Forensic Accounting 

Introduction 

Forensic Accounting or Forensic Auditing or Financial Forensic is the speciality practise area of accounting that describes engagements that result form actual or anticipated disputes or litigation.
In simple terms forensic accounting means the use of accounting skills to investigate into frauds or embezzlement and to analyse financial information for use in legal proceedings.
It involves use of analytical and investigative skills  to resolve financial issues.

Need of Forensic Accounting

With the passage of time and massive development in financial world and with the added complication of Technology the method of committing fraud has evolved massively in comparison to traditional ways of committing frauds. with so many commercial laws to govern economic transactions, one can easily overlook any particular legal compliance or finding a loophole in such laws using it for evasion purposes. The traditional way of auditing and fraud detection mechanism desperately needed a specialised , sophisticated and technical concept. hence the concept of Forensic Accounting emerged.
Financial Frauds are burning issue in the financial world today. whether it's the Enron Bankruptcy 2001, The World Com Scam 2002, The Madoff Pyramid 2008, The Great Recession 2008 or PNB Scam, and so many other bank frauds etc, the stake at risk were so massive that they shock not only the particular industry but the entire economy from it's roots. Millions of lives were directly affected in one way or another. This is why forensic accounting has grabbed so much attention now a days. The need for Forensic Accounting has been increasing rapidly due to fraud, financial crimes and money laundering.

Areas where Forensic Accounting can be applied

. Criminal & Civil Investigation
. Providing evidences in Court
. Insolvency & Litigation support Investigation
. Breach of Contracts
. Fraud detection/ prevention
. Insurance claims, warranty claims
. Regulatory Enquiries
. Business Valuations
. Divorce cases and matrimonial disputes settlement
. Arbitration
. Expert witness cases

Skills and Characteristics that a Forensic Auditor supposed to possess.

I. Core Skills
-Ability to critically analyse the financial statements. It helps auditors to analyse unusual pattern.

-Ability to understand and analyse the internal controls.

-Proficiency in Information Technology and Computer Network.

-Knowledge of Psychology to understand the thinking and motive behind the criminal behaviour and also to motivate and encourage employees. It is necessary to understand peoples psychology because people commit fraud and crimes underlined by many factors like financial problem, pressure, attitude of the employee, motivation etc.

-Through insight and knowledge into entity's governance policies and laws governing them.

- In depth understanding of fraud schemes like misappropriation, money laundering, bribery and corruption.

- Knowledge of relevant laws like commercial laws, taxation laws etc.
- Inter personnel and communication skills.

 
II. Non Core Skills
- Sound professional judgement
- Look beyond numbers and focus on substance of the situation.
- Do not overlook the details coz devils are in the details.
- Curiosity, persistence and creativity.
- Investigative skills

Process/ Steps in Forensic Auditing

1. Accepting and Initialising the audit
2. Develop The Plan for the audit
3. Gathering evidences
4. Analysing evidences
    While analysing following methods can be used
          i.   Substantive Techniques- like review of documents and                      records, doing reconciliation
          ii.  Analytical Procedure- it involves comparison of trends,                      financial ratios etc
          iii. Application of Computer Assisted Techniques
          iv.  Interviewing and Observation
5. Reporting
6. Court Proceedings

 Forensic Accounting in Nepal
 With the development of financial world crime, fraud and corruption, context of Nepal is no different. The instances and value of financial fraud and corruption has been ever increasing. Level of corruption is so massive that the entire country's economy has been adversely affected. The inefficient government policy and further more inefficient regulatory and control mechanism has further made the country vulnerable. Corruption has been institutionalised and no measures for check and balance whatsoever.
So it would not be fallacious, even a bit, to say that the need for Forensic Accounting in Nepal is utmost in the present days.
In a nutshell frauds in Nepal can be categorised in 3 types- 1. Financial Statement Frauds 2. Misappropriation of Assets 3. Corruption
The young accountants of the country need to draw their focus in Forensic Accounting because of it's increasing importance in Nepal and the fact that the existing number of professional in the filed of Forensic Accounting is trivial.

Nepal investment summit 2019 

                                                

Slogans on one hand and the ground reality. Is it that milestone which it has been projected as such or is it the other way opposite . My opinion

With a decade long civil war and polictical transition coming to its long awaited end Nepal has now got its own constitution and a stable government.

The main agenda is now sustainable and accelerated economic development.

And the investment summit tends to highlight the same issue and encourage foreign investment in nepal

There is no doubt that foreign investment is vital for a country like nepal who is dreaming of the economic growth where domestic capital is not enough. And it is a positive step in that direction to have a summit like this . But the ground reality points that it is just a spark which be nothing if not turned to flame. Summit is not the actual initiative.

Why would a foreign investor want to invest in any country? Coz he wants good return and sense of security of his investment. Nepal has still got to do it homework clearly and properly if it wants to attract heavy investment.

Ease of doing business should be massively improved. Laws and regulations should be investment friendly.

Tax laws should be simplified and should tend to promote investments. Infrastructure should be adequate. Nepal should come forward with clear cut policies in this respect. And one of the major decision that should be taken is the specification of sectors that shall be kept open for the foreign investment.

In my opinion foreign investment should be allowed in mega capital projects like hydropower, infrastructure, vehicles and machinery mfg companies, education, health, banking and finance ,technology, agro technology are the major possible sectors. These sectors require huge capital investment which can be acheived form foreign investment. Foreign investment on small sectors where domestic investors are working should be avoided because it could adversely affect the competitiveness and opportunities for our own investors.

Some of those sectors are Reatail sectors , hotel and restaurants, small and medium manufacturing sectors, shoes industry, construction material mfg sector, agriculture. Sectors where nepal is moving towards self sufficiency should be kept away from the per-view of FI, coz engagement of foreing investors on those sectors could kill our own businesses and prospects of our own investor. One thing shall be always kept in mind that we should also constantly move towards building our own domestic investments in the country in long run . We should not for always tend to rely on foreign investments and rather encourage entrepreneurship among our own people. 

In order to attract FDI building procedural and infrastructural ease is one important requirement and parallel to it different tax incentives whether in the form of tax exemptions for certain period or tax holiday or other similar progressive and welcoming tax laws should be made.