Banks and Financial Institutions Act, 2017

66. Functions, duties and powers of the auditor: (1) The functions, duties and powers of the auditor shall be as follows:

(a) To audit the accounts and financial statements,
(b) To prepare and submit an audit report to the board of directors of the bank or financial institution, including the audited accounts, balance sheet and profit and loss account,
(c) To inform the board of directors if there is irregularity in the operations of the bank or financial institution or if work is not done properly and such matter is likely to cause loss or damage to the bank or financial institution,
(d) To inform Nepal Rastra Bank if it perceives the possibility of the following situations:
 (1) Violation of conditions stipulated by Nepal Rastra Bank while granting the license to the bank or financial institution, or of this Act, or rules, regulations or directives made under this Act,
 (2) Adverse effect on the regular operations of the bank or financial institution,
 (3) Preventing the auditor from presenting the audit report or causing a false audit report to be submitted.

(2) The auditor shall have the right to inspect all documents, accounts, books of account, ledgers, vouchers and registers of the bank or financial institution at any time in the course of performing his/her duties, and the auditor may, in the course of completing his/her work and performing his/her duties appropriately, request any information and explanation from the officer of the bank or financial institution that he/she deems necessary.

(3) The auditor shall clearly mention the following matters in his/her report:

(a) Whether or not replies to requested matters have been received,
(b) Whether or not the financial statements including the balance sheet, off-balance sheet transactions, profit and loss account and cash flow statement have been prepared in the format and manner prescribed by Nepal Rastra Bank, and whether or not such statements are consistent with the books of account, ledgers, registers and accounts maintained by the bank or financial institution,
(c) Whether or not books of account, ledgers, registers and accounts have been properly kept in accordance with the prevailing law,
(d) Whether or not any officer of the bank or financial institution has done any act or irregular activity contrary to the prevailing law, or whether or not loss or damage has been caused to the bank or financial institution,
(e) Whether or not loan write-offs have been made in accordance with the loan write-off by-laws or directives of Nepal Rastra Bank,
(f) Whether or not the transactions of the bank or financial institution are being conducted satisfactorily as prescribed by Nepal Rastra Bank,
(g) Matters that need to be communicated to shareholders,
(h) Matters prescribed by the prevailing law and other details prescribed by Nepal Rastra Bank to be included in the audit report,
(i) Other suggestions the auditor deems necessary to give.

(4) After receiving the auditor's report, if deemed necessary, Nepal Rastra Bank may order the auditor of the bank or financial institution to do the following additional work:

(a) Submit additional information deemed necessary by Nepal Rastra Bank regarding the audit,
(b) Further broaden the scope of the audit of the transactions of the bank or financial institution or its subsidiary company,
(c) Conduct other checks on a specific matter as prescribed by Nepal Rastra Bank or as recommended to the bank or financial institution.