Abstract:
The main objective of the study was to establish whether the banks in Kenya were involved
in financial statement manipulations. The study involved all the banks registered and operating in
Kenya and whose financial statements are published for public consumption. Beneish five-variable
model was first used to categorize the banks as likely non-manipulators and likely manipulators. The
probit regression model was used to determine non-manipulators and manipulators based on the averages
derived
from
non-manipulators
using
Beneish
five-variable
model.
The results
obtained
showed
that
78.8%
of
all banks
were
not
involved
in
financial
statement
manipulations
while
21.2%
were
involved
in
financial
statement
manipulations.
The
study
concluded
that
some
banks
that
were
involved
in
financial
statement
manipulations.
The
study
recommended
that
both
internal
and
control
auditors
should
compute
individual
indices
to
determine
whether
the preparers
of
financial
statements
were
involved
in
manipulations.
Further
it
was
recommended
that
the
organizations
should
enhance
and strengthen
the
ICS
to
seal
the
loopholes utilized
in
financial
statement
manipulations.
