Audit Report of a Company in Nepal
Every registered company in Nepal must have its accounts audited every fiscal year by a licensed Chartered Accountant. The audit report is required for tax filing, the Annual Report (Adhyawadhi), and maintaining credibility with banks and investors.
What Is a Company Audit?
A company audit is an independent examination of your company's financial records by a qualified professional — a licensed Chartered Accountant. The auditor reviews whether your company's financial statements correctly and fairly represent the company's actual financial position for the fiscal year.
The audit is not done by the government. It is done by a private Chartered Accountant that your company appoints. However, this auditor must be licensed by the Institute of Chartered Accountants of Nepal (ICAN) to legally perform audits in Nepal.
What Does an Audit Cover?
Financial Statements
Review of Balance Sheet, Income Statement (Profit & Loss), and Cash Flow Statement to ensure they are accurate and complete.
Books of Accounts
Examination of ledgers, journals, vouchers, invoices, and bank reconciliations to verify all transactions are properly recorded.
Tax Compliance
Verification that tax deductions (TDS), VAT filings, and income tax payments are correctly calculated and paid on time.
Internal Controls
Assessment of the company's internal financial controls — such as authorization procedures, cash handling, and expense approvals.
Related Party Transactions
Examination of any transactions with related parties (directors, shareholders, or their businesses) to ensure they are at arm's length.
Auditor's Opinion
The auditor issues a formal opinion on whether the financial statements present a 'true and fair view' of the company's financial position.
Step-by-Step Process
- 1
Appoint a Licensed Auditor
Every company must appoint an auditor at the Annual General Meeting (AGM). For new companies, the first auditor is appointed as part of the Initial Update within 3 months of registration. The auditor must be a Chartered Accountant registered with ICAN. Verify their ICAN registration number before appointment.
- 2
Maintain Proper Books of Accounts
Throughout the fiscal year, maintain complete and accurate books of accounts including all income, expenses, assets, liabilities, and bank transactions. Proper bookkeeping throughout the year makes the audit process faster and less expensive.
- 3
Prepare Financial Statements
At the end of the fiscal year (31st Ashadh / mid-July), prepare the company's financial statements: Balance Sheet, Profit & Loss Statement, and Cash Flow Statement. These are typically prepared by your company's accountant before being submitted to the auditor.
- 4
Auditor Conducts the Audit
Submit all financial records to your appointed auditor. The auditor will examine the records, request additional documents or explanations as needed, and conduct the audit. The audit typically takes 1–4 weeks depending on the size and complexity of your business.
- 5
Receive the Audit Report
The auditor issues a formal Audit Report documenting their findings and opinion. This report is then placed before the AGM for shareholder approval. The signed audit report is then used for filing the Annual Report (Adhyawadhi) with the OCR and tax returns with the IRD.
Types of Auditor Opinions
Records to Keep Ready for the Auditor
- All bank statements for the fiscal year
- All sales invoices and purchase invoices
- Cash receipts and payment vouchers
- Payroll records and salary registers
- Loan agreements and repayment schedules
- Asset purchase invoices and depreciation schedules
- TDS (tax deduction at source) certificates
- VAT returns and payment receipts
- Previous year's audited financial statements
Need help with this process? Chartered Corporate Business Consulting handles it all for you — from start to finish.