Fraud Risk Factors and Financial Statement Fraud in Nigerian Public Sector Organizations

Financial statement fraud in the Nigerian public sector has been a recurring theme in audit reports and anti-corruption agency findings, yet the specific risk factors that predispose public sector organizations to such fraud have not been adequately examined within the Ebonyi State context. This study investigated the relationship between identified fraud risk factors and the occurrence of financial statement fraud in public sector organizations in Ebonyi State. The study was anchored on the fraud diamond theory, which extends the traditional fraud triangle by adding capability as a fourth element alongside pressure, opportunity, and rationalization. A survey research design was employed, with a population of 265 auditors, accountants, and anti-corruption officials in Ebonyi State. A sample of 159 respondents was drawn via stratified random sampling. A structured questionnaire adapted from established fraud risk assessment tools was administered, and data were analyzed using binary logistic regression. Findings indicated that weak internal controls (opportunity), performance pressure on managers, and rationalization through perceived organizational injustice were the most significant fraud risk predictors. Capability, proxied by management's accounting expertise, also emerged as a significant moderating factor. The study concluded that a combination of structural and behavioral risk factors drives financial statement fraud in the state's public sector. It was recommended that the Ebonyi State Government should establish a proactive fraud risk assessment system that monitors all four fraud diamond elements within government institutions.

Keywords: Fraud risk factors, financial statement fraud, public sector, fraud diamond theory, Ebonyi State