| Shreejan Shrestha

Audit Act
Amended(1st) on 18/6/2073
1. Short Title and Commencement: This act may be called as “Audit Act, 2073”.

2. Definition:
(a) "Government Office" means all government office and courts, including the Supreme Court,
Parliament, commission for investigation of Abuse of Authority Auditor General Public Service
Commission and Offices of other constitutional bodies, and Nepal Army and Nepal Police, states
and its local bodies and court.
(b) "Accounts" means the records, ledgers books etc. maintained under prevailing laws showing
particulars of transactions, and other documents substantiating such transactions.
(c) "Audit" means examination of the accounts and the analysis and evaluation made on the basis
thereof and this also includes re-audit of document.
(d) "Corporate body wholly owned by government of Nepal" means a corporate body whose all
shares of assets are owned by Government of Nepal, or a corporate body whose all shares or
assets are owned by the aforesaid corporate body or by such corporate body and Government of
Nepal and this expression shall also include such corporate body for whom Government of Nepal
is required to bear full responsibility.
(e) "Corporate body substantially owned by government of Nepal" means a corporate body whose
more than fifty percent shares or assets are owned by Government of Nepal.
(f) “Other organization” means any organization established under Nepal Laws or organization
established by direction of Nepal Government including Universities, Fund, Committee,
Institutions, Commission and Cabinet.

3. Methods of Audit:
The Auditor General may conduct final audit of the financial activities and other activities relating
thereto of the offices, bodies or organizations under its jurisdiction, either in detail or sporadically
or a random basis and present the facts obtained therefrom, make critical comments thereon and
submit its reports.

Auditor General may exercise following power:

(a) To check at any time the status of the program and project being operated under the grants
obtained by Government of Nepal and examine documents relating to accounts;
(b) To require contractors of government contracts to produce relevant documents or other
evidence relating to the contract, which are supposed to be in his/her possession;
(c) To hire services of any expert on the task of audit and, if necessary, engage someone under
contract with reasonable remuneration.

The OAG and Staffs of OAG will have access to information documents of Offices documented
by OAG.

3.A Miscellaneous Audit: The OAG may conduct audit on Information Technology,
Environmental/Social Impact, Performance Audit and other. Audit procedure/method, areas and
sampling of organization to be audited shall be directed by OAG.

3.B Joint Audit: The Auditor General may conduct joint audit of Corporate body wholly owned
by Govt/ Substantially owned by Govt of Nepal. Procedure of audit to be decided by Auditor

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General. Audit procedure/method, areas and sampling of organization to be audited shall be

directed by OAG.

4. Matters to be audited:
The Auditor General, with due regard to the regularity, economy, efficiency, effectiveness and
propriety, shall audit following matters to ascertain whether:
(a) the financial transactions comply with the existing laws and the evidence relating to items of
income and expenditure are sufficient;
(b) the accounts have been maintained in the prescribed forms and such accounts fairly represent
the position of the transactions;
(c) the amount appropriated in the concerned heads and subheads by the Appropriation Act for
respective services and activities have been expended for the specified purposes of designated
services or activities within the is approved limit;
(d) the inventory of government assets is accurate and up to date and the arrangement for
protection and management of governmental property is adequate;
(e) the arrangements for internal audit and internal control of cash, kind and other governmental
property against any loss, damage and abuse are adequate and if so, are they pursued;
(f) the accounts of revenue, all other incomes and deposits are correct and the rules relating to
evaluation, realization and methods of book keeping are adequate and if so, are they followed;
(g) the accounts relating to public debts, security, deposit, debt relief fund and the amounts set
aside for debt services and repayment of debts are accurate;
(h) The accounts of income and expenditure of industrial and business services, and their balance
of cash and kind, and the arrangements and rules relating to their financial transactions are
adequate and if so, are they observed;
(i) The organization, management and job allocation of the office are sufficient and proper and
are that operating accordingly;
(j) Any function is being unnecessarily performed in duplication by any employee or agency or
any essential function is being omitted;
(k) The available resources, means and assets are properly utilized and the maintenance and
perspiration thereof against any loss or damage has been properly arranged;
(l) The progress has been achieved within scheduled time and the quality and quantity of the work
is satisfactory;
(m) The objective and policy of the Office is explicit and the program is delineated conforming to
the specified objective and policy;
(n) The program is being implemented within the limits of approved cost estimate and the
proceeds received in comparison to the cost is reasonable;
(o) The arrangements for maintaining data relating to target, progress and cost are adequate and
reliable;
(p) Expense made under the limit or not and target achievement;
(q) As required by laws monitoring conducted or not;
(r) Electronic transactions and reports system is in progress or not.

5. Matters to be audited in View of Propriety:

(1) The Auditor General shall audit following matters considering the propriety thereof:
(a) On the propriety of any expenditure and its authorization, if in the opinion of the Auditor
General such expenditure is a reckless one or is an abuse of national property, whether movable
or immovable, despite that the expenditure confirms to the authorization, and
(b) On the propriety of all authorizations issued in respect of any grant of national property whether
movable or immovable, fixed or current, or underwriting of any revenue, or any contract, license
or permits relating to mining, forest, water resources, etc. and any other act of abandoning
movable or immovable, assets of the nation.

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(2) The Auditor General may not include in the report minor items of discrepancy and other items
deemed as insignificant in view of their property which were observed during the audit of income
and expenditure.

6. Audit of Corporate Bodies Wholly Owned by Government of Nepal:

(1) Notwithstanding anything contained in the existing laws, the audit of the corporate bodies
wholly owned by Government of Nepal shall be audited by the Auditor General pursuant to this
Act.
(2) If the Auditor General is constrained by time and resources to audit the corporate bodies wholly
owned by Government of Nepal pursuant to Sub-section (1) he/she may appoint license holder
auditors under the prevailing laws an assistant. While appointing auditor as such, he/she shall
give priority to the Nepali citizen.
(3) The auditor appointed pursuant to Sub-section (2) shall act under the direction, supervision
and control of the Auditor General.
(4) The powers, functions, duties and responsibilities of the auditors appointed pursuant to Sub-
section (2) and the procedures to be followed by them in course audit and provisions relating to
their report shall be as prescribed by the Auditor General.
(5) The remuneration to be paid by the concerned organization to the auditors appointed pursuant
to Sub-section (2) shall be fixed by the Auditor General keeping in view the volume of financial
transactions, status of accounts, number of branches and sub-branches, work load and work
progress of the concerned organization.

7. Audit of Corporate Bodies Substantially Owned by Government of Nepal:

(1) The audit of the corporate bodies substantially owned by Government of Nepal shall be done
in accordance with the prevailing laws relating to such body.
(2) Notwithstanding anything contained in Sub-section (1), the Auditor General shall be consulted
while appointing an auditor for auditing of the corporate bodies substantially owned by
Government of Nepal.
(3) The procedures to be followed while consulting the Auditor General for appointing auditors
pursuant to Sub-section (2) and on matters to principles of audit to be followed by the auditors
during their audit shall be as prescribed by the Auditor General.
(4) The concerned organization shall deliver at the Office of the Auditor General a copy of the
report submitted by the auditor appointed in consultation with the Auditor General pursuant to
Sub-section (2).
(5) The Auditor General may issue directives to the concerned organization in respect of the
irregularities observed in the report received pursuant to Sub-section (4) and it shall be the duty
of concern to abide by such directives.

7.A. Fees: The OAG may charge fees to conduct audit of Corporate body wholly owned by Govt/
Substantially owned by Govt. The fees charged shall be deposited in Consolidated Fund.

7.B. Audit Report: The auditor shall provide the audit report to President and the same to be
announced publicly.

7.C. Report to be publish: The OAG may publish the Audit report in the prescribed format listing
recommendation to the audited corporation. Addition to this the OAG may publish report of
Information Technology, Environment/Social Audit and others.

7.D. Audit Follow-up: The OAG may conduct follow-up for the recommendation provided to the
audited organization. The OAG may take strict action on any follow up not implemented as
directed in the audit report.

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7.E. Information to Legislative- Parliament: The OAG shall provide information to the
Legislative- Parliament stating financial and non- financial data and follow any direction provided
to such offices by Legislative-Parliament.

8. Annual Report of the Auditor General:

The Auditor General shall submit its annual audit report, including his/her comments and opinions
thereon, to president on the final audit of Government Offices and other offices and organization
prescribed by prevailing laws, which are subject to audit by the Auditor General.
Provided that the Auditor General may submit a report if he deems necessary at any time to take
immediate action against any loss or damage already happened or impending upon to the national
assets. President shall forward the Report received pursuant to Subsection to the legislative -
parliament.

9. Recruitment of Officers and Employees and Condition of Services:

(1) There shall be officers and employees as approved from time to time by Government of Nepal
in order to assist the Auditor General in the performance of his/her duties. The number of such
employees shall not be reduced without the approval of the Auditor General.
(2) A separate cadre of officers and employees in the Office of the Auditor General shall be
constituted. The recruitment and other conditions of services of the officers and employees within
the cadre shall be as prescribed in the Rules to be framed under this Act.

10. Powers to issue Directives by the Auditor General:

The Auditor General may, subject to the prevailing laws, issue directives to the concerned
Government Offices, and Corporate Bodies wholly or substantially owned by Government of
Nepal, from time to time to make proper arrangements on matters of accounts and to maintain
regularity therein. It shall be the duty of the concerned offices or organizations to abide by such
directives.

10. A. Peer- Review: The work conducted by OAG can only be peer reviewed.

10. B. Work conducted on good faith: The staffs of OAG shall not be held liable for any work
conducted in good faith during audit.

10. C. Power to issue directive, rules/regulations: The OAG may provide standards, directive,
rules/regulation as required.

11. Powers to Frame Rules: Government of Nepal may in consultation with the Auditor General,
frame Rules for the implementation of this Act.

12. Action to be taken Against Irregularities: Necessary legal action shall be taken in respect
of the faults and irregularities observed during the audit of income and expenditure and other
financial matters of Government of Nepal, according to the prevailing laws.

Declaimer: The information provided herein is merely translation of Amendment of Audit

Act, 2048 into English language and the recipient is requested to refer the amendment for
any clarification.