Major Highlights from the Draft Audit Act, 2075 currently under review of House of Representative, Nepal

How many of us know the Audit Act, 2048 will soon be repealed and hopefully, we will have a new Audit Act, 2075 soon. Honorable Finance Minister Yubaraj Khaitwada has filed the ordinance in House of Representative on 2075/03/14. It has already been tabled and gone through two rounds of discussion, the last one being 2075/04/21.

New Act addresses the change in the structure of the Office of Auditor's General given the fact that Nepal is now a Federal state. It has clearly determined the scope of work for the Office of Auditor's General (OAG). All the offices of Government of Nepal including Central Government, Provincial Government, Metropolitan City, Municipality, and Rural Municipality, Nepal Army, Nepal Police, Nepal Armed Force. Act also makes OAG responsible for the audit of the government-controlled entity, where Government of Nepal has more than 50% ownership. It also provides authority for the audit of donor-funded projects within Government of Nepal and entities mentioned above. OAG also will have authority to define the accounting forms and formats for the offices under Government of Nepal.

Act has clearly defined the methodology for audit, terms of reference for audit, use of subject matter expert for the special purpose audit and hiring of the licensed auditor's as the assistant for the audit of the government-controlled entity. Remuneration for the assistants hired will also be determined by OAG.

One of the major changes being envisioned is the provision of the review of the completed audit. What we need to understand here is that the review is for Quality Assurance or Peer review and not necessarily redoing the whole audit again.

Another one is that OAG now can actually issue a directive to Institute of Chartered Accountants of Nepal with regards to an audit of the private sector. You can see the provision Clause 24 (2), Page 19 of the Act. Extract of the same is also given below:

महालेखापरिक्षकले संविधान र यस ऐनको अधीनमा रहि निजी क्षेत्रको लेखापरीक्षण सम्बन्धी व्यवस्थाका सम्बन्धमा नेपाल चार्टड एकाउण्टेण्ट संस्थालाई समय समयमा निर्देशन दिन सक्नेछ ।

We hope The Institute of Chartered Accountants of Nepal (ICAN) and its council members are well informed about this and had an opportunity to express their opinions. Our only concern is how will this affect the autonomy of the ICAN and Nepal Auditing Standard Board. We will let this remain as a question and will wait for guidance from ICAN and its council members on this.