Fraud Red Flags and Fraud Prevention in Nigeria Small and Medium Size Enterprises (SMEs)

This paper examined the effect of fraud red flags on fraud prevention in Nigeria small and medium size enterprises (SMEs). The survey method was used to gather data from respondents which draw from the six geo-political zones of Nigeria, through the administration of seventy-five (75) copies of coded likert scale questionnaire, but only fifty-nine (59) copies were retrieved and used for purpose of data analyses.The analyses of the micro study were done with the aid of the undated ordinary least square regression (OLS) technique. The result of the analyses reveals that the identified red flags in our study all have a positive impact on fraud prevention. Specifically, it was revealed that as mishandling of cash (MHC) increases, the chances of forensic accountant/management being able to identify red flags increases thus culminating in development of preventive control, hence reducing further perpetration of fraud in Nigeria SMEs. Mishandling of cash (MHC) thus exhibited a significant and positive impact on fraud prevention in Nigeria SMEs (FPR). However, failure of account receivable clerk to record customers' payment in account, failure to record sales (FRS), and finally poor inventory management (PIM), all have a positive and insignificant impact on fraud prevention in Nigeria SMEs (FPR). It is therefore recommended that policy makers should enact laws that will make mandatory the engagement of forensic accountants in all sectors of the economy (including existing and would-be entrepreneurs) to help in the development of fraud red flags and subsequent design of preventive mechanisms within organisations to aid fraud prevention