Chapter 1: Office 4) What do you mean by report? What are its objectives? Mention briefly.

1) Explain the meaning and need of office procedures. Ans: A report is a written statement of jobs done by an organization, committee,
Ans: Office procedures are the set of rules or policies guiding the operations of commission, etc. for a particular period of time. It includes the details about
an office or business. They are the formal process followed by an organization problems, progress, achievements, facts, information etc. regarding the problems
to collect the necessary information for making efficient and effective decisions. under study. The main objectives of reports are listed below:
Hence, following are the main importance of office procedures:  To find out the inefficiencies of particular department and ways to
 For performance of office related jobs in organized and uniform way. overcome them.
 For abiding by the law of appropriate region where the business is  To disclose the facts about public programs run by government and their
functioning. relevance to society.
 For proper solution to organizational problems by listening and  To discuss the performance and progress of particular organization.
implementing the opinions, ideas and information from even lower level  To serve as the foundation on the basis of which decisions are taken.
staffs.
5) Mention the points to be considered while drafting a report.
2) What do you mean by Tippani? Briefly explain the objectives of Tippani. Ans: Report being a significant document for an organization should be
Ans: A Tippani is written statement of facts, information, related rules and prepared by skilled and experienced staffs by following standard procedures.
regulations, opinions and suggestions. It is prepared by lower level staffs and Following factors should be taken into consideration while drafting a report:
submitted to higher level staffs for decision making. Since it is used to make  The title of report along with date and subject should be established on
important decisions, it should be checked by each authority to ensure the top of the report.
inclusion of all the information and documents.  The time frame covered by the report should be clear.
The objectives of Tippani are as follows:  The information should be represented in such manner that they are
 To make correct and effective decisions on a particular issue. comprehensive and communicative.
 To communicate the current problems regarding particular issue to  Report must incorporate the opinions and suggestions of the report
concerned higher authority. writer.
 To clear the existing unclear rules and regulations or amend them.  Finally, report must be duly signed by the preparer to retain its validity.
 To make decisions based on opinions of all staffs of organization.
6) Explain in brief different types of reports.
3) Mention the things to be considered while drafting a Tippani. Ans: Report is the output or conclusion of certain investigations, study or
Ans: The act of preparing a Tippani in a systematic manner is called drafting a research. Following are the various types of reports:
Tippani. Since it should include the related facts, information, rules and Annual Report
regulations in an orderly manner, drafting a Tippani is a vital issue. Points to be The report covering the activities, progress and achievements made in a
considered for drafting a Tippani: particular year is called Annual Report. It is prepared by all kinds of
 The subject of Tippani should be clearly mentioned. organizations to measure their performance over the year. In companies, annual
 It should include all related facts, information, rules, regulations, ideas, report comprising of financial documents is presented at general meeting for
opinions etc. of the concerned authorities. approval by shareholders.
 It should be supported by necessary documents as evidences.
 It should be checked and duly signed by each authority to ensure its Government Report
validity and inclusion of all the information and documents. A government is always accountable to general public. So a report is prepared
by government to make people aware about its activities, plans, policies,
revenues or incomes, expenditures etc. which is called a government report. Ans: The subject of discussion presented in a meeting is called resolution. As
Based on this report, people can judge on the efficiency of the government. per the Company Act 2063, resolutions have been broadly divided into two
categories:
Audit Report
A report regarding the preparation and communication of financial information Ordinary Resolution
of an organization prepared by the auditor is called audit report. It checks The resolution that is presented in the general meeting of a public company is
whether financial transactions are carried out within existing rules and called ordinary resolution. It is generally related to the usual and regular
regulations. Auditor General and independent auditor prepares the audit report activities of a company. The general resolution can be approved if it is passed by
for government organization and public company respectively. simple majority i.e. more than 50% of the shareholders.

Academic Report Special Resolution

A report prepared by students or academic institution after completion of the The resolution that is presented in the special meeting of the shareholders is
examination or study or research is called academic report. The content of the called special resolution. The impact and prominence of a special resolution are
report is related to educational or academic activities. generally high and long term. Some instances are: issuance of bonus shares,
winding up of company etc. However, it has to be approved by getting
Committee Report permission from two third of shareholders i.e. 75% of the shareholders.
A committee is group of experts formed to achieve a particular objective by
carrying out certain activities. The very report prepared by members of Chapter: 2 Filling & Indexing
committee after completion of designated job is called committee report. It is 1) What do you mean by filing? Mention the importance of filing.
submitted to concerned authority for approval and implementation. Ans: In the course of performing different activities, different documents are
created inside office. Proper management of such documents is essential for
7) Write the meanings and objectives of resolution. future reference. Thus, filing is a systematic and scientific way of storing official
Ans: The subjects matter presented in the meeting for discussion and decision is documents safely for their future references and retrieve them as and when
called resolution. It is a written proposal. The participants of meeting discuss on required. Significance of filing can be listed below:
the relevance, pros and cons of particular resolution and accordingly decide on  Filing helps in easy retrieval of important documents in future.
the approval, rejection or postponement of the resolution.  Filing helps in preservation of documents from lost, theft, pests, dusts et
cetera.
Objectives of resolution are briefly discussed below:  It acts as precedent for future disputes and disagreements.
 To state the facts about discussion in systematic and organized manner.  It helps in formulation of plans and policies by providing suitable
 To serve as evidence for the validation of decisions. information.
 To allow the management to make democratic decisions.
 To act as documented evidence for future misunderstanding and 2) Explain any two traditional system of filing.
disputes. Ans: Those systems of filing dating to the past are called traditional filing. Small
 To enable the participants of the meeting to have beforehand knowledge office and household still follow this method of filing. Some traditional systems
about the matters to be discussed in the meeting. of filing are as follows:
Misil Filing
8) Mention briefly about the different types of resolution. Also known as case filing; in this system of filing, documents related to
particular case are collected in a file chronologically. The documents of earlier
date are placed on the bottom and the latest dates on the top. The documents are
tied with lace and wrapped by a paper of cloth. Each file is given a code called Since the files are loose they can be easily mishandled.
misil number. It is usually practiced in courts, land reform offices et cetera. Different kinds of documents in same box make the process of retrieval complex
and tedious.
Box Filing This system of filing is not appropriate for important and long term documents.
In this system of filing documents are accumulated and piled in a wooden, metal
or paper box. Generally, spring clip attached with the box is used to hold the 5) What is flat filing system? Mention its advantages and disadvantages.
documents properly. This system is preferable for less important and short term Ans: This is a system of filing in which the files and folders are kept
documents. However, we find its applications in the households to store land horizontally making a pile. The documents inside the files are kept
and building related documents. chronologically. The documents are punched and tied with lace or held using the
metal clips. The face of the file states the details about the correspondent such as
3) Define misil file. Mention its advantages and disadvantages. name, address, telephone number, subject et cetera.
Ans: Misil filing is a system of filing in which the documents related to a The advantages of flat filing are as follows:
particular case or subjects are collected in chronological manner. Various pros  The system is easy to understand and implement.
and cons of misil filing are as follows:  Requiring fewer filing equipment it is regarded as economical method.
 It requires less space as files are piled one upon another.
Advantages:  The documents remain intact as they are punched and tied.
It is simple and easy to understand.  The drawbacks of this system are as follows:
It is convenient to retrieve files by using misil number.  The word or figures in the document may become illegible while they
Addition and reduction of documents can be made easily. are punched.
It helps in proper referral to make decisions on current but similar past cases.
 Files are without locking system so they are accessible to unauthorized
staffs also.
Disadvantages:
 Retrieving the files is complex since they are kept in a pile.
The application is limited as it is not relevant to offices not dealing with cases.
There is greater probability of loss of data.
6) Introduce vertical filing system. Mention its advantages and disadvantages.
Punching the documents may make them illegible.
Ans: Vertical filing system allows the arrangement of files in upright position.
The folders are kept inside a drawer or cabinet having the lock system. Folders
4) Introduce box file. Mention its advantages and disadvantages.
are usually made of hard paper and aligned alphabetically, numerically,
Ans: Box filing is the system of filing where files are piled in a particular box of
geographically or subject-wise as per the need of organization. Advantages and
wood, metal or paper. The documents of earlier dates appear on the bottom and
disadvantages are listed below:
later dates on top. It is one of the traditional systems of filing. Advantages and
Advantages:
disadvantages of box filing are as follows:
The files can be easily located as they are kept vertically with guide card.
The folders are away from unauthorized access as lock systems are used.
Advantages:
It is simple to add or remove the documents as they are kept loose inside the
Easy to locate documents as all of them are stored in single box.
folder.
It is an economical method.
Papers are kept loosely so addition and reduction of files is simple.
Disadvantages :
Since documents are not punched there are no compromises with written figures.
It is an expensive system since the documents are kept inside a lock system.
The task of making guide cards is tedious and confusing.
Since the files are kept vertically more space is occupied.
Disadvantages:
 Disadvantages:
7) Write any five points of difference between flat and vertical filing system.
Ans: Distinctions between flat and vertical filing system are listed below: It will create confusion when files of two people with same names are to be
Basis of difference Horizontal Filing Vertical Filing arranged or located.
Position of files The documents are kept The documents are kept Confidentiality cannot be ensured as all files are named.
horizontally thus upright thus consuming
occupying less space. more space. The task of arranging large number of files is meticulous.
Safety It does not cover the It is very safe as it
safety measures as it does comprises of locking
not have lock system. system denying
unauthorized access. What is numeric filing? Mention its advantages and disadvantages.

Cost It is cheaper as it does not It is relatively expensive Ans: The system of filing in which the files of persons or institutions are
demand special filing system as it requires managed in drawer or cabinet according to numerical order is called numeric
equipment. additional filing devices. filing. The folders are divided into various groups like 1 to 40, 41 to 80 and so
on using guide cards. Also a separate index is required where a separate card is
Time It requires more time to It is a faster method as
assigned for each file. It contains the detail info about name, address, phone
locate a particular file. locating files is made easier
number et cetera about person or organization. It is followed by institutions with
by guide cards.
large number of files like banks and libraries.
Suitability It is appropriate for small It is appropriate at larger
offices where there are organizations where there The advantages of numeric filing:
fewer and less important is large no. of files and
documents. their safety is of prime The method allows high level of secrecy as files are arranges according to
concern. number.

The method enables efficient and quick location of files as and when required.
8) What do you mean by alphabetical filing method? Mention its advantages
and disadvantages. The system is appropriate for organization with huge volumes of data.
Ans: Alphabetical filing method arranges the documents stored in drawers and
cabinets according to the initial alphabets of the name of person and institution. The disadvantages of numeric filing:
Alphabetical arrangement can be made on the basis of English or Devanagari
scripts. It is very helpful for the quick location of required documents. It is expensive system as it requires separate index and cabinet.
Advantages:
 Simple and easy method to use and implement. Since the method is quite technical implementation and application may be
 It is economical system as there is no requirement of separate index to difficult.
retrieve the files.
 It removes the complexity of dealing with numbers to the clerks. It is not suitable for small organization dealing with few files.
 It is appropriate for every kind of organizations.
Define subject filing method. Mention its advantages and disadvantages. Easy location of data is possible.

Ans: The system of filing in which the files are created according to the subjects Performance of a particular region can be ascertained by analyzing appropriate
but arranged either alphabetically or numerically is called subject filing method. files.
If a particular subject contains a large number of files, it can be further sub
divided. For instance, if file related to assets contains large number of It is appropriate for organizations that maintain their file on basis of different
documents, it can be further divided into fixed or current assets for our locations.
convenience.
The files can be arranged either numerically or alphabetically as per the
The pros of subject filing: organization’s convenience.

It is a flexible method so addition and reduction of files is piece of cake. The drawbacks of geographical filing are outlined below:

Large number of files can be categorically sub divided into small factions. Confidential files cannot be filed under this method.

It is appropriate for organization with higher priority to subjects rather than It is time consuming to install this method of filing.
names and numbers.
Files can be highly concentrated on particular region while some regions may
The guide card enables retrieval of files in quick and convenient way. have no files under them.

The cons of subject filing:

Division of files on the basis of subject is strenuous. Introduce indexing. Explain its advantages.

Separate index and guide cards elevate the cost of filing. Ans: Indexing may be defined as the process of development of an indicator or
guide for locating the files and documents. It is an essential tool for proper and
It is very difficult to maintain confidentiality. efficient office management. Basic example of indexing is the content guide
given in the initial pages of the books.

The advantages of indexing are briefly discussed below:

What do you mean by geographic filing method? Mention its advantages and
disadvantages. Indexing helps in preservation of documents in efficient and organized manner.

Ans: The way of arranging the files of persons or organizations according to the It helps in prompt retrieval of files as and when required.
names of location or place is called geographic filing method. All the documents
related to a particular location are kept in the file assigned to it. It is suitable for Indexing helps in cross reference of files thus facilitating in the smooth official
those government organizations that function location wise. jobs.

The advantages of geographical filing are listed below: Indexing is of paramount importance for maintaining confidentiality.
Proper execution of indexing reduces cost as it saves labor and time. Ans : Nepal got its membership in 2004/04/23.
Chapter: 3 Trade
Very Short Answer Questions

Define trade in one sentence. When was the BIPPA signed?

Ans : The act of buying and selling of goods and services for profit is called Ans : BIPPA was signed in 2011/10/22.
trade.

Define invoice in one sentence.

What are the types of trade?
Ans : Invoice is a document issued by a seller/exporter to the buyer/importer
Ans : The trade can be divided into two types: Home Trade and Foreign Trade. stating the different aspects of goods.

What do you mean by letter of acknowledgement? What is a loco invoice?

Ans : A letter sent by the supplier to the buyer informing that he received the Ans : An invoice that includes the local price of the exporter is called a loco
letter of order or purchase order and the goods and services will be sent as soon invoice.
as possible is called letter of acknowledgement.
What is a free on board invoice?

Ans : The invoice that excludes all the charges like transportation, loading
What do you mean by bill of lading? charges etc. from the warehouse of the exporter to the board is called free on
board invoice.
Ans : The slip signed by the authorized personnel of shipping company after he
verifies that goods are as per the invoice is called bill of lading.

What is a cost and freight invoice?

When did WTO come in existence? Ans : The invoice including all the cost and freight expenses but excluding
insurance charges is called cost and freight invoice.
Ans : WTO was established in 1995/01/01.

What are cost, insurance and freight invoice?

When did Nepal get the membership of WTO?
Ans : The invoice that includes all cost, insurance, freight and other expenses is Ans : The international card facilitating the customer to withdraw money all
called cost, insurance, freight invoice. over the world is called master card.

What do you mean by bank draft?

What is a Franco invoice? Ans : Bank draft is a written order issued by a bank to another bank to make a
payment of certain sum to the specified person.
Ans : The invoice quoting only the price of goods is called Franco invoice.

What is a hundi?
What is a letter of credit?
Ans : Hundi is traditional means of payment used as remittance instruments to
Ans : The guarantee letter issued by bank on behalf of the importer to the transfer funds from one place to another.
exporter for the value of goods to be imported is called letter of credit.

What are the generally used hundi?

What do you mean by cheques?
Ans : Term Hundi and Khadi Hundi are the generally used hundi.
Ans : A cheque is a written order issued by account holder to make payment of
the amount mentioned to the specified person.

Write the full form of:

What is an ATM? ATM - Automated Teller Machine

Ans : ATM is a computerized device that provides the clients of a financial

institution with access to withdraw or deposit cash in a public place.
SWIFT - Society for Worldwide Interbank Financial Telecommunication

What is a visa card?

PIN - Personal Identification Number
Ans : Visa card is a culmination of ATM and debit card.

LC - Letter of Credit
What is a master card?
 Ans : The act of buying and selling goods and services with the objective of
WTO - World Trade Organization earning profit is called trade. It acts a bridge between customers and
manufacturers. The people and organization involved in trade are called traders.
The different types of trade are briefly discussed below:

SAPTA - SAARC Preferential Trade Arrangement Home Trade

As its name suggests the act of buying and selling of goods and services
between the buyer and seller of the same country is called the home trade. It is
SAFTA - South Asian Free Trade Area also known as internal or domestic trade. In home trade, transactions are usually
made in local currency. There are relatively less legal and administrative
obligations to fulfill before conducting domestic trade.

GATT - General Agreements on Tariffs and Trade Foreign Trade

The exchange of goods and services across international borders and territories
is called foreign trade. Foreign trade is the major source of international
CIF - Cost, Insurance, Freight currency for any nation. Since no country can provide for all of its needs foreign
trade is very necessary. It has been further divided into: export, import and
entreport.

FOB - Free on Board

C&F - Cost and Freight Explain in brief, the procedures of home trade.

BIPPA - Bilateral Investment Promotion and Protection Agreement Ans : There are fewer procedures in home trade which are briefly explained
below:

Enquiry
FDI - Foreign Direct Investment
It is the initial step of home trade where buyer makes the inquiry about quality,
quantity, discount, credit facility, transportation facility, modes of payment et
cetera of prospective goods and services. Enquiry can be made by letter, email,
Short Answer Questions newspaper etc.

What do you mean by trade? Explain in brief about the types of trade. Quotation letter
After receiving enquiry, seller sends the quotation letter answering all the
queries of buyer. He will try to make it attractive so that buyer accepts it. Carriage of goods

Purchase order The shipping company carries the goods to the buyer’s place as per the
instruction provided by the supplier.
If buyer is satisfied with the quotation he will send the purchase order stating the
quality and quantity of goods and service he expects. All the details of modes of
payment, delivery time etc. are also clearly mentioned.
Mention briefly about the terms and conditions of home trade.
Letter of acknowledgement
Ans : To avoid the future disputes and disagreements there are some issues
When the buyer receives purchase order, the supplier sends a letter to the buyer which are to be made clear by the supplier and buyer before starting the
informing that he received the letter of order or purchase order and the goods procedures of home trade which is called terms and conditions of home trade.
and services will be sent as soon as possible which is called letter of Beforehand discussion of these matters helps in running the trade without any
acknowledgement. obstruction. These issues are related to the quality and quantity of goods, terms
of payment, means of transportation, credit facility, discount, and terms of
Collection of goods insurance.

The supplier then begins to collect the goods for dispatch.

Packing of goods

After collection of the goods, they are packed in appropriate packages stating Mention about the documents of home trade.
the name and address of the buyer along with quantity of goods and precautions
to be taken. Ans : There are some written documents that are interchanged between buyer
and seller and sometimes shipping company in the process of carrying out home
Preparation of invoice trade. They work as proof and evidence for any misunderstanding that may arise
in the future. Some of the common documents used in home trade are: letter of
When goods are packed and ready for dispatch, the supplier prepares the enquiry, quotation letter, letter of order, letter of acknowledgement, invoice and
invoice. It contains the name, quantity, price, discount, carriage charges, mode receipt of goods.
and time of payment etc.

Delivery of goods

Now the goods are delivered to the transport company for being sent to buyer.
Explain in brief the procedures of foreign trade.
Receipt of goods
Ans : There are certain steps which are generally followed to complete foreign
After receiving the goods, the transportation company issues the bill of lading trade. The procedures are briefly discussed below:
after verifying the goods as per invoice.
Enquiry The authorized personnel of shipping company verify the physical quantity and
conditions of goods with the invoice. If he finds the goods as per invoice then he
Importer seeks the information about price, quantity, quality, discount, credit issues bill of lading which acts as evidence for exporter that shipping company
facility, transportation facility and modes of payment from the buyer. The has received the goods and now it is his responsibility to take it to importer.
inquiry is made via international media. It helps importer to find the best
available products at reasonable price.

Quotation Letter What is WTO? What are its functions?

It is a kind of letter written by exporter responding to all the queries of enquiry Ans : WTO stands for World Trade Organization established on 1995/01/01.
letter. The quotation should be reasonable so that importer accepts it. WTO aims at integrating the world economy by cutting down the barriers in
trade and investment. The vital decisions made by WTO on trade are based on
Purchase Order consensus among member countries. The foundation of WTO was based on
General Agreement on Tariffs and Trade (GATT). The main functions of WTO
If the importer is satisfied with the details in quotation letter, he will make the are:
order of goods and services by sending purchase order. At this point, trade
between importer and exporter formally begins. Settlement of misunderstandings between member countries.

Letter of acknowledgement Facilitate development of developing countries by providing assistance and

training.
The exporter sends the letter to the importer confirming that he received the
purchase order and he would dispatch the goods at pre-determined time. The Implementation, administration and operation of trade agreements.
goods are collected and packed after sending letter of acknowledgement.
Review trade policies of participating countries.
Letter of Credit

The importer opens the letter of credit with local bank guarantee on behalf of
exporter and sends the LC number to exporter. The exporter presents the LC Introduce SAFTA and mention its objectives.
number to his bank and receives payment.
Ans : South Asian Free Trade Area (SAFTA) is an agreement made on twelfth
Preparation of Invoice SAARC summit to create a framework for creation of free trade covering India,
Nepal, Pakistan, Sri Lanka, Bangladesh, Bhutan and Maldives. The foreign
When good are packed and ready for delivery, exporter prepares the invoice by ministers of these countries agreed to have zero customs duty on almost all
filling all the necessary details. Four copies of invoice are made which are products by 2016.
distributed to importer, bank, shipping company for verification and last one is
kept for record. The objectives of SAFTA are outlined below:

Delivery of goods and bill of lading To promote free competition.

To create an environment for proper implementation of agreement.

 Ans : Invoice is a document issued by seller/exporter to the buyer/importer
To eliminate existing trade barriers and allow cross border movement of goods stating various aspects of goods and services that is to be dealt.
among member states.
Various types of invoice are:
To establish framework for future regional co-operation and enhance mutual
benefits. Loco Invoice

It is an invoice that includes the local price of the exporter excluding other
charges of the trade.
What is invoice? What are the contents of an invoice?
Free on Board (FOB) invoice
Ans : An invoice is document issued by a seller to the buyer indicating types of
goods, quantities, prices, mode of payment or transportation. It shows the The invoice that excludes all the charges like transportation, loading charges etc.
amount that buyer must pay to the seller. The buyer is given certain time frame from the warehouse of the exporter to the board is called FOB invoice.
within which payment has to be made. Occasionally, discount is offered if
payment is made before due date. Generally invoice comprises of the following: Cost and Freight (C&F) invoice

Name and contact details of seller The invoice that includes all the expenses such as cost and freight of goods
except the insurance charge is called cost and freight invoice.
Date
Cost, insurance and freight (CIF) invoice
Invoice number
The invoice that includes all the expenses such as cost, insurance, freight and
Tax details other charges is called CIF invoice.

Name and contact details of buyer Franco invoice

Date of delivery The invoice that includes only the price of goods is called franco invoice. Franco
is Latin for free so all the expenses incurred while carrying goods to the
Description of product importers’ place is excluded.

Price of product

Payment terms A letter of credit is a reliable and safe mode of payment. Elaborate this
statement.

Ans : Letter of credit is issued by importer in favor of exporter. It would be a

Explain in brief about different types of invoice. very risky task to make cash payment since foreign trade involves a long
distance. Letter of credit makes it very easy as importer requests the local bank
for guarantee on behalf of the importer by submitting necessary documents and
sends the LC number to the exporter. Exporter encashes the amount and thus
transaction is clear. Hence, a letter of credit is reliable and safe mode of payment Ans : Nepal Rastra Bank is the central bank of Nepal.
as both parties are secured.

Which was the first central bank in world?

What do you know about SWIFT? Mention.
Ans : Reek Bank of Sweden is the first central bank in world.
Ans : Society for Worldwide Interbank Financial Telecommunication (SWIFT)
is a communication mechanism that allows the exchange of millions of
standardized financial messages between financial institutions throughout the
world. It provides a platform for banks, corporations and other financial State the meaning of central bank.
institutions to exchange messages, enabling them to work in co-operation. It is
extremely reliable and secured and has provided the best option to make Ans : The bank involved in supervising, controlling and regulating the activities
payment to any person or organization through banks. of commercial banks and other financial institutions is known as central bank.
Chapter 4: Financial Institutions
Very Short Questions What do you mean by development bank?

Define the meaning of financial institution in one sentence. Ans : The bank established to promote specific sectors like agriculture, industry,
tourism, hydro-power etc. is called development bank.
Ans : An institution that collects funds from various sources and invests such
collected fund into assets is known as financial institution.

What is bearer cheque?

What do you mean by bank? Ans : A cheque is said to be bearer cheque if the amount specified in cheque is
payable to one who submits the cheque into the bank for payment.
Ans : A bank is a financial institution that involves in monetary business like
deposits, loans, credit cards etc.

State the meaning of order cheque.

What is commercial bank? Ans : The cheque which is payable to a specified person only is called order
cheque.
Ans : A commercial bank is the bank that deals with currency exchange,
accepting deposits, making loans and doing other commercial activities.

What do you mean by crossed cheque?

Name the central bank.

Ans : The cheque for which payment is not made at the counter but the payee’s
account is credited is called crossed cheque. Give brief introduction of motor/accident insurance.

Ans : Motor insurance is the type of insurance policy in which the insurer
compensates for the victims of accident and any damage suffered by the vehicle.
Define the term insurance in one sentence.

Ans : The process of indemnifying against any kind of risk of loss is called
insurance.

What do you mean by life insurance? Long Answer Questions

Ans : Life insurance is the arrangement by the person with life insurance
company to cover the risk of death on the part of person formed over the
payment of certain premium by the person to the company. Explain the major functions of central bank.< /FONT>

What is marine insurance? Ans : Central Bank is the regulating body which supervises controls and
regulates the activities of commercial banks and other financial institution of a
Ans : Marine insurance is the contract in which the insurer agrees to compensate country. It issues directives to other banks and financial institutions periodically
the insured should there be any marine losses. and decides monetary policy for the country. Federal Reserve Bank, Nepal
Central Bank etc. are some of the central banks.

The functions of central bank are as follows:

What is fire insurance?
a. Bank of Note Issue:
Ans : Fire insurance is the contract in which the insurer agrees to pay the losses
to insured if there is any destruction caused by fire. The central bank has the sole monopoly of note issue in almost every country.
The currency notes printed and issued by the central bank become unlimited
legal tender throughout the country. It brings uniformity in the monetary system
of note issue and note circulation.
What do you mean by whole life insurance?
The central bank can exercise better control over the money supply in the
Ans : Whole life insurance is a kind of insurance policy in which the policy country. It increases public confidence in the monetary system of the country.
money and bonus is payable only to the nominee or beneficiary upon the death
of policyholder i.e. the policyholder does not receive any benefit during his
lifetime.
b. Banker, Agent and Adviser to the Government:
As a banker to government, the central bank performs the same functions for the with the central bank, the central bank can easily settle the claims of various
government as a commercial bank performs for its customers. It maintains the banks against each other with least use of cash. It economies the use of cash by
accounts of the central as well as state government; it receives deposits from banks while settling their claims and counter-claims. It reduces the withdrawals
government; it makes short-term advances to the government; it collects cheques of cash and these enable the commercial banks to create credit on a large scale.
and drafts deposited in the government account; it provides foreign exchange It keeps the central bank fully informed about the liquidity position of the
resources to the government for repaying external debt or purchasing foreign commercial banks.
goods or making other payments.

c. Bankers' Bank:
What are the functions of commercial bank? Explain.
The central bank acts as the bankers' bank in three capacities:
Ans : Commercial banks are those banks that deal with currency exchange,
1. Custodian of the cash preserves of the commercial banks; accepting deposits, making loans and doing commercial transactions as agents.
Major functions of commercial are briefly discussed below:
2. As the lender of the last resort; and
Accepting Deposits:
3. As a clearing agent.
The most important function of commercial banks is to accept deposits from the
In this way, the central bank acts as a friend, philosopher and guide to the public. Various sections of society, according to their needs and economic
commercial banks. condition, deposit their savings with the banks. For example, fixed and low
income group people deposit their savings in small amounts from the points of
view of security, income and saving promotion. On the other hand, traders and
businessmen deposit their savings in the banks for the convenience of payment.
d. Lender of Last Resort: Therefore, keeping the needs and interests of various sections of society, banks
formulate various deposit schemes.
As the supreme bank of the country and the bankers' bank, the central bank acts
as the lender of the last resort. In other words, in case the commercial banks are
not able to meet their financial requirements from other sources, they can, as a
last resort, approach the central bank for financial accommodation. The central Giving Loans:
bank provides financial accommodation to the commercial banks by
rediscounting their eligible securities and exchange bills. The second important function of commercial banks is to advance loans to its
customers. Banks charge interest from the borrowers and this is the main source
of their income. Banks advance loans not only on the basis of the deposits of the
public rather they also advance loans on the basis of depositing the money in the
e. Clearing Agent: accounts of borrowers. In other words, they create loans out of deposits and
deposits out of loans. This is called as credit creation by commercial banks.
As the custodian of the cash reserves of the commercial banks, the central bank Modern banks give mostly secured loans for productive purposes. In other
acts as the clearing house for these banks. Since all banks have their accounts words, at the time of advancing loans, they demand proper security or collateral.
Generally, the value of security or collateral is equal to the amount of loan. This
is done mainly with a view to recover the loan money by selling the security in Miscellaneous Functions:
the event of non-refund of the loan. At limes, banks give loan on the basis of
personal security also. Besides the functions mentioned above, banks perform many other functions of
general utility which are as follows:

(i ) Banks make arrangement of lockers for the safe custody of valuable assets of
Discounting of Bills of Exchange: their customers such as gold, silver, legal documents etc.

This is the most prevalent and important method of advancing loans to the (ii ) Banks give reference for their customers.
traders for short-term purposes. Under this system, banks advance loans to the
traders and business firms by discounting their bills. In this way, businessmen (iii ) Banks collect necessary and useful statistics relating to trade and industry.
get loans on the basis of their bills of exchange before the time of their maturity.
(iv ) For facilitating foreign trade, banks undertake to sell and purchase foreign
exchange.

Investment of Funds:

The banks invest their surplus funds in three types of securities—Government

securities, other approved securities and other securities. Government securities
include both, central and state governments, such as treasury bills, national Write about different classes of financial institutions.
savings certificate etc.
Ans : An institution that collects funds from various sources and invests such
Other securities include securities of state associated bodies like electricity collected funds to persons and organizations is known as financial institution.
boards, housing boards, debentures of Land Development Banks units of UTI,
shares of Regional Rural banks etc. Bank and Financial Institutions Act, 2063 has categorized the financial
institutions in Nepal into four categories: A, B, C, and D. They are briefly
discussed below:

Agency Functions: Class A: Commercial Bank

Banks function in the form of agents and representatives of their customers. The banks that have paid up capital of two billion and the right to operate its
Customers give their consent for performing such functions. Banks make activities throughout the country fall under this category. Nepal Bank Ltd.,
payment for their clients and at times accept the bills of exchange of their cus- Kumari Bank etc. are some Class A financial institutions in Nepal.
tomers for which payment is made at the fixed time.
Class B: Development Bank
Banks pay insurance premium of their customers. Besides this, they also deposit
loan installments, income-tax, interest etc. as per directions. The bank that has paid up capital of 640 million and performs its activities for
the development sector of the economy falls under this group. Clean Energy
Development Bank, Excel Development Bank, Yeti Development Bank etc. are
the instances of Class B financial institutions in Nepal.
Promotion of entrepreneurship
Class C: Finance Companies
Development Banks encourage new and small entrepreneurs to develop their
The financial company established with paid up capital of 200 million paid up own business. They provide loans at low level of interests to farmers to pay for
capital and performs its activities in specific area falls under this category. agricultural needs. Beside they conduct feasibility study and project appraisal
Prudential Finance, Patan Finance Ltd. etc. are the examples of Class C financial for the new ventures. They provide relevant training to individual to help them
institutions in Nepal. run their business.

Class D: Financial Cooperatives

The financial institution having 100 million paid up capital and provides micro
services comes under this group. Some of the financial institutions like Mithila
Laghu Bitta Bikas Banks Ltd., Rural Microfinance Development Centre etc. fall Gap filing
in this class.
Development banks are independent of normal channels of finance from other
financial institutions so they work as a gap filler to fill up the deficiencies of
existing financial institutions.
What are the functions of development bank? Explain.

Ans : Development banks are the banks established with the view to promote
industrial, agriculture, tourism, hydro-power sector of the country by satisfying Banking Functions
major funding need of these sectors. It works to speed up the pace of
development in accordance with the national priorities and aspirations of the Development banks accept deposits under different deposit account schemes as
people. directed by central bank.

Some of the prominent functions of development banks are as follows: It provides medium and long-term finance for hire purchasing, housing, leasing
etc. It also provides overdraft facilities.
Development Functions
Development banks also issues and makes payment for the letter of credit.
These are the functions for which development banks are incorporated:
It also invests in treasury bills, notes and bonds issued by Nepal Government
Contributes to the specific sectors through Nepal Rastra Bank.

Development banks help in the establishment, development and growth of

agriculture, industry, hydro-power, tourism and other infrastructural activities.
Since these activities require huge amount of capital, development bank acts as
seeder for these priority sectors.
What are the different types of cheque? Explain.
 cheques cannot en-cash in the counter. The holder of the cheque must have
Ans : Cheques may be defined as a written order of a depositor upon a bank to account in the bank to deposit that cheque.
pay to or to the order of a designated party or to bearer, a specified sum of
money on demand. The person who draws the cheques is called drawer, the Account Payee Only
bank on which the cheques is drawn is called drawee and the person to whom
payment is to be made is called payee. Different types of cheques are discussed If you write the words “account payee only” in between the lines, the bank is
below: liable to pay the money only to that person specified in the cheque. It cannot be
paid to any other person. The person whose name is specified in the cheque
Open Cheque must have the bank account to en-cash the cheque. If he doesn’t have any
account, he must create new account and deposit the cheque.
Open cheque means, a person who holds the cheque can receive the money at
the counter. The open cheque can be either bearer or order cheque. Not Negotiable

Bearer Cheque If the cheque has the words “not negotiable” between the lines, it means that the
cheque ca not be cashed by any other person then the name specified in the
Bearer cheque means that cheque for which money can be taken over the bank. Normally cheques can be transferred to third party by writing the details
counter in the bank. There is no restriction like the name specified in the cheque of another person in the endorsement column. It indicates that the owner of the
leaf. To make it as bearer cheque, you must not strike the ‘bearer’ word in the cheque directs the bank to pay to another person whose name is specified in the
cheque leaf after the ‘Payee’ name sentence. This kind of cheque is very risky cheque. But, it cannot be transferred if the cheque is mentioned as “not
because if someone steals your cheque or you have lost the cheque, one who negotiable’’.
holds the cheque can take the money from bank. If you want the bank to make
money only to the person specified in the cheque leaf, please strike out the word
bearer in the cheque leaf. The bearer cheque doesn’t need any endorsement. But,
it is bankers’ liability to check if they are paying to the right person. Explain the major functions of insurance.

b. Order Cheque Ans : Insurance is a contract by which one party, for a compensation called the
premium, assumes particular risks of the other party and promises to pay him or
An order cheque on the hand is a cheque made payable to a certain person or his nominee a certain or ascertainable sum of money on a specified contingency.
order. The language of such a cheque runs thus ‘Pay to Mr. X or order Rupees Functions of insurance can be broadly classified into two categories:
five hundred only’. An order cheque can be transferred only by endorsement and
delivery. It must first be endorsed and the bank must take care to ascertain that
the person demanding payment is the right person and that the addition of the
word ‘bearer’ or ‘order’ thereto it is regarded as an order cheque. Primary Functions:

Crossed Cheque

To prevent the cheque to be misused in the wrong hands, it will be crossed. It Insurance provides certainty:
means that it has special meanings to the banker who pay the money based on
the instructions given inside that cross mark. Crossing of a cheque means Insurance provides certainty of payment at the uncertainty of loss. The
drawing of two parallel lines across the face of the cheque. Normally crossed uncertainty of loss can be reduced by better planning and administration. But,
the insurance relieves the person from such difficult task. Moreover, if the
subject matters are not adequate, the self- provision may prove costlier. There Prevention of loss:
are different types of uncertainty in a risk. The risk will occur or not, when will
occur, how much loss will be there. In other words, there are uncertainty of The insurance joins hands with those institutions which are engaged in
happening of time and amount of loss. Insurance removes all these uncertainty preventing the losses of the assured and so more saving is possible which will
and the assured is given certainty of payment of loss. The insurer charges assist in reducing the premium. Lesser premium invites more business and more
premium for providing the said certainty. business leads to lesser share to the assured. So again premium is reduced to,
which will stimulate more business and more protection to the masses.
Therefore, the insurance assist financially to the health of organization, fire
brigade, educational institution and other organizations which are engaged in
Insurance provides protection: < /P> preventing the losses of the masses from death or damage.

The main function of the insurance is to provide protection against the probable
chances of loss. The time and amount of loss are uncertain and at the happening
of risk, the person will suffer loss in absence of insurance. The insurance It provides capital:
guarantees the payment of loss and thus protects the assured from sufferings.
The insurance cannot cheek the occurrence of risk but can provide for losses at The insurance provides capital to the society. The accumulated funds are
the happening of the risk. invested in productive channels. The dearth of capital of the society is
minimized to a greater extent with the help of investment of insurance. The
industry, the business & the individual are benefited by the investment & loans
of the insurers.
Risk-Sharing:

The risk is uncertain, and therefore, the loss arising from the risk is also
uncertain. When risk takes place, the loss is shared by all the persons who are It improves efficiency: < /P>
exposed to the risk. The risk sharing in ancient time was done only at time of
damage or death, but today, on the basis of probability of risk, the share is The insurance eliminates worries and miseries of losses at death and destruction
obtained from each and every insured in the shape of premium without which of property. The care-free person can devote his body & soul together for better
protection is not guaranteed by the insurer. achievement. It improves not only his efficiency, but the efficiencies of the
masses are also improved.

Secondary Functions:
It helps in economic progress: < /FONT>

The insurance by protecting the society from huge losses of damage, destruction
Besides the above primary functions, the insurance works for the following and death provides an initiative to work hard for the betterment of the masses.
secondary functions: The next factor of economic progress, the capital, is also immensely provided by
the masses. The property, the valuable assets, the man the machine and the
society cannot lose much at the disaster.
 Universal Life policy

Introduce life insurance. Explain the various types of life insurance. Universal Life Policy is relatively new policy in which there is greater flexibility
with respect to payments of insurance premium. The cash value of benefits to be
Ans : Life insurance is a contract between policy holder and the insurance paid to insured also varies over the time according to premium payments,
company where insurance company undertakes the risk of compensation of expenses and mortality charges.
insured sum either at the maturity of the insurance period or at the death of
insured to his nominee. For this purpose insured needs to pay certain amount of Fixed period life annuity policy
premium.
It is a kind of life insurance policy in which insured person is paid equal annual
Various types of life insurance are explained below: payments starting from certain age or after the expiry of certain number of years.
This kind of policy is useful to those who want to ensure a regular cash flow
Whole life insurance after certain age when other source of income drains out.

In this kind of policy the policy money and bonus are payable only to the
nominee or beneficiary upon the death of policyholder. The insurer does not
receive the benefit of policy in his lifetime. The payment of premium can be Give an introduction of employee provident fund and explain its functions.
paid annually throughout the life or for fixed number of years depending upon
the policy. Ans : Employee provident fund popularly known as Karmachari Sanchay Kosh
is a financial institution incorporated under Employee Provident Fund Act 2019.
Term Life Insurance It is a saving plan for the employees so that the savings can be used after
retirement from the job. In Nepal, the government compulsorily deducts 10% of
Under this policy, insurance policy is issued for 1 year to 7 years. The policy the monthly salary and contributes an equal amount which is deposited into the
amount is paid only if person dies within the term of insurance. This policy is account opened in the Employee Provident Fund for all government employees.
useful to those who need extra protection for certain period. This policy requires
additional cost every time for renewal after every term expires. Functions of employee provident fund are listed below:

Endowment Life Policy It facilitates compulsory saving which cultivates saving habit of the employers.

Endowment life policy is popular life insurance policy in which policy amount It helps to maintain constant cash flow even after retirement.
is paid not only if the insured dies but also if policyholder survives until the term
of policy. This policy has high premium since the insurer has to pay regardless It invests the amount so collected in productive and high income yielding sectors
of whether insured person dies. like securities issued by government and corporations.

Anticipated Endowment Policy It provides easy loan facility to the member employees thus helping them when
they require large sum of money for personal purposes.
Under anticipated endowment policy, a part of insured sum is paid at certain
intervals and the balance sum is paid at maturity. It is also called money back It also distributes dividend out of the profits they gain from investment.
policy.
Chapter: 7 Government Accounting System
Very Short Answer Questions
Mention the fiscal year in which offices of the treasury and comptroller
established throughout the Nepal.

When was accounting committee formed to recommend new accounting Ans : The office of treasury and comptroller was established in 2038/39 B.S. in
system? Nepal.

Ans : The new accounting system was formed on Magh 20, 2017 B.S.

Mention the Latin word from which the word audit is derived.

Mention the fiscal year when new accounting system come into operation. Ans : The word audit is derived from the Latin word ‘’audire’’ which means to
“’hear’’.
Ans : The new accounting system came into operation in 2019/20 B.S.

What are different types of audit? Write.

When the new accounting system became fully operation throughout Nepal?
Ans : There are two types of audit: - Internal Audit and External Audit.
Ans : It was in full operation from Shrawan 2025 B.S.

Name the offices involved in central level.

Short Answer Questions
Ans : Central level includes ministries, departments and constitutional bodies.

Explain any five features of new accounting system of Government of Nepal.

Mention the name of offices involved in operating level.
Ans : The new accounting system was introduced with a view to tackle its
Ans : Operating level offices include district, zonal and regional offices. previous deficiencies. It aims at providing the necessary information required to
the offices of government of Nepal. Some of its basic features are:

Double Entry System

When was the office of the Finance Comptroller General formed?
The improved accounting system is based on double entry system of book
Ans : The office of Finance Comptroller General was formed in 2032 B.S. keeping which states that every financial transaction has two aspects i.e. debit
and credit. The dual aspects help in maintaining arithmetical accuracy and to
detect and rectify accounting errors. Implementation of plans and policies

It is helpful in preparing plans and policies of government by supplying

necessary data, statistics and other information. It bolsters in continuing or
Emphasis on banking transactions. ending particular operations depending upon its effectiveness.

The new accounting system emphasizes on accountability as it allows receipts Reflects financial transactions
and payments only through bank. It has clearly stated that all the government
revenues must be deposited into bank and all payments to be made through New accounting system believes in transparency. It facilitates in keeping records
cheques except petty cash expenses. of government expenditure and revenues thus assigning appropriate
responsibility to every authority.

Facilitates preparation of budget

History of financial transactions
For proper budgeting, correct estimation is of vital importance. New accounting
It provides history of financial transactions of government offices. These system provides all data, statistics and information necessary for efficient budget
historical data help in preparing budgets, plans, policies and making decisions formulation and implementation.
and implementing them.
Control over financial matters

New accounting system helps to maintain control over financial transactions of

Secrecy government offices. All the transactions are recorded thus avoiding any
embezzlement and manipulation of government funds.
The transactions are recorded in different forms, receipts, slips voucher, books
etc. Only responsible staffs are authorized to maintain and handle accounting
records. As a result there is no chance of leakage of official secrets to the
outsiders.

Explain any five objectives of new accounting system.

Ans : The Account Committee, 2017 has recommended the following objectives
of the new accounting system:
Describe, in brief, the importance of new accounting system.

Ans : Accounting is a very essential rod to measure a transparency of any firm

or organizations. Keeping this in mind, new accounting system is designed to Maintenance of systematic accounting of financial transactions
provide required information, data, statistics and other financial details for
administration and financial decisions. Following are the importance of new As government offices are accountable to public, systematic recording of
accounting system: transaction is essential. Systematic accounting helps in allocation of
responsibilities in such manner that one civil servant is automatically checked through the office of the Treasury and Financial Comptroller General and
by another. It further strengthens internal control system. release to operating level on the basic of budget allocation.

To provide information about funds and their utilization. Operating level

For proper utilization of funds it is essential that authorities know about the Operating level comprises of district, zone and regional offices. It receives
status of various funds and their utilization. It provides necessary information imprest fund and budget from central level which they utilize for administration
about the position of funds, actual data of budget release and expenditures and developmental activities. At the end of every month, statement of
incurred under different budget headings. expenditures and other reports should be prepared and submitted to central level.
This continues till the end of fiscal year.
Safeguarding physical properties.

Government has huge inventory of valuable physical properties. The aim of new
accounting system is to maintain record of such assets in matters of purchase,
operation, sales, repair and maintenance etc.
Introduce office of the Finance Comptroller General. Write its major rights,
To make auditing simple and economical. duties and functions.

The new accounting system ensures that the financial transactions in Ans : Office of Finance Comptroller General falls under Ministry of Finance. It
government offices are maintained in accordance with the financial rules and is responsible for maintaining record of government revenue and expenditures.
regulations. It enables the office of Auditor General to examine and ensure that It was formed in 2032 BS by replacing the Office of Account General.
the records are true and fair.
As per Financial Administration Rule 2056, following are some of the rights,
duties and functions of Office of the Finance Comptroller General:

It operates and controls national budget and manages fund.

What are different levels of government offices? Explain. It keeps proper record of consolidated fund and other government funds.

Ans : In order to maintain the new accounting system, government offices are It creates and designs formats of forms and statements used for maintaining
divided into two levels on the basis of nature of functions they perform. They account of cash and goods.
are:
It provides guidance in making amendments to finance acts, rules and
Central level regulations.

Central level incorporates ministries and departments. Relatively they have It helps in carrying out internal audit of both revenue and budget expenditure.
fewer transactions as they are concerned with providing imprest fund and budget
release to operating level. Departments play the role of bridge between
ministries and operating level offices. They receive budget from ministries
 It conducts audit of books of accounts of all the Offices of Government of
Write about office of the Treasury and Comptroller. Mention its rights, duties Nepal, Constitutional bodies, Nepal Army, Nepal Police etc.
and functions.
It recommends the form and design for Auditor General Form used by all
Ans : The Office of the Treasury and Comptroller comes under department of government offices to maintain uniformity in accounting procedures throughout
Ministry of Finance. The main function of this office is to release the approved the bureaucracy.
budget to operating level offices. This office was fully functional in all 75
districts by 2038/39. It sets guidelines regarding the audit of books of accounts of government offices
and other institutions.
As per the provisions made in government revenue-expenditure operation rule
2038, following are the rights, duties and functions of the Office of the Treasury It provides suggestion for appointing statutory auditor in the entities having
and Comptroller: government interests.

To release one sixth of the total expenditures of the previous fiscal year as initial
imprest fund to every operating level of office at the beginning of the fiscal year
due to the absence of approval of annual budget. Define the term audit. Explain its importance.

To reconcile the daily statement of revenue received from every office and bank Ans : Audit is the verification of financial statements by independent and expert
statement received for the same transaction. authority to ensure reliability and accuracy in preparation and presentation of
these documents. Since audit is usually conducted by those who do not have any
To conduct internal audit of all the district level offices operating under its interest in company shareholders, creditors, customers, government authorities
supervision. and other stakeholders can trust the results reflected by these financial
statements.
To verify any balance of amount in imprest fund of district level offices before
the end of fiscal year and process for refund. The significance of financial statements is briefly discussed below:

Ensures accuracy

Introduce office of the Auditor General. Mention its rights, duties and functions. The auditors verify the recorded transactions by cross-checking the records with
evidential documents like bills, vouchers. This facilitates in preparing the final
Ans : The provision of Office of Auditor General has been made in section 12 of accounts with accurate figures.
the Interim Constitution of Nepal 2063. It is responsible for final auditing of all
the government offices and corporations having full investment of government. Acts as reliable evidence.
The head of this office is Auditor General who is appointed by the
Constitutional Council. The statutory audit is performed by experts in field of accounting and auditing
who are independent. They produce unbiased audit reports which serve as
As per the provisions of Interim Constitution of Nepal, 2063 the Office of the reliable evidence for stakeholders to assess the financial integrity of the
Auditor General has following rights, duties and functions: organization.

Facilitates obtaining loan.

 the audit license from the Office of the Auditor General according to Auditing
The banks and other financial institutions consider audited financial statements Act 2048 is authorized to conduct standard audit.
to assess the liquidity and credit ratings of the entities. Since these documents
are prepared by registered auditors they rely on documents prepared by them.

Proper valuation of assets.

Audited financial statements reflect the true and fair value of assets of a firm. Introduce internal audit. Explain its objectives.
This helps in creating a hassle free documentation for other functions like
dissolution of firm, admission or retirement of partners, amalgamation of Ans : Auditing functions performed by the employee within an organization is
companies etc. called internal audit. The internal auditor need not be qualified with professional
qualification. Internal audit helps in development of efficient accounting system
and detection and prevention of frauds and errors.

The objectives of internal audit are:

What are different types of audit? Explain. Verification of books of accounts

Ans : The word audit is derived from the Latin word ‘’audire’’ which means to Internal auditor verifies books of accounts maintained by accounting department
hear. Auditing is concerned with examining the accounting data and information and verifies it by cross checking them with the evidence like vouchers, bills.
in detail to determine the accuracy of final accounts and ensure accountability This helps in detection of embezzlements and omission.
and transparency.
Highlights the deficiencies
Different types of audit are discussed below:
The measures taken in internal audit help to identify the deficiency in
Internal audit accounting systems, attendance systems, assets control etc. The management can
take decision on the basis of these internal audit reports whether to continue or
Auditing functions performed by the employee within an organization is called cease a particular operation.
internal audit. The internal auditor need not be qualified with professional
qualification. Internal audit helps in development of efficient accounting system Facilitates statutory audit
and detection and prevention of frauds and errors. It guides management in
terms of installing proper internal checks to avoid hassle free environment for Public companies generally have their accounts audited by registered auditor.
final audit. The internal audit helps in proper preparation and presentation of financial
statements according to the appropriate accounting standards thus making final
External audit audit convenient.

Auditing functions performed by a qualified auditor according to the rule of

organization taking into account the accounting and auditing standards and laws
of the country is called external audit. Only a qualified auditor who has obtained
What do you mean by external audit? Explain the objectives of external audit.
Basis
Ans: Auditing functions performed by a qualified auditor according to the rule
of organization taking into account the accounting and auditing standards and Internal Audit
laws of the country is called external audit. Only a qualified auditor who has
obtained the audit license from the Office of the Auditor General according to External Audit
Auditing Act 2048 is authorized to conduct standard audit.
Auditor
The objectives of final audit:
The internal auditor is someone within the employee of organization.
Protection of stakeholders
The external auditor is registered and independent person.
External auditor is independent. He is not biased so he will verify the final
accounts with evidences like bills, vouchers et cetera to ensure transparency and Scope of duties
accountability. He raises questions with management to protect the interest of
shareholders. The scope and extent of internal audit is determined by management.

To provide true and fair statement. The scope and extent of external audit is set by Companies Act and auditing
standards.
The objective of external auditing is to provide true and fair financial statement
of a company. It is believed that audited financial documents are in line with the Nature of occurrence
prevalent laws and accounting/auditing standards thus ensuring true and fair
statement. It is continuous in nature and carried throughout the year.

To maintain ethics and provide advice It is periodical and generally done at the end of every financial year.

The statutory auditor keeps certain systems and procedures to conduct audit. Government offices
These measures help to maintain morale check on staff for accomplishing given
work with trustworthiness. Also since an auditor is finance expert, he helps Office of the Treasury and Comptroller is responsible for internal audit in govt
management in preparing future financial policies. offices.

Office of the Auditor General is responsible for external audit in govt offices.

Mention difference between internal and external audit.

Ans : Distinctions between internal audit and external audit: