Meaning, Purpose and Importance of Accounting and Auditing

Accounting
Accounting in the general sense means the records and accounts kept in such a way that
the actual details of the transactions are kept visible on the basis of prevailing laws,
rules, laws, policies, programs and decisions, orders and criteria. According to the Audit
Act, 2048, 'Accounts' refers to the records, accounts, books, etc., which are kept in
accordance with the prevailing law, and other documents certifying the transactions.
Key concepts of accounting
The concept of accounting refers to the basic principles of accounting. It gives an
answer as to why the account has to be kept or for what purpose. Some of the key
concepts or principles of accounting are as follows:
1. The principle of professional existence
2. Preparation of monetary criteria for preparing financial statements and accounts
on the basis of monetary criteria.
3. The principle of continuity in accounting for the existence of a business.
4. The principle of pearl value based on receipt value i.e. pearl value when keeping
records of property in the vassal,
5. The principle of keeping accounts on the basis of one financial year.
6. Once the amount to be paid has been fixed and the amount to be received has
been fixed.
7. The principle of reconciling the relationship between income and expenditure,
8. The principle of double accounting to have equal effect on both sides of the
transaction.
Dual Accounting System
Luca Pacioli, now a resident of Milan, Italy, is believed to have introduced the dual
accounting system in 1494.
As the one-stop accounting system is an incomplete and unscientific system, the
principle of double accounting system has been formulated to keep a systematic and
complete record of financial transactions. Dual accounting system is the principle of
accounting system that records the impact of two sides of the financial transaction. The
dual accounting system records the effect of the transaction on the debit and credit,
which records the financial transactions on the principle that the amount of the debit
side of the entire transaction should always be equal to the amount of the credit side.
For example, if the business buys furniture for cash, the business will get the furniture
and the cash will go out of the business. In this way both the accounts are shown in the
records affecting the furniture and the cash account. For example, furniture account is
debited, and cash account is credited. Therefore, since there are two sides to any
financial transaction, double accounting system is a complete, scientific and systematic
accounting system.
The one-stop accounting system records only one aspect of financial transactions. It is
an unscientific and incomplete system not based on any definite rules, norms, but double
accounting system is a scientific and complete accounting system based on the principle
of double accounting system which records the two sides of the transaction in two
definite rules, principles and norms.
Features of Dual Accounting System
1. Double Impact
2. Equal Impact
3. Changeability
4. Scientific
5. Easy accounting
6. Comprehensive use
Objectives of Dual Accounting system
1. To keep a complete record of transactions,
2. To ensure profit and loss,
3. To illustrate the economic situation,
4. To protect goods and property,
5. Providing financial information,
6. Help solve problems and make the right decisions.

Government accounting system

The government has the major responsibility of conducting the economic,
administrative and development activities of any country. The act of keeping an account
of the transactions of income and expenditure incurred by the government in conducting
such activities is called government accounting. As the government is accountable to
the people, records of taxes collected from the people and income earned by the
government from other sources as well as administrative and development expenditure
should be kept in a transparent manner.
The government accounting system is an accounting system used to keep a systematic,
scientific and complete record of income earned by the government and expenditure in
various sectors. The accounting system of our country is based on a double accounting
system. 2018 Chaitra 2 Lalmohar Sadar Bhai B.Sc. The government accounting system
of Nepal, which has been implemented since 2019 BS, is still in use today.
Accounts are kept in the prescribed forms of financial transactions of all government
organizations, constitutional bodies, ministries, secretariats, commissions, departments,
regional zonal and district level offices and organizations. Government accounts
provide clear and accurate information on the budget allocated for various government
bodies, its utilization, the returns received from it, government revenue, foreign aid, and
internal debt. Through which the government gets the necessary data for formulating
periodical plans and budget.
(A) Characteristics of Government Accounting System
• It is based on cash transactions; it has adopted double cash system.
• Economic procedures are governed by law.
 • Due to the format and method of the same form, uniformity has been
maintained.
• Records are kept according to the budget title and sub-title.
• The budget is kept within the prescribed limits.
• Adopted universal principles of accounting.
• Provision has been made for central accounting and operational level
accounting.
• This accounting system does not keep a profit and loss account, it reflects
the reality of the transaction.
• This accounting system is maintained in ministries, departments,
constitutional bodies and all government offices.
• In this account, provident fund, deposit fund, assistance fund etc. are
established.
• This article presents the real details of government budget and economic
situation to the government and the people.
• Certain forms are used to keep government accounts.
(B) Principles of Government Accounting System
1. Legal Principle
2. Principle of Budget Control
3. Principle of Classification
4. Principle of Fiscal Year
5. Principle of Net Value
6. Principle of Simplicity
7. Principle of Uniformity
Weaknesses in the accounting system
1. There is no standard in the government accounting system. The rules and
regulations are the only procedure to be followed while spending income. There
is a need to define different terms and formats for the level of accounting
(Accounting Standard). Lack of standards makes it difficult to understand the
accounting system.
2. The current system provides for the collection of income, expenses, assets,
liabilities and investments of government offices. This provision is incomplete
as there is no condition to present it.
3. There is a provision to prepare project accounts in relation to the projects, but
since it does not cover the entire status of the project, loans, grants, in-kind
assistance, interest, etc., the clear status of the project cannot be obtained.
4. "According to the accounting policy, the advance is shown at the expense. The
financial statements do not provide accurate information when the amount that
is not used or actually spent is included in the expenditure.
5. As there is a practice of preparing financial statements only by filing the bank
for revenue collection, it is based on Single Entry System. It is not possible to
analyze how much has to be raised from this, how much has been raised, when
and how much is due.
 6. Goods are purchased and kept in stock but not used, even if it is spent on the
accounting form.
7. Projects are being implemented with the grant of donor organizations but are not
visible in the accounts due to non-receipt of cash.
Due to the above weaknesses, it seems necessary to bring some reform programs in the
current government accounting system. Considering some of the information that needs
to be provided by the government for the sake of increasing economic turnover and
transparency and good governance, it seems necessary to make the following reforms
gradually.

Reforms of Accounting system

• The current cash-based credit system needs to be gradually modified to an
international level accrual-based accounting system.
• To prepare and implement government accounting standard.
• Vocational training and capacity building programs should be provided to the
manpower in the field of accounting continuously.
• According to the universal principle of accounting, in addition to the cash
transactions of any office / unit, it is necessary to develop and implement a
comparative study accounting system including income, expenses, liabilities,
assets, advances, commodities.

Auditing
Meaning
The word audit comes from the Latin word auditaire. It means to tell. Examiners
listened to the kings while auditing the accounts. The term audit is considered to have
evolved. According to the Audit Act, 2048, "test" means the audit of an account and its
evaluation and analysis. Therefore, audit means the examination of the records,
accounts, books, etc. and other documents proving the transaction and the evaluation
and analysis to be done on the basis of the transaction.
A) Purpose/objectives and importance of audit
• Finding fault or error,
• Keep the account up to date,
• To identify whether there is financial impropriety or corruption,
• To recommend action against the culprits for being unfair and corrupt,
• To make public the economic condition of the country that controls and
coordinates the economy,
• Encourage adherence to the Financial Act and punish those who do not.
B) Methods of Auditing
 • Internal audit
• Final Audit
• Performance Audit
• Pre-Audit
• Post Audit
• Efficiency Audit
• Verification Audit
C) Things to pay attention while auditing,
• Whether the prevailing law has been complied with,
• Whether the management is efficient, creative and equipped with new
technology,
• Whether or not it is utilized according to the condition of the resource,
• Whether the objectives and goals are met,
• A complete picture of financial transactions and the reality of the fund.

Types of Auditing
1. Internal Auditing
2. Final Auditing
Internal Auditing
An internal audit is an audit that seeks to correct immediate shortcomings. The Internal
Audit Fund of the Government of Nepal and the Office of the Comptroller and Auditor
General.
An internal audit is an audit that makes the accounts regular and periodical by actually
checking the income and expenditure by the organ or body of the organization. Before
the Office of the Auditor General conducts the final audit in government offices in
Nepal, the Internal Audit Co. Takes During the internal audit, the appropriated budget
of the government office, the prevailing act of law and records of revenue and deposit
transactions, law. It is kept according to the rules, isn't it? Is seen. It is a test of regularity
and mathematical accuracy, which seeks to correct any immediate shortcomings.
Objectives of internal audit:
a. To keep records of financial transactions periodically.
b. In case of any mistake, weakness or error in the transaction, to correct it in time,
c. Promptly inform if money laundering, misappropriation of goods and corruption
is found.
d. To assist in running a clean, balanced and regular financial administration.
e. Assisting in compliance with prevailing laws etc.

Final Auditing
The final audit is an independent, impartial, and purposeful examination of documents
and records related to financial transactions after a financial year is closed. Government
revenue and expenditure are independently examined to determine whether public funds
have been utilized in accordance with the policies and programs set by the legislature.
In order to convince the people that the financial transactions of the government are
right, an audit should have been done through an independent, impartial body in
accordance with the prevailing law. This is called a final audit as there will be no other
test after this test. The Office of the Auditor General audits the financial transactions of
all government offices one by one or intermittently or only a few percent, considering
the regularity, economy, efficiency, effectiveness and justification. The Office of the
Auditor General is the highest auditing body in Nepal. In the case of Nepal, the audit
conducted by the Office of the Auditor General is called the final audit as there is no
other body to conduct the audit.
The final audit is the audit that is done at the end of the transaction. The authority to
audit is vested in the Auditor General. The Constitution of Nepal presents the
Department of Auditor General as a constitutional body. There is a constitutional
provision for the Auditor General to conduct a final audit and submit a report to the
President at the end of each fiscal year.

Things to be examined by the Auditor General(Maha Lekha).

The following issues are considered by the Auditor General considering regularity,
economy, efficiency, effectiveness and justification, tests.
• According to the Appropriation Act, the amounts sanctioned under various
headings and sub-headings for spending on various services and works have been
spent for the same purpose within the limits allowed for the specified services
and works or not.
• The prevailing law has not been followed in conducting financial transactions
and there is sufficient evidence of income and expenditure or not.
• Accounts are kept in accordance with the prescribed format, no and it depicts the
reality of financial transactions, does not.
• The data of government property is accurate and up to date, there is adequate
provision of protection and management of government property, not.
• Internal audit to prevent loss and misuse of cash and other government property
adequate provision of internal control has not been made, if it has been followed
or not.
• Accounts of revenue, all other incomes and deposits are not properly evaluated,
assessed and accounted for. There are not enough rules regarding the methods,
if they have been followed or not,
• The accounts of government loans, securities, deposits, debt relief funds and the
amount transferred and released for the purpose of loan release are accurate or
not.
• Provisions and rules relating to income and expenditure of industrial and
business services, accounting, its cash reserves and financial transactions are not
adequate and have not been complied with.
 • The organization, management and division of labor of the office is adequate and
appropriate and the work is carried out accordingly.
• No work has been done by various employees or bodies in such a way that it is
unnecessarily duplicated, or any necessary work has been missed or not.
• The available resources, means and assets have not been properly utilized and
proper arrangements have been made for maintenance and protection without
any loss or not.
• According to the program, progress has been made within the stipulated time,
and the quality and quantity of work is satisfactory or not.
• The purpose and policy of the office is clear or not.
• The program has been prepared in accordance with the specified purpose and
policy or not.
• The program has not been conducted within the limits of the approved cost and
the return received is not reasonable compared to the cost.
• The system of keeping track of target progress and cost expenditure is not
adequate and reliable.
Things to be examined by the Auditor General from the point of view of
justification.
• If the Auditor General finds that the expenditure has been incurred in an
unreasonable manner or in a manner that is detrimental to the movable and
immovable national wealth, even if it has been incurred in accordance with the
discharge,
• In respect of grants of movable and immovable national funds or assignment of
revenue or provision of facilities for mining, forest, water, power, etc., in respect
of leases, licenses, rights and any other form of remittance of revenue or movable
and immovable national funds.

Unaccounted(Beruju)
An irregular amount on financial dealings shown by auditing.
Irregularities, losses incurred during the audit, amount due on principle, managerial
incompetence are called unaccounted. It is pointed out that if there is a negative result
in the financial transaction through the use of discretion if the ritual to be performed is
not followed if the ritual to be performed is not followed.

Difference between Internal and Final auditing

 Internal Audit External Audit
1. Internal auditors are company a. External auditors work for an
employees. outside audit firm.
2. Internal auditors are hired by the b. External auditors are appointed
company. by a shareholder vote.
3. Internal auditors do not have to c. A CPA must direct the activities
be CPAs. of the external auditors.
4. Internal auditors are responsible d. External auditors are responsible
to management, to the shareholders.
5. Internal audit reports are used by e. External audit reports are used
management, by stakeholders, such as
investors, creditors, and lenders.
6. Internal auditors can issue their f. External auditors must use
findings in any type of report specific formats for their audit
format. opinions and management
letters.
7. Internal auditors will examine g. External auditors examine the
issues related to company financial records and issue an
business practices and risks. opinion regarding the financial
statements of the company.