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The Impact of Forensic Accounting on Reducing Non-Performing Loans in Nigeria: A Case Study of Keystone Bank

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Background of the Study

Non-performing loans (NPLs) are a significant challenge for the Nigerian banking sector, and Keystone Bank, like many other banks in the country, has struggled with high levels of NPLs. Non-performing loans are loans that borrowers are unable to repay within the stipulated time, often due to fraud, financial mismanagement, or economic downturns. The presence of high NPLs can lead to liquidity problems for banks, negatively affecting their financial stability and ability to offer credit to other customers (Ogunleye & Ajayi, 2023).

Forensic accounting can play a vital role in reducing NPLs by identifying potential risks early in the lending process, detecting fraudulent activities, and investigating the reasons behind the non-performance of loans. Forensic accounting techniques such as fraud detection, transaction tracing, and asset verification can help banks identify fraudulent borrowers or businesses that intentionally default on loans. Keystone Bank has recognized the importance of forensic accounting in addressing the issue of NPLs, and its efforts to apply these techniques are integral to improving the bank’s financial health.

The focus of this study is to assess the impact of forensic accounting on reducing non-performing loans in Keystone Bank. By evaluating the role of forensic accounting in the detection and prevention of loan defaults, the research will provide insights into how forensic accounting can improve the financial stability of Nigerian banks.

Statement of the Problem

Non-performing loans have been a persistent problem in the Nigerian banking industry, and Keystone Bank has not been exempt from this challenge. The inability to address this issue effectively can lead to financial instability and loss of investor confidence. While forensic accounting provides a framework for identifying potential fraud and financial mismanagement that contribute to NPLs, its application in this context remains underexplored. This study seeks to evaluate the role of forensic accounting in reducing NPLs in Keystone Bank and provide recommendations for improving loan performance.

Objectives of the Study

  1. To evaluate the role of forensic accounting in identifying and reducing non-performing loans in Keystone Bank.

  2. To assess the impact of forensic accounting techniques on loan performance in Keystone Bank.

  3. To propose recommendations for improving the application of forensic accounting in reducing non-performing loans in Nigerian banks.

Research Questions

  1. How does forensic accounting contribute to identifying non-performing loans in Keystone Bank?

  2. What forensic accounting techniques are most effective in reducing non-performing loans in Keystone Bank?

  3. What strategies can be implemented to enhance the use of forensic accounting in managing non-performing loans in Nigerian banks?

Research Hypotheses

  1. Forensic accounting techniques significantly reduce the incidence of non-performing loans in Keystone Bank.

  2. The application of forensic accounting improves the loan performance of Keystone Bank.

  3. Enhanced forensic accounting practices reduce the financial impact of non-performing loans in Nigerian banks.

Scope and Limitations of the Study

This study will focus on Keystone Bank and assess how forensic accounting techniques are used to identify and manage non-performing loans. It will examine specific cases of NPLs and the application of forensic accounting to address these issues. Limitations may include access to confidential loan data and proprietary banking information.

Definitions of Terms

  1. Non-Performing Loan (NPL): A loan in which the borrower has failed to make the scheduled payments of principal and interest within the agreed time frame.

  2. Forensic Accounting: The use of specialized accounting techniques to investigate financial fraud and irregularities in business operations (Ogunleye & Ajayi, 2023).

  3. Commercial Bank: A financial institution that offers services like savings accounts, loans, and other financial products to individuals and businesses.





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