It refers back to the paintings of independently checking, evaluating, and analyzing whether or not the sources of profits and expenditure had been kept in an approved layout and whether or not regularity, financial system, performance, and effectiveness had been taken into consideration while engaging in economic transactions.
It refers to the assignment of examining debts, economic statements, records, operations, and performance with attention, independence, impartiality, and discretion.
>In an audit, the operation consequences are assessed, the economic scenario is evaluated and the coins go with the flow is checked and analyzed.
412 goals of Audit
the main goal of audit is to provide appropriate conclusions & guidelines on warranty of the following topics by inspecting with due consideration to regularity, economic system, performance, effectiveness and propriety thereof pursuant to acquisition and utilization of public sources, and to offer reasonable assurances in the presentation of economic statements. Followings are other targets of audit:
To decide whether or not the principles of monetary administration were followed in conducting financial transactions.
to ascertain whether or not the principles and norms of accounting had been used while keeping bills.
financial transactions. making sure that monetary statements do gift the correct and realistic anay
ensuring right protection of government finances and assets.
Genuineness whether the quantity to be included in government revue as expenditure has been protected or now not.
even as enforcing the finances, decide whether it has been implemented in the parliamentary approval.
figuring out whether the ideas of regularity,financial system,performance, effectiveness,and justification are observed inside the economic transactional the constitutional provisions.
To pick out the weakness that have regarded whilst accomplishing public management and to make guidelines for the improvement of the party involved.
to test whether the inner control device is effective or no longer.
To determine whether the predicted success has been finished in keeping with the provider or reason for which it has been spent.
To make the administrative officials responsible and accountable.
To keep right monetary governance in financial management by means of selling cleanliness, transparency, and responsibility.
locating fault and deception.
To preserve field i.e. desirable governance in the accounting gadget and universal economic control.
enhancing organizational structure, policies, and strategies.
To offer the vital assist to enhance the weaknesses inside the accounting device and management.
To affirm the validity of the accounting system and offer the idea for it.
To discover the subject count number of the manipulation of the account with the purpose of cheating and to take important movement.
4.1.three sorts of Audit
1) primarily based on legal provisions: obligatory audit and voluntary audit
2) based totally on the time of audit: Pre-audit,non-stop audit, interim audit and periodic audit
3)primarily based on auditing body: government,Non-government,non-public Cooperative,prepared institution,Public institution, and so forth.
primarily based on the auditor: internal audit and external audit
4)based totally on the difficulty rely to be audited:Regularity/financial,Compliance, 引ax,overall performance,environment,Social,Technical,records generation, Gender,danger-primarily based,and so on.
414 authorities Audit
Government audit refers to the paintings of independently inspecting, comparing, and studying whether or not the government revenue and expenditure have been accounted in accordance with law, concepts and standards and accredited codecs and whether regularity, economy,efficiency,and effectiveness had been taken into consideration whilst carrying out financial transactions.
>It refers to the challenge of examining debts,financial statements,statistics, operations, and performance of government entities with attention, independence, impartiality, and discretion.
a government audit is an act of investigating,inspecting,reading, evaluating, and reporting of presidency financial transactions by using an independent, unbiased, neutral, and autonomous individual/frame/organization/ office/authentic on whether or not the economic statements present the proper and sensible situation of the transaction.
The audit report includes the details of the audited bodies, the behavior of the audit,the efforts made inside the beyond, and pointers for future improvements.
in step with the audit act, 2075 "Audit" approach an exam of the debts and money owed associated transactions of the bodies cited in phase three and the analysis and assessment to be made on the idea thereof, and this term also consists of an act of comply with-up audit.
415 distinctive styles of authorities Audit
415.1 internal Audit
41511 creation
internal audit is the audit done with the aid of the employees inside the agency to study the info of the financial transactions in a departmental manner and offer pointers preserving in view the objectives and sports of the organization.
It examines whether or not the economic transactions of a frame are regulated,whether or not the expenditure is passed the sanctioned restrict,whether the inner manage
procedure is regulated in spending and excelling,and whether
adopted in expenditure within the worried body and institution.a19terity B
also dedicates
whether the record has been made in time to expose the actual monetary state of affairs er
now not.
inner audit is helpful to the control as the internal auditor allows in maintaining strong financial administration with the aid of right away regularizing the existing non-acting state of affairs.
inner Audit in Public administration method the audit carried out by using the Office of the economic Comptroller popular,the Province Comptroller standard, and the District workplace of the treasury and Comptroller.
further, an inner audit branch has been installation to behavior an inner audit on the neighborhood level.
four.1.five.1.2 targets of internal Audit
To assist in keeping an internal manage machine within the office.
To hold manipulate over abnormal transactions by way of exposing them in monetary transactions directly.
To have a base audit for the very last audit.
To assist deliver transparency in financial management.
To offer tips for managing proper governance.
To create an environment wherein the audit paintings may be completed in a brief time.
To play the position of supportive audit of control.
To help performing financial transactions following economic system,performance, effectiveness, regularity principles.
4.1.5.1.three The want for an inner audit
to strengthen internal control.
To preserve monetary discipline.
To provide the premise for the final audit.
To Early hit upon faults,forgeries,errors, and timely correction.
To operate the organization economically and regularly.
To make the records of economic transactions reliable.
2514 The importance of inner audit within the public area
>Internal audit helps the supervisor to take timely precautions to avoid discrepancies between the targets and achievements of the scheme and misappropriation of presidency property.
It helps maintain easy and legal monetary area.
It allows the supervisor to keep away from or correct mistakes directly,instead of mentioning irregularities.
It verifies the accuracy of income and expenditure statistics.
It helps to find out if movable/immovable belongings is nicely protected.
>inner audit enables to conduct very last audit paintings.
it's miles of great significance in the subject of public expenditure.
415.2 final Audit
415.21 introduction
An impartial audit of the financial statements, related bills, and authorized documents by way of an external legal frame or individual is referred to as a final audit.
This audit is called a final audit because it will not be re-audited for the transactions of the equal year after the audit file is submitted with the aid of such an auditor.
it's miles an audit conducted to ensure the regularity, economy, performance, and effectiveness of financial transactions.
The constitution of Nepal gives authority and duty for an Auditor fashionable to conduct a very last audit of federal, provincial and local degree government entities.
there is an arrangement for the final audit of federal, provincial, and local degree authorities offices and companies completely owned by way of the government to be carried out with the aid of the office of the Auditor-general.
1522 want and importance of very last Audit
To offer recommendations on in which upgrades are wanted for the overall performance of the authorities.
to indicate destiny policy choices on reforms that need to be made to mitigate management. the poor effect of government-adopted policies on public expenditure
to control irregularities,misuse of resources, and monetary frauds that may occur in economic transactions.
To guide the status quo of a nicely-ruled society.
To function the financial records system efficiently.
To hold financial transparency by using promoting responsibility of responsible parties.
To correct viable mistakes by following the regulation successfully.
To support clean, balanced, and ordinary monetary administration.
To ensure accountability to authorities price range.
To provide economic records to the policy-making and choice-making manner on the management level.
4.1.five.three monetary Audit
4.1.5.three.1 introduction
A financial audit is an audit that makes a specialty of issues which includes whether or not the financial statements gift accurate economic records, and statistics overlaying all financial transactions.
despite the fact that regularity or financial audit is considered in the equal feel, regularity audit makes a specialty of law, method, and policies even as the economic audit is based totally on the true and truthful view of financial statements.
whilst undertaking a financial audit, the audit is finished keeping in view the subsequent problems:
ideas of accounting at the same time as preserving accounts or now not.
tries were made to make accounting systems and financial transactions technology-primarily based or now not.
Prepares economic statements inside the prescribed format and depicts the true and actual scenario of the organization.
economic transactions and reporting structures are prepared in an permitted format or not.
adequate arrangements have been made for the record,use, and safety of belongings to prevent loss and misuse of coins and different government property and observe up or not.
bills of sales, all different income, or even deposits are correct or now not. The reporting system is timely, or no longer.
415.32 goals of economic Audit
To make certain that the financial statements are prepared under prescribed formats and present a real and truthful country of monetary transactions,
whether the economic transaction and reporting machine is underneath the authorized formats,
whether or not adequate arrangements have been made for recording, utilization and shield of coins,
whether or not inventories and different government houses to test the loss & damages and misuse, and the association so made were followed,
whether the debts of sales, other average earning and deposits are properly maintained,
whether or not the inner controls gadget is effective,
To attain affordable guarantee approximately whether the monetary statements as a whole are loose from fabric misstatement;
>To acquire reasonable guarantee that economic systems observe the accounting requirements;
to assess the level of compliance with relevant statutes and guidelines;
To file at the financial statements and speak as required by way of relevant requirements through auditor's findings, and
To talk to users approximately topics bobbing up from the audit as required with the aid of the usual or with the aid of law.
15.4 Compliance Audit
15.four.1 introduction
>An audit conducted with the aid of an auditor focusing at the prevailing legal guidelines,regulations, principles, approaches, and norms to be observed via the auditing body is referred to as a compliance audit.
As those subjects are associated with the method and concepts of spending or transaction rather than analysis of expenditure and fulfillment, this audit is taken into consideration a process-oriented audit and no longer an fulfillment-orientated audit.
while engaging in this audit,the following problems are tested:
·Expenditure for distinctive functions in the limits allowed as consistent with the Appropriation Act,
responsibility and duty fulfilled or nor,
Have enough evidence to comply with the law whilst carrying out financial transactions,
All earnings which include revenue is received lawfully,
monitoring has been finished as furnished via winning regulation,
An effective internal manipulate device has been used,
Expenditure with the aid of the Appropriation Act while enforcing the finances,
whether or not or now not the principles of financial administration are accompanied in accomplishing monetary transactions,
whether or not the operation of the consolidated fund is underneath the winning regulation.
proper safety of public belongings and different budget is or now not,
whether or not the quantity to be covered in public profits and expenditure has been blanketed or no longer,
revenue, safety deposits, Appropriation, public houses, public works, and tasks related transactions are finished in the winning legal guidelines and principles or not,
whether transactions consisting of internal debt, overseas resource, investment in stocks, and debt are prison,
whether or now not legal strategies to be observed for public procurement observe widespread method or now not,
whether the internal control gadget is efficaciously implemented,
whether or not or not the internal audit is accomplished on time and guidelines received from it have been implemented,
financial transactions are performed in keeping with the regulation but no longer done in a way that would justify it.
4.1.5.four.2 goals of Compliance Audit
To make sure whether or not the costs are incurred for distinctive functions last inside the accredited ceilings under Appropriation Act,
whether or not accountability and obligations are carried out,
whether the relevant laws are compiled and evidence is sufficient maintained at the same time as conducting financial transactions,
ethos the tracking is condensation per the arrangements of prevalent laws.
41.55 overall performance Audit
415.5.1 creation
The audit conducted on a big scale through analyzing and comparing the achievements and impact of the programs carried out with the aid of the auditing frame and the want for justification or relevance of the fees incurred even as accomplishing the audit is a overall performance audit.
,In conducting this audit, the principle foundation is taken to the economy i the utilization of sources, efficiency in overall performance level, and effectiveness in carrier delivery or go back distribution.
;A overall performance audit is taken into consideration to be based totally on a comprehensive audit, management audit, or result-oriented audit.
The employer's goals, targets, principles, policies, division of labor, paintings process, control technique, technique of choosing programs, profit-value evaluation, and value-effectiveness analysis even as selecting the programs, outcomes indicators, overall performance measurement, performance indicator, and overall performance assessment,the general troubles which include coordination, provision of penal and rewards based totally on evaluation, effect on social-financial sectors from the packages are examined on this audit.
that is to mention, because it checks the overall components of performance, it's far considered a end result-oriented or achievement-oriented, or cost-significant audit.
the following subjects are audited at the same time as doing the overall performance audit:
transactions. low-priced arrangements had been made even as undertaking monetary
performed progress within the stipulated time as in keeping with time table.
The service shipping degree is suitable and effective in line with the working nature of the office.
objectives of the offices and bodies, desires, and achievements were finished via this system
ok and dependable provision for file-keeping of the goal,progress price, and affordable return on value
company control is suitable or not.
this system/challenge is finished on time and returns are received.
4.1.5.5.2 goals of overall performance Audit
To make certain whether or not the cost-efficient approaches are followedin incurring expenditure,
whether the development has been completed within the scheduled time underneath he programme,
whether or not the standards of provider delivery are suitable and effective as puppy the character of labor of the workplace,
whether or not the goal and development are completed below the goal,the programme of theoffice/entity,
whether or not the arrangements for keeping statistics regarding target, progess and fee are good enough and reliable,
whether the go back is quality in contrast to the value involved,
whether the organizational management is suitable and the works are performed without duplication, and
whether the outputs are achieved commissioning the programme/assignment in the scheduled time
four.1.five.6 Periodic Audit
▶ The Auditor-wellknown may based on the choice of the body, behavior periodic audits earlier than the end of the financial 12 months or after the crowning glory of the transaction,
The approach, scope, length, and reporting of the periodic audit shallbe as prescribed by way of the Auditor standard,
The Auditor-trendy shall send the periodic audit document to the involved badi and make it public.
415.7 Audit of presents and help
reeived by way of the authorities of Nepal, the Province Govemment, of the Peul level and any quantity of help or furnish provided by means of the Govemment of Nepal,the state authorities,or the Iocal stage.
The audit approach,region,duration,and reporting will be as prescribed via the Auditor trendy.
415.8 Others
The Auditor-general can audit numerous subjects which include information era,Gender,Forensic technology,chance-based,and environment primarily based, considering the regularity,financial system,efficiency,effectiveness,and justification of the auditing body and the technique, area, and length. there's an arrangement to behavior the examination and reporting as prescribed with the aid of the Auditor widespread.
forty one.6 Audit techniques
The approach performs a extensive function in figuring out the scope of audit works. If the audit fails to adopt an appropriate method it will affect the fulfillment of audit works and therefore cause harm recognition of the auditors. ordinarily, there are 4 special styles of techniques that may be followed in sporting out an audit.
416.1 The chance-based totally method
A danger-based audit conceptually is to audit the things that pose the greatest risks to an organisation.
▶on this method, the audit is completed by way of focusing on the regions of monetary statements that can include misstatements both by mistakes or by way of omission, due to the dangers confronted with the aid of the commercial enterprise.
A threat-primarily based technique is adopted focusing at the foremost sports of an agency, targeting its targets instead of the controls,and looking at the threats to its achievements.
This audit technique facilitates the auditor to evaluate the level of danger to a selected location of audit, i.e. unique debts and transactions.
The essence of a hazard-primarily based audit starts with the objectives of the activity being audited,then movements directly to the thrats or risks to the success of these gaul and then to the processes and approaches to mitigate the risks.
This approach requires auditors to discover the important thing risks faced through a businea, don't forget the effect those dangers may want to have at the monetary statements, and then plan their audit tactics for that reason.
The chance-primarily based audit approach that emphasizesthe gadget of assessing threat and focusing audit at the high-chance regions minimizes the auditor's danger towards the credibility of the audit via negligent work.
This audit approach avoids both over auditing and underneath auditing,which wil lead to cost-effectiveness without compromising the high-quality of the audit.
in comparison to noticeable testing and system-based totally auditing, danger-based totally auditing takes account of sizeable check risks and includes inherent threat, manipulate chance, detection hazard, sampling danger, and different analytical tactics.
If an enterprise has already diagnosed its key risks then it can be used as a foundation for figuring out dangers for auditing purposes.
If such risks have no longer been recognized and assessed, then the auditor needs to paintings with management to create this records for figuring out and evaluating commercial enterprise risks.
With the brilliant boom in affairs and volume of transactions in the government of Nepal, it has end up almost impossible to audit every entity or transaction of the government.
in this attitude, the threat-primarily based approach can be applied, choosing audits at extraordinary ranges e.g. entity stage or task-level, or transaction-stage.
The fundamental philosophy at the back of this method is choosing a few entities,projects, or transactions having excessive risks out of the full populace.
This audit technique is vital for the development of the fine of government auditing.
4.1.6.2 The substantial procedure technique
that is also called the vouching or the direct verification method or the direct considerable trying out approach.
in this approach,audit targets are finished without counting on the systens of controls in vicinity and accordingly without task tests of manage.
The audit is foxcused on lesting massive volumes of transactions and acount balances with out precise awareness on particular areas of the financialstatements.
sabstantive methods are intended to create proof that an auditor asembles to guide the statement that there aren't any material misstatements regarding the completeness, validity,and accuracy of the monetary facts of an entity.
consequently,an auditor plays significant strategies to discover whether or not there are any material misstatements in accounting transactions.
The assessments may also involve the exam of a pattern of transactions and is from inductive reasoning in which the reasonableness of the aggregate outcomes is inferred from the proof of the reliability of the man or woman details that have been examined.
great methods encompass the subsequent preferred classes of hobby:
oTesting instructions of transactions, account balances, and disclosures.
oAgree on the monetary statements and accompanying notes to the underlying accounting facts.
o inspecting fabric journal entries and different adjustments made for the duration of the preparation of the monetary statements.
At a fashionable stage, sizeable methods related to trying out transactions can encompass the following:
o examining documentation indicating that a process become executed
o Re-acting a technique to make sure that the manner features as planned
o Inquiring or watching a transaction
The noticeable approach is presumed to be suitable for the ones audit targets that relate to valuation, presentation and disclosure assertions, and non-recurring transactions. The approach:
。wherein inner controls are sturdy, auditors usually rely extra on major Analytical methods (the contrast of sets of monetary information, and monetary with non-financial records, to see if the numbers make experience and that sudden moves can be defined)
where internalcontrols are weak, auditors commonly rely extra on sizeable tests of element (deciding on a sample of items from the foremost account balances and finding tough proof (e.g.invoices, financial institution statements) for the ones gadgets.
four.1.6.3 The financial announcement technique
in this approach, the substantial technique is centered on stability shet accounts with only very confined strategies being carriedout on income declaration/profit and loss account objects.
All balance sheet debts are examined and proven.
The justification for this method is the notion that if the relevant control assertions for all balance sheet money owed are tested and established,then the income/loss figure reported for the accounting duration willnot bematerially misstated.
This technique can beused in companies in which accounts are kept in the accrual accounting gadget and a stability sheet is ready to expose the economic positions.
Froma public sector angle, like in our u . s ., this audit method is best beneficial for the ones company bodies that preserve money owed onan accrual basis and put together a stability sheet.
four.1.6.4 The structures-based totally technique
This method is predicated upon the entity's internal manipulate device.
on this approach, the auditor is required to evaluate the effectiveness of the inner controls of an entity and then to direct major tactics more often than not to the ones regions wherein it's miles considered that structures goals will no longer be met.
This method is used for the evaluation of systems and techniques as opposed to places or branches.
This technique is a horizontal in preference to vertical technique, reviewin n pastime throughout the organisation and searching out the areas in which there are inconsistencies or interfaces are incomplete.
The govermment normally establishes structures of manipulate designed to guarantee the accuracy and completeness of economic statements, the legality, and regulanty of underlying transactions, and the economy and efficiency of operations.
If an auditor is happy with the adequacy of those controls, the paintings ofte auditor regarding sizeable checking of financialstatements and transactions or the performance of an audited business enterprise can be redaurd for that reason.
life, and accuracy of systematically processed routine transactions.
417 The triumphing standards of Audit
) concentration,equity,and independence
e auditor should show honesty, equity,independence,and dedication to prolesional paintings. No action ought to be laken in a biased way that would cal into question equity. within the face of non-discrimination,the moral cost of all adils,the impartiality of the concepts of audit,and the freedom to behave need to be proven.Profesional equitable choice-making calls for lots of effort. Thi way that the auditor should no longer take note of other needless elements whilst considering the ethical concerns within the paintings to be executed. The impartial mindset and impartiality of the auditor must no longer be restricted to the overall performance of hisresponsibilities however the auditor himself must additionally assimilate these fundamental values. Expressing one's opinion within the report must be based on proof, felony, mathematical records, and justification and not based on external hearth.
2Secrecy
The auditor shall now not reveal any facts obtained in connection together with his / her paintings, except to disclose to any 1/3 celebration as prescribed by law, and shall not reveal such information to all and sundry besides folks who are professionally obligated lo do so.
talent and capability
to complete the audit paintings and put together the document, proper professional vigilance should be followed from the educated, skilled, able and professional auditor within the audit.further, the auditor ought to regularly update the sources posted by way of the professional take a look at institute to make the professional paintings dignified inclusive of acounting standards, audit standards, monetary management, laws and rules, legal requirements, modern situational surroundings, and felony choices.
professional behaviour
The auditor must display respect,dedication,equity,and fine toward the audiling profession.alternatively,if the career is in any manner devalued and Wmreliable, it need to be effortlessly rejected and even countered.
five) paintings done with the aid of others
The auditor is liable for the perspectives expressed by means of the chief audior a delegating authority to a part of his/her asistant,the use of the paintings accomplished be the deler auditor and the work edited via the professional even if he is based at the worte thers,he should additionally point out the motives why he ought to depend upon his propersdal and vigilance. for that reason, an independently appointed auditor shouldcarefully supervise,direct,reveal,and overview the work delegated to his assistants aboet his perspectives and work expressed through others during the paintings.however,the professional individuals of the agency who're contributors of the organizahim will be responsible although they paintings as assistants.
6) information
It 4refers to the systematically compiled files, facts,statistics,and flsad the auditor's evidence and different proof acquired from the audit for the duration of he exam. although such proof is stored in paper, film, computer, and athet paperwork,proper religion within the proof must be taken into consideration.The auditor have to obtain the facts of the vital difficulty of the evidence, sign the proof,mention the name of the audited, and mention the economic 12 months and dae of education.
7) Audit plan
The planning and programming of the audit start with the of entirety of the previous audit paintings. based totally on the auditor's evaluation of inner control, preliminay assessment, regulatory confrontation, and the outcomes of the audit, the antique audit plan need to be changed and a brand new plan for this year ought to be formulated as required. while preparing the audit plan, it's miles essential to take the professional information of the audited agency, extra accounting preparations, information policy,overall performance, and internal control gadget system and coordinate it a addition, the method of the audit procedure should additionally mention the nature d the enterprise, the timing, and adherence to the system, the evaluation of the plan and adjustments that can be made.
eight) Consolidation of evidence
The auditor need to be capable of draw conclusions primarily based on the ideal assessmentd the best audit proof. as an example, the proof provided below s necessities of the auditor ought to be relevant and genuine as the basisd auditor's conclusion.because the internal manipulate gadget in operation sumde rules of technique, interest should be paid to its tactics and rexod example,the analysis of the inner manipulate system regarding salar andalono
the accounting machine.
Acounting and inner manage device
aagement ought to adopt the best acounting machine that regulates the nture, competition, length,and law of the commercial enterprise.there may be a unique type of interrelationship among accounting and auditing.because of the systematic improvement of accounting, the most effective form of audit has also began.
10) record of audit results
The results of the audit work are typically offered as formal and writen reports. earlier than issuing the audit record, the auditor must discuss with the higher management about the irregularities, recuperation,pending fee, and recovery from different humans.
418 INTOSAI Code of Ethics
in line with the code of ethics of INTOSAI, authorities auditors have to observe the ethical requirements referring to all audit engagements, including the following fundamental concepts:
Integrity:honesty;
Objectivity:the auditor should be fair and should now not permit prejudice or bias, warfare of hobby, or impact of others to override objectivity.
Independence: the auditor must now not have private or financial dealings which can also motive a battle of loyalty or interest;
war of interest: auditors have to avoid all relationships with managers and staff of the audited entity and different events which may also impact,compromise or threaten the ability of auditors to act and be seen to be acting independently;
Confidentiality: auditors have to now not reveal facts obtained inside the auditing method to third parties;
expert competence and due care: auditors ought to not adopt works that they are not equipped to carry out.
Technical requirements: the auditor must perform professional services under the relevant technical and professional standards. Political
neutrality:the auditor need to be politically non-bias in providing professional offerings.
Ethics in the public region
repal should comply with the general requiremets of the ode of ethic an s e a carrier Act as well as the professional ethical reqpuirements sperali designed for auditors.
OAG Nepal Code of Ethics
primarily based on the INTOSAI requirements,the OAG-Nepal has also advanced the Coe of Ethics for its auditors.All auditors have to follow the codes whlk carryingout their audit engagement. The essential principles envisangutin the Code of Ethics encompass the subsequent subjects:
Independence
Competence
expert improvement
Impartiality
professional secrecy
Prudence
Due care
Reliability
Political neutrality
Integrity
conflict of interest
.
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