Forensic Accounting: The Untapped Potential to Improve Nepal’s Financial System
“Behind every missing rupee lies the life of a citizen, silently paying the price for systemic failure.”
In Nepal, the collapse of cooperatives, irregularities in public spending, and frequent cases of corruption are issues we hear about on a regular basis. Due to these kinds of activities, middle and lower-middle class people lose the funds they have saved by working their entire lives. Especially those who work hard just to pay bills and educate their children, increasingly feel that the system was never designed for them. They feel that they are being betrayed by a financial system that was meant to protect the interests of the general public.
When cooperatives collapse or public spending goes wrong, it is the general public who pays the price through poorer services and higher indirect costs. Beyond the financial statements, what cuts deepest is the erosion of trust in the financial system of the country. People demand transparency, but our financial system is still not as transparent as it needs to be. But there is a solution, and surprisingly, it is not a political debate or dramatic reform; it is a practical and proven method: Forensic Accounting.
What Forensic Accounting Really Means
For many, the term sounds like something out of a crime documentary. But its purpose is simple: to find the truth insidefinancial records. In simple terms, forensic accountants act like detectives who use numbers to detect fraud in its early stages. While a normal audit confirms the compliance check, a forensic accountant checks if those numbers are honest. They examine transactions carefully, look for unusual patterns, investigate misstatements, and trace where money actually moves. In a country where financial misconduct often happens quietly and is discovered too late, this discipline is more than necessary to ensure transparency.
In countries where financial discipline matters, forensic accounting is not an optional specialty. It is the backbone of transparency. Gordon Brown, the then British Chancellor of the Exchequer, stated that “what the use of fingerprints was to the 19th century and DNA analysis was to the 20th, forensic accounting will be to the 21st century.” It is the reason governments, banks, and businesses can uncover fraud early instead of suffering losses later. Forensic accounting goes beyond regular audits by not just verifying numbers but uncovering frauds, analyzing hidden financial patterns, and revealing the true story behind the figures.
The Cracks in Nepal’s Financial System
One of the most visible problems is the repeated collapse of cooperatives. Mismanagement and weak internal controls have allowed irresponsible lending and hidden manipulation to thrive. When these cooperatives fail, it is always the everyday citizens who lose everything. These failures are not isolated accidents; they expose how fragile and unprotected Nepal’s financial ecosystem actually is.
The Auditor General’s latest report for Fiscal Year 2080/81 (2023/24), submitted to President Ramchandra Paudel on May 14, exposed a staggering jump in government arrears. An additional Rs. 91.59 billion in financial mismatches was recorded this year alone, pushing total outstanding arrears to an alarming Rs. 733.19 billion. These figures are not just accounting errors; they are the financial footprints of weak monitoring and opaque transactions across federal, provincial, and local bodies. Billions of rupees are allocated for roads, drinking water, hospitals, and local development, but many of these projects aren’t completed within a given timeframe due to financial irregularities, which increases the cost of the project. Citizens end up paying twice, once through taxes and again through the daily frustrations caused by poor infrastructure and failed services.
According to Transparency International, Nepal scored just 34 out of 100 in the 2024 Corruption Perceptions Index, placing it 107th out of 180 countries. This score shows how fragile our financial ecosystem has become, with consequences that reach far beyond what most of us can even imagine in our wildest dreams. One of the main reasons for all these activities to prevail is the lack of transparency and accountability in the financial system, which can be significantly improved through the application of forensic accounting.
How Forensic Accounting Can Bring Transparency and Accountability
Transparency is not created through speeches or slogans, it comes from creating a system that can detect dishonesty and loopholes before it becomes a disaster. When people know that every rupee can be tracked and every dishonest act can be exposed, this creates a sense of accountability among the people. In a country where financial irregularities often happen because problems remain “who is to be held accountable,” forensic accounting gives institutions and government the power to prove the truth.
Forensic accounting is a tool that can solve many financial mysteries which are otherwise very difficult to justify orprove. It can create more transparent and cleaner future for the financial system of Nepal where there is no room for hidden fraud, mismanagement, or misuse of public funds. When each and every transaction are traced and can be held people accountable who are responsible, it ensures that cooperatives, government projects and different institutions can operate freely and smoothly. Forensic accounting goes beyond protecting money, it enhances the public confidence in the financial system of Nepal and overall economy which is very necessary for any nation to grow, thrive and prosper.
Conclusion
Nepal’s financial system is at a crossroads. The repeated collapse of cooperatives, the swelling arrears in public spending, and the alarming levels of corruption are no longer just policy failures, they are daily realities affecting millions of general public. Nepal needs a system that can view through each and every transaction and hold every wrongdoer accountable. Forensic accounting offers a practical and proven solution to these systemic problems by unveiling hidden financial irregularities and other unethical activities in the financial system. Its adoption can transform Nepal’s financial landscape by fostering transparency, protecting citizens savings and rebuilding the integrity of cooperatives and government projects. To move forward, Nepal must institutionalize forensic accounting across every high-risk sector and empower independent bodies with the authority to investigate and publish findings transparently. This shift will not only save money, but it will also protect the trust of millions of citizens whose savings, taxes, and future depend on the financial system of Nepal. If Nepal truly wants a financial system that works for the general people, embracing forensic accounting is a must.
Author 1
Name: Nischal Adhikari
BBA 8th Semester, School of Business, Pokhara University
E-mail: nischaladhikari429@gmail.com
Author 2
Name: Dikshyant Subedi
BBA 8th Semester, School of Business, Pokhara University
E-mail: dikshyantsubedi16@gmail.com
Both of the authors are pursuing their final semester of Bachelor of Business Administration (Accounting) at the School of Business, Pokhara University. Their academic interests include sustainable finance, forensic accounting, financial literacy, and Information Technology.
