Efficacy of forensic auditing in mitigating occupational fraud among Kenyan county governments moderated by organization culture

Abstract

This study examined the efficacy of forensic auditing in mitigating occupational fraud within Kenyan county governments, with organizational culture incorporated as a moderating variable. Occupational fraud remains pervasive in devolved units, undermining public trust, fiscal discipline, and service delivery despite existing audit frameworks and regulatory interventions. Anchored on the Fraud Hexagon Theory, Technology Acceptance Model, and Social Exchange Theory, the study adopted a convergent parallel mixed-methods design. Data were collected from 154 respondents across 30 county governments and the Office of the Auditor-General using structured questionnaires, key informant interviews, and audit report reviews. Quantitative data were analyzed using multiple linear regression, while qualitative data were analyzed thematically. Empirical findings confirmed that all four forensic auditing tools significantly and positively influenced occupational fraud mitigation. The moderated regression model demonstrated strong explanatory power (R² = 0.7892; Adjusted R² = 0.7645), indicating that approximately 79% of the variance in fraud mitigation is explained by the combined effects of forensic auditing techniques and organizational culture. The regression coefficients revealed that forensic interviews exert the strongest direct effect (β = 0.4532, p < 0.01), followed by computer-assisted audit tools (β = 0.3421, p < 0.05), fraud risk assessment (β = 0.2345, p < 0.05), and internal control evaluation (β = 0.1876, p < 0.05). Organizational culture independently demonstrated a statistically significant effect on fraud mitigation (β ≈ 0.3156, p < 0.01), confirming its role as both a direct predictor and a moderating variable. The moderation analysis further revealed the differential interaction effects: fraud risk assessment exhibited the strongest culture-dependent explanatory power (R² ≈ 0.83), suggesting that its effectiveness is highly contingent on ethical climate and governance structures, while CAATs showed comparatively moderate interaction with culture (R² ≈ 0.59), indicating that technological effectiveness is less sensitive to behavioral context. These findings underscore a critical complementarity between technical audit mechanisms and organizational culture in strengthening fraud mitigation outcomes. The study concludes that while forensic auditing tools are empirically effective, their impact is significantly amplified or constrained by organizational culture. Weak ethical environments, political risks, inadequate training, and limited management support were identified as key inhibitors to effective fraud mitigation. The persistence of fraud despite forensic audit interventions reflects systemic governance deficiencies rather than mere technical gaps. From a policy perspective, the study recommended: (i) institutionalization of forensic auditing frameworks within county governments through statutory reinforcement and alignment with the Public Finance Management framework; (ii) strengthening the independence and capacity of internal audit functions, including mandatory adoption of CAATs and continuous professional training in forensic techniques; (iii) embedding ethical leadership and accountability systems through enforceable codes of conduct, whistleblower protection mechanisms, and tone-at-the-top initiatives; and (iv) enhancing the mandate of oversight institutions such as the Office of the Auditor-General to initiate forensic audits proactively rather than on request. For future research, the study recommends longitudinal designs to assess causal stability of forensic auditing interventions over time, comparative cross-county or cross-country studies to enhance generalizability, and deeper exploration of moderating variables such as political risk, auditor independence, and institutional capacity. This study contributes to the forensic auditing and public sector governance literature by providing robust, context-specific empirical evidence on the interaction between forensic audit techniques and organizational culture within decentralized systems, and offers actionable insights for strengthening anti-fraud frameworks in Kenya’s public sector.