Pass Marks: 35
Lecture hours: 150
Course Objectives:
The objective of the course is to provide conceptual and working clarity and understanding of the relevant audit
procedures and techniques and increase candidate's capability to assess internal control systems to identify audit
risks of auditing, various types of audit so that they can plan and perform effective and efficient audit.
Course Description:
This course contains conceptual foundation, planning an audit, internal check and control, vouching, audit of
impersonal ledgers, verification and valuation of asset and liabilities, depreciation, reserve and provision,
appointment, remuneration and right and duties of an auditor, audit of a limited company, audit of divisible profits
and dividends, audit report, liabilities of an auditor, audit programmes and procedures of different classes of
audits, investigation, government audit in Nepal, recent trends in auditing.
Course Details:
Unit 1: Conceptual Foundation LH 9
Nature and scope, Evolution of auditing practices in Nepal, Objectives of audit ; Detection and prevention
of frauds and errors with practical dealings; Advantages and Limitation of audit; Accounting, auditing
and investigation; Terms of audit engagement.
Unit 2: Planning an Audit LH 10
Knowledge and understanding of the organization; Audit programme: Contents of audit programme,
techniques and preparation of audit programme; Tolerable error, audit risks, sampling and determinants
of sample size; Audit note books: Objectives, procedures and techniques and contents of audit note
books; Organization of audit staff, job description, responsibility assigned and liabilities defined, conduct
of an audit work, continuous audit, periodical audit, interim audit, partial audit; Types of audit: Tax audit,
cash audit, cost audit, management audit, data processing audit, scope of work to be determined,
instruction to the client, preparation by the auditor, division of work, audit files, audit working papers.
Unit 3: Internal check and control LH 8
Concept, objective, essential characteristics, advantages and disadvantages, internal check and internal
audit, effects of internal control and internal audit, auditor's duties as regard to internal check and internal
control, use/adoption of distinctive ticks, routine checking, difference in balancing books, concept of test
checks, advantage and limitation; Difference between statutory audit and internal audit.
Unit 4: Vouching LH 14
Concept, importance, objectives of vouching, vouching of cash transactions, vouching of payments,
vouching of receipts, vouching of sales, credit and cash sales, internal checks as regard to cash sales, cash
discount allowed and return, credit sales, review of internal check system as regard to credit sales, sales
on approval basis, sales under hire purchases system, goods on consignment, goods sent on package and
containers, return, vouching of purchase, cash purchase, internal check as regard to cash purchase,
discount received and return, credit purchase, internal check as regard to credit purchase, discount
received and return.
Unit 5: Audit of Impersonal Ledgers LH 8
Capital expenditure, revenue expenditure and deferred expenditure; Outstanding expenses and income,
repairs and renewals; Prepaid expenses, contingent liabilities and asset.
Unit 6: Verification and valuation of asset and liabilities LH 13
Concept, importance, distinction between verification and vouching, verification and valuation of assets,
methods of valuation, vouching and valuation, valuation of fixed assets, current assets and wasting assets,
auditor's position as regards to verification and valuation of assets, verification of liabilities, capital loans
and long-term loans, trade creditors, outstanding liabilities for expenses, bills payable, contingent
liabilities, confirmation and verification, concept of fair value measurement.
Unit 7: Depreciation, reserve and provision LH 5
Depreciation: Concept and causes for depreciation, methods of depreciation, difference between
fluctuation and depreciation, difference between obsolescence and depreciation, Auditor's duty in
connection with depreciation.
Reserve and Provision: Concept of reserve and provision, need for reserve and provision, types of
reserve and provision, Auditor's duty in connection with different provisions and reserves.
Unit 8: Appointment, remuneration and right and duties of an auditor LH 5
(According to Nepal Company Act and other legislations governing audit)
Qualification of an auditor of a company, appointment and remuneration of an auditor, qualities of an
auditor, rights and duties of an auditor, removal of an auditor.
Unit 9: Audit of a limited company LH 13
Nature of company audit, preliminaries before company audit, statutory audit, audit of preliminary
expenses, audit of statutory general meetings, review of memorandum of association and articles of
association, audit of shares capital, issue of shares at par, premium and discount, issue of share for other
than cash, bonus share, calls in arrear and calls in advance, forfeiture and re-issue of forfeited shares,
transfer and conversion of shares, alternation of share capital; Audit of underwriting commission, transfer
fees, brokerage and commission; Audit of debentures: Debentures issued at par, discount and premium,
redemption of debentures, regular redemption and redemption at par, premium and discount, redemption
through purchase in open market, conversion of debentures into shares.
Unit 10: Audit of divisible profits and dividends LH 9
Concept of profit and divisible profit, consequences of incorrect valuation of profit; Factors affecting
dividend-capital profit and revenue profit, dividend by appreciating assets including intangible assets, loss
on fixed assets and dividend pre-opening profit and dividend; Dividend on preference shares: cumulative
and non-cumulative preference shares, unclaimed dividend.
Unit 11: Audit report LH 5
Meaning of audit report, content of audit report; Types of audit report: statutory report, general report,
qualified report, tax audit report; Evaluation of audit evidence, adequacy and appropriate of audit
evidence.
Unit 12: Liabilities of an auditor LH 10
Legal provision regarding liability of an auditor, auditor appointed by a private business concern, liability
of a limited company auditor, civil liability, liability for negligence and misfeasance, criminal liability
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Joint audit: Meaning, liability of joint auditor and branch auditor, liability of an honorary auditor,
auditor's liability to third party.
Unit 13: Audit programmes and Procedures of different classes of Audits LH 8
Audit of educational institutions, co-operative societies, charitable institutions, NGO's and local
government bodies; Audit of partnership firm: concept of partnership firm audit, procedures to be
followed by a newly appointed auditor, audit on behalf of different types of partners, performance audit.
Unit 14: Investigation LH 8
Concept of investigation, difference between investigation and audit, causes for investigation and
methods of investigation, identification of objectives of investigation, formulation of programme,
collection and examination of records and evidence; Types of investigation, investigation on behalf of
incoming partners, prospective shareholders, prospective moneylenders and suspected frauds, duties and
liabilities of an investigator.
Unit 15: Government Audit in Nepal LH 7
Concept, objectives, natures and evolution, difference between government audit and commercial audit;
Internal audit: Concept, objectives and advantages; Misappropriation and procedure for regularization,
roles of Comptroller General, final audit, audit of expenditure, debts, deposit, remittance and stores, audit
report; Roles of auditor General in government audit, and Public Account Committee; Directives of
Office of Auditor General; Government auditing standard.
Unit 16: Recent trends in auditing LH 8
Establishment of ICAN, Accounting Standards Board, Auditing Standard Board, The Institute of
Chartered Accountants Act; Roles of ICAN and AuSB in developing and promulgating auditing
standards, Certificate of practice, code of ethics; Auditing Standards, concept, objective, importance and
requirement of each auditing standards (mandatory, voluntary and exposure drafts).
Project Work LH 10
After the completion of fourth year concentration classes the students shall have to prepare and submit a project
work in the area they have specialized. The subject teachers have to discuss with students on possible topics of the
project work, availability and sources of literature, availability of data, data collection methods, appropriate tools
of data analysis, etc relevant to the subject within 10 lecture hours.
Basic Books:
Ramaswamy, M.S., Auditing, New Delhi: S. Chand and Co.
Saxena, R.G., Principles of Auditing, Bombay: Himalayan Publishing House.
References:
Dhakal, K.D., Bhattarai, I & Koirala, G.P., The Principles and Practice of Auditing, Kathmandu: Asmita Books
Publishers and Distributors Pvt, Ltd.
Tandon, B.N., Practical Auditing, New Delhi: S.Chand and Co.
Pandey, D.L., Auditing, Kathamandu: Asia Books Distributors Pvt. Ltd.
Government of Nepal, Auditing Act, 2048 with amendments.
Government of Nepal, Company Act, 2063 with amendments.
Auditing Standards Board of Nepal, Nepal Standard on Auditing.
Website: ICAB, AuSB
Government of Nepal; Income Tax Act, Co-operative Act, Education Act, Self Governance Act (with
amendments).
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