Public Sector Auditing Practices in Nepal Chandra Kanta Bhandari, FCA

Session Overview 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

AUDIT ???? Examination, verification, evaluation or 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

Audit: Three Party Relation It begins with a three party relationship. Entity Professional Accountant/Auditor User of Subject Matter

Audit: Three Party Relation contd… Entity Professional Accountant Data Against suitable criteria Systems & Processes Evaluate/Measure Subject Matter Behavior User of Subject Matter

Audit: Three Party Relation contd… 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

Audit: Three Party Relation 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

Framework for Public Sector Auditing in Nepal Constitutional Provisions Audit Act, 1991 Financial Procedural Act, 1998 Other Laws

Constitutional Provisions 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.

n]vfk/LIf0fsf] pB]Zo M 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{] .

n]vfk/LIf0f k|sf/ / n]vfk/LIf0fsf] pB]Zo 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 .

n]vfk/LIf0f k|fo M # k|sf/n] ug{ ;lsG5 M n]vfk/LIf0f k|sf/ M n]vfk/LIf0f k|fo M # k|sf/n] ug{ ;lsG5 M lalQo n]vfk/LIf0f 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{] . lgoldttfsf] n]vfk/LIf0f ;fj{hlgs ;]jf tyf sfo{x? k|rlnt P]g, lgod jf lgb]{lzsfsf k|fjwfgx? adf]lhd ePsf] jf gePsf] k/LIf0f ug]{ . sfo{d"ns n]vfk/LIf0f ldtJooLtf, sfo{bIftf / k|efjsf/Ltfsf] b[li6|sf]0f af6 k/LIf0f ug]{ .

n]vfk/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 .

n]vfk/LIf0f ;DjGwL tl/sf M n]vfk/LIf0f P]g, @)$* sf] bkmf # M n]vfk/LIf0f ;DaGwL t/Lsf M 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} OsfO{dfq 5gf}6 u/L cfly{s sf/f]af/ / ;f];Fu ;DalGwt cGo lqmofsnfkx?sf] Ps Ps u/L jf aLr aLrdf 58\s] u/L jf s]xL k|ltzt dfq k/LIf0f ug]{ u/L n]vfk/LIf0fsf] 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] .

n]vfk/LIf0f ;DjGwL tl/sf M 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 #s= ljljw ljifosf] n]vfk/LIf0f_ n]vfk/LIf0f ug'{kg]{ lgsfosf] ;fdlos n]vfk/LIf0f ug{ ;Sg] . -bkmf#v=;fdlos n]vfk/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] .

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

n]vfk/LIf0f cfwf/x? ;/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?

Matters to be examined

Matters to be examined contd…

a]?h' Criteria Condition 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' = n]vfk/LIf0fsf] cfwf/ / n]vfk/LIf0fjf6 b]lvPsf] Joxf]/f ljr km/s ePsf] cj:yf ;}4flGts a]?h' / nutL a]?h' Criteria Condition

a]?h'sf] lsl;d / o;sf] cj:yf -%#cf}+ k|ltj]bg @)&@_

a]?h' n]Vbf Wofg lbg'kg]{ s'/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)

n]vfk/LIf0fsf k|lqmofut s'/fx? 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]{ .

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)

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

Audit Process Flow at Entity level Audits

Audit of State Owned Enterprises 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

Latest Developments- Recognition of SAIs 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.

Latest Development - others 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

Case

Query ????????? Discussion

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