The state of health of an organisation is scientifically diagnosed from its financial statements. Where the financial statements’ quality is compromised, decisions taken based on such fraud infected financial statements could lead to devastating consequences. Many consumers of micro-financial services, sometimes express worries about the quality of financial reports issued. These worries are further compounded by empirical studies which disclose that financial statement fraud though the least common, is the most costly to an organisation. As a consequence this study sets out to investigate the financial statement fraud likelihood determinants prevalent in micro financial institutions in Cameroon. Data was collected through a survey, analysed and regressed. The empirical results revealed that fraudulent audit confirmations, falsification of financial amounts, alteration of accounting records, misrepresentations, and improper capitalisation of expenses are the main likelihood determinants. Although financial statement fraud cannot be completely eradicated given that they are perpetuated by human beings who themselves are imperfect, it can be significantly mitigated when micro financial institutions become conscious of the events or conditions that motivate the commission of financial statement fraud. Micro financial institutions are encouraged to create enabling environment for the stagnation of these elements by strengthening the internal control systems of assets, liabilities, expenses, and revenues. Independent audits be carried out irregularly, perpetrators of fraud held responsible, and employees treated decently and fairly. Management should introduce financial management ethics to employees and be very sensitive to behavioural red flags.
Keywords: Financial Statement, Fraud, bid rigging, falsification, fraudulent audit confirmation, improper capitalisation of expenses., micro-financial institutions, misrepresentation
