Building the Foundation: Towards a Theoretical Framework for Forensic Accounting

Abstract

This study proposed a forensic accounting theory after examining how the impact of certain variables and their interplay on forensic accounting practices can contribute to developing integrated and robust fraud prevention strategies, enhance organizational accountability, and strengthen the overall integrity of financial and internal control systems. In literature, most studies on forensic accounting and fraud prevention have primarily focused on broader aspects such as governance, ethics, and accountability and are largely predicated on theories such as fraud diamond theory and agency theory that seek to understand the causes of fraud, highlighting the importance of forensic accounting in fraud prevention and detection, without suggesting practical forensic accounting frameworks. Also, the forensic accounting theory developed by Peterson Ozil in 2020 examines how the investigator’s attitude or mindset at the time of decision-making influences the outcomes of a forensic investigation. While these studies provide valuable insights into the overall context of fraud prevention, there is a scarcity of research on the specific forensic accounting processes that should be implemented to enhance the effectiveness of fraud prevention measures. This is the significant difference between the current study and previous studies. Therefore, the proposed Vutumu Forensic Accounting Theory serves as the guiding philosophy that underpins the integrated approach of combining control system reliance, litigation support, whistleblower hotlines, sustainable governance systems, ethical philosophy, digital fraud review frequencies, accounting record to reporting quality, and the frequency of system reviews, thereby enabling organizations to establish a proactive framework that addresses various dimensions of fraud prevention and detection. The implementation of the theory emerges as a formidable and comprehensive anti-fraud strategy, seamlessly integrating multiple elements to create a robust defense against fraudulent activities, safeguarding financial integrity, ethical conduct, and accountability within organizations. Furthermore, it is the researcher’s desire that this study serve as a foundation for further research and practical implementation of forensic accounting frameworks in strengthening the ability to detect and prevent fraud.