Effect Of Employee Fraud Management Practices On Fraud Detection In Small And Micro Enterprises In Migori Town, Kenya

Abstract

Fraud in organizations is a major threat to performance. Specifically, employee fraud has been identified as a major form of fraud that occurs in companies and a subject that has received interest among researchers. This study aimed at investigating effect of employee fraud management practices on fraud detection in small and micro enterprises in Migori town, Kenya the study aimed at achieving the following specific objectives including establishing how weak internal control system influences employee fraud in organizations, to determine how collusion between employees and third parties affects employee fraud in organizations and to examine the how whistle blower protection system influences employee fraud in organizations. This study adopted a descriptive survey design because it aims at giving an accurate description on the factors contributing to employee fraud in Kenyan organizations. The target population was 478 employees working in micro enterprise in Migori town. The researcher used a census survey as the sampling method. The sample of the study was 142 employees working in micro enterprise in Migori town. Questionnaires were used as the main data collection instrument. The research used primary data collected from the participants. A pilot testing was done to test the validity and reliability of the data collection instrument. Data analysis was done using the Statistical Package for Social Sciences (SPSS). The Cronbach's alpha was used to measure of internal consistency of the variables that is, how closely related a set of variable are as a group. Data was presented using percentages, frequencies, tables and figures. Before data collection, the researcher got authorisation from the university and consent from the respondents. The study concludes that internal control systems rest mostly influence employee fraud management, for a control system to be described as effective, control policies and procedures must not be under the influence of one person. When such a thing happens that individual can easily override the controls and the employee fraud increases. The study recommends that business owners should engage in training and for their employees on internal controls. They should be confident enough when it comes to controls because internal controls are vital to the success of a business. The business owners, amongst themselves in an area should organise workshops and seminars more frequently. This initiative would give them a platform to learn from each other about how to implement and follow the controls on fraud management. The study further recommends that incentives and appraisals should be given to employees who adhere to the internal controls and facilitate whistle blower system. Business owners should design the policies regarding internal controls which will act as a guide to follow internal controls. These policies should be easy to follow and should be changed every time there is a breach of internal controls. Systems for detecting problems faced businesses (embezzlement of records, and asset misappropriation) should be put in place so that any occurrence of such matters is reported immediately.