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10. Types of Auditing

i. Internal Auditing
Internal auditing is the act of examining the accounts and reporting by the employee
of same organizations considering the organizational objectives and activities. Purpose
of the internal audit is to assist the board of directors and managers in promoting sound
operations of the company and reasonably ensuring the objectives listed. At the same
time, purpose is to make timely recommendations for improvements to ensure sustainable
operating effectiveness of the internal control system and to provide a basis for review
and correction for the system. Office of the Treasury and Comptroller has the power and
rights to check the books of financial transactions as internal audit. For this government of
Nepal has established the office of the Treasury Comptroller in all 77 districts providing
responsibility of internal audit of government offices. This office uses the red ink to audit
the books. Final audit is conducted after the completion of internal audit. Following are
the main objectives of internal audit:
1. To detect the errors and frauds and prevent them.
2. To verify the books of accounts and statements continuously.
3. To give suggestions to the management in accounting and financial matter of the
organization.
4. To prepare basis for final audit.
5. To ensure the reliability in way of keeping accounting records.
6. To assist the management.

Key Point It is the act of examining the books of account by an internal staff to ensure
proper result and correction of error.

ii. Final Auditing
Final auditing is the auditing of presented financial statements and related documents,
done by independent body under the prevalent rules and regulations. This auditing is
done for a certain period, for example, Department of Auditor General conducts such
audit for the government offices. Business organizations are audited by the registered
auditors according to the provisions mentioned in the existing Act and rules. In case of
companies, the auditor appointed by the Annual General Meeting conducts such audit.
Thus, final audit refers to the act of checking the books of accounts of all the government
office, constitutional bodies in corporation with the Office of the Auditor General. This
office uses green ink to audit the books of accounts.

In Nepal, Auditor General has got sole right to conduct audit of government organizations
under the provision of Auditing Act, 2048. The scope and functions of final auditing are
provisioned by the constitutions and laws. So, auditor is free to put any comments freely
on the irregularities. Therefore, the auditors conduct auditing on the basis of legality,
economy, efficiency, effectiveness, and reasonability.

194 Aakar’s Office Practice and Accountancy - 10 Government Accounting System 195