Chapter 7
Audit  

(1) Every company shall appoint an auditor in accordance with the act to audit its accounts. 

(2) In case any company appoints any foreign citizen as its auditor,  it shall also appoint a Nepali citizen, as far as possible, possessing the qualifications mentioned in the chapter, as a coordinater. 

(Section 7 and Section 98 have been repealed by the 1975 Auditors Act) 

99. Appointment of Auditors  

(1) The annual general meeting shall appoint the auditors of the company from among auditors who have obtained certificate from the concerned department before the commencement of this section or from the Auditor-General's Department thereafter and retained such certificates. The name of such auditor shall be notified to the appropriate department within fifteen days from the date of his appointment. Provided that the appointment of the auditor until the convening of the first general meeting shall be made in the manner prescribed in the prospectus in the case of a public company, while in the case of an private company, the appointment shall be made by the Board of Directors. 

Provided that far the purchase of Sub-Section (2) of Section  55, the auditor shall be appointed by the Board of Directors. The ramuneration of such auditor shall be as proscribed by the Board of  Directors. 

(2) The auditor appointed under Sub-Section (1) shall remain in office until the first annual general meeting is convened. 

(3) No Auditor shall be appointed for more than three consecutive terms in the same public company. 

100. Persons Who Cannot be appointed Auditors  

The following persons of the firm in which they are partner shall not be appointed as auditor of any company and shall not remain in office even if they have been already appointed in that capacity : 

(a) Director, managing agent, employee or worker of the company. 

(b) Partner of the director, managing agent, employee of worker of the company. 

(c) Debtors of the company. 

(d) Any person who is a relative of the director or managing agent of  the company or of his partner. 

(e) Any person who has been punished on charges pertaining to audit. 

(f) A person who is insolvent. 

101. Audit to be Invalid  

The audit of accounts done by a person who is appointed in contravention of this act shall be invalid. 

102. Action to be Taken in the Event Failure to Appoint Auditer 

In case the annual general meeting fails to appoint an auditor, the appropriate department itself shall appoint  bone. The remuneration's of such auditors must be barne by the company. 

103. Accounts to be Furnished  

The account and records of the company shall be furnished to the auditor for the purpose of audit in case he so demanos at any time, and the appropriate director or employee shall forthwith give such explanations as may be asked by him. 

104. Function and Duties of the Auditor 

(1) The auditor shall submit a report addressed to the shareholders, to the company as well as to the appropriate department, on the accounts, records, and balance-sheet audited by him, explaining the following points. A copy of this report shall be sent by the company to every shareholder. 

(a) Whether or not prompt replies to queries made by him and explanations sought by him were given to him. 

(b) Whether or not the balance-sheet duly conforms to the provisions of the act. 

(c) Whether or not accounts and records have been accurately maintained in accordance with existing law. 

(d) Whether or not the balance-sheet has been correctly prepared so as to reflect the economic condition of the company. 

(e) Whether or not the Board of Directors or the managing agent or the representative or any employee of the company has acted contrary to law or committed misappropriation or caused loss or damage to the company. 

(f) Whether or not the business is being conducted satisfactorily. 

(g) Suggestions, if any. 

105. Vacancy in the Office of Auditor  

In case the office of auditor falls vacant for any reason, the Board of Directors may appoint another auditor to fill up such vacancy for the remaining term of the predecessor, with the approval of the appropriate department. 

106. Auditor to Certify  

The auditor shall affix his signature on the accounts and  records audited by him and mention the date on which he audited them. 

107. Presence of the Auditor  

The auditor shall be present in the general meeting of the company in case he is asked to do  and shall provide accurate replies to all question which may be put to him in course of the discussions held therein on the accounts and records audited by him. 

108. Auditor to Notify  

The company shall send to the auditor a printed copy of the balance-sheet accordins to his audit report as it does to its members.  In case the auditor finds that alterations have been made in the report attached to such balance-sheet, he shall forthwith notify the appropriate department accordingly. 

108A. Audit in the Case of Companies Owned by His Majesty's Government  

(1) Notwithstanding anything contained in the other Sections of this act : 

(a) Audit operations relating to companies fully owned by His Majesty's Government shall be supervised and controlled by the Autditor-General's Department. 

(b) In the case of companies partially owned by His Majesty's Government, or of those whose liabilities have been partially borne by His Majesty's Government, the auditor shall forward a copy of his report also to the Auditor General. In case such report indicates that there has been any shortcoming in the all of the company, the Auditor-General may issue necessary directives to the concerned company and it shall be the duty of the company to comply with such directives. 

(2) Other matters relating to audit operations to be undertake under  Sub-Section (1) shall be according to this act. 

109. Remuneration of Auditor  

The remuneration of the auditor shall be as prescribed by the Board of Directors, if he is appointed by he Board of Directors, and by the general meeting in case he is appointed by the annual general meeting.