FORENSIC AUDITING AND FINANCIAL FRAUD PREVENTION AMONG LISTED FINANCIAL FIRMS IN NIGERIA

Abstract

Financial fraud has remained a persistent challenge within financial institutions globally,
particularly in emerging economies where weak control systems, technological
vulnerabilities, and inadequate regulatory enforcement continue to expose firms to fraudulent
activities. Thus, this study examined the effect of forensic auditing on financial fraud
prevention among listed financial firms in Nigeria. The study adopted a quantitative cross
sectional survey research design using primary data collected through structured
questionnaires administered to 302 respondents drawn from listed financial firms on the
Nigerian Exchange Group. Data were analysed using Partial Least Squares Structural
Equation Modelling (PLS-SEM). The findings revealed that forensic auditing practices
significantly improve financial fraud prevention (β = 0.221, p = 0.002), while forensic audit
expertise and professional competence also exert a positive and significant effect (β = 0.184,
p = 0.007). Furthermore, forensic audit tools and techniques (β = 0.256, p = 0.001), internal
control systems (β = 0.278, p = 0.000), and regulatory compliance (β = 0.205, p = 0.002) all
significantly enhance financial fraud prevention among listed financial firms in Nigeria. The
study concludes that effective forensic auditing mechanisms are critical in reducing fraud
opportunities and strengthening transparency and accountability within financial
institutions. The study recommends that the management of financial firms should strengthen
forensic auditing practices, invest in professional training and digital forensic technologies,
improve internal control systems, and ensure strict regulatory compliance to enhance fraud
prevention effectiveness.