Dimension of Audit Damodar Pudasainee Assistant auditor general Office of The Auditor General

Audit Examination of Accounts evaluation of a person, organization, system, process, project or product. Audits are performed to ascertain the validity and Reliability of information, and also provide an assessment of a system's internal control. Contd:

Audit Independent evaluation of financial transactions It is generally a post-mortem activity It is an integral part of financial administration

An Audit is an examination of such records to establish their reliability and reliability of statements drawn from them. A.W.Hanson

The goal of an audit is to express an opinion on the Financial Statements

Types of Government Audit Pre Audit Internal Audit External/Final Audit

Internal Audit Internal auditors support managers in monitoring and controlling an organization's behavior and performance against agreed constraints and objectives Report to internal managers or ministries. Internal auditors are employees of a company hired to assess and evaluate its system of internal control.

External/Final Audit External auditors oversee a wide range of activities, including the audit of financial statements and the legality and probity of transactions. External Auditors are independent staff assigned by an auditing office/ firm to assess and evaluate financial statements . Report to Board of Directors/Parliament

Performance Audit Full scope Audit Value for Money Audit Comprehensive Audit

THREE E'S Plus ECONOMY EFFICIENCY EFFECTIVENESS COMPLIANCE PROPRIETY

Emerging trends Transparency and Accountability in auditing Performs their duties under legal framework. SAI make their mandate, responsibility, mission and strategy Adopt audit standards and processes and methods that are objective and transparent. High standard of integrity and ethics for staff of all levels Communicate widely and timely on their activities and audit results.

Emerging trends.... 2. Separate compliance auditing report Compliance Audit report for parliamentary decisions, law, legislative acts, policy. Compliance auditing include both the aspects of regularity and propriety. Audit criteria might already be defined by national legislation. SAI promotes good governance by defined by identifying and reporting deviations from criteria. Peer review Communication Strategy

Emerging trends…. 3. Separate financial, compliance and performance auditing Prevailing practice of including all types of issue in the same report. Different comities have been introduced the practice of separating three audits

Emerging trends…. 4. Cooperative Audit Cooperative audit is carried out by two more supreme audit institutions, Joint team Parallel/ Concurrent Audit Mission: A decision is taken to carry out similar audits. Coordinated Audit Mission: A coordinated audit is either a joint audit with separate audit reports or parallel audit with single audit report.

Emerging trends…. 5. Citizen Participatory audit Involving citizen or civil society organization (CSO) Mainly involved in performance auditing to identify risk area and collect evidence. Methodology use -Focus group discussion, Interview etc.

Emerging trends…. 6. Risk based approach 6.1 Strategic Level Volume of Transaction Value of Transaction Complexity of system Sensitivity Control Environment 6.2 Individual Level Inherent risk Control environment and control procedure Control risk Detection risk

Emerging trends…. 7. Other Audit Disaster Audit Debt Audit Environment auditing Audit of Privatization IT Audit Auditing policy System audit Sectoral Auditing, technical audit, energy audit, medical audit, forensic audit, management audit Concurrent auditing Leadership auditing Financial Accountability assessment

Audit Procedure n]vfk/LIf0f Audit Plan sfof{Gjog Verification Evidence Gathering k|ltj]bg Reporting Preliminary Final Annual u'0f:t/ ;dLIff Quality Review ;+k/LIf0f cg'udg Follow up lgsfosf] hfgsf/L Discussion document overview Audit Procedure

Supreme Audit Institutions Watch dog of public purse/Taxpayer’s friend Existence in every country all over the world for final/external audit Role is to Provide independent assurance to Parliament on the Financial Statements of the Audited Entity.

Constitutional Provision 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, remunerations, functions duties and power of the AG The office of the president and vice- precedent, the system court, federal legislative- parliament, provincial parliament, provincial government, local bodies, constitutional bodies and their office of 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 propriety.

Auditor General as an Independent Institution Appointed by the President on the recommendation of the Constitutional council. Fixed term of office. Removal on the grounds as of the judge of the Supreme Court.

Auditor General as an Independent Institution Ineligible to hold government post after retirement. Remuneration and facilities guaranteed by separate Act Expenditure charged to consolidated fund No reduction of OAGN vacancies without AG’s Consent

Auditor General as an Independent Institution Code of ethics for staff Full Access to information Hire professional consultant for audit. Prescribes Accounting formats. Submits annual Report to the President

Accountability Framework President Constituent Assembly Annual Report PAC Auditor General Ministries Issuance of Audit Report Financial Statement/Collection of information

Sources of Audit Mandate Constitution of Nepal Audit Act, 1991 Audit methodology Matters to be Audited Scope of Audit Powers to issue directives Other Special Legislations

Scope of Audit Constitution of Nepal Public Audit: Supreme court, Constituent Assembly, Constitutional bodies, Nepal Army, Nepal Police, Local bodies, Provinces, All Government Offices and Courts. Boards, Committees, University etc. specified by Legislation Other Services: Fully State Owned Enterprises (SOEs) Provide consultation to government substantially owned entities for appointment of Statutory Auditors Issue Directives on audit methodology to be applied.

OAG/N Strategic Direction Vision – Enhance Good Governance through Accountability and Transparency in the Public Sector Mission – Provide Trustworthy, Effective and Independent Audit Service for the Efficient Management and Utilization of Public Resources

Audit Objectives and Policies To promote Accountability and Transparency To bring forth economy in the mobilization of public resources and enhance efficiency To enhance effectiveness in public entities To improve and assure clean practices in the working system of administrative, financial and managerial system

Audit Objectives and Policies To assist in compliance of the existing laws To encourage abandonment of the discretionary work style To recommend practical suggestion for improvement by identifying weaknesses and lacunae in the existing approach, process, practices and legal provision, and To encourage the practice of taking action against delinquents and rewarding the excellent performance

Types of Final/External Audit Financial/Compliance Audit Covers more than 6 thousands Cost Centers Boards, Committees, Universities Performance Audit (PA) Audit of Entity, program, project and activities About 10 topics/Issues are audited every year

Audit Process - Planning & Execution Preparation of Annual Schedule of Audit Operation and sent to all secretaries and concerned ministry Audit planning Assessing the volume of work Determining Audit Approach and focus area for the year Setting of Audit criteria Preparation of Audit Program

Audit Process Audit Planning  Audit Execution Audit Supervision Audit Report Follow Up

Audit Process - Planning & Execution Approval of Audit Planning Memorandum Audit Execution Field Based audit (Single Audit Team and Multiple Audit Team) Finalization of Audit by reviewing Internal audit report Appointment of Auditor of the Statutory audit of SOEs

Audit Process- Reporting Parliament Auditee PAC Hearing Discussion wih Auditee during audit Considering the response report finalized and submitted to president Discussion with Auditee on Preliminary Draft Audit Report by holding Exit meeting After AGs clearance copies of Final Draft Report is sent to secretaries of concerned Ministry for confirmation/response Issue preliminary audit report (PAR) to Audited entity for response & copies sent to controlling authority Panel discussion on Draft Annual Report incorporating AG’s comments Important issues are picked up from PAR & Preliminary Draft of Annual Report is prepared for AG’s Review

Audit Impact Audit Recoveries of over payments and under assessment of taxes Improvement of Legislation and procedures Compliance in presentation of Financial Statement is encouraging in recent years Timely response on presentation of financial statement and Audit Report Settlement of queries better compared to previous years

Relation with Public Account Committee Active participation in PAC hearings Depute staff to PAC or Legislative Committee for review purposes Clarify and brief audit issues to PAC members Review of action taken by Entities on the decision of PAC through follow up process

Audit Recommendation for improvement in Financial Management Develop and adoption of Accounting Standards and Improvement in Accounting System Bring all financial transaction (including foreign assistance) in the purview of budget Initiate timely to get pending reimbursable amount from donors Reconcile Revenue Account with Central Bank Revise PWD norms Increase People’s participation in social programs Depute medical expert in accordance with approved post and provide adequate medical equipments for service delivery

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Thank you