Publication: Effect of Forensic Auditing and Investigation Techniques on the Financial Performance of Deposit-Taking Microfinance Institutions in Kenya
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2022-11
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International Research Journal of Business and Strategic Management
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Abstract
The Microfinance institutions in Kenya have experienced notable financial losses in the first 10
years since of the enactment MFIs act of 2006. Many of these have been occasioned by fraud
which not only affects the MFIs, but the entire financial sector. In order to minimize the effects
of these losses, these institutions’ deposit-taking microfinance have adopted the use of forensic
auditing and investigation techniques that are used to investigate and deter financial
improprieties. The study’s main objective was; to assess the effect of forensic auditing and
investigation techniques on the financial performance of Deposit-taking Microfinance
Institutions in Kenya. The study was guided by the fraud diamond theory. The study targeted all
the Deposit-taking microfinance institutions in Kenya that were in operation between 2016 and
2020. The target population was 387 employees and managers of these firms that included:
management and operations, Finance and credit control, Internal audit and Risk, External Audit,
ICT, and Litigation departments of the Twelve Microfinance Institutions that were in operation
in Kenya during the period of the study. The sample size was 281. The researcher used purposive
and stratified Random sampling methods to select the sample. Both descriptive and inferential
statistics were used in analyses. The findings showed that the micro-finance institutions used
forensic auditing and investigation techniques in the fight against fraud. The findings further
showed that the use of forensic auditing and investigation techniques have reduced incidences of
fraud in the banking sector which have positively contributed to financial performance. The
study concludes that there is a significant positive relationship between forensic auditing and
investigation techniques and the financial performance of the deposit-taking microfinance
institutions in Kenya. The study recommends that the management of microfinance institutions
should invest more in auditing and investigation techniques and should implement the
recommendations of external auditors
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Keywords
Forensic Auditing and Investigation, Financial Performance, Microfinance Institutions, Fraud Diamond Theory