Enhancing Financial Integrity in Ghanaian Microfinance Institutions Through Forensic Auditing: Assessing Its Role in Fraud Reduction
Enhancing Financial Integrity in Ghanaian Microfinance Institutions Through Forensic Auditing: Assessing Its Role in Fraud Reduction

Summary/Abstract: Microfinance institutions (MFIs) play a critical role in promoting financial inclusion and driving economic growth, especially in developing economies. However, the prevalence of fraud has increasingly threatened the stability and credibility of these institutions, particularly in Ghana. This study investigates the impact of forensic auditing as a mechanism to mitigate fraud in deposit-taking MFIs, with a focus on the Ghanaian context. Forensic audit, a specialised area of auditing aimed at uncovering financial misconduct, is examined for its effectiveness in reducing fraudulent activities. Data were collected from 92 professional accountants using a purposive sampling method and a structured questionnaire based on a 5-point Likert scale. One hypothesis was formulated to assess the relationship between forensic auditing and fraud reduction, and regression analysis was conducted using the Statistical Package for Social Sciences (SPSS). The results revealed that, at a 5% significance level, the coefficient of the dummy variable representing forensic audit implementation was 2.57. This indicates that the reduction of fraud in MFIs implementing forensic audits was, on average, 2.57% higher compared to those without such audits. These findings underscore the importance of forensic auditing in enhancing financial integrity within MFIs and suggest that its mandatory enforcement by shareholders and regulatory bodies could significantly improve investor confidence in the sector. The study contributes to the limited body of research on forensic auditing in the context of Ghana and highlights its potential to strengthen the financial governance of MFIs, thereby promoting their long-term sustainability.

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