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Auditing Concepts and Practices in Nepal: Frameworks, Irregularities, and Legal Mandates

Examination and evaluation of auditing concepts and practices in Nepal, focusing on the broader definition, types, and elements of public sector auditing frameworks. The audit approach involves confirming the reliability and fairness of financial transactions, effectiveness of internal controls, value for money principles, and more. Legal mandates such as the Audit Act and Constitutional Provisions empower the Auditor General to audit various entities in Nepal, ensuring regularity, economy, and accountability.

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Auditing Concepts and Practices in Nepal: Frameworks, Irregularities, and Legal Mandates

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  1. Chandra Kanta Bhandari, FCA

  2. Auditing Concepts; broader definition, types, elements /parties Public Sector Auditing Frameworks and Practices in Nepal Irregularities; amount by type Audit of State Owned Enterprises Other relevant matters     

  3. Examination confirmation of: ◦ Reliability & Fairness of financial transactions and reports, ◦ Effectiveness of internal control system, ◦ Value Adding principle of Value for Money ◦ Meeting objectives and expected outcome ◦ Sustainability in meeting the challenges ◦ Establishing accountability ◦ Promoting transparency ◦ Strengthening Integrity Examination, , verification, evaluation or confirmation of: verification, evaluation or

  4. It begins with a three party relationship. Entity Professional Accountant/Auditor User of Subject Matter

  5. Entity Professional Accountant Data Against suitable criteria Systems & Processes Evaluate/Measure Subject Matter Behavior User of Subject Matter

  6. Entity Professional Accountant Data Against suitable criteria Systems & Processes Evaluate/Measure Subject Matter Behavior Express an opinion / conclusion on level of assurance about subject matter “FA- presented fairly, in all material respects” or “true and fair view” User of Subject Matter

  7. Entity AUDIT APPROACH & Methodology Professional Accountant Data Against suitable criteria Systems & Processes Evaluate/Measure Subject Matter Behavior Express an opinion / conclusion on level of assurance about subject matter User of Subject Matter

  8.  Constitutional Provisions  Audit Act, 1991  Financial Procedural Act, 1998  Other Laws

  9.  AG receives its legal mandate through The Constitution of Nepal.  Part 22 of the constitution in Article 240 and 241 contains provisions relating to: ◦ appointment of AG, terms of office, remuneration, functions, duties and powers of the AG  AG is empowered to carry out audits of the accounts of : ◦ the office of the Prez and Vice-prez, the Supreme Court, Federal Legislature-Parliament, Provincial Parliament, Provincial Government, Local Bodies, Constitutional bodies and their offices, the courts, the Office of the Attorney General, Nepal Army, Nepal Police or Armed Police Force including all federal and provincial government offices and other entities as per prescribed in Laws  in such manner as may be determined by law, with due consideration given to the regularity, economy, efficiency, effectiveness and the propriety thereof.

  10. n]vfk/LIf0fsf] n]vfk/LIf0fsf] pB lgsfosf] cfly{s ljj/0fn] ;Dk"0f{ cfly{s sf/f]jf/ / l:yltsf] ;xL / oyfy{ lrq0f u5{ jf ub}{g eGg] ;DaGwdf k/LIf0f u/L :jtGq /fo JoQm ug{] . a:t' tyf ;]jfsf] ;fj{hlgs vl/b nufot ;fj{hlgs lgdf{0f sfo{x? cfly{s sfo{ljlw P]g, ;fj{hlgs vl/b P]g tyf lgodfjnL nufot ;fGble{s sfg"g Pj+ ;fj{hlgs lgdf{0f lgb]{lzsf jf cGo ;DalGwt lgb]{lzsfsf k|fjwfgx? adf]lhd ;DkGg eP gePsf]] k/LIf0f ug{] . ;fj{hlgs >f]tsf] k|of]u ldtJooL, bIftfk"j{s tyf k|efjsf/L ?kdf u/LP gu/LPsf] ;DaGwdf k/LIf0f ug{] . pB] ]Zo Zo M M

  11. n] n]vfk vfk/LIf0f /LIf0f k|sf • n]vfk/LIf0fsf] k|sf/ cg';f/ n]vfk/LIf0fsf] d"Vo pB]Zo km/s x'G5 . • t/ ;j} k|sf/sf n]vfk/LIf0f cfjZostf cg';f/ 5'§f5'§} jf ;+u} ug{ ;lsG5 . • n]vfk/LIf0fsf] k|sf/ / d"Vo pB]Zo h] ;'s} ePtfklg n]vfk/LIf0fsf] k|lqmof w]/} xb;Dd ldNbf]h'Nbf] x'G5 . To;sf vf; lqmofsnfk dfq km/s x'g ;S5g . k|sf/ / / n] / n]vfk vfk/LIf0fsf] /LIf0fsf] pB pB] ]Zo Zo

  12. n] n]vfk vfk/LIf0f /LIf0f k|sf n] n]vfk vfk/LIf0f /LIf0f k|fo lalQo lalQo n] n]vfk vfk/LIf0f /LIf0f k|sf/ M k|fo M # M # k|sf lgsfosf] cfly{s ljj/0fn] ;fj{hlgs ;]jf jf a:t'df u/LPsf vr{x?sf] ;xL / oyfy{ lrq0f u5{ jf ub}{g eGg] :jtGq /fo JoQm ug{] . ;fj{hlgs ;]jf tyf sfo{x? k|rlnt P]g, lgod jf lgb]{lzsfsf k|fjwfgx? adf]lhd ePsf] jf gePsf] k/LIf0f ug]{ . ldtJooLtf, sfo{bIftf / k|efjsf/Ltfsf] b[li6|sf]0f af6 k/LIf0f ug]{ . / M k|sf/n] /n] ug ug{ ;lsG5 M { ;lsG5 M lgoldttfsf lgoldttfsf] ] n] n]vfk vfk/LIf0f /LIf0f sfo sfo{ {d"ns d"ns n] n]vfk vfk/LIf0f /LIf0f

  13. n] n]vfk vfk/LIf0fsf] b[li6sf]0f /LIf0fsf] b[li6sf]0f • lgoldttf, • ldtJooLtf, • sfo{bIftf, • k|efjsfl/tf / • cf}lrTo g]kfnsf] ;+ljwfg / n]vfk/LIf0f P]g - k|yd ;+zf]wg_ @)&# b'j}df oL b[li6sf]0f cg';f/ n]vfk/LIf0f ug'{kg]{ s'/f pNn]v 5 .

  14. n] n]vfk vfk/LIf0f ; /LIf0f ;DjGwL n] n]vfk vfk/LIf0f P]g, @)$* /LIf0f P]g, @)$* sf sf] ] bkmf • n]vfk/LIf0f ug]{ ;/sf/L sfof{no, g]kfn ;/sf/sf] k"0f{ jf clwsf+z :jfldTj ePsf] ;+ul7t ;+:yf jf cGo ;+:yfsf] ;a} jf tL cGtu{tsf s'g u/L u/L cfly{s sf/f]af/ / ;f];Fu ;DalGwt cGo lqmofsnfkx?sf aLr aLr aLrdf aLrdf 58 58\ \s] u/L s] u/L jf jf s] s]xL xL k|ltzt k|ltzt dfq tl/sf, If]q / cjlw tf]sL clGtd n]vfk/LIf0f ug{, To;af6 k|fKt ePsf tYox? bzf{pg, To;df cfnf]rgf ug{ / cfly{s ljj/0f pk/ cfjZostfcg';f/ /fo;lxtsf] k|ltj]bg ug{ ;Sg] . • g]kfn ;/sf/åf/f cg'bfg k|fKt u/L ;+rfng ePsf sfo{qmd tyf cfof]hgfsf] l:ylt tyf n]vf;DaGwL sfuhft h'g;'s} avt x]g{, • ;/sf/L sfdsf] 7]Ssf lng] lgdf{0f Joj;foL / cfk"lt{stf{ jf ;/sf/L sfdsf] lhDdf lng] ;+:yf jf JolQmnfO{ ;d]t To:tf] 7]Ssf jf cfk"lt{ jf cGo ;/sf/L sfd;Fu ;DalGwt sfuhft, cfGtl/s /fh:j sfof{noaf6 s/ k/LIf0f ePsf kmfOn tyf yk k|df0f sfuhft k]z ug{ nufpg, • n]vfk/LIf0fsf] sfddf s'g} ljz]if1sf] ;]jf pknAw ug{ / cfjZos k/]df plrt kfl/>lds lbO{ s/f/df sfd nufpg . • n]vfk/LIf0f ul/g] lgsfon] ckgfPsf ;"rgf k|ljlwdf dxfn]vfk/LIfs jf dxfn]vfk/LIfssf] sfof{nosf sd{rf/Lsf] kx'Fr x'g] . DjGwL tl tl/ /sf sf M M bkmf # M # M n] n]vfk vfk/LIf0f ; /LIf0f ;DaGwL DaGwL t/ t/Lsf Lsf M M s'g} } OsfO OsfO{ {dfq ] Ps Ps ug]{ ]{ u/L n]vfk/LIf0fsf] dfq 5gf}6 5gf}6 Ps u/L u/L jf jf lqmofsnfkx?sf] Ps dfq k/LIf0f k/LIf0f ug

  15. n] n]vfk vfk/LIf0f ; /LIf0f ;DjGwL • n]vfk/LIf0f ug'{kg]{ lgsfosf] ljQLo n]vfk/LIf0fsf] cltl/Qm sfo{d"ns, ;"rgf k|ljlw, ljlwlj1fg, n}lus, jftfj/0fLo h:tf ljifosf] n]vfk/LIf0f ug{ ;Sg] . - -bkmf ljljw ljljw ljifosf ljifosf] n] ] n]vfk vfk/LIf0f_ /LIf0f_ • n]vfk/LIf0f ug'{kg]{ lgsfosf] ;fdlos n]vfk/LIf0f ug{ ;Sg] . - -bkmf bkmf#v #v=; =;fdlos fdlos n] n]vfk vfk/LIf0f_ /LIf0f_ • o;/L ul/g] n]vfk/LIf0fsf] ljlw, tl/sf, If]q / k/LIf0f ug]{ s'/fx? dxfn]vfk/LIfsn] tf]lslbP adf]lhd x'g] . DjGwL tl tl/ /sf sf M M bkmf #s= #s=

  16. n]vfk/LIf0fsf] ljlw k|0ffnLsf] k|0ffnLsf] d"Nof+sg n] n]vf vf clen clen] ]vsf vsf] k/LIf0f kmfO kmfO{n / {n / sfuhftsf sfuhftsf] k/LIf0f : :ynut ynut cjnf cjnf] ]sg sg tyf cGo cGo pko'St pko'St ljlw ljlw d"Nof+sg ] k/LIf0f ] k/LIf0f /LIf0f / tyf lg lg/LIf0f /

  17. n] n]vfk vfk/LIf0f /LIf0f cfwf ;/sf/L gLlt, ah]6, sfo{qmd, lgb]{lzsf, ;fj{hlgs vl/b P]g tyf lgodfjnL, cfly{s sfo{ljlw P]g tyf lgodfjnL, ;fj{hlgs lgdf{0f lgb]{lzsf, lgdf{0f sfo{ ;DjGwL :jLs[t gd{z, lhNnf b/ /]6, Jfflif{s sfo{qmd, cfof]hgf k|ltj]bg jf cjwf/0ff kq, bft[;+:yf Pj+ /fi6| ;+u ul/Psf ;Demf}tf, lgdf{0f Joj;foL;+u ul/Psf] ;Demf}tf cGo ;DjlGwt P]g lgodx? cfwf/x? /x?

  18. Matters to be examined k/L If0f ug] { s' ' /fx¿ - n] vfk/L If0f P ] g -klxnf] ;+ zf] w g_ , @ )& # s] f bK fm f $ jdf] lhd_ n] vfk/L If0f b[ li6sf] 0f M lgoldttf, ldtJ olotf, sfo{ bIftf, k| efjsfl/tf / cf} lrT o ;d] t ljrf/ u/L qm = ;+ = k/L If0f ug] { s' ' /fx¿ lj lgof] hg P ] g tyf cG o k| r lnt P ] g adf] lhd ; ] j f tyf sfo{ df vr { ug{ lglb{ i6 ah] 6 zL if{ s tyf pkzL if{ sdf :j L s[ t eP sf /sdx? ; f] xL zL if{ s tyf pkzL if{ ssf] ; L dfdf /xL lglb{ i6 k| of] hgsf] nflu vr { eP geP sf] , @ sf/f] af/sf] n] vf tf] lsP sf] 9fF rf cg'?k /fv] g/fv] sf] , ; + j } w flgs lgsfo, dG qfno, lj efu / ; f]; /xsf s] G b| L o txsf sfof{ nox?n]dftxtsf sfof{ nosf]lj lgof] hg, /fh:j , w /f} 6Lnufotsf ; D k" 0 f{ cfly{ s sf/f] af/sf]s] G b| L o n] vf /fvLs] G b| L o lj j /0 f tof/ kf/]gkf/] sf]/ tof/ kf/] sf]eP; f] sf]cfw f/df cfly{ s sf/f] af/sf]oyfy{lrq0 f u/] gu/] sf] , $ cfly{ s lj j /0 fn] T o; df n] lvP sf] cj lw sf] cfly{ s sf/f] af/sf] ; xL / oyfy{ lrq0 f u/] gu/] sf] , % cfD bfgL vr{ eP sf sndx?sf] k'i6\ ofO { x'g] k| df0 f oy] i6 eP geP sf] , gubLlhG ; Lnufot pknA w; | f] t, ; fw g / ; D klQ sf]plrt ?kdf pkof] u u/]gu/] sf]/ T o:tf]; D klQ sf]xflg gf] S ; fgLgx'g]u/L; D ef/ tyf ; + /If0 fsf] plrt J oj :yf u/] gu/] sf] ; /sf/LC0 f tyf nufgL/ T o; af6 k| fK t x'g'kg] {P j +ltg'{a'em fpg'kg] {/ a'em fO P sf]; fF j f, A ofh, nfef+ z cflbsf]n] vf /fV g]J oj :yf kof{ K t eP geP sf] , ; f] cg'?k n] vf /fv] g/fv] sf] / oyfy{ eP geP sf] , cfG tl/s lgoG q0 f k| 0 ffnL sf]k| efj sf/LJ oj :yf ePgeP sf]/ ; f] sf]cg'z/0 f u/]gu/] sf] , ; D alG w t ; /sf/Llgsfon]cfj Zos ah] 6 ; dodf pknA w u/fP gu/fP sf] , ( cfG tl/s n] vfk/L If0 f eP geP sf] , eP sf] df k| ltj ] bg sfof{ G j ogsf] l:ylt ; G tf] ifhgs eP geP sf] , ! # ^ & *

  19. Matters to be examined contd… /fh:j P j+; /sf/Lsf] ifdf hD df x'g'kg] {/sd / w /f} 6L; D aG w LP ] g, lgod, lg0f{ o, cfb] z / tT ; D aG w Lsfo{ ljlw sf]kof{ K ttf, nut Joj:yfkg, T o; sf] kfngf / sf/f] af/af6 xflg gf] S ; fgL k'u] gk'u] sf] , cf} Bf] lus tyf Jofj; flos ; ] jfx?sf]cfD bfgLvr{ sf]n] vf, T o; sf]lhG ; L , gub df} H bft tyf cfly{ s sf/f] af/ ; D aG w LJoj:yf / sfg" g kof{ K t eP geP sf] / ltgsf] kfngf u/] gu/] sf] , sfof{ nosf] ; + u7g / Joj:yfkg tyf sfo{ ljefhg oy] i6 / ; d'lrt eP geP sf] / ; f] cg'; f/ sfo{ ; ~rfng eP geP sf] , !) !! !@ s'g}sfd cgfjZos ?kdf bf] xf] /f]x'g]u/LljleG g sd{ rf/Ljf lgsfoaf6 ul/P sf]jf ug'{ kg] {s'g}sfd 5'6fP sf]jf sfof{ nosf]sfd lglb{ i6 ; dodf ug] { u/fpg] k| efjsf/L Joj:yf eP geP sf] , ; + u7g / sfo{ qm dsf]pknA w Lls6fg ug] {cfw f/ :ki6ePgeP sf] , sfo{ qm d cg'; f/ lgw f{ l/t ; doleqk| ult ePgeP sf]tyf sfdsf]u'0f:t/ / kl/df0f ; G tf] ifhgs eP geP sf] , !% sfof{ nosf] p2] Zo / gL lt :ki6 eP geP sf] / lglb{ i6 p2] Zo tyf gL lt cg'?k sfo{ qm d sfof{ G jog eP geP sf] , :jL s[ t nfut vr{ sf]; L dfleq /xLsfo{ qm d ; ~rfng u/]gu/] sf] , vr{ubf{nfut tyf pknA w LljZn] if0f u/Lplrt 9+ un]vr{u/]gu/] sf]/ nfutsf] t'ngfdf k| fK t k| ltkm n dgfl; a eP geP sf] , !# !$ !^ !& nIo k| ult tyf nfut vr{ sf] clen] v /fV g] Joj:yf kof{ K t / e/kbf] { eP geP sf] , !* !( k| rlnt sfg" gn] cg'udg ug'{ kg] { Joj:yf u/] cg'?k cg'udg eP geP sf] , / ljQ L o sf/f] af/, nut Joj:yf / k| ltj] bg Joj:yfnfO { ; " rgf k| ljlw df cfw fl/t agfpg k| of; eP geP sf] .

  20. a]?h' • cfly{s sfo{ljlw P]g,@)%%, bkmf @ -b_ æa]?h'Æ eGgfn] k|rlnt sfg"g adf]lhd k'¥ofpg' kg]{ /Lt gk'¥ofO{ sf/f]af/ u/]sf] jf /fVg' kg]{ n]vf g/fv]sf] tyf clgoldt jf a]dgfl;a tl/sfn] cfly{s sf/f]af/ u/]sf] egL n]vfk/LIf0f ubf{ cf}+NofOPsf] jf 7x¥ofOPsf] sf/f]af/ ;D´g' k5{ . a]?h' a]?h' = n]vfk/LIf0fsf] cfwf/ / n]vfk/LIf0fjf6 b]lvPsf] Joxf]/f ljr km/s ePsf] cj:yf Criteria Condition • ;}4flGts a]?h' / nutL a]?h'

  21. a]? a]?h'sf h'sf] ] lsl;d lsl;d / / o;sf o;sf] ] cj:yf @)&@_ @)&@_ cj:yf - -%# %#cf cf}+ }+ k|ltj k|ltj] ]bg bg [?- nfvdf{ s'n j] ?h" sf] k| ltzt 100.00 8.60 45.26 11.28 33.35 ;ldlt tyf cG o ;_ :yf / lhN nf ljsf; ;ldlt 7,87,42 53,42 6,30,42 2,09,64 3,92,81 juL + s/0f ;/sf/L sfof+ no hD df hD df a] ?h" 48,77,88 4,33,62 19,33,82 4,29,63 14,96,64 56,65,30 4,87,04 25,64,24 6,39,27 18,89,45 !- c;'n ug'+ kg] + @ - lgoldt ug'+ kg] +  clgoldt eP sf]  k| df0f sfuhft k] ; geP sf]  lhD d] jf/L g;f/] sf]  zf] w egf+ glnPsf] #- k] ZsL  sd+ rf/L k] ZsL  df] lanfO h] ;g k] ZsL  k| lttkq k] ZsL  ;_ :yfut k] ZsL - 1 1 - 7,55 27,96 1,03,58 10,20 35,51 0.63 46.14 2.78 18.73 6.72 17.91 25,10,44 1,47,07 10,61,37 3,80,82 9,21,18 26,14,02 1,57,27 10,61,37 3,80,82 10,14,56 - - 93,38

  22. a]?h' n] a]?h' n]Vbf Vbf Wofg Wofg lbg'kg lbg'kg]{ s'/ ]{ s'/fx fx? ? • Effiffut s'/fx? M :ki6tf, ;/ntf, a'lemg], ;Gt'lnt • $ l; sf] cfwf/df n]Vg] M – Criteria (What should be) – Condition ( What is) – Consequence (What will happen because of condition) – Cause (What is underlying cause behind having this condition) • yk @ l; klg n]Vg ;s]df /fd|f] x'g] – Corrective Action (Recommendation) – Commitment (Response from audited agencies)

  23. n] n]vfk vfk/LIf0fsf /LIf0fsf k|lqmofut • z'?df n]vfk/LIf0f k|j]z a}7s . • ulDe/ q'6L b]lvPdf lar lardf hfgsf/L u/fpg] . 5nkmn ug]{ . • cGtdf alxu{dg a}7s . of] a}7ssf] dfO{Go'6 clgjfo{ . • k|f/lDes n]vfk/LIf0f k|ltj]bg hf/L . • #% lbgleq k|f/lDes n]vfk/LIf0f k|ltj]bg pk/ k|ltlqmof . • ;Dk/lIf0fsf] nflu cg'/f]w ug{ ;Sg] . • !% lbg leq ;Dk/lIf0fsf] hfgsf/L lbg'kg]{ . k|lqmofut s'/ s'/fx fx? ?

  24. Auditing Standards applied • Government Auditing Standards issued by the AG and other subject matter specific audit guides – Policy Standard, – Operational Guide (recently replaced by Financial Audit Manual) – Revenue Audit Guide, – Procurement Audit Guide, – Donor Funded Audit Directives, – Administrative Expenses Audit Guide – Performance Audit Guide, • Basically guided by INTOSAI Pronouncements referred as INTOSAI Professional Pronouncement Framework (IPPF)

  25. Annual Audit Plan Ministry Level Audit Plan/ Sectoral Audit Plan Quality Control & Assurance Entity Level Audit Plan Planning Pre-Planning Execution Reporting & Follow up

  26.  Fully owned public enterprises by the Office of auditor General or by the professional Accountants (CAs/ RAs) appointed by the AG as his assistant  Substantially owned public enterprises – audited by the auditor recommended by the AG and appointed by the AGM of respective enterprise

  27.  UN Resolution A/66/209 ◦ recognizes SAIs can accomplish their tasks objectively and effectively only if they are independent of the audited entity and protected against outside influence and ◦ also recognizes role of SAIs in promoting the efficiency, accountability, effectiveness and transparency of public administration.  The Sustainable Development Goals (2016-30) comprises 17 goals and 169 targets, whereas goal 16 "[...] build effective, accountable and inclusive institutions at all levels" is of special importance for SAIs.

  28.  OAGN has started Engaging Civil Society Organizations (CSOs) in its audit process  OAGN is trying to aligning its standards in line with ISSAIs  GoN has decided to use Cash Based IPSAS as its Financial reporting Framework  Treasury Single Accounts is being used in all District Treasury Offices

  29. Case Case

  30. Query ????????? Discussion

  31. THANK YOU VERY MUCH !!!

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