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THE EFFECT OF INTERNAL CONTROL MEASURES ON FRAUD IN SECURITY FIRMS IN KENYA

Faith Kavila - Masters Science in Finance and Investment, Kenya Methodist University, Kenya

Prof. Felix Mwambia - Kenya Methodist University, Kenya


ABSTRACT

Management, not the auditor is responsible for setting up and monitoring of the internal control system. Internal control system cannot fully be regarded as effective not even when the design and implementation is properly done; this is because the effectiveness of an internal control system depends on the competency and dependability of the people using it. Security firms failures and widespread losses over the past two decades, have clearly pointed out the picture of how fraud has penetrated the financial strength of these institutions; it has however, elevated the importance of effective internal control system within the formal financial sector worldwide. Organizations set up internal control system most at times because they are required by law to do so; but then, how many have actually made it a point of duty to train and educate employees on how to use these internal control system since its effectiveness depends on the competency and dependability of the people using it. The research delves into the impacts of these measures on fraud and there efficacy in general. The first chapter highlights the background of the study, the objectives, the research question, significance and the scope of the study. The second chapter reviewed three theories put forth by early scholars related to the study and shows the relationship between the dependent and independent variables. The third chapter outlines the research methodology that the researcher used to collect data for study. This includes research design, target population, sampling design, data collection instruments and procedure, data analysis, research limitations and research ethics. The primary data was obtained through the use of structured questionnaires and data was analyzed using Statistical Package for Social Science (S.P.S.S) versions 17 and presented inform of tables and figures. The researcher also conducted multiple regression analysis to determine the contribution of various forms of internal control measures to fraud and applied correlation to measure the strength of the relationship between the four forms of fraud. The study concludes that assets custody control, system monitoring, finance duties segregation and authorization of processes highly influence fraud management in Kenyan security firms. It was established that 51.50% of variation in fraud management in security firms in Kenyan is explained by assets custody control, system monitoring, finance duties segregation and authorization of processes. The study first recommends that Kenyan security firms should enhance their assets custody control policies to improve the fraud management, strengthen and ensure efficiency of their system monitoring to avert any foreseen and unforeseen loophole and hence effective fraud management, implement finance duties segregation polices and  reviewed their policies on authorization of processes to improve the fraud management. The study found that 51.50% % of variation in fraud management in security firms in Kenyan is explained by assets custody control, system monitoring, finance duties segregation and authorization of processes. This means that there are other factors that account for the remaining 48.50%. So the study recommends that other studies should be conducted to establish what influence the 48.50% change of fraud management.


Full Length Research (PDF Format)