Abstract:
The question of deterrence of incidence of fraud is both important and sensitive since fraud causes organizations and individuals to incur massive investment losses and loss of resources which hurt the economy, suffer negative image and reputation and cause an erosion of confidence in capital markets among others. This study analyzes the effect of forensic accounting practices on deterrence of incidence of fraud in Kenya. It evaluates the effect of three objectives namely: fraud investigation, investigative accounting and litigation support on their significant effect in deterrence of incidence of fraud in Kenya. The study is guided by the theory of the fraud diamond and the new fraud triangle model using an explanatory research design. The study used a closed ended five – Likert scale questionnaire, to collect primary data from a purposive sample of 256 CPA (K) in the North Rift ICPAK branch where a survey of all 256 CPAs in North Rift was conducted. The study employed both descriptive and inferential statistics. Descriptive statistics used mean and standard deviation whereas inferential statistics analyzed data through correlation analysis and multiple regression analysis aided by SPSS version 23. Findings indicated that Investigative Accounting has a positive and significant effect on deterrence of incidence of fraud in Kenya (β2 = .295; p <0.05). Similarly, Litigation Support has a positive and significant effect on deterrence of incidence of in Kenya (β3= .255; p< 0.05). Findings confirmed that an increase in efforts of investigative accounting and litigation support practices are important in deterrence of incidence of fraud in Kenya. The researcher recommends that both government and private sector should employ forensic accounting practices by setting up units in their organizations, training of forensic accountants and establishing a regulatory body to oversee and protect their work. Additionally, the government should strengthen its legal system to give confidence for litigation support and institutions of higher learning should be encouraged to include forensic accounting in their coursework. The results have practical implications to government, academic institutions of higher learning, accounting and audit profession, the private sector and stakeholders in organizations. The study contributes to the importance of forensic accounting in practice.
