The impact f forensic account on the financial performance of listed banks in Kenya- Case Study: Kenya Commercial Bank (KCB)
Background information
Forensic and investigative accounting can be defined as the application of financial skills and investigative mentality to unsolved issues, conducted within the context of the rule of evidence. According to Ng’ang’a (2015), it involves financial expertise and fraud knowledge and understanding of business realty and working of a legal framework. Generally, forensic audit is seen as a branch of accounting that is appropriate for legal review and pestering the top most level of assurance.
A recent research by Onyango (2018) has proven that fraudulent activity among the commercial banks in Kenya have had a negative impact on the sustainability, viability and performance of such banks. As a result, the need for forensic accounting and audit has significantly own up to mitigate financial casualties among the listen banks in Kenya. Akelola (2015), asserts that most organizations’ audit system fail to detect certain errors in the managerial system. Additionally, more and more forensic accountants are being called up to thoroughly search through documents and find out new information necessary in putting together the irregular pieces of company’s financial puzzle to curb the vexing (Crain et al, 2016). Don't use plagiarised sources.Get your custom essay just from $11/page
The incorporation of modern accounting techniques is seen and understood to be timely in the preparation field to effectively deal with the problem of fraud schemes emanating from audit failure to detect frauds in Kenyan banks. According to Ng’ang’a (2015), proactive forensic accounting proactive seeks out operational vagaries, errors and defiant transactions before they grow into fraud.
Forensic Accounting services
Forensic refers to the scientific method and techniques used to investigate the crime. Audit refers to an official inspection of an organization’s accounts, typically by an independent body or person. According to Gray (2008), forensic may refer to the application of knowledge to the legal problems such as crime. Therefore, forensic accounting is an examination of the firm’s or industrial’s financial information for use as evidence in the court. The Institute of Forensic accounting (IFA) defines a forensic accounting as an activity that involves the collection, verification analysis and reporting of data with the an aim of collecting evidence to be used in the court of law. On the other hand, The Institute of Certified Public Accountants of Kenya (ICPAK) terms forensic accounting as gaining and understanding of a fraudsters’ mind in efforts to determine a reason for committing fraud as well as detecting them. (Onyango, 2018).
The main aim of forensic accounting is to determine fraud that may rise due to the fact that the internal and external audit functions of the organization are not in a good position to detect the corporate fraud. These fraud can be theft, which may include cash, inventory as fraudulent payments. On the other hand, fraud can be corruption such as conflict of interest, bribery and extortion (Onodi, et al, 2015). Forensic skills are critical in uncovering and establishing the occurrence of financial fraud and crime, (Alao, 2016)
Forensic Accounting Services and Fraud Detection
Forensic accounting (Rezaee et al, 2004) is defined as the practice of rigorous data collection and analysis in the areas of litigation, support, consulting, expert witnessing and fraud examination. According to Bolgina and Robert (1985), forensic means relating to the application of scientific knowledge to legal problems usable in court of law. Forensic accounting includes the use of accounting, auditing and investigative skills to assist in legal matters. It consists of two components: Litigation services that recognize the role of an accountant as an expert consultant and investigative that uses forensic accounting skills and may require