FRAUD REPORTING AND FINANCIAL PERFORMANCE OF COUNTY GOVERNMENTS IN KENYA: THE MODERATING ROLE OF GOVERNANCE ACCOUNTABILITY
Article Sidebar
Main Article Content
Abstract
Fraud mitigation forms major part of any institution’s financial and business policies and procedures so as to safeguard the institution’s financial performance. However, fraud occurrence has increased over the recent years globally and all the sectors of the Economies have been affected. Kenya has continued to experience the effects of fraud which have contributed to the decreased growth in its development. The public Sector in Kenya especially the County Governments have not been spared by fraud effects and thus have over the years experienced massive Fraud that have threatened to cripple their functions and have negatively impacted on their financial performance objectives. The objectives of this study were to examine the effect of fraud reporting on the financial performance as well as to assess the moderating effect of governance accountability on the relationship between fraud reporting and financial performance of County Governments in Kenya. Descriptive research design was used. The investigation targeted 47 county staff who were internal auditors from each County Government, Purposive sampling method was employed for the investigation, with forty-seven County Governments serving as units of analysis and the study’s units of Observations being forty-seven members from Internal Audit Function of each of the forty-seven County Governments. The investigation was anchored on Fraud Triangle and Institutional theories. Primary data was gathered using a structured question sheet that was issued to the sampled respondents. Data was evaluated quantitatively using descriptive statistics, correlation and regression analyses. Study results illustrated that fraud reporting was statistically significant on determining the financial performance of County Governments in Kenya as was depicted by an R square of 0.522, P<0.05. The final R square of the moderating variable was found to be 0.725, P<0.05 which implies that the model explained 72.5% variance in financial performance in County Governments in Kenya. The investigation concluded that if fraud reporting was strengthened by governance accountability, then the financial performance of the county governments would be enhanced. Therefore, county Governments should strengthen governance accountability structures by enforcing ethical standards, implementing transparent decision-making processes, and ensuring public participation in budgetary and financial matters.
Article Details
References
Ahmed, I., Senturk, I., & Ali, A. (2025). The Role of Forensic Accounting in Fraud Detection and Prevention in Developing Economies. Journal of Social Signs Review, 3(1), 715-735.
Aila, F., & Ombok, B. (2015). Validating measures in business research: Practical implications.
Al Natour, A. R., Al-Mawali, H., Zaidan, H., & Said, Y. H. Z. (2025). The role of forensic accounting skills in fraud detection and the moderating effect of CAATTs application: evidence from Egypt. Journal of Financial Reporting and Accounting, 23(1), 30-55.
Albrecht, W. S., Albrecht, C. O., Albrecht, C. C., & Zimbelman, M. F. (2018). Fraud examination. Cengage Learning.
Anyona, V. O. (2024). Effect of Corporate Governance on Fraud Mitigation Among Microfinance Banks in Kenya (Doctoral dissertation, KCA University).
Araka, G. K. (2023). Effectiveness of forensic accounting practices in prevention of money laundering in County governments of Kenya (Doctoral dissertation, Strathmore University).
Bordens, K. S., & Abbott, B. B. (2002). Research design and methods: A process approach. McGraw-Hill.
Chacha, C. K., Nyangau, A., & Omare, M. (2021). Influence of revenue collection on financial accountability: A study of Rorya District Council, Tanzania. International Journal of Public Administration and Policy Studies, 9(3), 45–58.
Chacha, C. K., Nyangau, A., & Omare, M. (2021). The moderating effect of government policy on the relationship between revenue collection practices and financial accountability of Rorya district council in Tanzania. International Academic Journal of Economics and Finance, 3(6), 302-316.
Cheliatsidou, A., Sariannidis, N., Garefalakis, A., Azibi, J., & Kagias, P. (2023). The international fraud triangle. Journal of Money Laundering Control, 26(1), 106-132.
Chukwuma, O. V., Ugwu, J. I., & Babalola, D. S. (2022). Application of forensic accounting in predicting the financial performance growth of MTN mobile communication in Nigeria. Journal of Environmental Science and Economics, 1(1), 67-76.
Cressey, D. R. (1953). Other people's money; a study of the social psychology of embezzlement.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160. https://doi.org/10.2307/2095101
Ethics and Anti-Corruption Commission. (2019). Annual report 2018–2019. Nairobi, Kenya: EACC.
Fathmaningrum, E. S., & Anggarani, G. (2021). Fraud Pentagon and Fraudulent Financial Reporting: Evidence from Manufacturing Companies in Indonesia and Malaysia. Journal of Accounting and Investment, 22(3), 625-646.
Fwambaa, M. S. (2023). Influence Of Forensic Accounting Services on Financial Performance of County Governments in Kenya (Doctoral dissertation, KCA University).
Hastuti, H. W., & Mardijuwono, A. W. (2020). Good government governance against government accountability performance. International Journal of Management (IJM), 11(6), 2023-2030.
Kagias, P., Cheliatsidou, A., Garefalakis, A., Azibi, J., & Sariannidis, N. (2022). The fraud triangle–an alternative approach. Journal of Financial Crime, 29(3), 908-924.
Karsono, B. (2023). Good Corporate Governance: Transparency, accountability, responsibility, independency dan fairness (literature review). Dinasti International Journal of Management Science, 4(5), 811-821.
Karuti, J. K. (2020). Forensic Accounting and Fraud Control in County Governments in Kenya: Evidence from Counties in Mt. Kenya Region (Doctoral dissertation, KeMU).
Kaunda, F. O. (2021). Effect of forensic accounting practices on fraud mitigation among commercial banks in Kenya (Doctoral dissertation, KCA University).
Kauppi, K. (2022). Institutional theory. In Handbook of Theories for Purchasing, Supply Chain and Management Research (pp. 320-334). Edward Elgar Publishing.
Kiprono, G. J., & Ng’ang’a, P. (2018). Fraud management practices and financial performance of Kenya Ports Authority. International Academic Journal of Economics and Finance, 3(2), 241-264.
Kombe, R. D. (2025). Forensic Accounting Practices and Reliability of Financial Statements Among Manufacturing Firms in Kenya (Doctoral dissertation, Technical University of Mombasa).
Mason, M. (2020). Transparency, accountability and empowerment in sustainability governance: a conceptual review. Journal of Environmental Policy & Planning, 22(1), 98-111.
Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340–363. https://doi.org/10.1086/226550
Meyer, R. E., & Höllerer, M. A. (2014). Does institutional theory need redirecting?. Journal of management Studies, 51(7), 1221-1233.
Mwaringa, C. K. (2020). Effect of Financial Audit on Fraud Mitigation: The Case of Government Entities in the Coastal Region of Kenya.
Nzioki, S. K. (2022). Effect Of Forensic Accounting Practices on Financial Accountability in Machakos County Government, Kenya (Doctoral Dissertation, KCA University).
Ofei, E. F., Asante, C. R., & Andoh–Owusu, M. (2020). Assessing the Moderating Effect of Government Policy in the relationship between Internal Control Environment and Financial Performance of Banks in Ghana.
Okeke, E. U., Okoye, E. I., & Nwoye, U. J. (2025). Forensic Audit Skills and Fraud Control in Selected Ministries, Departments and Agencies in South East Nigeria. Journal of Global Accounting, 11(4), 65-90.
Okoye, E., & Ndah, E. N. (2019). Forensic accounting and fraud prevention in manufacturing companies in Nigeria. International Journal of Innovative Finance and Economics Research, 7(1), 107-116.
Onyango, G. (2022). Bureaucratic Corruption and Maladministration in Kenya: A Bureaucratic Analysis. International Journal of African Renaissance Studies-Multi-, Inter-and Transdisciplinarity, 17(1), 171-189.
Opiyo, J. (2017). The Role of Forensic Accounting Services in Fraud Mitigation Among Kenyan Public Institutions A Case of Parastatals in Kenya (Doctoral dissertation, University of Nairobi).
Rahayu, S., Yudi, R., & Jumaili, S. (2025). Enhancing good governance and fraud prevention for school performance. Cogent Business & Management, 12(1), 2534097.
Rahman, M. J., & Jie, X. (2024). Fraud detection using fraud triangle theory: evidence from China. Journal of Financial Crime, 31(1), 101-118.
Rizvi, S. K., Mirza, N., Naqvi, B., & Rahat, B. (2020). COVID-19 and asset management in EU: A preliminary assessment of performance and investment styles. Journal of Asset Management, 21(4), 281-291.
Romzek, B. S., & Dubnick, M. J. (2018). Accountability. In Defining public administration (pp. 382-395). Routledge.
Sahin, K., & Mert, K. (2023). Institutional theory in international business studies: the period of period of 1990–2018. International Journal of Organizational Analysis, 31(5), 1957-1986.
Schuchter, A., & Levi, M. (2016). The fraud triangle revisited. Security Journal, 29, 107-121.
Sofyani, H., Riyadh, H. A., & Fahlevi, H. (2020). Improving service quality, accountability and transparency of local government: The intervening role of information technology governance. Cogent Business & Management, 7(1), 1735690.
Solomon, J. (2020). Corporate governance and accountability. John Wiley & Sons.
Umoru, I., Farouk, M. A., & Abubakar, S. (2025). Impact Of Forensic Accounting Techniques on Reducing Procurement Fraud in Listed Manufacturing Companies In Nigeria. ANUK College of Private Sector Accounting Journal, 2(1), 292-299.
Vutumu, A., Oshota, S. O., & Akinteye, A. S. (2025). Forensic Accounting, Internal Control Impact on Nigerian Public Sector Fraud Prevention: A Descriptive Analysis. Open Journal of Business and Management, 13(2), 781-808.
Wamboi, L. A. (2024). The Effect of fraud management strategies on the non-financial performance of microfinance banks in Nairobi County, Kenya. Strathmore University.
Warui, C. (2025). Effect of fraud risk management on revenue growth in Women-Owned Small and Medium Sized Enterprises in Starehe Sub-County, Kenya (Doctoral dissertation, Strathmore University).