Is the fraud diamond perspective valid in Kenya?

Purpose The purpose of this study was to determine the influence of the elements of the fraud diamond theory in detecting financial statement fraud among non-financial firms in Kenya. Secondary data used to calculate ratios and figures representing the study variables was collected using a checklist for each of the targeted firms listed in the Nairobi Securities Exchange in Kenya for the 2013-2017 period. Design/methodology/approach Secondary data used to calculate ratios and figures representing the study variables was collected using a checklist for each of the targeted firms listed in the Nairobi Securities Exchange in Kenya for the 2013-2017 period. Convenience sampling technique was used to come up with a sample size of 35 out of the targeted population of 45 non-financial firms listed in Kenya (78% representation). This sample size was representative enough of the targeted population. Findings The results strongly supported that all the four elements of the fraud diamond triangle influenced financial statement fraud in Kenya. However, using three parameters, namely R 2 , predicted sign and standard error, to compare the applicability of either the Yoon et al. (2006) or the modified Jones (1991), our study findings are mixed. It is therefore imperative that a new model should be developed in detecting earnings management in the Kenyan context. Note that including other variables will to a greater extent increase the explanatory power in detecting earnings management practiced by non-financial firms listed in Kenya. Research limitations/implications Use of secondary information in the study was one limitation. Certain financial information was missing from some of the targeted firms’ official websites and the Nairobi Securities Exchange research handbooks. The researcher ensured that only non-financial firms whose audited financial statements were easily accessible were included in the study. Firms whose records were not readily available were excluded from the survey. Practical implications Practically, this study enables regulatory authorities in Kenya to understand the extent with which each element of the fraud diamond theory could be relied on in detecting financial statement fraud. Moreover, it will advise them on the areas to lay more emphasis when attempting to detect financial statement fraud using this model. Originality/value The main value of this study is the determination of the key elements of the fraud diamond theory, which have influence on financial statement fraud among non-financial firms listed in Kenya.