks should enhance document verification procedures through digital authentication and block chain technologies to improve transparency and reduce manipulation. Finally, capacity-building initiatives should be prioritized to improve the effectiveness of forensic investigations and align them with emerging financial fraud trends.