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Effect of Financial Misstatement and Corruption on Fraud Risk among State Corporations in Mombasa County in Kenya

The aim of this study was to evaluate effect of financial misstatement and corruption on fraud risk among state corporations in Mombasa County in Kenya. The study was anchored the fraud triangle theory. The study used a descriptive research design since it reports and determines things as they are. The sample size of the study consisted of 64 internal auditors and accountants of state corporations in Mombasa County. Since the accessible population is regarded as small no sampling will be done and therefore a census survey was used. This means all the internal auditors of state corporations was used. Structured questionnaires were used for data collection. The questionnaire will be self-administered. The study used a Statistical Package for Social Sciences (SPSS) for both descriptive analyses, that is, mean, percentages, and correlations. For inferential analysis, a both bivariate linear and multiple linear regressions was carried out. Inferential statistics was carried out at 95% degree of confidence. Results were presented in Tables and Figures. The study concluded that financial misstatement had a positive and significant effect fraud risk among state corporations in Mombasa County. To reduce financial misstatement reporting, the study recommends the management of state corporations in Mombasa County to adopt more robust monitoring measures to avoid manipulation of their financial records. There is also need for the management of state corporations to emphasize on proper disclosure of financial statement information. The study also recommends the management of state corporations to ensure that their expenditures are not overstated through the provision of accountability reports. The study further recommends for the adoption of policies to handle financial statements such as Forensic accounting and auditing.