An Empirical Study of the Impact of Forensic Accounting Techniques on Fraud Prevention in the Banking Sector

Posted: Dec 07, 2024

• Noah Brown
• Noah Hill
• Noah Johnson

Abstract

The global banking sector faces an escalating challenge in combating financial fraud, with estimated annual losses exceeding $4.2 trillion worldwide. Traditional fraud detection mechanisms, while progressively sophisticated, often operate reactively, identifying fraudulent activities only after substantial financial damage has occurred. This empirical study addresses this critical gap by investigating the proactive potential of forensic accounting techniques in fraud prevention within banking institutions. Forensic accounting, traditionally employed in post-fraud investigations, represents an underexplored frontier in preventive financial security. This research pioneers a paradigm shift by repositioning forensic accounting from its conventional investigative role to a strategic preventive function. Our study is motivated by the increasing sophistication of financial fraud schemes and the limitations of existing detection systems. Current automated fraud detection systems primarily analyze transactional patterns and anomalies but often fail to account for the behavioral and psychological dimensions of fraudulent activities. This research introduces a novel conceptual framework that integrates forensic accounting principles with behavioral analysis, creating a comprehensive approach to fraud prevention. The central research question examines whether systematically applied forensic accounting techniques can significantly reduce the incidence and financial impact of fraud in banking operations.