Effect Of Management Control Systems On Occupational Fraud Risk In Commercial Banks In Kenya

Abstract

Globally, a typical organization loses at least 5% its annual revenue loss through occupational fraud. Further statistics indicate that occupational fraud risk is highest in commercial banks than any other industry globally. Occupational fraud risk is therefore a global problem. When the percentage annual loss statistics is applied to the consolidated commercial banks revenue for the year 2012, the loss translates to approximately Kshs 15 Billion. The problem is that Kenya has the highest incidences of fraud is East Africa. The study set to determine the effect of management control systems on occupational fraud risk in commercial banks in Kenya. A representative sample of 30 banks out of the 43 commercial banks licensed by Central Bank of Kenya by June 30, 2012 was used in this study. Multiple linear regression was used to test the null hypothesis; There is no relationship between management control systems and occupational fraud risk in commercial banks in Kenya The findings from this study are, a Cronbach's alpha of 0.830 for the drivers of management control systems, a moderate positive correlation between management control systems and moderate influence on occupational fraud risk in commercial banks in Kenya. These results provide insights into the occupational fraud risk management and the regulatory authorities in the design of deterrents of fraud in Kenya and developing countries.