The Role of Forensic Accounting in Detecting and Preventing FinancialFraud: Evidence from Financial Institutions in Somalia

Abstract

This study examines the role of forensic accounting in detecting and preventing financial fraud in financial institutions in Somalia, an institutionally developing financial system that remains underrepresented in the forensic-accounting literature. The study adopted a quantitative, crosssectional descriptive survey design, distributing a structured, closed-ended questionnaire to staff of financial institutions in Somalia, including forensic accountants, auditors, managers, regulators, and employees involved in accounting, auditing, finance, and compliance. Using simple random sampling, 70 questionnaires were distributed, completed, and returned, for a 100% response rate. The instrument measured fraud detection, fraud prevention, and the perception of forensic accounting and financial fraud on a five-point Likert scale, with items adapted from validated instruments developed by Alfordy (2022) and Shbeilat and Alqatamin (2022). All three scales demonstrated satisfactory internal consistency (Cronbach's alpha of .847, .833, and .818, respectively). Descriptive results indicated generally positive perceptions of fraud detection (M = 3.87, SD = 1.072) and fraud prevention (M = 3.86, SD = 1.043) practices. Correlation analysis showed that forensic accounting was significantly and positively associated with both fraud detection (r = .556, p < .001) and fraud prevention (r = .834, p < .001). In a multiple regression of the forensic accounting scale on the two fraud-control scales (N = 68), detection and prevention jointly explained approximately 69.6% of the variance (R² = .696; F(2, 65) = 74.338, p < .001), but only fraud prevention made a significant unique contribution (β = .822, p < .001), while fraud detection did not (β = .019, p = .836). These findings suggest that the preventive function of forensic accounting is the stronger driver of fraud control in Somalia's financial institutions. The study contributes the first direct empirical evidence on forensic accounting in Somalia's financial sector, extends the fraud triangle, agency, and information asymmetry theories to a fragile, institutionally developing setting, and offers practical guidance for financial institutions, regulators, and policymakers seeking to strengthen fraud-control mechanisms.