Government Auditing in Nepal

Meaning: - Government audit is the systematic and professional examination

of financial, administrative and other operations of a public entity.

In Nepal, Office of Auditor General (establishment date: - 15th Asar 2016 ) is

responsible for audit of public sectors. Provisions on appointment,
qualifications and removal of auditor general are provided in the constitution
of Nepal.

Provisions on Appointment of Auditor General:-

- To be appointed by president on recommendation of constitutional
council.
- Maximum Tenure is 6 years from the date of appointment. He cannot be
reappointed. His tenure will be terminated before 6 years, if he becomes
 disqualified within the 6 years period (for eg. If he attains the age of 65
years in his 4th year of service, his position gets vacant in the fourth year
itself)

Vacancy in the office of Auditor General:-

- Upon resignation (letter sent to the President)
- Upon attainment of 65 years of age
- Upon success of impeachment resolution passed in the parliament as per
article 101 of the constitution
- if he or she is removed from office by the President on recommendation
of the Constitutional Council on grounds of his or her inability to hold
office and discharge the functions due to physical or mental illness
- upon death
Qualification of Auditor General
A person shall be eligible to be appointed as the Auditor General if he or she
possesses the following qualification:
(a) having served in the Special Class of the Government of Nepal or having at
least twenty years of experiences in audit related work, after having obtained a
bachelor's degree in management, commerce or accounting from a recognized
university or having passed a chartered accountancy examination
(b) not being a member of any political party at the time of appointment,
(c) having attained the age of forty five years, and
(d) being of high moral character.

Remuneration of Auditor General

As provided for in the Federal law.
Appointment in other government services
A person once appointed as the Auditor General shall not be eligible for
appointment in another government service.
Functions, duties and powers of Auditor-General:
(1) The accounts of all Federal and State Government Offices including the
Office of the President, Office of the Vice-President, Supreme Court, Federal
Parliament, State Assembly, State Government, Local level, Constitutional
Bodies and Offices thereof, Courts, Office of the Attorney General, Nepal Army,
Nepal Police and Armed Police Force, Nepal shall be audited by the Auditor-
General in 154 accordance with law, having regard to, inter alia, the regularity,
economy, efficiency, effectiveness and the propriety thereof.
(2) The Auditor General shall be consulted in the matter of appointment of an
auditor to carry out the audit of a corporate body of which the Government of
Nepal or State Government owns more than fifty percent of the shares or
assets. The Auditor General may also issue necessary directives setting forth
the principles for carrying out the audit of such corporate body.
(3) The Auditor General shall, at all times, have power to examine any books of
accounts for the purpose of carrying out the functions under clause (1). It shall
be the duty of the concerned chief of office to provide all such documents and
information as may be demanded by the Auditor General or any of his or her
employees.
(4) The accounts to be audited pursuant to clause (1) shall be maintained in the
form prescribed by the Auditor General, as provided for in the Federal law.
(5) In addition to the accounts of the offices mentioned in clause (1), the
Federal law may also require the accounts of any other offices or bodies to be
audited by the Auditor General.

Objectives of Office of Auditor General

 To promote Accountability and Transparency
 To enhance effectiveness of operations
 To promote legal and regulatory compliance within the organization
 To encourage abandonment of discretionary work-style
 To encourage economy in conduct of operations, etc.
Audit Guides published by OAGN
 Administrative Expenditure Audit Guide
 Operational Guideline
 Government Auditing Standards
 Performance Audit Guide
 Procurement Audit Guide
 Revenue Audit Guideline
 Policy Guideline
 Guidelines for the audit of public sector enterprises.

Types of Public sector Auditing

1. Financial Audit
Examination of financial statements with the objective of issuing opinion
as to whether the financial statements are free from material
misstatements.
2. Performance Audit (Efficiency Audit, Economy Audit and Effectiveness
Audit)
Efficiency Audit
Efficiency Audit involves examining as to whether the project/ program
is carried out in efficient manner, with optimum utilization of different
resources.
Economy Audit
Economy Audit involves examining as to whether the project/ program is
carried out at the lowest possible cost.
Effectiveness Audit
It involves examining whether project/program is directed towards the
set objectives and goals.

3. Compliance Audit
It involves examining whether the project/program complies with all
applicable laws, rules and regulations.
Concept of Propriety in Government Auditing
Propriety is the characteristic of a proprietor. Normally, it is expected that the
owner or proprietor of any organization is more concerned about the
possibilities of mis-utilization of the fund of the organization than any
employee of the organization. Propriety involves examination of transactions
with this perspective, i.e. whether or not the funds are utilized in the best
interests of the organization.
Key Concept in Government Auditing
1. Concept of INTOSAI ( International Organization of Supreme Audit
Institutions)
INTOSAI is a body formed by combination of Supreme Audit Institutions
across the world. The members of INTOSAI are supreme audit institutions
of different countries. For eg. Office of Auditor General of Nepal is the
supreme audit institution of Nepal.
2. Concept of ISSAI (International Standard of Supreme Audit Institution)
Level ISSAI Number Purpose
 1 1 to 9 Fundamental
principles of
Govt. Auditing
2 10 to 99 Prerequisites for
auditing
3 100 to 999 Elaboration on
Level 1 and Level
2
4 1000 and Above Specific Auditing
guidelines

3. General Principles of Public Sector Audit under ISSAI

 Ethics
 Independence
 Professional Judgement, due care and skepticism
 Quality Control
 Team Management Skills
 Audit Risk
  Materiality
 Documentation
 Communication

4. Preconditions for Auditing

 Similar to NSA 210, INTOSAI also require the existence of
preconditions for government auditing. They include:-
 Acknowledgement by Management of their duty to prepare
Financial Statements as per Acceptable FRF
 Acknowledgement by Management of their duty for internal
control system
 Following Requirement by auditors to be fulfilled management
- To provide all information
- To provide additional information
- To provide unrestricted access to people in the
organization
 Relevant Provisions from Audit Act 2075
Parameters Section 10 : Fully owned by GON Section 11 :- Substantially owned by
GON
Applicablility Body Corporate wholly owned by Body Corporate Partially owned by
[GON/Prov. Govt./Local [GON/Prov. Govt./Local Govt./another
Govt./another Body corporate Body corporate owned by GON] alone or
owned by GON] alone or in in combination
combination
Who is the Office of Auditor General; he can Member of ICAN
auditor take help from other auditors (i.e.
members of ICAN)
Role of AG  To prescribe the duties,  To provide advice for
functions, powers, appointment of auditor in the
responsibilities and organization
audit-procedures to be  To offer recommendations to
followed by the auditor the organization regarding any
assisting the audit observations in the audit
report prepared by the auditor
  To direct, control and
supervise the auditor
 To decide the
remuneration
Special Note The remuneration of the second  Auditor General should be consulted
auditor (member of ICAN) is borne in appointment of such organization
by the concerned organization.  The remuneration of auditor is borne
by the concerned organization