The Role of Reconciliation in Fraud Detection and Prevention of Selected Commercial Banks in Sierra Leone
DOI:
https://doi.org/10.56830/IJAMS07202603Keywords:
Commercial Banks, Fraud Detection, Fraud Prevention, Governance, Reconciliation Controls, Internal ControlsAbstract
Fraud is one of the key threats to the stability and performance of commercial banks in Sierra Leone. In this study, we examine the role of reconciliation in the detection and prevention of fraud of selected commercial banks: Rokel Commercial Bank, Sierra Leone Commercial Bank, and Zenith Bank. The study ties up on the Fraud Triangle, Fraud Diamond, and the Fraud Management Lifecycle and employs an explanatory mixedmethod, combining quantitative surveys with qualitative interviews involving internal audit, operations, and risk management employees. The findings of the study show that although reconciliation controls are carefully executed, they display a cynical relationship with fraud detection (R = −0.594, β = −0.57, p < 0.001), propose that existing exercise remain conventional rather than strategically fraud-oriented. Governance mechanisms including finance, audit, and investment committees also demonstrated limited moderating influence (R = −0.401), reflecting gaps in oversight and accountability. With respect to fraud prevention, the study finds that preventive reconciliation is poorly manage due to manual processes, weak automation, and limited forensic integration. Trend analysis further shows that political cycles and institutional disruptions undermine the preventive potential of reconciliation. The study concludes that reconciliation controls alone are insufficient for effective fraud mitigation; their impact depends on timely automation, staff capability, forensic intelligence, and strong governance oversight. The study contributes to theory and practice by demonstrating how contextual, operational, and institutional factors shape the preventive and detective value of internal controls in high-risk banking environments.
References
Alhassan, A. M. (2018). Fraudulent activities and forensic accounting services of banks in Port Harcourt`. International Journal of Economics and Financial Management, 3(2), 45-58.
Bangura, A. B., & Conteh, M. (2021). Banking fraud and regulatory enforcement in Sierra Leone: A review of control failures. Journal of Financial Crime, 28(4), 1123–1138.
Basel Committee on Banking Supervision. (2012). Core principles for effective banking supervision. Bank for International Settlements.
Bierstaker, J. L., Brody, R. G., & Pacini, C. (2021). Forensic accounting and fraud prevention: Integrating proactive controls. Journal of Forensic & Investigative Accounting, 13(2), 201-221.
Committee of Sponsoring Organisations of the Treadway Commission. (2013). Internal control Integrated framework. COSO.
Cressey, D. R. (1973). Other people's money: A study in the social psychology of embezzlement. Patterson Smith.
Institute of Internal Auditors. (2019). Global technology audit guide: Automated reconciliation and continuous monitoring. IIA Research Foundation.
Kanu, S. I., & Bangura, A. B. (2020). Corporate governance and internal control weaknesses in Sierra Leonean banks. International Journal of Finance and Banking Research, 6(3), 67-78.
Kargbo, M. (2016). Frauds in Sierra Leonean banks: Nature, deep-seated causes, aftermaths and probable remedies. Mediterranean Journal of Social Sciences, 3(2), 79-80.
Kimani, J. (2011). Internal controls and financial performance of commercial banks in Kenya. (Unpublished MBA thesis). University of Nairobi.
Ndungu, H. W. (2013). The effectiveness of internal controls in preventing fraud in commercial banks in Kenya. (Unpublished MBA thesis). University of Nairobi.
Noushad, M. P., Sukumaran, B. S., & Thomas, M. (2020). Fraud hexagon: Extending the fraud theory framework. Journal of Governance and Control, 8(1), 34-48.
Okoye, E. I., & Gbegi, D. O. (2013). Forensic accounting: A tool for fraud detection and prevention in the public sector A study of selected ministries in Kogi State, Nigeria. International Journal of Academic Research in Business and Social Sciences, 3(3), 1–19.
Omondi, P. O. (2013). Internal control systems and financial performance of commercial banks in Kenya . (Unpublished MBA thesis). University of Nairobi.
Othman, R., & Ameer, R. (2014). Corporate governance and fraud prevention in developing economies. Corporate Governance. The International Journal of Business in Society, 14(3), 385-400.
Saunders, M., Lewis, P., & Thornhill, A. (2016). Research methods for business students (7th ed.). Pearson Education.
Schachler, M. H., Juleff, L., & Paton, C. (2007). Corporate governance and internal control: The role of audit committees. Journal of Financial Regulation and Compliance, 15(2), 140 152.
Taber, K. S. (2018). The use of Cronbach's alpha when developing and reporting research instruments in science education. Research in Science Education, 48(6), 1273–1296. DOI: https://doi.org/10.1007/s11165-016-9602-2
Vorhies, J. B. (2006). The role of reconciliation in fraud detection. Journal of Accountancy, 202(4), 45–50.
Wanyama, D. W. (2012). Internal controls and fraud prevention in commercial banks in Kenya. (Unpublished MBA thesis). University of Nairobi.
Wilhelm, W. K. (2004). The fraud management lifecycle: A framework for fraud prevention and detection. Journal of Economic Crime Management, 2(2), 1–38.
Wilks, T. J., & Zimbelman, M. F. (2020). Preventive reconciliation as a fraud deterrent: Evidence from field studies. Auditing. A Journal of Practice & Theory, 39(3), 167–188.
Wolfe, D. T., & Hermanson, D. R. (2004). The fraud diamond: Considering the four elements of fraud. The CPA Journal, 74(12), 38–42.
