Ican Journal December 2015

CAHARTERED
CCOUNTANT
T H E
N E P A L
Journal of the Institute of Chartered Accountants of Nepal
December 2015
Vol. 18 No. 2
December 2015
Vol. 18 No. 2
CA. Prakash Lamsal

CA. Mahesh Khanal
CA. Nil Bahadur Saru Magar
CA. Hemanta Pokharel
CA. Sanju Adhikari
CA. Shraddha Singh Shrestha
RA. Dev Bahadur Bohara
RA. Surendra Keshar Amatya
RA. Dharanidhar Adhikari
Mr. Binod Prasad Neupane
Chairman
Vice-Chairman
Member
Member
Member
Member
Member
Member
Member
Secretary
Editorial
President's Message
Accounting
7
Challenges and Quality of Accounting Profession

- CA. Paramananda Adhikari
The Legitimacy of International Public Sector Accounting Standards (IPSASs)
10
- Dr. Pawan Adhikari
Economy
Nepal Unrest: The Fault Line
15
Managing Risks Facing the Economy
18
- CA. Anal Raj Bhattarai

- Mr. Tula Raj Basyal
Information Technology
Dimension of Digital Signature
22
Why Audit of Information System is Required in Nepal ?
27
- CA. Mukunda Pokharel
- CA. Gaurav Khwaunju Shrestha
Taxation
Taxation of Income from Long Term Contract: Need to have Clear
Guidelines/Manual
33
Conference Material
38
News
45
- CA. Kaushlendra Jha
- CA. Narendra Bhattarai
Global Nepal Printing Press Service Pvt. Ltd.

Tel: 4102772
Notices
Contribution
Standard Chartered Bank Nepal Ltd.
Kailash Bikash Bank Ltd.
Nabil Bank Ltd.
Rastriya Banijya Bank Ltd.
Deva Bikash Bank Ltd.
14, 17, 52, 53, 56
As stipulated by Nepal Chartered Accountants Act, 1997 the objective of the Institute of
Chartered Accountants of Nepal (ICAN) is to play the role of a regulatory body to encourage
the members to carry on accounting profession being within the extent of the code of conduct in
order to consolidate and develop accounting profession as a cause for economic development
of the nation. The function and duties of the Council is to monitor and regulate its members so
as to ensure the compliance of Accounting Standards and Standards on Auditing developed or
recommended by Accounting Standards Board and Auditing Standards Board".
Prior to the 5th amendment in Nepal Chartered Accountant Rules, 2061 ICAN has constituted a
Peer Review Board in order to monitor its members with regards to practice monitoring. Institute
has issued NSQC and a Statement on Peer Review with an intention to further enhance the
quality of professional work of practicing CA/RA members. The Nepal Chartered Accountants
Act, 1997 requires ICAN to enforce compliance with the prevailing Standards and laws by
professional accountants and auditors through Disciplinary Committee. Many cases of violation
of Code of Ethics (COE) and Standards are still under investigation in Disciplinary Committee.
However, neither the Quality Assurance (QA) system for audit nor the practice monitoring of the
members was effectively enforced. It is worth to note that ICAN has to fulfill IFAC membership
obligations as a professional body and should ensure a mandatory quality assurance review
program is in place for its members performing audits of financial.
In the above context, the Council feels necessary for mandatory QA system for audit firms that
conduct audit of listed companies such as insurance, bank and financial institutions etc. under
the direction of ICAN as well as oversight and supervision of a Board formed by ICAN.
In the view of above the 5th amendment in Nepal Chartered Accountant Rules, 2061 has been
approved by the ministerial decision of 2072/08/18 of Government of Nepal empowering
regulatory regime of the Institute more responsive by forming an independent Quality Assurance
Review Board (QARB) comprising of 7 members. The Board will conduct inspection and
monitoring independently to the accounting firms. The Board will oversee whether there exist
assurance system in the accounting firms to conform the compliance with auditing standards,
NSQC by accounting firms in course of performing audit.
The Board has started its functions and very soon will come up with its policy and programs
on quality assurance. The function, duties and rights of the Board as specified in the Rules is to
prepare policy and program for QA review, to enforce and conduct monitoring of Practice Unit
pursuant to Rules as well as and as per the QA policy and program, to recommend Council to
make aware about the areas of improvement revealed in course of QA review of PU (Practice
Unit), to recommend council for prohibiting audit of related entity or audit of the particular sector
for the errors if revealed through QA of PU. The QA Board will carry out quality assurance of
accounting professional and accounting firms compulsorily for the effectiveness of accounting
profession pursuant to the provision of the Rule and as its QA policy and programs.
Practice monitoring review activity is intended to ensure the quality of audit performed and
audit procedures of the practicing members are in compliance with Nepal Standards on Auditing
(ISAs). Therefore, we must be aware of the fact that NSQC requires that all firms including
sole practitioners establish and maintain a system of quality control to be designed to provide
with reasonable assurance that firm and its personnel comply with professional standards and
applicable legal regulatory requirements. The Institute as a member of IFAC we are required to
satisfy IFACs Statement of membership obligations (SMOs) with regards to quality of audit.
In recent years our members are facing many ethical dilemmas and some of them are very
complex and difficult to resolve. In this context, we need to take QA Review System as an
opportunity for our entire membership to demonstrate a strong sense of ethics in the conduct of
our profession by bringing out our competence, knowledge and character. ICAN is determined
to ensure that its members work beyond self-interest to uphold the integrity of the profession.
We have to be mindful of the fact that our failure to comply with these aspects may be challenging
to retain the authority of self-regulation of the Institute. So all the members are expected to
safeguard the public interest and avoid any action that would discredit the profession.
Dear Professionals,
This is my second message after assuming office as the
President of ICAN. Without a doubt, the role of our profession
is important as it contributes for the development of the society
and the nation. Dedicational performance in the accounting
profession is necessary to shape the professional activities
in the changing financial scenario. Traditional practices in
accounting profession have been eliminated and new practices
have emerged. In this scenario, all the accounting professionals
are required to be updated as prescribed by international
accounting bodies to demonstrate professionalism in their
performance. We feel this is our responsibility and opportunity
to prepare our members more capable and result oriented.
Considering the fact that the uses of relevant Accounting
and Auditing Standards is very crucial while discharging
the professionalism in accounting services. It is accounting
professionals immense responsibility to provide professional
services to stakeholders.
The extensive natural calamity is now becoming common in
the world and Nepal is not free from such tragedy. We are
still exhilarating with the catastrophic disaster of 25 April,
2015, earthquake which took more than 8000 lives, over
25000 injured leaving hundreds of thousands homeless and
damaged around USD 6.6 billion worth of properties. Due
to this devastation the national economy has been affected
badly which adversely affected supply system leading to low
economic growth. This low growth rate also affects the overall
demand which highlights the current economic scenario of our
country. Discouraging business environment has been rampant
and investors are not ready to invest in such situation that further
declines the national GDP and employment opportunities. But
we are still hopeful to rebuild the nation by standing on the
new Constitution, 2072 and all the people and professionals
need to be united for nation building. On the above scenario,
there have been direct disruptions on the supply that impacted
communities and affected sector through formal business
channel and there could be a number of financial reporting
issues that have emerged as a result of natural calamity.

The Institute is organizing the Conference focusing on
these issues on 31 January, 2016.
In the capacity of the President its my pleasure to
share with the members and stakeholders about some
achievement made as of the Journal period and upcoming
program of the Institute.
Student, Education and Educational Plan
Indeed, the chartered accountancy education is the
professional course carrying better future opportunities.
It is said that the student in chartered accountancy course
plays vital role in educational sector hence it has become
the choice for deserving and meritorious student. This
course is not bound only in one single sector but also
covers various sectors of market.
The Institute has recently taken some reform initiatives in
line with my previous message. Such initiatives include
recruitment of the staff with appropriate professional
qualification in order to update and revise the study
materials and this activity will be continued in the
coming days also. Similarly the Institute also organized
interaction program between President as well as Vice
President and CAP III level students so as to listen their
grievances and matters related to educational activities to
explore the room for further improvement in the existing
professional education. We assure to organize such
interaction program on regular basis with the students
pursuing CA education. We hope that their comments
and suggestions received will be useful for constructive
improvement of the Institute.
Apart from the chartered accountancy curriculum, the
institute in coordination with Kathmandu University,
School of Management has conducted the GMCS training
within the framework of market requirement. GMCS
program has been able to raise the awareness about the
importance of dynamics of communication in a business

environment and help participants to demonstrate
individual communication abilities and recognize their
strengths and weaknesses.
Career Counselling is the backbone to attract the
deserving and meritorious student to chartered
accountancy education. So considering this fact we need
to step up our efforts in order to attract brightest students
to the profession and increase the future prospects and
opportunities in the CA education.
With the 5th amendment in Nepal Chartered Accountant
Rules, 2061, the Education Committee has been replaced
by the Board of Studies (BoS) to carry out all activities
of Education Committee. With the formation of Board of
Studies, we are hopeful to achieve further improvement
in Chartered Accountancy education in future.
We have successfully conducted Chartered Accountancy,
Membership and ISA examination during the Journal
period. With the view of decentralisation policy and
make our students facilitated we have conducted the
CAP I and CAP II examination in different branches of
the Institute. I would like to congratulate the students of
all levels for their achievement and welcome the CAP III
students those who completed all necessary requirements
for obtaining membership of Institute of Chartered
Accountant of Nepal. I wish all the best for their future
professional career.
Formation of Quality Assurance Board
The Government of Nepal has approved the 5th amendment
in Nepal Chartered Accountant Rules, 2061 by the
ministerial level decision of 2072/08/18 empowering
regulatory regime of the Institute further responsive
by forming an independent Quality Assurance Review
Board (QARB). The Board will comprise 7 members
and conduct independent inspection and monitoring of
practicing accounting firms in order to oversee quality

assurance system in the accounting firms.
In accordance with provision of the Rules ICAN has
formed the QARB and has commenced its functions.
Pursuant to Rules the function, duties and rights of the
Board has been mentioned to prepare policy and program
for QA review, to enforce and conduct monitoring
of Practice Unit as per the QA policy and program, to
recommend Council to make aware about the areas of
improvement.
Members and Professional Capacity Development
We cannot deny the significant contribution of the
members in the development initiatives of the Institute and
acknowledge the accounting and auditing professionals
as they are the pillars for the professional development.
Therefore, Institute is conducting various professional
development activities and keeping them well-informed
of new development in the field of accounting, auditing
and other related matters for the members in time to
time.
We are making our membership aware about ethical
practices by publishing different notices and using
various other methods. Monitoring committee of the
Institute is cautious to reduce any unethical activities of
the members performed by them.
The Institute conducted Diploma in IFRS Certification
Course in October, 2015, jointly with The Association
of Chartered Certified Accountants of UK (ACCA) in
Kathmandu. The Course provided in depth knowledge
of International Financial Reporting Standards (IFRS).
Refresh course for the previous batch was also conducted
coinciding with the regular Diploma in IFRS course.
The Contemporary Issues Discussion Committee of
the Institute organized workshop under the theme of
Valuation Techniques to make our membership aware on
business valuation of different sectors.

The Institute organized a workshop on Nepal Financial
Reporting Standards (NFRS) Implementation Status
and Preparatory Work in Commercial Banks of Nepal in
Kathmandu in collaboration with Nepal Rastra Bank, the
Central Bank of Nepal in October 2015. The workshop
was mainly targeted for the Chairperson of the Boards/
Chair of the Audit Committee/ Board Members and Chief
Executive Officers of the Commercial Banks.
Institutional and Human Resources
Considering the increasing volume of the work and
activities of the Institute, it is felt that to some extent
the existing organizational structure and manpower is
overburdened to perform each and every task efficient
and effectively. Therefore, to meet the organizational
goal and face the new challenges, the organizational
structure is being reconstructed so as to strengthen the
working environment and operational efficiency of the
Institute.
The 5th amendments of Nepal Chartered Accountant
Rules, 2061 have been approved by the Ministerial Level
decision of Nepal Government. As per the decision total
17 Rules have been either revised or added with new
provision.
The Institute of Chartered Accountants of Nepal (ICAN)
conducted TOT program on Nepal Public Sector
Accounting Standards (NEPSAS) in October, 2015, with
the joint initiatives of Financial Comptroller General
Office (FCGO).
International Relation
ICANs relation with the International accounting bodies
is now expanding gradually. In this regard, we have
visited and attended the various meetings, seminars,
workshops etc. organized by different national and
international Accounting Bodies of different countries for
expanding the relation with those organizations. During

the reporting period, we have attended the meetings in
South Korea, Singapore, and Malaysia.
I assure to keep our members and stakeholders informed

about the activities of the Institute in the next issue of our
Journal.
ICAN Officials and other member visited Bangladesh

and Sri Lanka representing ICAN to attend various
Committee and Board meetings.
Before I conclude my message I would like to seek the

support and valuable suggestions from ICAN family
and past presidents for the development initiatives of the
Institute.
It is my duty to inform the entire membership that the

Institute has submitted the SMO Action Plan to IFAC in
December 2015.
Its my immense pleasure to bring the notice of the
entire membership that I have been selected as the
Board member of CAPA representing ICAN. This has
been possible due to the significant contribution of past
Presidents and unflinching support of my colleagues and
all the members of ICAN.
Best wishes !
CA. Prakash Lamsal

President
ACCOUNTING
Challenges and Quality of Accounting Profession
Background
The number of cases of audit
failures all over the world since
last one decade raise the question
about the independency of auditor
and their responsibilities. To win
the public trust on the audit, there
has obviously led the credibility
question over the profession that
provides justification for need
of external/oversight regulation
worldwide.
CA. Paramananda Adhikari

CA. Adhikari is a Technical Director of ICAN.
He can be reached at
pnadhikari@gmail.com
About a month back, one of my

fellow colleagues came to my office
after a gap of couple of years. I
ardently asked to him how you
are doing. He softly replied that I
had just started consulting work of
record keeping, tax advising and
other contemporary services. I was
surprised and asked him that how
can you provide these services
without your relevant professional
qualification. He simply replied that I
had not audited the books of accounts
of the clients. Still I had a question
that though you had not audited the
books of accounts but how can you
provide the non-assurance services
like those. Still he had throwing to
me other non-tenable logic. Finally
I did not want to lose my good
friend through unnecessary debate
and changed the topic to other nonaccounting issues like the difficulties
that we are passing now a days i.e.
shortage of cooking gas, petroleum
products, groceries items and quality
of life of people of Nepal. This is not
the single case practice over here.
There are many more such services
carried out by the person who has

no relevant qualification, experience
and knowledge in the relevant field.
This would be one of the biggest
challenges to the regulating body
to capture these types of services
within the scope of accountancy.
Introduction
The word accountancy that had a
distinctive meaning in the past is
now being changed as customary to
suit their own purpose by the users
or service providers. The meaning
of accountancy embraces a number
of assignments like record keeping,
preparation of financial statement,
audit and assurance, financial
management, consultancy, taxation
and so on. Now a days, person who
are directly or indirectly associated
with the accountancy claimed to
the public that the different practice
other than assurance services they
are operating are not part of the
accountancy profession and its a
kind of service provided beyond the
scope of accountancy. However, all
over the world, accountancy is held
as embracing all these disciplines
and without getting valid authority
The Nepal Chartered Accountant
December 2015
ACCOUNTING
cannot do any of the services. So, we have that great

challenge to address the issue and bring those disciplines
within the meaning of accountancy in our context.
Circumstances of Audit Failures

The objective of audit is to get reasonable assurance
rather than absolute assurance and the opinion of the
auditor shall be considered persuasive rather than
conclusive. Hence, auditor must obtain a high level of
assurance that the conclusion expressed in managements
assessment is correct to provide an opinion. However,
if we look back to the audit failures of the past across
the globe, indicates that auditor fails to understand
business environments, risk assessment including error
in interpreting accounting principles, application of the
standards and misstatements caused by client fraud are
few of them. Aftermath investigation of the failures cases,
it was found that in most of the cases auditors were also
involved in the fraud with the management and found
guilty of the professional misconduct due to concealment
of facts and information. The number of cases of audit
failures all over the world since last one decade raise
the question about the independency of auditor and their
responsibilities. To win the public trust on the audit,
there has obviously led the credibility question over the
profession that provides justification for need of external/
oversight regulation worldwide. Probably, the oversight
regulation is related to the result of the serious audit crisis
and the way out of minimizing the consequences of the
crisis and its reasons.
Criticism Against the Auditors

Based on the above facts, there are some specific
charges against auditors which includes, failed to obtain
adequate business knowledge, failed to obtain sufficient
appropriate audit evidence to corroborate management
representations and explanations, failed to assess the risk
attached with the business, failed to respond on overvaluation of assets, limiting the analytical and substantive
procedures, limiting the sample selection procedures,
December 2015
failed to exercise professional skepticism on unusual

or related party transactions and issued unqualified
opinion despite being aware of many accounting material
misstatements and failures of disclosure of such facts. The
auditing profession in Nepal is experiencing a period of
serious havoc. Few years back from now, backing to raise
the fake VAT billing and manipulation of accounting data
of the clients were some of the severe criticism against
the auditors not only by the government but public too.
Further, there are heavy debates on the minimum audit
fee issues of the accounting professionals for the services
they discharged to the clients. This may bring to light the
charges faced by the accounting professionals but who
knows the problem actually they are facing to uphold
their profession.
Practicality of Audit Services

The audit function is governed through the theory of
agency that the owner will monitor the management
activities through audit function carried out by independent
professional accountant. However, in Nepal audit is
mandatory for all companies incorporated under the
Companies Act, 2006, despite of their size and ownership
structure i.e. private or public companies. According to
the provisions of sections 108 and 109 of the Act, the
management of the company is responsible to maintain
the accounts of the company, annual financial statements
and report of the Board. Similarly, sections 110, 111 and
115 of the Act, every company incorporated under the
Act needs to have its financial statements duly audited
by an independent auditor. This is a mandatory provision
even for the small company. The low perceived value of
the audit function is challenge facing audit practitioners
in Nepal. Nevertheless, the mandatory audit requirement
for the companies whether large or small, the actual
contribution of auditing towards its intended purposes is
somehow limited. This is because significant numbers of
companies in Nepal are private companies incorporated
under the Act as opposed to public companies. And
ACCOUNTING
majority of these private companies are owner-managed.

Hence, an audit would be worthless to most of the private
companies because the directors and the shareholders are
ultimately the same persons. Due to this reason, most
audit clients have found an audit function as a non-value
adding activity and perceive it to be a costly process
to them paying money to the auditor just for signing
the financial statement. They totally ignore about the
responsibility taken over by the auditors on issuing the
audit report. The most noticeable value of auditing for
the private companies is merely adding trustworthiness
to the financial statements for the purpose of tax return
to the Inland Revenue Department (IRD) and for the loan
applications to the bank and financial institutions to catch
the credit facilities.
Quality of Audit Services

In contrast with the usefulness of audit services in the
private companies, audit function has a more significant
role for public companies since it serves the purpose of
reporting to their existing shareholders and attracting
further investment. However, the practical usefulness of
auditing may only be pertinent to a limited group of users
such as bankers, regulatory bodies, institutional investors
and large stakeholders such as IRD, NRB, Office of the
Company Registrar and VIP shareholders. As opposed
of these, by and large public do not actually rely on the
audited financial statements for their decision making
purposes. As a result, over the years, it is realized that
the audit has gained very little recognition from a large
section of the public. Another problem underlying the
audit practice in Nepal is the inability of the public to
make a fair evaluation of auditors performance. Public
do not have adequate knowledge and ability to understand
the quality of an audit. Public judgment of audit quality
will only come out as a result of subsequent events
(situation of failing) which more often negative reporting
by the media that an audit has not been performed with
due care. The issue of audit quality versus audit fees has
been a major concern of the auditing profession in Nepal

since many years from now. Due to this, audit quality is
likely to be sacrificed by the client as a result of low audit
fees and the audit clients may not be interested for higher
audit quality or the audit clients may not be able to judge
the audit quality as it should be.
Conclusion
Perhaps, higher moral value, competency and improved
qualities of services are few of the fundamental principles
of profession to enhance the scope, trust and credibility
of auditing profession. Educating the public and various
stakeholders on the nature, objective and expected
outcome from an audit that may help the public to
recognize the value of auditing and the value addition
made by the auditors work. Stringent regulation alone
may not be only solution in promoting qualitative and
better practices of auditing.
December 2015
ACCOUNTING
The Legitimacy of International Public

Sector Accounting Standards (IPSASs)
The government/FCGO should

consider an incremental approach
to public sector accounting reform
extending the use of modified
version of cash accounting
and then gradually migrating
towards a simpler form of accrual
accounting.
Dr. Pawan Adhikari

Dr Pawan Adhikari is a Lecturer in
Accounting at Essex Business School.
He can be reached at padhik@essex.ac.uk
10
1. International Public
Sector Accounting
Standards in Nepal
The Financial Comptroller General
Office (FCGO) is in the process of
extending the pilot use of Nepal
Public Sector Accounting Standard
(NPSAS). The NPSAS corresponds
to a large extent the requirements laid
down in the cash basis International
Public Sector Accounting Standard
(IPSAS). Twelve more centre-level
agencies would be preparing their
consolidated statements using the
NPSAS by the end of this financial
year (2015-16). It is expected that
the NPSAS would be used to prepare
the consolidated statement of all
44 central-level agencies within
the next three years. A number of
trainings are being conducted to
disseminate the underlying ideas of
NPSAS to government accountants
at different levels and to make
them capable of preparing the
consolidated statements, as required
by the NPSAS. Once the adoption of
the NPSAS across the central-level
agencies is accomplished, the FCGO
intends to initiate a step towards the
December 2015
accrual basis of IPSASs.

What is worth mentioning is that
six years have already been passed
since the government first approved
the use of NPSAS by budgetary
entities. Some important changes
have occurred in international
public sector accounting standards
during these years. For instance,
the International Public Sector
Accounting
Standards
Board
(IPSASB) has recently announced
that it will facilitate the revision
of the cash basis IPSAS following
the recommendations of the Task
Force, which it had established
in 2010 to review the use of the
standard in developing nations. In
another development, the Europe
Commission (EC) has clarified
that the accrual-based IPSASs
cannot be implemented in Europe
in their present form and has put
forward a proposal for developing
a separate European Public Sector
Accounting Standards (EPSASs)
for its member states. This paper
aims at providing an update of
contemporary developments taking
place in international public sector
ACCOUNTING
accounting standards. This understanding might be

valuable both for the government/FCGO and accounting
profession in the process of implementing the NPSAS
and developing a reform strategy for future public sector
accounting reforms.
2. Revisiting the Cash Basis IPSAS

The global accounting profession and international
organisations, mainly the World Bank, are of a view that
the adoption of accrual accounting cannot be an immediate
solution for developing countries to improve their poorly
performing public sector accounting. The challenges in
implementing accrual accounting and the costs incurred
in the implementation process are unfolding, as more and
more European governments have moved towards the
accrual basis of accounting. For instance, the European
Commission (2012, 2013) has in its reports assumed that
the costs of moving away from a cash-based accounting
system to an accruals-based accounting system for the
central government alone in a medium-sized member
could reach up to EUR 50 million given the expense
of putting into place the new standards, the associated
IT systems, and appropriate training and education. In
the same report, it is mentioned that France had spent
in excess of EUR 1,500 million on articulating accrual
accounting and budgeting reforms over the last decade.
Given the costs incurred in the transition process, some
countries have been even forced to move back and adopt
a step-by-step approach to accrual accounting starting the
reforms from their ministries rather covering the entire
public entities.
The global accounting profession and the World Bank
have therefore urged developing countries to sequence
their public sector accounting reforms, beginning with
the adoption of the cash basis IPSAS, with a possible
move towards accrual accounting in the longer-term.
The adoption of the cash basis IPSAS has, however,
appeared to be a problematic in many developing nations.
Certain requirements of the standard, for instance,
full consolidation, reporting external assistance and

third party payments, have proved impractical in many
countries (see e.g. IFAC, 2010). Wynne (2013) claims
that at least 31 governments in Africa have tried to adopt
this standard, but its key requirements have not proved
practical. The PriceWaterCooperss (PwC) report is
another illustration in this regard. It is mentioned in the
report that not a single government has been able to fully
implement the core requirements of the cash basis IPSAS
(PwC, 2013).
Such ambiguities in implementing the cash basis IPSAS
have also been acknowledged by the IPSASB, the
developer of the cash basis IPSAS. In 2008, the Board
had established a Task Force with a view to identifying
the areas/issues within the cash basis IPSAS that have
apparently become an obstacle in extending its use in
developing countries. The Task Force was also assigned
to make recommendations as to whether the cash basis
IPSAS should be modified, or if further guidance should
be provided in light of the challenges that the countries
had experienced in its implementation. In its report
submitted to the IPSASB in 2010, the Task Force had
raised concerns over several issues, consolidation being
the primacy one. In addition to the Task Force, the
International Consortium on Governmental Financial
Management (ICGFM), which is reckoned to be a strong
supporter of the cash basis IPSAS, had also submitted
detailed proposals for amending the cash basis IPSAS.
Due to the issues related resource constraints, the
IPSASB was not in a position until recently to address
the recommendations of both the Task Force and the
ICGFM.
In 2015, the IPSASB, however, agreed on a project
brief proposing that the cash basis IPSAS be reviewed
to respond to certain recommendations of the Task
Force. In its meeting which was held in Toronto in June
26, 2015, the IPSASB had on its agenda a review of
the cash basis IPSAS. An entire session of the meeting
December 2015
11
ACCOUNTING
was devoted to setting directions for the preparation of

a first draft of an Exposure Draft (ED) identifying the
potential amendments to the cash basis IPSAS. Some of
the potential amendments to the standard discussed in the
meeting included;
shifting the consolidation requirements from part
1 (required) to part 2 (optional) and providing
countries the option of either consolidating their
financial statements or publishing them as stand-alone
statements
shifting the requirements for third-party payments
from part 1 to part 2 and provide each country an
option of reflecting third-party payments in their
financial statements
accommodating the requirement of external assistance
in part 2 instead of part 1 so that each country will
have the option of reflecting the extent of external
assistance that they receive, and
addressing the ambiguities in dealing with foreign
currency and treasury single account transactions,
amongst others.
An agreement was made in the meeting to action a limited
scope review of the cash basis IPSAS so as to:
propose amendments to requirements in part 1 of the
cash basis IPSAS dealing with consolidation, external
assistance and third party payments,
propose limited housekeeping changes where
necessary to ensure that the requirements remain
appropriate, and
clarify that the adoption of the cash basis IPSAS is
intended as an intermediate step on the road towards
accrual accounting, not an end in itself.
It is expected that this agenda of revising and simplifying
the cash basis IPSAS will be endorsed in the next IPSASB
meeting, which is scheduled in March, 2016.
12
December 2015
3. The Applicability of the Accrual Basis

IPSASs
As part of improving public sector governance, a large
number of European countries have in the last decade
adopted some degree of accrual accounting in their public
sector (Ernst & Young, 2012; PwC, 2013). Organisations
such as the IMF and the European Commission and the
professional accounting associations and accounting
firms have envisaged accrual accounting a means not
only of tackling the evolving sovereign debt crisis in
Europe, but also of avoiding the future financial crises.
Despite the widespread use of accrual accounting, only
few counties (except UK, Australia, New Zealand and
Switzerland), however, have shown an interest in adopting
the accrual basis of IPSASs. Mentions are made that the
accrual basis of IPSASs have appeared inadequate to
address the requirements of most of the central European
governments in which public finance is centred around
the annual budget (European Commission, 2012, 2013).
For instance, countries such as Italy and Slovakia, have
expressed concerns over the lack of public-sector-specific
provisions in the IPSASs for recognising and measuring
pension liabilities, social benefits, tax revenues and
historical costs (Ernst & Young, 2012).
In a similar view, several EU member states have raised
concerns over a lack of provisions in the IPSASs to address
the main intangible asset inherent to the government, i.e.
the power to levy taxes. The IPSASs have also come short
in many counties in dealing with non-exchange transaction
expenses, i.e. taxes and transfers, employee benefits,
public debt and government revenues. For instance,
non-exchange transaction expenses have been the main
expense within many European central governments
and some other public entities; there are however no
IPSASs available for those expenses. In addition, IPSAS
23 has turned out be irrelevant in a number of European
governments given that their revenue sources have been
very broad rather than defined in the standard. Similarly,
ACCOUNTING
IPSAS 29 has appeared inapplicable in many European

countries and do not have a developed system that could
separate commissions and expenses for their public debt.
The significance of the IPSASBs proposed conceptual
framework has also been questioned by many EU
member states. Having spent nine years and eight public
consultations with the global constituency, the IPSASB
has recently approved its Conceptual Framework for
General Purpose Financial Reporting by Public Sector
Entities (Christiaens & Vandendriessche, 2015). The
IPSASB claims that the framework has been developed
by giving a special attention to specific public sectorrelated issues, and that it would provide a basis for
preparing high-quality reports for both accountability
and decision-making purposes. However, evidence
shows that the notion of government control used in
the conceptual framework has proved problematic in
a range of countries. The accountability mechanisms
in the European public sector are primarily focused on
the use of budget appropriations and on the services
provided and effects achieved from the point of value for
money. This also means that the budgets statements and
performance reporting, rather than the general purpose
financial statements as prescribed by the IPSASs, would
continue to form a basis for discharging accountability
in the public sector. Furthermore, questions have been
raised about the way the users of financial statements
have been identified in the conceptual framework. The
citizens, resource providers, legislators, and other service
recipients and their representatives have been reckoned
to be the key users of the financial statements in the
public sector, without any actual interviews or field work
having been undertaken to specify their requirements
and their varied information needs (Christiaens &
Vandendriessche, 2015). Countries are also of the view
that the framework would have been introduced prior to
the issuance of standards rather than when the standards
are fully developed.
In its assessment report, the European Commission

(2012) has underscored several critical issues relating
to the accrual basis IPSASs, such as, the governance of
the IPSASB, the relationship between the IPSASs and
the European Systems of Accounts and the left out of
budgeting, amongst others, and explicated that the
accrual basis of IPSASs cannot be implemented in the EU
member states as they currently stand. Using the IPSASs
as a starting point, the European Commission (2013) has
made a recommendation for the development of a set
of harmonised public sector accounting and budgeting
standards, i.e. the European Public Sector Accounting
Standards (EPSASs) for the member states. This trend
towards the EPSASs has certainly become a caveat,
warning not only against the suitability of the IPSASs but
also against their future adoption by EU member states.
4. Alternative Reforms to Nepal

The fact that a large number of countries, both developed
and developing, have referred to the IPSASs, while
articulating their public sector accounting reforms, cannot
be denied. However, there is no evidence that any country
has fully complied with the requirements laid down in
the IPSASs. The applicability and legitimacy of both
the cash and accrual basis IPSASs have therefore raised
concerns at a global level. Claims that a large number of
countries are embarking on a move towards the IPSASs
can therefore be contested. For instance, developing
countries have failed to cope with several requirements of
the cash basis IPSAS relating to the disclosures of thirdparty payment and external assistance and the preparation
of consolidated statements. In a similar vein, Europe has
rejected the accrual basis of IPSASs mentioning that
the standards lack provisions for operating the budget, a
key governance tool in the public sector and for tackling
various other non-exchange transaction expenses, for
instance, taxes. The Europe Commission (2012) has
therefore proposed the development of a separate set of
European Public Sector Accounting Standards (EPSASs)
December 2015
13
ACCOUNTING
for its member states instead of adopting the accrualbased IPSASs.

Given this, concerns can therefore be raised whether it is
time for Nepal to revisit its government accounting reform
strategy and plans. Instead of devoting its energy and
resources to implementing the NPSAS and developing
consolidated accounts, it may be better to search for
an alternative approach to improving the accounting
practice. For example, the promotion of certain aspects
of modified cash accounting could be one alternative.
A large number of governments in Latin America have
in recent years moved from pure cash accounting to
a modified-version of cash accounting by disclosing
certain aspects of receivables, payables, borrowings and
other financial liabilities, non-cash assets, and accrued
revenue and expenses. The paper therefore suggests that
the government/FCGO should consider an incremental
approach to public sector accounting reform extending
the use of modified version of cash accounting and then
gradually migrating towards a simpler form of accrual
accounting. Only through the adoption of such approach
the future federal and states governments would be able
to demonstrate their financial viability and discharge their
accountability to the citizens.
References:
Christiaens. J., & Vandendriessche, F. (2015). IPSASs
conceptual framework: a comment. CIGAR Network
Newsletter, 6(2), 2.
Ernst & Young. (2012). Overview and comparison of
public accounting and auditing practices in the 27 EU
member states. UK.
European Commission. (2012). Public consultation
assessment of the suitability of the International Public
Sector Accounting Standards for the member states.
Summary of responses. Brussels: EUROSTAT.
European Commission. (2013). Towards implementing
14
December 2015
European Public Sector Accounting Standards (EPSAS)

for EU member states public consultation on future
EPSAS governance principles and structures. Public
Consultation Paper. Brussels: EUROSTAT.
International Federation of Accountants (IFAC) (2010).
Review of the cash basis IPSAS -Report of the task force
(agenda paper 6.1). Vienna, Austria.
PWC. (2013). Towards a new era in government
accounting and reporting. PWC:
PwC Global survey on accounting and reporting by
central governments.
Wynne, A. (2013). International public sector accounting
standards: compilation guide for developing countries,
International Consortium on Governmental Financial
Management.
http://www.scribd.com/doc/134603499/
ICGFM-Compilation-Guide-to-Financial-Reporting-byGovernments.
ECONOMY
Nepal Unrest: The Fault Line
Every institutions who are

responsible for bringing current
situation has been adversely
affected by the crisis but, the
general public has been affected
the worst.The reasons for these
failures can be clearly understood,
it happened apparently because
lead players had miscalculated
the effects.
The current economic difficulties

and shortage of essential goods
are the result from non-economic
activities. Major factors of current
crisis are political mistrust, border
unrest and blockade.Political
instability has significant impact on
the economic growth as the market
always negatively respond to Noneconomic turmoil.
The political implications for the
market are as important as the
economic effects.The collapse of
the supply system furtheramplified
anger at ground level, sending a
wide ramification throughout the
Nepalese population.It was further
accelerated by opportunists who
want to fulfil their political dream
and translate them into political
benefits.
CA. Anal Raj Bhattarai

CA. Bhattarai is a Fellow Member of ICAN.
bhattaraiar@gmail.com
We stand at movement of great

challenge and great opportunity. We
are facing worst economic crises
in generation, in part because of
complex political situation. These
difficult times are not a result of
accident of history. There are a
number of composite political
and legal issues which were not

handled prudently. To be sure, some
of these problems are results of
unprecedented political development
that could have been easily avoided.
The recent turmoil does not condone
our mistake!
Due to various reason price of daily
necessitates from groceries to fuel
had been skyrocketed. Many of us
are worry about whether we will be
able to raise our kids in safety and
security and give them a better life.
It is easy to feel as if that dream of
boundless opportunity that should
be right of all Nepalese is slipping
away. Our country needs to provide
economic opportunities to the
people to fulfil their dream. We need
to provide economic security to
private sector with continual spread
of benefit to the general public.
Economic policy need to protect
the interest of the working families
that are backbone and the engine
of our economic growth. It is a
complex phenomenon which not
merely concerns the national policy
or behaviour of political leaders
December 2015
15
ECONOMY
but also touches upon the very structure of our country.

We must create bottom-up growth that empowered
hardworking families to climb the ladder of success and
raise their children with security, opportunity, and hope
for better future. These hopes are at the heart of Nepalese
people. Yet despite of the resilience, optimism, and hard
work of Nepalese people, their dreams too often have
been frustrated.
In difficult times, there's less room for ambiguity in
defining goals. To meet our challenge, we must summon
our common faith in our values - "the sense of who we
are, and what is our limits". We are at critical juncture of
time, to lead Nepal at this critical moment in history, we
require more rational judgements. We cannot simply look
backward for finding solution to the complex economic
problems.
Todays political crisis needs to be analysed very carefully.
Constitution promulgated by Nepalese Constitution
Assembly may or may not be able to address concerns of
all sections of the society but it has been able to emphasise
on freedom of economic activities, unquestioned right to
properties, smooth and free flow of goods and services
etc. To encourage investment activities government must
guarantee uninterrupted supply system. The demand,
production, trade and transport are the major basis of
market selection. We learnt our lesson.
When the economy takes a downturn, wise market player
usually respond by changing their financial behaviour.
Even though constitution has secured economic rights
of all,Corporate Investors do not blend with political
instability as a result of which they will book profits
and go to another country. Further, crisis like today
definitely encourage investors to make larger and riskier
investments during the upswing of the business cycle
and to cut back in their investments during the downturn,
increasing rather than damping the instability of the
financial markets and the volatility of the underlying
16
December 2015
real economy.
The integrity of political system and the publics trust in
those system are essential to the economic well-being
of a nation. The soundness and the sustained prosperity
of the country depends on the notions of fair dealing,
responsibility, and transparency.Unfortunatelythere
has been cases of mistrust and confusionwe witnessed
an erosion of standards of responsibility and ethics that
exacerbated the politicalcrisis. The Political system has
been thus suffering from mistrust (lax governance, falling
confidence, ownership and slow acceptance) through the
fault in its own inabilities. The problem that we are facing
is unique to our country.Though, the constitution has been
able to address legitimate demands of various sections of
societies, the politicalsystem has not been able to take
venerable section in confidence. Serious flaws exist in the
short-term vision of our political players.
Considering the situation in various part of country our
political system should have taken some rational steps
to deal with them so that they could have easily avoided
those elements which can disintegrate country. They
should have played a role to consolidate all Nepalese in to
one roof. The political turmoil, when it appeared in some
section of societies, or more precisely, in the Tarai regions
but now the ramifications of turmoil had wider effect which
crossed the Nation and had crossed maximum economic
losses The problems we faced are not only political but
it has rather affected the survival of people.This has
had negative impacts on investmentactivities therefore
the government must guarantee an uninterrupted supply
system and support free market.
Every institutions who are responsible for bringing current
situation has been adversely affected by the crisis but, the
general public has been affected the worst.The reasons
for these failures can be clearly understood, it happened
apparently because lead players had miscalculated the
effects.
ECONOMY
Under present condition, reconciliation with each one is

necessary to remove the mistrust. If this continues, we
expect that, the entire system, may become incapable
of carrying out even the simplest of steps involved
in the conversion of savings into investment or the
financing of home building, personal consumption, or
development.
There is a deep fault in our approach both politically,
economically and diplomatically, we are not been able
to design proper solution for current crisis. Further the
crisis had not been managed smoothly. It seems our
Political Systemdoes not process information efficiently,
or well.Any solution must take account of the socioeconomic costs of the crisis as its starting point, because
these are disproportionally affecting the country economy
as well as the poor and labour more generally.
Assuming that our political system cannot be fully
reformed, measures must be taken to place a ring around
the systems core called politic. A stable political
system is a means to an end, not an end in itself, and
the ends that matter are social justice and economic
development. The merit of the politicalsystem should not
be judged merely in terms of the stability that it promotes
or in terms of the growth, innovation, and investment that
it may encourage. The political arrangements should also
be judged in terms of how effectively they promote social
justice.
We must analyse the magnitude of the impact of current
crisis and its impact on socialharmony and loss of
businesses confidence. We need an emergency economic
plan to jump-start the economy and get our economy back
in track. We must adept our policies that can triggered
a fundamental changes in the economy and create wide
spread opportunity and economic prosperity; we need to
make commitment towards future generations, so that,
they know, we care:1. To move beyond the bitterness,
2. To arrive at consensus,
3. Fulfil our responsibility for the Nation,
4. To start the path for economic development and
reconstruct our Nation.
We know, once we overcome with our political difference,
other complex economic and legal issues can be easily
resolved to ensure sustainable economic development.
We are confident on our abilities and we must look
forward, do work efficiently and maintain good relation
with our neighbouring countries.
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December 2015
17
ECONOMY
Managing Risks Facing the Economy
1. Past Growth
Increasing and managing wider
and deeper interrelationships
with the global economy would
be essential for enhancing the
efficiency and effectiveness of
the economies in the modern
world. Globalization means
increasingly integrating with
the world economy through
introducing facilitative changes
and arrangements so that
the benefits of the associated
openness, competition, reform,
and restructuring are available
to the stakeholders at a faster
pace and rising scale.
Mr. Tula Raj Basyal

Mr. Basyal is a Former Executive Director of
Nepal Rastra Bank.
tula.basyal@fulbrightmail.org
18
On an annual basis, Nepals growth

for the last four decades (1975/762014/15) averaged at a lower single
digit of 4.2 percent. Population
growth during the period averaged
at 1.8 percent. So, Nepals per capita
gross domestic product (GDP)
growth during the four decades
averaged at 2.3 percent. However,
talking about our neighbors, the
average per capita GDP growth
during the 34-year period (19802015) was 9.0 percent in China and
4.5 percent in India, according to
World Economic Outlook Database
(IMF, October 2015). According
to GDP figures published by the
Central Bureau of Statistics of
Nepal, the pre-democracy period
(1975/76-1989/90) recorded an
average growth of 3.9 percent
while the post-democracy period
(1990/91-2014/15) experienced an
average growth of 4.4 percent. The
highest growth rates recorded were
in 1983/84 (9.7 percent), 1993/94
(8.6 percent), 1980/81 (8.3 percent),
1987/88 (7.7 percent), and 1990/91
(6.4 percent). During the three years,
December 2015
namely, 1984/85, 1999/00, and

2007/08, the growth rate recorded in
each of these years was 6.1 percent.
The growth rates were 5.3 percent
each in 1995/96 and 1996/97, 5.6
percent in 2000/01, and 5.4 percent
in 2013/14. Rest of the 28 years
witnessed growth rates below five
percent. During the last nine years
(2006/07-2014/15), the growth
rate averaged 4.4 percent. During
the current fiscal year 2015/16, the
economy is heading for negative
growth on account of so called
economic blockade. Two previous
blockades imposed by India were
in (a) 1969 and (b) 1988/89 and
1989/90. The growth rate then was
not negative. Actually, the growth
rates recorded in 1988/89 and
1989/90 were positive 4.3 percent
and 4.6 percent respectively. During
the last four decades, there were
previously two episodes of negative
growth occasioned by large negative
agricultural growthin 1979/80
and 1982/83. The negative growth
recorded in these two years was 2.3
percent and 3.0 percent respectively.
In 2001/02, almost nil growth was
recorded yet the growth (0.1 percent)
ECONOMY
was positive. We can, therefore, observe that the negative

growth during this year will be the first such evidence in
33 years.
2. Effects of Blockade
The effects of so called blockade now continuing for over
four months are evident throughout daily lives of people
and in every sector of the economy. The immediate and
short-term costs of the blockade are catastrophic. The
long-term costs of the blockade are even hard to guess.
The shortage of fuel, food, medicine, other essential
commodities, and industrial raw materials has hardest
hit the peoples lives. Transportation in the country has
been paralyzed. The Terai Bandha has crippled normal
life. Closure of educational institutions has created
uncertainty about the future of the children. Closure of
about 2,200 industrial establishments and disruption of
business activities has resulted in colossal loss in terms
of lost output and employment. Blockade near the border
points has severely affected Nepals transit facilities and
resulted in revenue loss worth billions of rupees. The
supply chain associated with domestic and foreign trade
has been disrupted. As a result, scarcities and price rise of
essential commodities have been the normal occurrence.
The size and reach of Informal economy has been on
the rise. Development projects in the public sector and
investment activities in the private sector have been
disturbed. On the whole, the economys consumption,
investment, and external trade have been affected.
Business confidence and competitiveness of the economy
have declined. Unemployment has been on the rise.
Consequently, the ratio of population living below the
poverty line must have increased by a couple of percentage
points more. Therefore, the 13th Plan (2013/14-2015/16)
target of reducing the population below the poverty line
to 18 percent by 2015/16 from 23.8 percent at the end
of 2012/13 is unlikely to be attained. Nor will there be
favorable outcome in the goal of elevating Nepal to the
status of developing country by 2022 from the present
status of LDC. Other targets of the 13th Plan are also

likely to be unmet.
3. Globalization as the Present Trend

Globalization is defined as the process of enhanced
economic interdependence and integration among
nations. Increasing integration is seen today in the
dramatic growth in the flows of goods, services, and
finance across national borders. Goods, services,
finance, and even manpower markets across the globe
are being liberalized, becoming more competitive and
getting increasingly integrated. The restrictions in their
transactions are being reduced through implementation
of rule-based institutional arrangements, both at the
regional and international levels. Institutions and fora
like the Bretton Woods institutions; WTO, BIMSTEC,
Group of Twenty, regional trading arrangements like
the South Asia Free Trade Area, etc. are supporting this
process. Increasing and managing wider and deeper
interrelationships with the global economy would be
essential for enhancing the efficiency and effectiveness of
the economies in the modern world. Globalization means
increasingly integrating with the world economy through
introducing facilitative changes and arrangements so
that the benefits of the associated openness, competition,
reform, and restructuring are available to the stakeholders
at a faster pace and rising scale. In fact, globalization is
the process of expanding and intensifying the transactions
and interrelationships with the global economy so as to
make the domestic economies efficient, productive, and
competitive.
One major component of globalization is the steady
increase in the international trade as a share of GDP.
Globalization is supported by a continuous drop in the
transportation and associated costs along with declining
tariffs and barriers to trade. Essentially, globalization
reflects an extension of specialization and division of
labor to the entire world. Global integration of goods and
financial markets has produced impressive gains from
December 2015
19
ECONOMY
trade in the form of lower prices, increased innovation,

and more rapid economic growth. However, these gains
have sometimes been accompanied by adverse sideeffects. One consequence of economic integration is
the unemployment and lost profits that occur when lowcost foreign producers displace domestic production. To
address such interests, some arrangement of protectionism
in the form of tariffs and quotas on international trade is
sometimes advocated. Globalization could raise many
new issues for policymakers as it has both positive
and negative connotations. A prudent step would be to
strive to make globalization a better instrument for a
countrys prosperity. Inability to do so would only reflect
ones ignorance in skillfully managing the dynamics
of the domestic economy in the face of rising currents
of the process of globalization. Inability on the part of
national authorities to manage successfully the process of
globalization due to lack of vision and failure to introduce
necessary enabling and mitigating measures should not
be viewed as the demerits and defects of the globalization
itself. Are the gains from trade worth the domestic
costs in terms of social disruption and dislocation?
Does integration lead to greater income inequality?
The policymakers with the responsibility to deal with
globalization have to think about such questions.
4. Neighbors Wrong Policies in the Past

Nepal realized the importance and appreciated the virtues
of increasing economic interrelationships with the world
economy six decades ago and, consequently, adopted
liberal trading regime, private sector-friendly investment
climate, and other conducive policy arrangements.
However, the control-based policies of the neighbors
exerted pressure on Nepal to abandon the liberal regime
and start pursuing the control-fostering policies, thereby
dismantling from the roots Nepals vision and quest
for rapid economic transformation. Our neighboring
countries then loved and glorified the system of licenses,
permits, quota, and inspection raj as the means for
20
December 2015
economic transformation under the popularized slogan

of creating socialistic society. Under the hangover of
centuries of colonialism, they intentionally forced people
to wrongly believe that economic liberalization was
another form of colonization. They showed that they
hated everything foreign and also discouraged growth of
domestic private sector entrepreneurship and investment
for their real fear that the domestic capitalists could snatch
the politicians new-found luxury of controlling and
exploiting the economy and the masses. However, they
forced the masses to believe that all these controls were
meant for making them rich and increasing their welfare.
The policies adopted by the politicians penalized people
who wanted to pursue prosperity and happiness through
their hard work, enterprise, innovation, and efficiency.
In the process, the politicians succeeded in amassing
personal wealth and transformed themselves into a highly
prosperous lot. They turned their economies into the most
underdeveloped ones and pushed their countrymen into
the abject poverty, misery, squalor, decline, and decay.
The economies became most unproductive and the people
became the most under-privileged. They were successful
in making South Asia the abode of highest number of poor
and destitute. The wrong policies succeeded in not only
producing massive scale of poverty, unemployment, and
underdevelopment but also transmitting the negative spillover effects on the countries neighboring them. The only
beneficiaries of this drama of incompetent handling of the
economic management were none other than the whole
lot of new political masters who falsely championed the
cause of socialism to serve their real object of themselves
becoming the biggest capitalists. When people finally
woke up to the fallacies of such wrong tactics perpetrated
by the politicians, many precious decades were
already lost for the people and the economy. When the
control-loving politicians also sensed that the drama of
deception and cheating so far orchestrated would not
become sustainable, they were forced to review it and
introduce hesitatingly the liberal regime which they
ECONOMY
thought would widen the economic inequality. Since

the adoption of these policies 25 years ago, substantial
changes have occurred in these neighboring economies.
The positive effects of liberal economic regime based
on increased foreign direct investment (FDI), fostered
productive domestic investment, and adoption of prudent
macroeconomic and sectoral policies have been evident
in these countries. Due to good policies, the previously
poverty-producing economies have thus started creating
wealth and prosperity. People have started to believe that
they can become rich through hard work and enterprise
instead of dishonesty.
and pursuing any policy regime are the continuation of

the status-quo by the external environmental factors. For
close neighborly country with open border, the validity
of such assumption becomes far greater. However, such
assumptions get violated by bigger neighbors and no
corrective mechanism for enforcing them is presently in
sight.
5. Globalization Benefits for Nepal
* For more agricultural production and productivity,

Government should introduce policy reforms and
support increased investment in agriculture, forestry,
and fishing
Nepal immensely benefitted from globalization. Sectoral

areas of investment and economic activities have widened
and deepened. Financial sector, civil aviation, mass
communication, transportation, hotels and restaurants,
cooperatives, NGOs, social infrastructure like educational
and health institutions, etc. are fast progressing. Rising
public resources and their more productive and equitable
distribution have fostered better allocation of resources.
Literacy and health indicators have improved. The ratio
of population falling below the poverty line also came
down fast. However, the current blockade is a vain
attempt to deny Nepal the benefits of liberalization and
globalization policy hitherto adopted by Nepal.
6. Assumptions behind Adopted Policy

Regime
In the era of globalization and deregulation where
each country is interlinked to the global economy, it is
assumed that countries will foster, and not inhibit, the
transit and border trade. It is assumed that the landlocked
countries are offered unrestricted transit facility and the
provisions of WTO, other international conventions like
the UN Convention on Transit Trade of Landlocked States
(Vienna Convention, 1965) and UN Convention on the
Law of the Seas (1973), and also the bilateral agreements
are respected. The minimum assumption for choosing
7. Conclusion and Suggestions

To minimize the risks and overcome the negative
consequences of the so called blockade, the following
measure should be adopted:
* More investment should be channeled towards mining

and quarrying with focus on extracting gas
* Government should introduce policy reforms and
support increased investment in hydro-power and
other sources of power
* Policy of prioritizing the regulated development of
financial intermediation area should be continued
* Focus on real estate, renting, and business activities
* Enhance the capacity utilization of hotels, restaurants,
and other tourism-related activities
* Prioritize development of education and health sector
* Focus on promoting community and social activities
* Manufacturing industries with indigenous raw
materials and components should deserve priority
* Government should introduce policy reforms and
support increased investment in construction
* To the extent possible, consumption and investment
should be based on domestic products.
December 2015
21
INFORMATION TECHNOLOGY
Dimensions of Digital Signature
Contextual Background
Digital Signatures provide a
viable solution for creating
legally enforceable electronic
records,
closing
the
gap
in going fully paperless by
completely eliminating the need
to print documents for signing.
Digital
signatures
enable
the replacement of slow and
expensive paper-based approval
processes with fast, low-cost, and
fully digital ones.
CA. Mukunda Pokharel

CA. Pokharel is a Member of ICAN
emukunda@gmail.com
22
During the past few years, we have

seen an increasing move from paper
documents to electronic documents.
With ever growing adoption of
electronic transactions, there needs to
be a mechanism to trust those digital
documents at a level of signed paper
documents or better. The major factor
that determines the trustworthiness
and legal enforceability of digital
documents or electronic transactions
is the ability and easy mechanism
to establish that the transaction
has been initiated by the party in
question, that the document is notaltered before it reaches the recipient
and when needed it can be validated
and proved in the court that the
document was signed and sent by
the party in question.
It has been long since we have
benefited from digital signature,
knowing or unknowingly. For
instance, when you download
some update from Microsoft, the
update is digitally signed and you
can verify that the update is indeed
sent by Microsoft and not by any
bad party who wants to send some
December 2015
spyware to your computer disguised

as a genuine Microsoft update.
Major software vendors release
their software and updates digitally
signed so that you can verify and be
assured that the files received are not
viruses or spywares.
Similarly, when you fill a form to
apply for passport or file an income
tax return with the document or
message digitally signed by you
(this will happen in near future), the
passport or income tax office should
be able to verify that the document
was really send by you; and on the
other hand, when you receive a
notice from income tax office, bank
or court, you should be able to verify
that the document was really sent by
the respective office and it is not a
con to deceive you and steal your
information.
A digital signature scheme offers
a cryptographic analogue of
handwritten signatures that provides
much stronger security guarantee.
Digital signatures serve as a
powerful tool and are now accepted
as legally binding in many countries
including Nepal. They can be used for certifying contracts,

notarizing documents, filing returns or for authentication
of individuals or corporations.
Digital Signatures provide a viable solution for creating
legally enforceable electronic records, closing the gap
in going fully paperless by completely eliminating the
need to print documents for signing. Digital signatures
enable the replacement of slow and expensive paperbased approval processes with fast, low-cost, and fully
digital ones. The purpose of a digital signature is the same
as that of a handwritten signature. Instead of using pen
and paper, a digital signature uses digital keys (publickey cryptography). Like the pen and paper method, a
digital signature attaches the identity of the signer to
the document and records a binding commitment to the
document. However, unlike a handwritten signature, it
is considered impossible to forge a digital signature the
way a written signature might be. In addition, the digital
signature assures that any changes made to the data that
has been signed cannot go undetected. Digital signatures
calculate the hash or digest of the complete document
and a small change in the document will result in big
change in the hash which will make the digital signature
verification fail.
After about 9 years of passing the Electronic Transaction
Act, 2063, the Digital signature service has been officially
launched in Nepal on Mangsir 16, 2072. This has a lots of
potential regarding electronic transactions and document
exchange in government services and banking services
among other sectors.
What is Digital Signature?

Adigital signatureis a mathematical scheme for
demonstrating the authenticity of a digital document. A
valid digital signature gives the recipient reason to believe
that the message was created by a known sender in a way
that they cannot deny sending it and that the message was
not altered in transit.
A digital signature scheme is typically used by a signer

and a set of potential verifiers. The signer possesses a pair
of keys - public key and private key (or secret key). The
private and public keys are mathematically related and
it is not possible to compute the private key from public
key. The signer then publicizes its public key so that
any potential verifier is in possession of (or can obtain)
an authentic copy of the public key associated with the
signer.1
There is a public directory linking signers to their public
keys, and this directory is administered in such a way that
it is not possible for someone to register a public key in
someone elses name. There will be many signers, each
with their own public key, and so any potential verifier
must know not only the set of valid public keys, but also
which of these public keys belongs to the signer whose
signature he is interested in verifying.
Once a signer has established a public key, digital sig
nature schemes allow the signer to certify (or sign)
a message in such a way that any other party who knows
public key can verify that the message originated from
the signer and has not been modified in any way.
How Digital Signature Works?

Lets see how this works with an example.
Ram is sending a document to Sita. Sam wants to send the
document in such a way that:
Ram wants Sita to know that the document really
came from him
Ram wants to assure Sita that the document has not
been changed in the way
And if needed, Sita can prove that the sender of the
document was Ram and not anyone else
1 Jonathan Katz, Digital Signatures (Advances in

Information Security),
December 2015
23
Using digital signature scheme, Ram will send the

document to Sita as follows:
Ram creates the document to be sent in electronic
form like word, pdf or excel (also possible with email
message)
He also creates a hash (also called fingerprint or
digest)2 of the message using a special software tool
He then encrypts the hash with his private key
The encrypted hash becomes the digital signature of
the document and the signature is appended to the
document using the software tool
This becomes the signed document which Ram sends
to Sita
On Sitas part, she verifies the message as follows:
Sita receives the document
To be sure it came from Ram unchanged; first, she
creates a hash of the document she received using
some software tool.
The signing and verifying tools are part of digital
signature certificate issuance. The software tool may
be in the form of web application or software supplied
to the user in USB tokens or some other similar way.
Then, she decodes the encrypted document hash using
Rams public key which was attached to the message
as well.
In this process the software tool provided for digital
signature checks the validity of the certificate by
asking the Certificate Status Provider where all the
valid and revoked certificates are listed.
At this point, Sita compares the two hashes
If they match, the document came from Ram and has
not been tampered with.If they do not match, digital
signature verification fails and the document cannot
be trusted.
2 Message digest, also known as the hash of a message, is a small

piece of data that is generated by applying a mathematical
calculation (hashing function) on the message.
24
December 2015
Diagrammatic representation of sending and verification

process. Image adopted from Wikipedia
Digital Signature Certificate

A Digital Signature Certificate explicitly associates the
identity of an individual or application server with a pair
of electronic keys - public and private keys - and this
association is endorsed by a Certifying Authority. The
private key is stored on the user's computer hard disk or
in an external device such as a USB token and the public
key is published through some key repository service.
The user retains control of the private key; it can only be
used with the issued password. The certificate contains
information about a user's identity. The certificate
can be used to verify that a public key belongs to the
individual.
Digital signature certificates are also used by browsers
and servers to encrypt and decrypt information regarding
the identity of the certificate user during information
exchange processes.
How Digital Signature Certificate is

Managed and Issued?
Figure: Digital signature trust chain overview

In the trust chain, there will be one or more trusted
authorities approved by Controller and empowered by law
to issue digital signature certificate, known as Certifying
Authorities or CAs. The CA is responsible for vetting
all applications for Digital Signature Certificates, and
once satisfied, generates a Digital Certificate by digitally
signing the public key of the individual along with other
information using its own private key. So far there is only
one authorized CA in Nepal (Radiant Infotech).
Digital signature can be used according to the need and

preference of the parties involved. In our example above,
Ram and Sita could build their own scheme and signing
and verification infrastructure themselves. But, to be
widely acceptable, verifiable and legally enforceable,
there needs to be a scheme and infrastructure approved
by the government through some Act and Rules.
Digital signature in Nepal is governed by Electronic
Transaction Act, 2063 (ETA). As per the ETA, there
will be an Office of the Controller for Certification as
the governing body. The Controller will generate a Root
Certificate which will sign Certification Authority (CA)
certificates. The Controller certifies the public keys
of CAs using its own private key, which enables users
to verify that a given certificate is issued by a licensed
CA. For this purpose, it operates as the Root Certifying
Authority of Nepal.
Figure: Digital signature certificate issuance process in

general
To assist the Certifying Authority there may be one or
more Registration Authority (RA) who act as the verifier
for the Certifying Authority before a Digital Signature
Certificate is issued to a requestor. RA is the entity
that collects and verifies each Subscribers identity and
information that are to be entered into his or her public key
certificate. An RA interacts with the CA and recommends
the subscriber request for certificate issuance to CA.
December 2015
25
Uses of Digital Signature in Government

and Commercial Services
Digital Signature Certificate can be presented
electronically to prove ones identity, to access information
or services on the Internet or to sign documents digitally.
The following are some the examples where the digital
signature can be used:
Send and receive digitally signed and encrypted emails
Carrying out secure web-based transactions, or
to identify the other parties of in the web-based
transactions.
Filing Income Tax, VAT and TDS returns
Filing documents with the Company Registrars office
and similar government offices.
Application for PAN, Passport or Driving License
Signing documents like word, Excel and PDF
Banking Transactions like fund transfer
Signing Audit Report by a Chartered Accountant or
Registered Auditor
Legal Validity of Digital Signatures

As mentioned above, Electronic Transaction Act, 2063
provides legal validity to electronic records and digital
signatures. Electronic Transaction Rules came a year
later in BS 2064 to make rules to operate and maintain
digital signature scheme.
Section 4 of the Act provides legal validity to electronic
records. The section titled Legal Recognition of
Electronic Record says Where the prevailing law
requires any information, documents, records or any
other matters to be kept in written or printed typewritten
form, then, if such information, document, record or the
matter is maintained in an electronic form by fulfilling
the procedures as stipulated in this Act or the Rules made
hereunder, such electronic record shall also have legal
validity.
In section 5, the Act gives legal validity to the digital
26
December 2015
signature. The section titled Legal Recognition of Digital

says Where the prevailing law requires any information,
document, record or any other matters to be certified by
affixing signature or any document to be signed by any
person; then, if such information, documents, records or
matters are certified by the digital signature after fulfilling
the procedures as stipulated in this Act or the Rules made
hereunder, such digital signature shall also have legal
validity.
Conclusion
We have legal validity of both electronic records and
digital signature for about 9 years now. The only issue
remaining in the adoption of digital signature is the set-up
of trusted and secure infrastructure and e-governance plan
to incorporate digital signature in government service in
the first place to take full benefit of the digital signature
in real sense for good governance.
References
Digital Signatures (Advances in Information Security),
Jonathan Katz, Springer
http://www.cca.gov.np
http://www.cert.com.np
https://en.wikipedia.org/wiki/Digital_signature
http://cca.gov.in
Electronic Transaction Act, 2063
Electronic Transaction Rules, 2064
Why Audit of Information System is

Required in Nepal ?
With the evolution of new

devices
of
information
system ,ever increasing use
of electronic infrastructure,
integration of technology in
business process to improve
the competitive advantage and
weak implementation of cyber
law, criticality of information
technology control and audit has
become a critical mechanism
for ensuring the integrity of
information systems and prevent
future financial scandals
CA. Gaurav Khwaunju Shrestha

CA. Shrestha is a Member of ICAN
gaurav.shrestha@ican.org.np
Information System:
A Global Scenario
Organizations today operate in a
dynamic global multi-enterprise
environment with team-oriented
collaboration.The chief executive
officer and senior management
of the organizations want to
exceed their business objectives
and attain maximum profitability
through an extremely high degree
of availability, fast response time,
extreme reliability, and a very high
level of security in information
in value chain process. In such a
situation, organizations are critically
dependent on the timely flow of
accurate information. This means
that information system provides
necessary information which will be
of high quality, rich in information
content, and come packaged with a
variety of useful services to meet the
changing business conditions and
competition.
In this modern age, information
technology is playing an ever
increasing role in supporting business
strategies and transformation with
E-business lending new visibility
to organizational strategic roles.

To compete effectively in the
business competitive environment,
organization must adopt a business
process strategy and global
supply chain prospective that
allow organization to shape their
process into adaptable structure.
The essential prerequisite for
global business optimization is an
integrated information system. In
addition to this, the advancements in
network environments technologies
have resulted in bringing to the
forefront issues of security and
privacy that were once only of
interest to the legal and technical
expert but which today are topics
that affect virtually every user of
the information infrastructure. The
Internet has grown exponentially
from a simple linkage of a relative
few government and educational
computers to a complex worldwide
network that is utilized by almost
everyone from the terrorist who
has computer skills to the novice
user and everyone in between.
Common uses for the Internet
include everything from marketing,
sales, and entertainment purposes to
December 2015
27
e-mail, research, commerce, and virtually any other type

of information sharing.
Unfortunately, as with any breakthrough in technology,
advancements have also given rise to various new
problems that must be addressed, such as security and
privacy. Along with the spread of the internet, evolution
of new infrastructure for the information system, a new
avenue for crime has also evolved.The financial scandals
in global area and domestic companies generated a
demand for the new measures to prevent, detect, and
correct such aberrations.
In July, 2014 The US largest bank was compromised by
the hacker, stealing the name, addresses, phone number
and email address of seventy six million household
and seven million small business account. The hacking
was began in June but was not discovered until July,
when the hacker has already obtained highest level of
administrative privilege to dozen of bank computer server.
Until the JP Morgan breach surfaced in July, banks were
viewed as relatively safe from online assaults because of
their investment in defenses and trained security staff.
Most previous breaches at banks have involved stealing
personal identification numbers for A.T.M. accounts, not
burrowing deep into the internal workings of a banks
computer systems.
Around the world, reports of white-collar crime,
information theft, computer fraud, information abuse,
and other information technology control concerns are
being heard more frequently these problems demanded
the assurance from control specialists due to their impact
on public and private organizations.
Various control-oriented organizations such as the
American Institute of Certified Public Accountants
(AICPA), Institute of Internal Auditor, Association of
Certified Fraud Examiners (ACFE), and others have
issued guidance and instructions and supported studies/
research in this area.
28
December 2015
The most recent addition to these major studies is

the Control Objectives for Information and Related
Technology (CoBiT) research.CoBiT emphasizes
that high speed information processing has become
indispensable to organisation activities and substantiates
the need to research, develop, publicize, and promote upto-date internationally accepted IT control objectives. The
primary emphasis of CoBiT is to ensure that information
needed by businesses is provided by technology and the
required assurance qualities of information are both met.
The International Federation of Accountants (IFAC)
acknowledged the need for better university-level
education to address growing IT control concerns and
issues. From this, it has published more recent guidance
and information.
The Institute of Internal Auditors (IIA) 1992 document
"Model Curriculum for Information Systems Auditing"
was developed to define the knowledge and skills required
by internal auditors to be proficient in the information
age of the 1990s and beyond. The IIA has developed and
produced guidance for its membership while conducting
the information system audit.
Protection against Cyber Crime: A

Domestic Concern
The increased connectivity , availability of systems and
open environments have proven to be the lifelines of most
business entities in Nepal now a days as they are getting
more dependent on information technology. The banking
industry is considered to be one of the forerunners in
the use of computers in the Nepal. The industry started
with mechanizing bookkeeping and accounting tasks,
automating transaction flows, implementing magnetic
ink character recognition (MICR) technology, and
finally, utilizing online terminals to update depositor's
account and record receipt or disbursement of cash.
The advancement of both computer and communication
technologies has spurred the phenomenal growth of
electronic Commerce and Electronic Fund transfer

systems. As more consumers become familiar and trust
electronic financial transactions, EFTs will continue to
be more widely used. Today, information system have
already gone beyond the banking industry and can be
seen in almost all other establishments such as insurance,
hospital, manufacturing companies, supermarkets ,movie
theaters, online retail. Some example of Business using
the Internet based E-Commerce are given below :
Industries
Application of Internet based E-Commerce
Airlines
Most of the airlines around the world have

created web sites and are actually receiving
order for tickets
Banks and
Financial
Institutions
Use of Electronic Fund transfer, Debit and

Credit cards and various internet based
services was conducted
Media and
Publishing
Many publishing houses have developed

the Web version of traditional print media
e-zines , a entirely new electronic
magazines
Retails
industries and
outlet
Many retailers are now marketing on

internet and thousands of product and
services are offered
Hotels and
recreation
center
Reservation of hotel room or booking of

ticket are done in advance through Websites
Increased use of information technology in Nepal has

brought with it issues related to policy, security, control
and responsibility on the authorized person. Prior to 2004,
the government of Nepal dealt with cyber crimes under
the Public Offence Act. Later The Electronic Transaction
and Digital Signature Act 2004, also known as the cyber
law, was passed which was taken as a landmark legislation
for the development of IT industry in Nepal.Under Act
of 2004, hacking, deleting data, stealing e-documents,
software piracy and posting defamatory information
invite criminal and civil sanctioning to individuals and
institutions. Under this law, the government can punish
cyber offenders with up to five years of imprisonment
and/or a fine of up to fifty thousand rupees which is
dependent on the severity of the crime.
The Government of Nepal (House of Representatives)

has approved the Electronic Transaction Act, 2063 on 4th
December 2006. The law does not only legalize all sort
of electronic transactions and digital signatures, it has
undoubtedly implied the ways to run several computerbased mechanisms and penalize cyber crime. Apart from
that the Act has formulated the terms of Comptroller
of Certification Authority which is further divided into
12 Sections and 80 Clauses. For further effectiveness
it has been assigned separate judicial body called IT
Tribunal and Appellate Tribunal to keep an eye into all
cases which are connected to computer and cyber crime.
If anyone is found to be violating Cyber Law then he
is equally punished like any other crimes.According to
Cyber Law in Nepal if an individual is found involved
in such cybercrime like hacking the intellectual property
of others he or she will be punished for minimum of 6
months to 3 years in prison and has to pay minimum of
Rs. fifty thousand to max three lakhs.
Security Threats and Assurance of Controls

With the evolution of ecommerce and online shopping
system, people buy what they want via online system.
The online system of transactions will bring us benefits
as well as problems. One major benefit of digital money
is its increased efficiency. However, it will also create
another problem. "Security" is perhaps the biggest factor
for individuals interested in making online purchases
by using digital money. As people are shopping in
the comfort of their home through networks so its
controls and reliability of information security are very
important. A number of large-scale breaches that took
place in 2014 show that criminals are looking for more
efficient, lesstime-consuming and more profitable ways
to steal a large number of credit cards or large sums of
money. Instead of spending time phishing and using
social engineering on individuals, cybercriminals are
penetrating retailers systems and stealing data as the card
is swiped. Cybercriminals have been known to launch
December 2015
29
these attacks by penetrating insecure systems belonging

to a third party in the retailer's supply chain. Another
method used in stores whose points of sale are under
video surveillance that the criminal scans hosts for open
ports which indicate a remote access connection to the
POS (left open to enable easy access to check balances
and so on) and IP video (which lets the attacker know
where the cameras, and therefore the points of sale, are).
Attackers will brute-force the remote access connection
until they get in to the system, at which point they can
install the POS malware and start stealing card details.
Attackers monetize the credit card details stolen during
these large breaches in the usual way, either by selling the
card details or using them to buy goods online which are
then resold.
Similarly, given the increasing rate of smartphone
adoption around the world, mobile threats and fraud
could create a major threat for the business operating
through mobile services. The vast majority of mobile
malware is still focused on the Android platform. Not
only is it an open platform, but Android phones tend to be
manufactured and distributed using less tightly controlled
supply chains than other company, say, Apple's. And
because Android is the most widely used platform,
there's a big attack surface to exploit. Banking Trojans,
used with SMS sniffers on mobiles, have seen increased
adoption over the past couple of years. In this scenario, a
user is persuaded through social engineering to download
mobile malware from the internet. For example, during
an online banking session, a screen will pop up inviting
the user to download a mobile app, often masquerading
as a security feature, which is actually an SMS sniffer.
When the user's bank detects an unusual activity, such as
a high-value wire transfer, and sends an out-of-band onetime password to the user's mobile that must be entered to
authorize the transaction, the criminal can intercept it and
complete the transfer to their own account.
Fraudsters who attack financial institutions are targeting
30
December 2015
the corporate network and going straight to where the

money or the information is. The attack types include:
Transferring cash from a bank's system to criminals'
own accounts
ATM attacks directly cashing out an ATM
Ransom requests extorting money based on locking
private information about a bank's customers
Most people are afraid of conducting the transactions
using the ATM Cards provided by the respective banks.
Credit card system is still in infancy in the Nepalese
environment. Users of credit card are afraid that people
will be able to use these to retrieve their private or other
valuable information without their consent. With identity
theft and fraud on the rise, much care is needed in the
protection, security, and control of such information.
Security, indeed, is the biggest risk in using digital
money on the Internet. Besides the problem of security,
privacy is a significant factor in some electronic payment
systems. To encourage people to use digital money, these
electronic payment systems should ensure that personal
and unrelated information is not unnecessarily disclosed
and their transaction are legally secured from cyber
crimes.
In February, 2015, Moscow-based security firm
Kaspersky Lab released a report showing that a gang of
international hackers have stolen as much as $1 billion
from 100 banks across 30 countries by installing malware
that allowed them to take control of the banks' internal
operations. Previously, the biggest cyber threat to banks
was of hackers going after customers, including lifting
their personal financial information and skimming their
cards. Now the hackers steal directly from bank instead
of their customer. The scheme used phishing and other
techniques to infect bank employee computers, and then
to spread the virus to entire networks. Once inside, the
hackers would lie in wait, often for months, watching
how employees operated until they could figure out how
to lift money, often in amounts under $10 million, to an

outside account. They were so good at taking control of
the banks' operations they could remotely dispense cash
from ATMs. The Report said that the losses per bank
ranged from $2.5 million to $10 million, where it seemed
to be deliberately capped, perhaps to avoid detection
and total financial losses could be as much higher as $1
billion.
The existing legislation in Nepal is inadequate in a
number of ways to cover such offense. Some of the
most common forms of cybercrime are not covered by
the law. For example, no punishment exists for sending
offensive messages. Cyber crime like, cyber-squatting,
or purchasing domain names to benefit from anothers
trademark or brand, does not come under Nepals cyberlaws. Similarly, the act of electronically obtaining
private information for financial or personal benefit
lacks legal coverage in Nepalese environment.and the
biggest hindrance to cybercrime prosecution is weak
law enforcement. Even if the reporting on number of
cybercrimes have been increasing; the official response
has been slow. The Information Technology industry is
continually changing which demands the laws, policies,
procedures, and guidelines must change constantly along
with it; otherwise, they will have a tendency to become
outdated, ineffective, and obsolete.Thus, if security
products are not safe from every attack, and if current laws
may not always be efficient in addressing the problem
correctly, every user of the information infrastructure
are at the vulnerable state while doing transactions on
information system.
With the evolution of new devices of information
system ,ever increasing use of electronic infrastructure,
integration of technology in business process to improve
the competitive advantage and weak implementation
of cyber law, criticality of information technology
control and audit has become a critical mechanism
for ensuring the integrity of information systems
and prevent future financial scandals Although many

products are quite efficient in securing the majority of
attacks on a network, no single product seems to be
able to protect a system from every possible intruder.
The extant security legislation, although addressing
the issues of unwanted entry into a network, may also
allow for ways by which some criminals can escape the
most severe penalties for violating authorized access
to a computer system.
Although there is nothing at this time that will guarantee
a system's security, a good starting point might be the
establishment and implementation of a good computer
security policy and diligent audit of the information
system. A good policy can include:
Specifying required security features and recovery
procedures
Defining reasonable expectation of privacy
Requiring violations security to be recorded and
establishing trust through an effective password
policy, access privilege
Defining access rights and privileges and protecting
resources from losses, disclosures, or damages by
specifying acceptable use guidelines for users and also,
providing guidelines for external communications
(networks)
Defining responsibilities of all users and providing
users with support information
A good computer security policy may differ from each
organization, corporation, or individual depending on
security needs, although such a policy does not guarantee
a system's security or make the network completely
safe from possible attacks from cyberspace. With the
implementation of such a policy, helped by good security
products and a plan for recovery, perhaps the losses can
be targeted for a acceptable level and the leaking of
private information can be minimized.
December 2015
31
IT audit is next tools to assure that the information system

are fully secured reliable. Initially, IT auditing evolved
as an extension of traditional auditing with included
auditing around the computer.Traditional IT auditing
means that processing done by the computer system
needs not to be audited as auditor expects that sufficient
appropriate audit evidence can be obtained by reconciling
inputs with outputs. In simple words evidence is drawn
and conclusions are reached without considering how
inputs are being processed to provide outputs.
IT auditing is an integral part of the audit function
because it supports the auditor's judgment on the quality
of the information processed by computer systems.
Initially, auditors with IT audit skills are viewed as the
technological resource for the audit staff because the
audit staff often looked to them for technical assistance
as can be seen in organizational IT audits (management
control over IT), technical IT audits (infrastructure,
data centers, data communication), application IT
audit (business/financial/operational), development/
implementation IT audits (specification/ requirements,
design, development, and post-implementation
phases), and compliance IT audits involving national
or international compliances. The IT auditor's role
has evolved to provide assurance that adequate and
appropriate controls are in place. Even though the
responsibility for ensuring that adequate internal
controls are in place rests with the management, the
audit's primary role, except in areas of management
advisory services, is to provide a statement of assurance
as to whether adequate and reliable internal controls
are in place and operating in an efficient and effective
manner.
The breadth and depth of knowledge required to audit IT
systems are extensive which involves the
Application of national or international standards to
improve and implement quality systems in software
development and meet security standards
32
December 2015
Examination and verification of the organization's

compliance with any IT-related legal issues that may
jeopardize or place the organization at risk
Understanding of business roles and expectations in
the auditing of systems under development as well
as the purchase of software packaging and project
management
Assessment of information security and privacy issues
which can put the organization at risk
Evaluation of complex systems development life
cycles (SDLC) or new development techniques; e.g.,
prototyping, end user computing, rapid systems, or
application development
Reporting to management and performing a follow-up
review to ensure actions taken at work
Conclusion
In summary, owing to the rapid diffusion of computer
technologies ,the criticality of security of information
system, protection against computer fraud, complexity
of system and privacy of the information of the user,
organization needs IT auditors to ensure that effective
IT controls are in place to maintain data integrity and
manage access to information. As auditors recognized
repeating patterns of fraud which ranged from data entry
clerks changing check payees to programmers making
deliberate rounding errors designed to accumulate cash
balances in hidden bank accounts, they recommended
a variety of security features designed to automatically
prevent, detect, or recover from theft of assets. For the
every organisation, the need for audit, security, and control
will be critical in the areas of IT and will be the challenge
of this millennium. There are many challenges ahead;
everyone must work together to design, implement, and
safeguard the integration of these technologies in the
workplace.
TAXATION
Taxation of Income from Long Term Contract:

Need to have Clear Guidelines/Manual
Background
Nepal Accounting Standards
prescribed by Nepalese law
provide the basis for the time
at which income and expenses
are recognized for income
tax purposes. The Accounting
Standard which attracts in case
of Long term contract is Standard
on Construction Contracts (NAS
13) and the Standard on Revenue
(NAS 7) require revenue
and costs to be recognized
by reference to the stage of
completion of the contract.
CA. Kaushlendra Jha

CA Kaushlendra Jha is a Business Consultant
in India and Nepal,
kaushlendra@jkkfoundation.org
Contribution
of
Construction
Industry to the country's GDP is
around 10 to 11 percent which
accounts around 35 percent of
government
budget.
Similarly
about 60 percent of the nation's
development budget is spent
through the use of contractors*1.
Most of the construction projects
completed in more than a tax year
or 12 months time period which
attracts under long term contract.
The taxation of Income from Long
term contract becomes relevant
for the government and concerned
stakeholders. We believe that most
of the contractors books of accounts
which attract Sections 26 of Income
Tax Act should be prepared and
presented as the Nepal Accounting
Standard. Standard on Construction
Contracts (NAS 13) and the Standard
on Revenue (NAS 7) are not being
followed.
There are many reasons of not
following
the
Standards
of
constructions contract such as due
to lack of professional staffs with
the construction company, the
Internal Revenue Department is not
following up for the compliance

of related sections of the act, the
complexity to compliance of VAT
in case of recognizing the revenue
and expenses based on degree of
completion method, unawareness
among contractors about methods
of accounting and lastly not having
clear manual/guidelines on Income
from long term contract.
Provision in the Income

Tax Act and Rules
The related Sections of Acts and
Rules attracted to the taxation of
income from long term contract
are the basic sections of taxability,
assessable income, calculation
and deductions are Sections 5,
6,7,13,20,12 and 63 whereas special
Sections are 26,22 and Rules
10,11,12.
The article has covered the related
Section of Nepalese Income Tax
Act and Income Tax Rules laws and
commentary in the Inland Revenue
Department's Income Tax Manual
(Updated 2068) and the how the
same areas are being treated in
USA , UK and India.
December 2015
33
TAXATION
Section 26(1) says for calculating the income of any

person in any income year from any heads of income, the
estimated amounts includible and deductible according
to the sum of sequential increase as per the percentage of
completion of the contract under the long-term contract of
that person shall be deemed to have been received or spent.
Long Term contract has been defined in explanation of
the same Section is:
bL3{sfnLg s/f/ eGgfn] b]xfo adf]lhdsf] cj:yfsf] s/f/

;Demg' k5{ M
-s_ ;f] s/f/sf] axfnL cjlw afx| dlxgf eGbf a9L ePsf], /
-v_ ;f] s/f/ pTkfbg, h8fg jf lgdf{0fsf nflu jf To:tf]
k|To]s sfdsf ;DaGwdf ;Da4 ;]jfsf] ;Dkfbgsf nflu
ul/Psf] jf ;dfj]z gePsf] s/f/ afx]ssf] k|ltkmn
ljnlDat x'g] s/f/ .
"Long-Term Contract" means a contract in the following
circumstance:
(a)
(b)
A contract with a validity period of more than

twelve months, and
A contract which is concluded for production,
installation or construction or for the discharge
for relevant services for each of such works and A
contract with a deferred consideration except
excluded contract."
There happens to be many businesses which enters into

contract completes in more than one year. The one year for
long term contract in Nepal means more than 12 months
but in many countries like USA, UK, India are tax year
which may be 1 to 365 days of income year.
Calculation of taxable income from long term contract
shall attract tax accounting Sections and Rules of Income
Tax Act and Rules, Section 22 of the Acts provides the
time when a person receives any income or makes any
expenditure shall be determined according to the generally
accepted accounting principles subject to the Act. The
general accounting principles is if the Standard is prescribed
under prevailing law that Standard, if not prescribed by
34
December 2015
Department vide Rule 8 so Rule 8 hence Nepal Accounting

Standard prevail except specific anti avoidance rule.
Nepal Accounting Standards prescribed by Nepalese
law provide the basis for the time at which income and
expenses are recognized for income tax purposes. The
Accounting Standard which attracts in case of Long term
contract is Standard on Construction Contracts (NAS 13)
and the Standard on Revenue (NAS 7) require revenue
and costs to be recognized by reference to the stage of
completion of the contract. Hence, this requires the
application of a percentage-of-completion method.
The provisions of NAS 7 and NAS 13 are consistent with
the equivalent with International Accounting Standard
on Construction Contracts (IAS 11) and International
Accounting Standard on Revenue (IAS 18).
The need of these Accounting Standards felt because
actual income and expenditures to be charged cannot be
measured as per the matching concept under long terms
contract hence prescribed different method of calculation
of profits to be allocated to the accounting year.
Further, Section 26 with Rule 12 has stipulated to apply
percentage of completion method in calculating the
taxable income for a particular income year from a longterm contract.
Section 26 states that the method of calculating average
of amounts to be included or deducted under long term
contract: (1) For the purposes of calculating a person's
income for an income year from an employment,
business, or investment, estimated cumulative inclusions
and deductions under a long-term contract of the person
shall be treated as derived or incurred according to the
percentage of the contract completed during the year.
Type of Long Term Contract shall be Attracted

by Section 26.
The precondition of the application of Section 26 relates
to the type of contract which are:
TAXATION
a contract for manufacture, installation, or

construction;
a contract for the performance of services related
to a contract for production, installation, or
construction; or
a contract with a deferred return other than an
excluded contract.
A long-term contract method of accounting (completed

contract or percentage of completion) is only available
to taxpayers that have long-term contracts. Therefore,
whether or not a long-term contract exists and the
classification of the contract must be determined prior to
electing a proper method of accounting.
Long Term Contract

A long-term contract generally is any contract for the
manufacture, building, installation, or construction of
property if the contract is not completed within the
contracting year, as defined in Regulation Section 1.4601(b)(5). However, a contract for the manufacture of
property is a long-term contract only if it also satisfies
either the unique-item or 12 month requirements described
in Section 1.460-2. A contract for the manufacture of
personal property is a manufacturing contract. In contrast,
a contract for the building, installation, or construction of
real property is a construction contract.
Construction Contract
We shall take reference of the same from

Internal Revenue Code (IRC) USA Section
460
As per IRC 460 (e) (4) the term "construction contract"

means any contract for the building, construction,
reconstruction, or rehabilitation of, or the installation of
The term "long-term" tends to indicate a contract that

lasts a long period of time, but the duration of the contract
is irrelevant in order for it to be classified as a long term
construction contract. IRC Section 460(f) (1) generally
defines a long-term contract as one that is not complete at
the end of the tax year.
Manufacturing Contract
The Long Term Contract must also be for

the Manufacture, Building, Installation,
or Construction of Property.
IRC Section 460(f)(1): In general, the term "long-term
contract" means any contract for the manufacture,
building, installation, or construction of property if such
contract is not completed within the taxable year in
which such contract is entered into.
Example:
A calendar year of taxpayer begins a construction job
on December 31 and completes the job on January 1 of
the subsequent year. The contract is considered a long
term contract even though the job was only two days in
duration.
any integral component to, or improvements of,

real property.
IRC Section 460(f) (2) provides a special rule for

manufacturing contracts. A contract for the manufacture
of property shall not be treated as a long-term contract
unless such contract involves the manufacture of:
1.
2.
Any unique item of a type which is not normally

included in the finished goods inventory of the
taxpayer, or
Any item which normally requires more than 12
calendar months to complete (without regard to the
period of the contract).
Integral Components of Real Property

A contract not completed in the year, the contract is entered
into is a long-term construction contract if it involves the
building, construction, reconstruction, or rehabilitation of
real property; the installation of an integral component to
real property; or the improvement of real property. These
are collectively referred to as construction. Treas. Reg.
Section 1.460-3(a).
December 2015
35
TAXATION
Real property means land, buildings, and inherently

permanent structures, as defined in section 1.263A-8(c)
(3), such as roadways, dams, and bridges. Real property
does not include vessels, offshore drilling platforms, or
natural products of land that have not been severed.
An integral component to real property includes property
not produced at the site of the real property but is intended
to be permanently affixed to the real property, such as
elevators and central heating and cooling systems.
Example 1:
A contract to install an elevator in a building is a
construction contract because a building is real property,
but a contract to install an elevator in a ship is not a
construction contract because a ship is not real property.
Example 2:
A taxpayer enters into a contract to manufacture an
elevator. However, an unrelated party will install it.
The contract for the manufacture of the elevator is not
a construction contract even though the elevator is
considered an integral component to real property. The
regulations define a construction contract as one that
involves the installation of the integral component.
Nepal Perspectives:
The definition of Long term contract has restricted and
mixed up 12 month period provision and expanded
the areas through deferred returns concept. There is no
such classification of long term contract has been given
in Income Tax Act, Rules and Manual as well. We may
elaborate the types through definition and explanation
given in Section 26 and relevant rules.
For the application of Section 26 a long term contract is
contract if it is:
36
a contract for manufacture, installation, or construction;

a contract for the performance of services related
to a contract for manufacture, installation, or
construction; or
December 2015
a contract with a deferred return other than an

excluded contract.
A Contract for Manufacture, Installation,

or Construction:
There is no fixed meaning of these three word/function
manufacture, installation, or construction but we have
explained the same as above with reference of IRC 460.
A contract for construction also includes a contract for:
the demolition of assets; and

the restoration of the environment following the
demolition of assets.
A Contract for the Performance of Related

Services:
A contract for the performance of related services is a
contract requiring one party to the contract (the service
provider) to provide services in support of manufacturing,
installation, or construction activities being undertaken
by the other party to the contract.
A Contract with a Deferred Return:

The reference to 'contract with a deferred return' expands
the scope of Section 26 beyond contracts for manufacture,
installation, or construction or a contract for related
services. But Rule 10 clarifies that a contract with a
deferred return has the following meaning:
Any contract of a person shall be a contract with a
deferred return if the person does not show the details
prescribed by the Department regarding estimated gain
and estimated loss during every six-month period from
the commencement of the contract.
That is, Rule 10 confirms that a person who does not
disclose the required details as to the estimated gain or
estimated loss from any contract (other than an excluded
contract) that has a term of more than 12 months must
apply the percentage-of-completion method to determine
the income from that contract that is to be disclosed in the
person's tax return.
TAXATION
As noted, Rule 10 is not limited in its application. Thus,

where a person has failed to disclosure the required
information but same has not been given in the Act and
Rules that what are the required information, Rule 10
would require that the percentage-of-completion method
be applied to:
a contract for manufacture, installation, or

construction or a contract for related services;
a contract for the sale of goods;
a contract for the use of an asset owned by another
(a lease or hiring contract);
a contract for other types of services.
It means the contract shall includes all kinds of contract

whether manufacturing, construction or its related
services, consultancy services, sale of goods etc. which
obviously shall bring this section into complexities for
calculation of income from long term contracts.
The Term 'Excluded Contract' is Defined

in Rule 11 to Mean:
(1)
any contract created by reason of an interest in an entity

or by obtaining membership in a retirement fund; or
(2)
any contract of investment insurance.
Example: Mr. A has entered into contract with Life

Insurance Company for his retirement time. In return for
regular monthly payments which increase over the term
of the agreement in line with increment, The Company
agree to pay Rs, 7000 per month on his retirement at 58
years of age.
Even though the period of the contract exceeds 12 months,
Rule 10 would not apply as the insurance contract is an
excluded contract as defined in Rule 11.
Rule 12 clarifies that Section 26 does not apply to a
person unless that person is required to file an estimate
of tax payable for the year under Section 95 of the Act.
We have seen the accounting standard prescribed by
Nepal Accounting Standard Board, India Accounting
Standard Board and International Accounting Standard

Board are Standard on Construction Contracts but not
Standard on long term contract.
The reasons of application of accounting standard or
degree of completion of contract method is that if the
tax payer could not estimate their gain or expenses for
the period of six months in case of deferred return in any
contract but in case of manufacturing and construction
contract normally it happens that the gain or loss can not
be confirmed in just ending of accounting year for which
one needs to have an estimated gain or loss for the period.
The purpose of accounting standard is on construction
contract which definitely covered long term contract
related to support services in manufacturing, construction
and installation but if it extends to any contract with
differed returns of which cannot be given estimated
gain or estimated loss from any contract (other than
an excluded contract) that has a term of more than 12
months must apply the percentage-of-completion method
to determine the income from that contract that is to be
disclosed in the person's tax return.
The coverage areas of the differed returns should only
be taken where the contracts is relates to manufacturing,
construction, installation and support services but not to any
long term contract of which by its natures estimated gain
or estimated loss from the contract can be known. Rather
in case of related support services where only management
consultancy like planning, design, supervision anything of
consultancy services are involved and income generates
based on man month basis which can be calculated or
estimated exactly does not required to apply Section 26.
Hence, there is a need or emergence of clear manual/
guidelines on taxation of income from long term contract.
*1:As per Federation of Contractors' Associations of Nepal
date; References: http://www.fcan.org.np, https://ird.gov.np,
https://www.irs.gov, http://www.icai.org, http://www.ican.org.
np and others related materials.
December 2015
37
Conference Material
National Strategic Choice
Earthquake and Economic Blockade

Role of Professional Accountants
in
Road to Recovery
&
Economic Resilience
Narendra Bhattarai
Chairman, ASB Nepal
Survival Strategy of the Nation
Growth and Development Strategy of the Nation

my little children one day live in a
nation where they will not be judged by
the color of their skin but by the content of
their character, I have a dream today
- Martin Luther King, Jr. August 28, 1963
If you dont have a strategy, you

will be . part of somebody- else's
strategy.- Alvin Toffler
Barriers to Implementation of National Strategy

Nepalese Context
The Vision Barrier
The US Senate has recently passed a bill "Nepal Trade
Only 5% of the Decision

Makers understand the
national strategy
The People
Barrier
Only 25% of the

bureaucrats have
incentives linked to
national strategy
9 of 10
entities
fail to
execute
strategy
The Management
Barrier
85% High Ranking

Executives spend less
than one hour per month
discussing strategy
The Resource Barrier
60% of the entities dont link

budgets to national strategy
38
Some Positives
December 2015
Preferences Act" granting duty-free treatment to

certain textile or apparel articles from Nepal, effective
from 1 January 2016. This provision will remain in place
by 2025
Promulgation of the New Constitution
Nepal has been ranked as the best tourist destination
for 2016
CEO of Authority appointed
Reconstruction work launched
Conference Material
Impact of Earthquake
Some Negatives
Birgunj-Raxaul customs point has remained closed for more
than 120 days

The y-o-y consumer price inflation hit 11.6 percent in midDecember 2015, While the food and beverage group inflation saw
a pick up of 14.8 percent
Around 2200 industries are closed for the last 5 months
Revenue Loss to the Government - The government revenue
mobilization dropped by 20.6 percent to Rs. 112.81 billion (24.1
percent growth previous year).
Government revenue collection during first 5 months is just 23.7
percent of the annual target of Rs. 475.01 billion
Earthquake victims died because of cold
Huge smuggling of POL products
Low level of capital expenditure by the government
Impact of Economic Blockde
Humanitarian Crisis
As issue of post-quake vulnerability became lost
Humanitarian crisis has erupted
UNICEF - Looming humanitarian disaster as more than 3 million
children under the age of 5 in Nepal are at risk of death or disease

during the harsh winter months due to a severe shortage of fuel,
food, medicines and vaccines
Unicef has cautioned that the blockade of Nepals border posts
with Indiathreatens the future of the country itself.
First, there was a devastating act of nature the
earthquakes that took and damaged so many lives, said Anthony
Lake, the executive director of Unicef, during a recent visit to the
country. Now, political differences among human beings are
dealing new blows to the children of Nepal.
Additional people below poverty line

The estimated 700,000-982,000 additional people
pushed below the poverty line by the earthquakeinduced income shock

The post-reconstruction programs need to be well
coordinated, ensure building back better, and be an
integral part of the larger goal of meaningful structural
transformation of the economy.
PDNA - the cumulative damage and loss amount to
33.3% of GDP ($7.1 billion) and the cumulative need
for recovery is estimated at $6.7 billion (31.5% of GDP).
Context of Graduation from LDC
Major Development Indicators

Population (Growth Rate 1.35%)
Poverty and inequality (Gini Coefficient, Population
below poverty line)

National Accounts GDP, Saving and Investment
Public Finance Revenue/GDP Ratio, Capital Exp
External Sector Import/Export to GDP
Education Enrolment
Health and Nutrition
Others Drinking water, sanitation, employment,
road, electricity
Investors Darling Environment?
Development Parlance
Are we ready to create investors
Development Happened
darling environment to kick off

economic growth to attain the target
of attaining the status of developing
nation by 2022 from LDC status?
Will Nepal graduate from LDC
category by 2022?
Development Achieved
Real Sustainable Development
Faade Development
Size, Speed and Skill (3S)
Big Push Theory
December 2015
39
Conference Material
Are we heading to a failed state ?
Fragile States Index
Are we heading to a failed state?
Politically Failed State?
social, economic and political
Loss of control of its territory, or of the monopoly on
the legitimate use of physical force therein
Erosion of legitimate authority to make collective
decisions
Inability to provide public services

Inability to interact with other states as a full member
of the international community
A state must have a permanent population, a defined

territory, a government and sovereignty. If just one of
these is missing, an area will not be given statehood.
Public & Development Partners

Perception?
Mounting Demographic Pressures

Massive Movement of Refugees or Internally Displaced Persons
Vengeance Seeking Group Grievance
Chronic and Sustained Human Flight
Uneven Economic Development
Poverty, Sharp or Severe Economic Decline
Legitimacy of the State
Progressive Deterioration of Public Services
Violation of Human Rights and Rule of Law
Security Apparatus
Rise of Factionalized Elites
Intervention of External Actors
PEFA 2014: Change in Rating
Ego of Nepali people badly hurt because of the

Challenge to National Sovereignty
Change in Ratings over PEFA
Number of
2008 Rating
Indicators
Upwards
19
61
Downwards
Remained the same
10
32
TOTAL
31
100
Government inability to control price rise and

maintain rule of law
Government inability to resolve political problem
for more than 5 months
Poor Project Management Skill
High Fiduciary Risk!
Why?
Summary of Changes in Indicator Scores: PRFA 2008 & 2014
40
% Indicators
Corruption Perception Index (CPI) 2014
Score
PEFA 2014
PEFA 2008
Net Change
+6
Rank
2014
2013
2012
Denmark
Country
92
91
90
New Zealand
91
91
90
11
Australia
80
81
85
14
UK
78
76
74
B+
+3
15
Japan
76
74
74
C+
30
Bhutan
65
63
63
-5
D+
-2
Total
31
31
43
S. Korea
55
55
56
50
Malaysia
52
50
49
85
India
38
37
40
-2
85
Sri Lanka
38
37
40
126
Nepal
29
31
27
126
Pakistan
29
28
27
145
Bangladesh
25
27
26
172
Afghanistan
12
December 2015
Conference Material
Ease of Doing Business Index 2015

Rank
Country
Value for Money = 3Es
DTF Score
Singapore
88.27
New Zealand
86.91
Hong Kong
84.97
Denmark
84.20
S. Korea
83.40
10
Australia
80.66
18
Malaysia
78.83
74.80
29
Japan
99
Sri Lanka
61.36
108
Nepal
60.33
58.73
116
Maldives
125
Bhutan
57.47
128
Pakistan
56.64
142
India
53.97
173
Bangladesh
46.84
183
Afghanistan
41.14
Value for Money Continuum
Input
Process
Output
ECONOMY
EFFICIENCY
EFFECTIVENESS
Spending less
Spending well
Spending Wisely
Types of Fiduciary Risk

Operational Risk
Input
Financial Risk
Governance Risk
Impact
Reputation Risk
Process
Democratic Risk
VFM
Outcome
Output
Components of Fiduciary Risks
Fiduciary Risk Assessment

Program Management
Accounting
Operational
Risks
Reputational
Risks
Procurement
Reporting
Audit
Human Resources
Capacity
Risk
Shared Risk
Budgeting
Civil Service Training
Donor image
Financial Risks
Civil Service Laws
(Accountability)
Cash
Management
Oversight
Quality
Institutional Capacity
Governance
PFM Reform
Risks
Capacity Development Agenda
Internal Controls
Compliance
Risk
Contracting
Fiduciary
Risk
Corruption
Risk
Media Freedom
CSO Vibrancy
Political Will
Democratic
Risks
(Accountability)
Public and CSO participation
Result Risk
23
December 2015
41
Conference Material
Reconstruction Authority
Control Design
Establishment of a National Reconstruction Authority
(NRA)
Right
Structure
Reconstruction-focused budget and monetary policy
for FY2016
Right
Technology
Control
Design
Right
People
Right
Process
Gradual improvement in political environment

Making NRA operational with immediate planning
and strategizing of reconstruction projects is critical

for ensuring a fast and inclusive recovery
NRAs and sector ministries ability to swiftly prepare
and implement the viable reconstruction projects are
the key determinant for speedy restoration of
livelihoods and economic recovery.
Reconstruction Authority - Structure

The Reconstruction Authority has three-tier structure:
Steering Committee, Advisory Council and Executive

Committee
Steering Committee and Advisory Council is led by the
prime minister with the leader of the main opposition as
vice-chair
The Executive Committee will be led by CEO who has been
appointed by the government
Advisory Council has representation of 14 lawmakers, one
each from 14 worst affected districts
A monitoring team comprising lawmakers also will be
formed to oversee the activities of the Authority
The Reconstruction Authority will mobilize Rs 91 billion
from the state coffers and Rs 450 billion pledged by donors
Concerns over budget execution
under normal circumstances, which has further

weakened, one of the biggest challenge for NRA is its
ability to fully execute the planned reconstruction
budget.
Actual capital spending averaged about 72% in the last
decade and about 60% is bunched in the last quarter.
The actual capital spending (about 3% to 4 % of GDP)
is far less than the required spending (of 8-10% of
GDP) to close the infrastructure gap.
Public as well as private buildings should be rebuilt to
earthquake-resilient standards, fully applying the principle of

Build-Back-Better.
Inclusiveness should be at the core of reconstruction effort.
A robust institutional setup for reconstruction at the central,
district and local level for successfully execute reconstruction
projects
A strong leadership and competent human resources are vital for
the success of the NRA.
Continuous enhancement of the institutional capacity with the
adoption of sound governance and fiduciary risk management
systems for the reconstruction process are also important.
Effective donor coordination and strong government ownership
Challenges in Budget Execution
Given the persistent budget execution shortfalls even
42
Effective reconstruction and recovery
December 2015
Bureaucratic hassles: project approval delays, and
weak intra and inter-ministry coordination,
Structural weaknesses: limited appraisal, planning,
and implementation capacity of line ministries,
Low project readiness: lack of feasibility studies and
detail designs in advance, lack of well-planned

procurement plans, and delays in land acquisition,
Weak project management: high staff turnover, lack of
staff capacity, lengthy procurement process, weak
contractor capacity, and weak contract management
High fiduciary risks in project implementation
Political instability and interference at operational leve
Conference Material
NRA - Crucial Issues

Hiring competent human resources
Preparing a credible time-bound action plan
Managing political interference in normal operations and
preparation of reconstruction projects

Ensuring line ministries full ownership of projects
designed, approved and procured by the NRA
Coordinating with development partners
Engaging civil society in reconstruction planning, design,
implementation, monitoring, and evaluation
Ensuring crowding-in of private investment for
reconstruction on public-private partnership (PPP) basis
Outsourcing of managerial as well as non-managerial work
Role in PFM
Professional Accountants with
Professional Skepticism in the

Cabinet Table to provide value
added services in decision making
process
Role in Creating Internal Control System
Internal Control Mechanism
Control Environment
Components
Governance - Risk management, System of control,
Risk Assessment
Control Activities
Communication
Monitoring
Risk Response - Internal Control
Transaction Level Control

Management Oversight Control
Governance Control
Additional Mitigating and Compensating
Control
Monitoring and Evaluation
Internal and External Audit
Social Audit, Public Audit and Hearing
Reporting
Good supervision and monitoring, Accountability and
responsibility
Effective Operations
Compliance
Protection of Assets
Testing
Existence
Put in Practice Continuously
Effectiveness
Issues on Internal Control

High fiduciary risk
Control Override
Control Collusion
Unmonitored control system tends to deteriorate over
time.
December 2015
43
Conference Material
Assurance Mechanism: Role of Professional Accountants

Earthquake disaster recovery
You Cant Improve What you Dont Measure
Programmatic Visits &

Monitoring
Assuring compliance
with policies and
procedures
Action against fraud

and other corrupt
practices
External/Internal
Audit
Fiduciary
Risk
Assurance
Mechanism
Social/Public Audit
and Public Hearing
Payment Control
through
Monitoring
Follow up of Audit
& Monitoring
Report
If you cannot measure, you cannot count; if you can
not count, you cannot plan; if you cannot plan, you

cannot manage.
Measurement is the first step that leads to control and
eventually to improvement. If you cant measure
something, you cant understand it. If you cant
understand it, you cant control it. If you cant control
it, you cant improve it.
Measure twice and cut once
Third Party
Performance
Evaluation
Earthquake disaster recovery
Assertions
Assertions
Assertion Tests and their Definitions
C - Completeness
Test of potential understatement
O - Occurrence
Test of potential overstatement
M - Measurement
Test of accuracy and consistency on

measurement
P Presentation & Disclosure
Test of classification, presentation and

disclosure.
A Accuracy and Regularity
Test of accuracy, compliance and regularity.
R Rights and Obligations
Test of right and obligation
E - Existence
Test of existence.
Professional Attitude?
Government
Development Partners
Business Community
General Public
Time for Discussion and feedback
One cannot do today's job with

yesterday's methods and be in
business tomorrow
44
Business Recovery from the shock of

Earthquake and Economic Blockade is
an Extremely Difficult Task
&
Recovery Depend on the Positive
Response of :
December 2015
NEWS
Diploma in IFRS
successfully conducted Diploma in IFRS Course from
6-12 October, 2015, jointly with The Association of
Chartered Certified Accountants of UK (ACCA) in
Kathmandu. The Course was designed to provide in
depth knowledge of International Financial Reporting
Standards (IFRS). The course was conducted eight hours
a day for seven days. The course was attended by 29
member and non-member of the Institute.
Workshop on NFRS Implementation in

Commercial Banks
In collaboration with Nepal Rastra Bank, the Central
Bank of Nepal, the Institute of Chartered Accountants
of Nepal organized a workshop on Nepal Financial
Reporting Standards (NFRS) Implementation Status
and Preparatory Work in Commercial Banks of Nepal
on 9 October 2015 in Kathmandu. The workshop was
mainly focused to the Chairpersons of the Board/the
Audit Committee, Board Members and Chief Executive
Officers of the Commercial Banks.
Technical papers on gap analysis as well as
roadmap to move forward for the effective implementation
of the NFRS in the banks were presented at the workshop.
Participants of Diploma in IFRS Course with ICAN

Officials.
Refresh course for the previous batch were also

conducted coinciding with the regular Diploma in IFRS
course.
The examination result of Diploma in IFRS conducted
on 11 December, 2015 has been published. According to
the result 20 examinees were declared pass in the exam
out of 37 examinees. For the examination purpose 63
examination form were submitted.
Preview of Workshop NFRS Implementation in Commercial Banks.
The gap analysis highlighted some of the key

critical areas in NFRS and existing local GAAP practice
by the commercial banks following the existing Nepal
Accounting Standards, Directives issued by the Central
Bank and other regulations applicable to the banks and
financial institutions. CA. Prakash Lamsal, President of
ICAN threw the light on the objectives of the workshop.
December 2015
45
NEWS
The program was chaired by the Acting Governor

of Nepal Rastra Bank CA. Maha Prasad Adhikari.
Altogether over 80 participants attended the program.
The program was found effective in disseminating the
knowledge and enhancing confidence of high level
officials about the importance of application of NFRS
in the long-run.
Training for Trainers (TOT)
conducted TOT program on Nepal Public Sector
Accounting Standards (NPSAS) from 11-16 October,
2015, with the joint initiatives of Financial Comptroller
General Office (FCGO) in Kathmandu. The training was
designed to provide the knowledge about Nepal Public
Sector Accounting Standards.
ICAN President CA. Prakash Lamsal Delivering Speech on

Workshop on "Valuation Techniques".
Contemporary Issues Discussion Committee, Chairman

CA. Sunil Jakibanja welcomed the participants and
highlighted the features of the program and ICAN
President CA. Prakash Lamsal has delivered the opening
remarks. Program was divided into two sessions followed
by program highlight and opening remarks. The sessions
were as follows:
S.
No.
1
Topic
Paper Presenter
Issues of valuation of
business and other assets
and liabilities on DDA in
Banking Sector in Nepal.
CA. Sudarshan Raj

Pandey
Valuation Techniques
CA. Suman Rayamajhi
Altogether 71 participants attended the workshop.

Participant Members of the Institute have been granted 5
CPE credit hours.
Preview of TOT Program on Nepal Public Sector Accounting
ICAN Submitted SMO Action Plan
Standards.
(2015-17) to IFAC
Altogether 25 officials of FCGO and Office of the

Auditor General (OAG) participated in the training
program.
The Institute of Chartered Accountants of Nepal has

submitted its Statements of Membership Obligations
(SMOs) Action Plan (2015-17) on 15 December 2015
to the International Federation of Accountants (IFAC)
that provide clear benchmark to ensuring high-quality
performance by professional accountants. The SMOs
cover IFAC member bodies obligations to support
the (a) adoption and implementation of international
standards and other pronouncements issued by the
International Auditing and Assurance Standards Board
Workshop on Valuation Techniques

The Contemporary Issues Discussion Committee of the
Institute of Chartered Accountants of Nepal conducted
half day workshop under the theme of Valuation
Techniques in Kathmandu on 18 December 2015(Poush
3, 2072).
46
December 2015
NEWS
(IAASB), International Accounting Education Standards

Board (IAESB), International Ethics Standards
Board for Accountants (IESBA), International Public
Sector Accounting Standards Board (IPSASB), and
International Accounting Standards Board (IASB), and
(b) the establishment of quality assurance, investigation
and disciplinary systems. The action plan prepared and
reviewed by compliance staffs was comprehensively
discussed in the Council Meeting before submission to
the IFAC.
Rules Amendments
The 5th amendments of the Nepal Chartered Accountant
Rules, 2061 have been approved by the Ministerial Level
decision of Nepal Government. As per the decision total
17 Rules have been either revised or added with new
provision. The major revisions and additions include
Education, Internship, Certificate of Practice, Board
of Studies, Accounting Technician Board, Quality
Assurance Board etc. the new provision shall be made
effective immediately.
Member Related
Status of Membership, Certificate of Practice
and Audit Firms
The status of membership, Certificate of Practice and
Audit Firms as of December end is given below:
Category/
Class
Membership
Total
No
FCA/CA 896
COP
Firm
Renewal
No
Total
No
Renewal
Renewal
Total No
No
No
574
688
323
600
323
RA- B
3375
1867
3140
1353
1610
1357
RA-C
1607
816
1475
665
811
666
RA -D
2285
1222
2093
1071
1167
1065
Total
8163
4479
7396
3412
4188
3411
Student Related
Student Registration
Chartered accountancy course is job oriented and highly
demanding professional course for the student interested to
make their career in accounting and auditing profession. Now
a days the craze towards this course is growing and becoming
the choice of the youngsters. Till date (Jan 14) in 2072/073
the enrollment status of the different levels is as follows.
CAP I
CAP II
CAP III
309
301
80
Additional Books in Library

added some new books in Library for CAP II and CAP III
level of different subjects.
Information System Audit (ISA) Examination
The Institute of Chartered Accountants of Nepal conducted
Information System Audit (ISA) Examination on 26
December 2015. Total of 22 persons attended in the exam.
Publication
Published Revision Test Paper for 2015 December
examination of CAP II and CAP III. Similarly It has
also published the suggested answers of 2015 June
examination of CAP I, CAP II and CAP III level.
Chartered Accountancy Membership
Examination
The Chartered Accountancy Membership Examination
was successfully conducted on 4th and 7th December 2015
in PEA Building, Thapathali, Kathmandu.
Total applicants of the examination in Corporate Law
and Advanced Taxation were 138 and 142 respectively
while the appeared examinees were 108 and 101 in the
respective subjects.
December 2015
47
NEWS
Membership examination is mandatory for ICAI pass

outs. Corporate Law and Advance Tax are compulsory
paper to pass for eligibility to get membership of the
Institute.
successful candidates become eligible to get AT License

from the Accounting Technician Board. The Details are
as follows:
Subjects
Advanced A/c &

Management A/c
Audit &
Assurance
Corporate &
Other Laws
Tax Laws
Date
2015/09/17
2015/09/18
2015/09/20
2014/09/21
Total
Applicants
Appeared
Chartered Accountancy Examination

The Institute of Chartered Accountants of Nepal
conducted final examination of different Level of
chartered accountancy course. Exam was conducted from
1 to 9 December, 2015.
CAP I and CAP II Level Examinations were conducted
at Kathmandu as well as at branch offices Biratnagar and
Pokhara. The Details of applicants and appeared students
are given below.
S.
Level
No
Student Description
No. of Applicants
704
Appeared Number in
Examination
675
CAP I
No. of Applicants
CAP II Appeared Number in
Examination
3 CAP III
First Second Both

Total
Group Group Group
348
300
812
1460
290
255
777
1322
No. of Applicants
164
159
178
501
Appeared Number in
Examination
152
132
175
459
Completion of 8th Batch of GMCS Program

The 8th Batch of 15 days GMCS program has been
organized from 23 November to 13 December 2015 by the
Kathmandu University, School of Management (KUSOM).
The program has been designed to improve skills in oral,
written and non-verbal communication for executives in
business situations. In addition to specific skills, GMCS
program raised awareness the dynamics of communication
in a business environment and help participants demonstrate
about their individual communication abilities and identify
their strengths and weaknesses.
Total applicants of all level of CA Examination were

2665 and appeared at least one subject were 2456.
AT Examination Result Published
Participants of GMCS Programs with ICAN Officials.
The Accounting Technician Board of the Institute

of Chartered Accountants of Nepal has published
Accounting Technician Examination result in pursuance
of Bye-Law 17 of the Accounting Technician Bye-Laws,
2067 on 8 November 2015. The Accounting Technician
Examination was conducted from 17 - 21 September
2015 in ICAN Building, Satdobato, Lalitpur. According
to the result only one examinee was declared pass. After
fulfilling the necessary requirements set by the Institute,
The programme helped in developing General

Management,
Personality
Development
and
Communication Skills that would enable the Chartered
Accountant to occupy higher general management
positions and even aspire to become the head of large
business corporate. This program was highly acclaimed
by the participants. Altogether, 32 newly qualified
chartered accountants attended the program.
48
December 2015
NEWS
Education Committee Replaced by Board of Studies

The Education Committee which was formed by the
Council as a non-standing committee in 2003 with the
terms of reference of the committee inter alia designation
of professional education course, review and finalization
of curriculum at par with the international peer institute
and IFAC requirements, development of study modules,
conduction of eligibility test and intensive coaching classes,
granting of accreditation to tuition providers, liaison with
universities for course matching between ICAN and them
at graduate / post graduate level and monitoring of CA
firms imparting articled training to CA students.
International Relation
CAPA Annual General Meeting, CAPA Board and
CAPA Conference, Seoul, South Korea
The Five members delegation team led by President CA.
Prakash Lamsal visited South Korea to attend the CAPA
Annual General meeting, CAPA Board meeting and 19th
CAPA Conference from 26-30 October 2015. Korean
Institute of Certified Public Accountants (KICPA) hosted
the CAPA conference.
With the 15th amendment of Nepal Chartered Accountant

Rules, 2061, the Education Committee has been replaced
by the Board of Studies (BOS) to carry out all the work
of Education Committee. The 116th Education Committee
meeting held on Tuesday, 8 December 2015 was the
last meeting since its first meeting held on Monday, 15
September 2003.
Interaction with CA Students of CAP-III Level
In continuation of the past practice, the students of CAPIII level were invited for interaction with the president
and Vice president on various matters of education
system and identify the room for further improvement for
the betterment of professional education.
Delegates at CAPA Conference.
The delegation team comprises of Vice President, CA.

Mahesh Khanal, Council Members CA. Bhashkar Singh
Lala, RA. Ganesh Raj Rai and Executive Director CA. Binay
Prakash Shrestha attended the events. ICAN President CA.
Prakash Lamsal was elected as a Board Member of the
CAPA representing ICAN for four years tenure.
IFAC Board and the Council Meeting, Singapore
A Glimpse of Interaction Program.
The interaction program was organized by the Education

Department on 1st January 2016 at ICAN Office,
Satdobato, Lalitpur.
President & Vice President of ICAN with IFAC President Olivia Kirtley.
December 2015
49
NEWS
President CA. Prakash Lamsal and Vice President CA.

Mahesh Khanal attended the IFAC Board and the Council
Meeting in Singapore from 10-13 November, 2015. This
meeting was held to discuss IFAC Strategy for 2016
2018 and Strategy Implementation Plan.
Malaysian Institute of Accountants (MIA) Visit
The Board discussed inter alia legal status of SAFA Virtual

Knowledge & Training Centre, signing of MoU amongst
member bodies for sharing of their material/courses and
other documents available for their members and students,
study report on Impact of Basel-II implementation in
SAARC Countries, Integrated Reporting, SAFA-IFAC
Regional SMP Forum 2016, SAFA Best Presented
Annual Report Awards, Integrated Reporting Awards &
SAARC Anniversary Awards for Corporate Governance
Disclosures Competition 2014 in the meeting.
RA. Dhruba Prasad Paudel, Council Member and CA.
Paramananda Adhikari, Technical Director attended the
SAFA Board Meeting representing ICAN.
SAFA iTAG Committee Meeting: Dhaka, Bangladesh
President and Vice President in Malaysian Institute of Accountants (MIA)
President and Vice President visited Malaysian Institute

of Accountants (MIA) to discuss on the renewal of
Memorandum of Understanding (MOU) signed between
ICAN and MIA and other contemporary issues. ICAN
signed MOU with MIA in 10 May 2013.
41st SAFA Board Meeting - Dhaka, Bangladesh
The Institute of Cost and Management Accountants
of Bangladesh (ICMAB) hosted the 41st SAFA Board
Meeting on 18 October, 2015 and SAFA International
Conference on the theme Financial Reforms to Boost
Industry and Service Sectors on October 18-19, 2015 at
Dhaka, Bangladesh.
The SAFA iTAG Committee Meeting was held on

17 October 2015 at Dhaka, Bangladesh. In the meeting a
comprehensive discussion was held on marking moderation
process in order to finalize the SAFA BPA & CG winners.
The iTAG Committee felt that there is a requirement to give
the comments on the marks given by each country before
the conference marking session. The iTAG Committee
concluded by agreeing to circulate the respective marks
given by each country before the 31st of October 2015 to
the SAFA secretariat and the next Technical Committee
meeting was fixed to be held from 5-7 November 2015 at
Colombo, Sri Lanka to finalize the winners. Further ICAP
has agreed to host the BPA Awards Ceremony 2014 on 30
January 2016 at Lahore, Pakistan.
RA. Dhruba Prasad Paudel, Council Member and CA.
Paramananda Adhikari, Technical Director attended
the meeting representing the Institute of Chartered
Accountants of Nepal.
SAFA BPA Conference
Colombo, Sri Lanka
Group Photograph of Participants at 41th SAFA Board Meeting
50
December 2015
Marking
Meeting:
The SAFA Best Presented Annual Report Awards-2014,

Technical Committee meeting was held to finalize the
NEWS
winners of SAFA BPA & CG Awards, 2014 from 5 - 7

November 2015 at Colombo, Sri Lanka. The Technical
Committee moderated the marks awarded by the member
bodies and recommended its finding to the SAFA iTAG
Committee.
Technical Staffs from the five SAFA Member Bodies
represented in the marking session and comprehensive
discussion was held for the preliminary markings moderation
process to finalize the SAFA BPA & SAARC Corporate
Governance Award winners. Based on the present marking
criteria, the Technical Committee carried out the marking
session and finalized all the business categories nominated
for SAFA BPA Awards from member bodies.
CA. Paramananda Adhikari, Technical Director attended
the Technical Committee meeting representing the
Institute of Chartered Accountants of Nepal.
Meeting of the SAFA iTAG Committee: Colombo,
Sri Lanka
The SAFA iTAG Committee meeting was held on
17th October 2015 in Sri Lanka with the welcome
speech of Chairman of the Committee Mr. Lasantha
Wickremasinghe.
Delegates at The SAFA iTAG Committee Meeting.
The meeting recognized the contribution of the Technical

Committee for the work done during the three day
conference marking sessions and for the successful
completion of the finalization of SAFA BPA award
winners. Altogether 74 entities were selected for the
award and merit certificates from the five member
countries. Out of 74 entities, 31 were from Sri Lanka, 15
from Bangladesh, 15 from Pakistan, 10 from India and 3
from Nepal.
CA. Paramananda Adhikari, Technical Director was
represented in the iTAG Committee Meeting from the
Institute of Chartered Accountants of Nepal.
December 2015
51
52
December 2015
Notice
As per the decision of 197th Council meeting, the following Nepal Standards on
Auditing revised and drafted based on IAASB hand book 2012 edition, are
applicable voluntarily from 1st Sharwan 2072 & Mandatory from 1st Sharwan 2073.
Nepal standards on Auditing

(Based on IAASB Hand Book 2012 Edition)
LIST OF STANDARDS
S.No. NSA No.
Standards
NEPAL STANDARDS ON QUALITY CONTROL(NSQCs)

1
NSQC1
Nepal Standard on Quality Control (NSQC) 1 : Quality Control For Firms that Perform
Audits and Reviews Of Financial Statements, and Other Assurance and Related Services
Engagements
AUDITS OF HISTORICAL FINANCIAL INFORMATION

200-299 GENERAL PRINCIPLES AND RESPONSIBILITIES
1
NSA 200
Overall Objective of the Independent Auditor and the conduct of an Audit in Accordance
with Nepal Standards on Auditing
NSA 210
Agreeing the Terms of Audit Engagements
NSA 220
Quality Control for an Audits of Financial Statements
NSA 230
Audit Documentation
NSA 240
The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements
NSA 250
Consideration of Laws and Regulations in an Audit of Financial Statements
NSA 260
Communication with Those Charged with Governance
NSA 265
Communicating Deficiencies in Internal Control to Those Charged with Governance and

Management
300-499 RISK ASSESSMENT AND RESPONSE TO ASSESSED RISKS

9
NSA 300
Planning an Audit of Financial Statements
10
NSA
315(Revised)
11
NSA 320
Materiality in Planning and Performing an Audit
12
NSA 330
The Auditors Responses to Assessed Risks
13
NSA 402
Audit Considerations Relating to an Entity Using a Service Organization
Identifying and Assessing the Risks of Material Misstatement through Understanding the
Entity and Its Environment
December 2015
53
Notice
14
NSA 450
Evaluation of Misstatements Identified during the Audit
500-599 AUDIT EVIDENCE

15
NSA 500
Audit Evidence
16
NSA 501
Audit Evidence-Specific Considerations for Selected Items
17
NSA 505
External Confirmations
18
NSA 510
Initial Audit EngagementsOpening Balances
19
NSA 520
Analytical Procedures
20
NSA 530
Audit Sampling
21
NSA 540
Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related
Disclosures
22
NSA 550
Related Parties
23
NSA 560
Subsequent Events
24
NSA 570
Going Concern
25
NSA 580
Written Representations
600-699 USING THE WORK OF OTHERS

26
NSA 600
27
NSA
610(Revised)
28
NSA 620
Special considerations-Audit of Group Financial statements (including the work of

component Auditors)
Using the work of Internal Auditors
Using the work of an Auditors Expert
700-799 AUDIT CONCLUSIONS & REPORTING

29
NSA 700
Forming an opinion and Reporting on financial statements
30
NSA 705
Modifications to the opinion in the Independent Auditors report
31
NSA 706
Emphasis of Matter Paragraphs and other Matter Paragraphs in the Independent Auditors
Report
32
NSA 710
Comparative information-corresponding Figures and comparative Financial Statements
33
NSA 720
The auditor's responsibilities relating to Other information in Documents Containing

Audited Financial statements.
800-899 SPECIALIZED AREAS
54
December 2015
Notice
34
NSA 800
Special Considerations-Audit of financial statements Prepared in accordance with special

Purpose Frame works
35
NSA 805
Special Considerations-Audits of Single Financial statements and Specific Elements,

Accounts or Items of a Financial statements
36
NSA 810
Engagements to Report on Summary of Financial Statements
NEPAL AUDITING PRACTICE NOTES

37
NAPN 1000
Special considerations in Auditing Financial Instruments
AUDITS AND REVIEW OF HISTORICAL FINANCIAL INFORMATION

2000-2699 NEPAL STANDARDS ON REVIEW ENGAGEMENTS(NSREs)
38
NSRE 2400
Engagement to Review Financial Statement
39
NSRE 2410
Review of Interim Financial Information Performed by the Independent Auditor of the

Entity
ASSURANCE ENGAGEMENTS OTHER THAN AUDITS OR REVIEWS OF

HISTORICAL FINANCIAL INFORMATION
3000-3699 NEPAL STANDARDS ON ASSURANCE ENGAGEMENTS (NSAEs)
3000-3399 APPLICABLE TO ALL ASSURANCE ENGAGEMENTS

40
NSAE 3000
Assurance Engagements Other than Audits or Reviews of Historical Financial

Information
3400-3699 SUBEJECT SPECIFIC STANDARDS

41
NSAE 3400
The Examination of Prospective Financial Information
42
NSAE 3402
Assurance Reports on Controls at a Service Organization
43
NSAE 3410
Assurance Engagements on Greenhouse Gas Statements
44
NSAE 3420
Assurance Engagements to Report on the Compilation of Pro Forma Financial

Information Included in a Prospectus
RELATED SERVICES
4000-4699 NEPAL STANDARDS ON RELATED SERVICES (NSRSs)
45
NSRS 4400
46
NSRSs
4410(Revised)
Engagements to Perform Agreed-Upon Procedures Regarding Financial Information

Compilation Engagements
Note: Click on link below for details.

http://www.ican.org.np/newnsas.php
December 2015
55
Notice
56
December 2015

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CAHARTERED

Journal of the Institute of Chartered Accountants of Nepal

CA. Prakash Lamsal

Challenges and Quality of Accounting Profession

The Legitimacy of International Public Sector Accounting Standards (IPSASs)

- Dr. Pawan Adhikari

Managing Risks Facing the Economy

- CA. Anal Raj Bhattarai

Why Audit of Information System is Required in Nepal ?

- CA. Mukunda Pokharel

- CA. Gaurav Khwaunju Shrestha

- CA. Kaushlendra Jha

- CA. Narendra Bhattarai

Global Nepal Printing Press Service Pvt. Ltd.

14, 17, 52, 53, 56

issues that have emerged as a result of natural calamity.

importance of dynamics of communication in a business

practicing accounting firms in order to oversee quality

business valuation of different sectors.

expanding the relation with those organizations. During

I assure to keep our members and stakeholders informed

ICAN Officials and other member visited Bangladesh

Before I conclude my message I would like to seek the

It is my duty to inform the entire membership that the

CA. Prakash Lamsal

Challenges and Quality of Accounting Profession

CA. Paramananda Adhikari

About a month back, one of my

carried out by the person who has

The Nepal Chartered Accountant

cannot do any of the services. So, we have that great

Circumstances of Audit Failures

Criticism Against the Auditors

The Nepal Chartered Accountant

failed to exercise professional skepticism on unusual

Practicality of Audit Services

majority of these private companies are owner-managed.

Quality of Audit Services

been a major concern of the auditing profession in Nepal

The Nepal Chartered Accountant

The Legitimacy of International Public

The government/FCGO should

Dr. Pawan Adhikari

The Nepal Chartered Accountant

accrual basis of IPSASs.

accounting standards. This understanding might be

2. Revisiting the Cash Basis IPSAS

full consolidation, reporting external assistance and

The Nepal Chartered Accountant

was devoted to setting directions for the preparation of

The Nepal Chartered Accountant

3. The Applicability of the Accrual Basis

IPSAS 29 has appeared inapplicable in many European

In its assessment report, the European Commission

4. Alternative Reforms to Nepal

The Nepal Chartered Accountant

for its member states instead of adopting the accrualbased IPSASs.

The Nepal Chartered Accountant

European Public Sector Accounting Standards (EPSAS)

Nepal Unrest: The Fault Line

Every institutions who are

The current economic difficulties

CA. Anal Raj Bhattarai

We stand at movement of great