NSA 08

NEPAL STANDARDS ON AUDITING

THE AUDITOR'S REPORT ON FINANCIAL STATEMENTS

Contents Paragraphs

Introduction 1-7
Basic Elements of the Auditor's Report 8 - 28
The Auditor's Report 29 - 30
Modified Reports 31 - 42
Circumstances That May Result in Other Than an Unqualified Opinion 43 - 48
Compliance with International Standards on Auditing 49
Effective Date 50
Public Sector Perspective
Annexure (Illustrations):

I Auditor's Report Expressing an Unqualified Opinion

II Auditor's Report When Matters Do Not Affect the Auditor's Opinion
III Auditor's Reports Expressing Qualified Opinion and Disclaimer of Opinion (a and b)
IV Auditor's Reports Expressing Qualified Opinion and Adverse Opinion (a, b and c)

Introduction

1. The purpose of this Nepal Standard on Auditing (NSA) is to establish standards and
provide guidance on the form and content of the auditor's report issued as a result of an
audit performed by an independent auditor of the financial statements of an entity. Much
of the guidance provided can be adapted to auditor reports on financial information other
than financial statements.

2. This NSA is to be read in conjunction with the Preface to Nepal Standards on Auditing.

3. This NSA contains the basic principles and essential procedures (identified in bold type
black lettering) together with related guidance in the form of explanatory and other
material.

4. This NSA needs only be applied to material matters.

5. The auditor should review and assess the conclusions drawn from the audit evidence
obtained as the basis for the expression of an opinion on the financial statements.

6. This review and assessment involves considering whether the financial statements have
been prepared in accordance with the identified financial reporting framework or relevant
practices. It may also be necessary to consider whether the financial statements comply
with statutory requirements.

NSA 08/final 1
7. The auditor's report should contain a clear written expression of opinion on the
financial statements taken as a whole.

Basic Elements of the Auditor's Report

8. The auditor's report includes the following basic elements, ordinarily in the following
layout:

(a) title;

(b) addressee;

(c) opening or introductory paragraph

(i) identification of the financial statements audited;

(ii) a statement of the responsibility of the entity's management and the

responsibility of the auditor;

(d) scope paragraph (describing the nature of an audit)

(i) a reference to the NSAs or relevant practices;

(ii) a description of the work the auditor performed;

(e) opinion paragraph containing

(i) a reference to the identified financial reporting framework or relevant

practices used to prepare the financial statements; and

(ii) an expression of opinion on the financial statements;

(f) date of the report;

(g) auditor's address; and

(h) auditor's signature.

A measure of uniformity in the form and content of the auditor's report is desirable
because it helps to promote the reader's understanding and to identify unusual
circumstances when they occur.

Title

9. The auditor's report should have an appropriate title. It may be appropriate to use the
term "Independent Auditor" in the title to distinguish the auditor's report from reports that
might be issued by others, such as by officers of the entity, the board of directors, or from

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 the reports of other auditors who may not have to abide by the same ethical requirements
as the independent auditor.

Addressee

10. The auditor's report should be appropriately addressed as required by the

circumstances of the engagement and regulations. The report is ordinarily addressed
either to the shareholders or the board of directors of the entity or as applicable to whose
financial statements are being audited.

Opening or Introductory Paragraph

11. The auditor's report should identify the financial statements of the entity that have
been audited, including the date of and period covered by the financial statements.

12. The report should include a statement that the financial statements are the
responsibility of the entity's management and a statement that the responsibility of
the auditor is to express an opinion on the financial statements based on the audit.

13. Financial statements are the representations of management. The preparation of such
statements requires management to make significant accounting estimates and
judgements, as well as to determine the appropriate accounting principles and methods
used in preparation of the financial statements. This determination will be made in the
context of the financial reporting framework that management chooses, or is required, to
use. In contrast, the auditor's responsibility is to audit these financial statements in order
to express an opinion thereon.

14. An illustration of these matters in an opening (introductory) paragraph is:

"We have audited the accompanying balance sheet of the ABC Company as of Ashad 3X,
20XX, and the related statements of income and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audit."

Scope Paragraph

15. The auditor's report should describe the scope of the audit by stating that the audit
was conducted in accordance with NSAs or relevant practices. "Scope" refers to the
auditor's ability to perform audit procedures deemed necessary in the circumstances. The
reader needs this as an assurance that the audit has been carried out in accordance with
established standards or practices. Unless otherwise stated, the auditing standards or
practices followed are presumed to be those of the country indicated by the auditor's
address.

16. The report should include a statement that the audit was planned and performed to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.

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17. The auditor's report should describe the audit as including:

(a) examining, on a test basis, evidence to support the financial statement

amounts and disclosures;

(b) assessing the accounting principles used in the preparation of the financial
statements;

(c) assessing the significant estimates made by management in the preparation

of the financial statements; and

(d) evaluating the overall financial statement presentation.

18. The report should include a statement by the auditor that the audit provides a
reasonable basis for the opinion.

19. An illustration of these matters in a scope paragraph is:

"We conducted our audit in accordance with Nepal Standards on Auditing or relevant
practices. Those Standards or relevant practices require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion."

Opinion Paragraph

20. The opinion paragraph of the auditor’s report should clearly indicate the financial
reporting framework or relevant practices used to prepare the financial statements
and state the auditor's opinion as to whether the financial statements give a true and
fair view (or are presented fairly, in all material respects,) in accordance with that
financial reporting framework and, where appropriate, whether the financial
statements comply with statutory requirements.

21. The terms used to express the auditor's opinion are "give a true and fair view" or "present
fairly, in all material respects," and are equivalent. Both terms indicate, amongst other
things, that the auditor considers only those matters that are material to the financial
statements.

22. The financial reporting framework is determined by Nepal Accounting Standards or

relevant practices, rules issued by the Accounting Standards Board, and the development
of general practice within the country, with an appropriate consideration of fairness and
with due regard to legislation. To advise the reader of the context in which the auditor's
opinion is expressed, the auditor's opinion indicates the framework or relevant practices
upon which the financial statements are based. The auditor refers to the financial
reporting framework or relevant practices in such terms as:

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 “…in accordance with Nepal Accounting Standards or relevant practices and comply
with (Quote the relevant statute or law)...(For example: Company Act, 2053 /
Commercial Bank Act, 2031 e.t.c.)"

This designation will help the user to better understand which financial reporting
framework was used in preparing the financial statements. When reporting on financial
statements that are prepared specifically for use in another country, the auditor considers
whether appropriate disclosure has been made in the financial statements about the
financial reporting framework that has been used.

23. In addition to an opinion on the true and fair view (or fair presentation, in all material
respects,), the auditor's report may need to include an opinion as to whether the financial
statements comply with other requirements specified by relevant statutes or law.

24. An illustration of these matters in an opinion paragraph is:

"In our opinion, the financial statements give a true and fair view of (or 'are presented
fairly, in all material respects,') the financial position of the Company as of Ashad 3X,
20XX, and of the results of its operations and its cash flows for the year then ended in
accordance with Nepal Accounting Standards or relevant practices and comply with
(Quote the relevant statute or law) )...(For example: Company Act, 2053 / Commercial
Bank Act, 2031 e.t.c.)"

Date of Report

25. The auditor should date the report as of the completion date of the audit. This
informs the reader that the auditor has considered the effect on the financial statements
and on the report of events and transactions of which the auditor became aware and that
occurred up to that date.

26. Since the auditor's responsibility is to report on the financial statements as prepared
and presented by management, the auditor should not date the report earlier than
the date on which the financial statements are signed or approved by management.

Auditor's Address

27. The report should name a specific location, which is ordinarily the city where the
auditor maintains the office that has responsibility for the audit.

Auditor's Signature

28. The report should be signed in the name of the audit firm, the personal name of the
auditor or both, as appropriate. The auditor's report is ordinarily signed in the name of
the firm because the firm assumes responsibility for the audit.

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The Auditor's Report

29. An unqualified opinion should be expressed when the auditor concludes that the
financial statements give a true and fair view (or are presented fairly, in all material
respects,) in accordance with the identified financial reporting framework or
relevant practices. An unqualified opinion also indicates implicitly that any changes in
accounting principles or in the method of their application, and the effects thereof, have
been properly determined and disclosed in the financial statements.

30. An illustration of the auditor's report incorporating the basic elements and expressing an
unqualified opinion is set out in Annexure I.

Modified Reports

31. An auditor's report is considered to be modified in the following situations:

Matters That Do Not Affect the Auditor's Opinion

(a) emphasis of matter.

Matters That Do Affect the Auditor's Opinion

(a) qualified opinion,

(b) disclaimer of opinion, or

(c) adverse opinion.

Uniformity in the form and content of each type of modified report will further the user's
understanding of such reports. Accordingly, this NSA includes suggested wording to
express an unqualified opinion as well as examples of modifying phrases for use when
issuing modified reports.

Matters That Do Not Affect the Auditor's Opinion

32. In certain circumstances, an auditor's report may be modified by adding an emphasis of

matter paragraph to highlight a matter affecting the financial statements which is included
in a note to the financial statements that more extensively discusses the matter. The
addition of such an emphasis of matter paragraph does not affect the auditor's opinion.
The paragraph would preferably be included after the opinion paragraph and would
ordinarily refer to the fact that the auditor's opinion is not qualified in this respect.

33. The auditor should modify the auditor's report by adding a paragraph to highlight
a material matter regarding a going concern problem.

34. The auditor should consider modifying the auditor's report by adding a paragraph
if there is a significant uncertainty (other than a going concern problem), the
resolution of which is dependent upon future events and which may affect the

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 financial statements. An uncertainty is a matter whose outcome depends on future
actions or events not under the direct control of the entity but that may affect the financial
statements.

35. An illustration of an emphasis of matter paragraph for a significant uncertainty in an

auditor's report is set out in Annexure II.

36. The addition of a paragraph emphasising a going concern problem or significant

uncertainty is ordinarily adequate to meet the auditor's reporting responsibilities
regarding such matters. However, in extreme cases, such as situations involving multiple
uncertainties that are significant to the financial statements, the auditor may consider it
appropriate to express a disclaimer of opinion instead of adding an emphasis of matter
paragraph.

37. In addition to the use of an emphasis of matter paragraph for matters that affect the
financial statements, the auditor may also modify the auditor's report by using an
emphasis of matter paragraph, preferably after the opinion paragraph, to report on matters
other than those affecting the financial statements. For example, if an amendment to other
information in a document containing audited financial statements is necessary and the
entity refuses to make the amendment, the auditor would consider including in the
auditor's report an emphasis of matter paragraph describing the material inconsistency.
An emphasis of a matter paragraph may also be used when there are additional statutory
reporting responsibilities.

Matters That Do Affect the Auditor's Opinion

38. An auditor may not be able to express an unqualified opinion when either of the
following circumstances exist and, in the auditor's judgement, the effect of the matter is
or may be material to the financial statements:

(a) there is a limitation on the scope of the auditor's work; or

(b) there is a disagreement with management regarding the acceptability of the

accounting policies selected, the method of their application or the adequacy of
financial statement disclosures.

The circumstances described in (a) could lead to a qualified opinion or a disclaimer of

opinion. The circumstances described in (b) could lead to a qualified opinion or an
adverse opinion. These circumstances are discussed more fully in paragraphs 43-48.

39. A qualified opinion should be expressed when the auditor concludes that an
unqualified opinion cannot be expressed but that the effect of any disagreement
with management, or limitation on scope is not so material and pervasive as to
require an adverse opinion or a disclaimer of opinion. A qualified opinion should be
expressed as being 'except for' the effects of the matter to which the qualification
relates.

NSA 08/final 7
40. A disclaimer of opinion should be expressed when the possible effect of a limitation
on scope is so material and pervasive that the auditor has not been able to obtain
sufficient appropriate audit evidence and accordingly is unable to express an
opinion on the financial statements.

41. An adverse opinion should be expressed when the effect of a disagreement is so

material and pervasive to the financial statements that the auditor concludes that a
qualification of the report is not adequate to disclose the misleading or incomplete
nature of the financial statements.

42. Whenever the auditor expresses an opinion that is other than unqualified, a clear
description of all the substantive reasons should be included in the report and,
unless impracticable, a quantification of the possible effect(s) on the financial
statements. Ordinarily, this information would be set out in a separate paragraph
preceding the opinion or disclaimer of opinion and may include a reference to a more
extensive discussion, if any, in a note to the financial statements.

Circumstances That May Result in Other Than an Unqualified Opinion

Limitation on Scope

43. A limitation on the scope of the auditor's work may sometimes be imposed by the entity
(for example, when the terms of the engagement specify that the auditor will not carry out
an audit procedure that the auditor believes is necessary). However, when the limitation
in the terms of a proposed engagement is such that the auditor believes the need to
express a disclaimer of opinion exists, the auditor would ordinarily not accept such a
limited engagement as an audit engagement, unless required by statute. Also, a statutory
auditor would not accept such an audit engagement when the limitation infringes on the
auditor's statutory duties.

44. A scope limitation may be imposed by circumstances (for example, when the timing of
the auditor's appointment is such that the auditor is unable to observe the counting of
physical inventories). It may also arise when, in the opinion of the auditor, the entity's
accounting records are inadequate or when the auditor is unable to carry out an audit
procedure believed to be desirable. In these circumstances, the auditor would attempt to
carry out reasonable alternative procedures to obtain sufficient appropriate audit evidence
to support an unqualified opinion.

45. When there is a limitation on the scope of the auditor's work that requires
expression of a qualified opinion or a disclaimer of opinion, the auditor's report
should describe the limitation and indicate the possible adjustments to the financial
statements that might have been determined to be necessary had the limitation not
existed.

46. Illustrations of auditor's reports expressing qualified opinion and disclaimer of opinion in
circumstances where the auditor's scope is limited are set out in Annexure III (a) and (b)
respectively.

NSA 08/final 8
Disagreement with Management

47. The auditor may disagree with management about matters such as the acceptability of
accounting policies selected, the method of their application, or the adequacy of
disclosures in the financial statements. If such disagreements are material to the
financial statements, the auditor should express a qualified or an adverse opinion.

48. Illustrations of auditor's reports expressing qualified opinion and adverse opinion in
circumstances where there is a disagreement with management on accounting policies are
set out in Annexure IV (a), (b) and (c).

Compliance with International Standards on Auditing

49. Compliance with this NSA ensures compliance in all material respects with ISA 700 (The
Auditor's Report on Financial Statements).

Effective Date

50. This Nepal Standard on Auditing becomes operative for the audit commencing on or after
01 Shrawan 2061 corresponding to 16 July 2004. Earlier application is encouraged.

Public Sector Perspective

1. While the basic principles contained in this NSA apply to the audit of financial
statements in the public sector, the legislation giving rise to the audit mandate may
specify the nature, content and form of the auditor’s report.

2. This NSA does not address the form and content of the auditor’s report in circumstances
where financial statements are prepared in conformity with a disclosed basis of
accounting, whether mandated by legislation or directives from appropriate authorities,
and that basis results in financial statements which are misleading.

3. Paragraph 20 of this standard requires the auditor to indicate clearly the financial
reporting framework or relevant practices used to prepare the financial statements.

For example:
“In our opinion, the financial statements present fairly, in all material respects, the
financial position of the [public sector entity] as of Ashad 3X, 20XX and of its financial
performance and its cash flows for the year then ended in accordance with Nepal
Accounting Standards or relevant practices and comply with (Quote the relevant statute
or law)...(For example: Relevant Corporation Act)"

NSA 08/final 9
Annexure I

An Illustration of the Auditor's Report Expressing an Unqualified Opinion

"AUDITOR'S REPORT

(APPROPRIATE ADDRESSEE)

We have audited the accompanying balance sheet of the ABC Company as of Ashad 3X,
20XX, and the related statements of income, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Nepal Standards on Auditing or relevant

practices. Those Standards or relevant practices require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

(Quote the specific requirements of relevant statue and law)

In our opinion, the financial statements give a true and fair view of (or 'are presented fairly,
in all material respects,') the financial position of the Company as of Ashad 3X, 20XX, and
of the results of its operations and its cash flows for the year then ended in accordance with
Nepal Accounting Standards or relevant practices and comply with (Quote the relevant
statute or law)... (For example: Company Act, 2053 / Commercial Bank Act, 2031 e.t.c.)

AUDITOR

Date
Address"

NSA 08/final 10
Annexure II

An Illustration of the Auditor's Report When Matters Do Not Affect the Auditor's Opinion

"AUDITOR'S REPORT

(APPROPRIATE ADDRESSEE)

We have audited the accompanying balance sheet of the ABC Company as of Ashad 3X,
20XX, and the related statements of income, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Nepal Standards on Auditing or relevant

practices. Those Standards or relevant practices require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

(Quote the specific requirements of relevant statue and law)

In our opinion, the financial statements give a true and fair view of (or 'are presented fairly,
in all material respects,') the financial position of the Company as of Ashad 3X, 20XX, and
of the results of its operations and its cash flows for the year then ended in accordance with
Nepal Accounting Standards or relevant practices and comply with (Quote the relevant
statute or law)...(For example: Company Act, 2053 / Commercial Bank Act, 2031 e.t.c.)

Without qualifying our opinion we draw attention to Note X to the financial statements.
(Add a paragraph(s) explaining the matter of the significant uncertainty)
For example:
"The company is the defendant in a lawsuit alleging infringement of certain patent rights
and claiming royalties and punitive damages. The company has filed a counter action, and
preliminary hearings and discovery proceedings on both actions are in progress. The
ultimate outcome of the matter cannot presently be determined, and no provision for any
liability that may result has been made in the financial statements."

AUDITOR

Date
Address"

NSA 08/final 11
Annexure III

Illustrations of the Auditor's Reports Expressing Qualified Opinion and Disclaimer of Opinion

(a) Limitation on Scope - Qualified Opinion

"AUDITOR'S REPORT

(APPROPRIATE ADDRESSEE)

We have audited the accompanying balance sheet of the ABC Company as of Ashad 3X,
20XX, and the related statements of income, and cash flows for the year then ended. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audit.

Except as discussed in the following paragraph, we conducted our audit in accordance with
Nepal Standards on Auditing or relevant practices. Those Standards or relevant practices
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

(Quote the specific requirements of relevant statue and law)

(Quote the limitation on the scope of audit)

For example:
"We did not observe the counting of the physical inventories as of Ashad 3X, 20XX, since
that date was prior to the time we were initially engaged as auditors for the Company.
Owing to the nature of the Company's records, we were unable to satisfy ourselves as to
inventory quantities by other audit procedures."

In our opinion, except for the effects of such adjustments, if any, as might have been
determined to be necessary had we been able to satisfy ourselves (For example: "as to
physical inventory quantities"), the financial statements give a true and fair view of (or ‘are
presented fairly, in all material respects,’) the financial position of the Company as of
Ashad 3X, 20XX, and of the results of its operations and its cash flows for the year then
ended in accordance with Nepal Accounting Standards or relevant practices and comply
with (Quote the relevant statute or law)... (For example: Company Act, 2053 / Commercial
Bank Act, 2031 e.t.c.)

AUDITOR

Date
Address"

NSA 08/final 12
 (b) Limitation on Scope - Disclaimer of Opinion

"AUDITOR'S REPORT

(APPROPRIATE ADDRESSEE)

We were engaged to audit the accompanying balance sheet of the ABC Company as of
Ashad 3X, 20XX, and the related statements of income, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's management.
(Omit the sentence stating the responsibility of the auditor).

(The paragraph discussing the scope of the audit would either be omitted or amended
according to the circumstances)

(Quote the specific requirements of relevant statue and law)

(Add a paragraph(s) discussing the scope limitation)

For example:
"We were not able to observe all physical inventories and confirm accounts receivable
(having material impact on the operating results and financial positions) due to limitations
placed on the scope of our work by the Company."

Because of the significance of the matters discussed in the preceding paragraph, we do not
express an opinion on the financial statements.

AUDITOR

Date
Address"

NSA 08/final 13
Annexure IV

Illustrations of the Auditor's Reports Expressing Qualified Opinion and Adverse Opinion

(a) Disagreement on Accounting Policies - Inappropriate Accounting Method - Qualified

Opinion
"AUDITOR'S REPORT

(APPROPRIATE ADDRESSEE)

We have audited the accompanying balance sheet of the ABC Company as of Ashad 3X,
20XX, and the related statements of income, and cash flows for the year then ended. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Nepal Standards on Auditing or relevant

practices. Those Standards or relevant practices require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

(Quote the specific requirements of relevant statue and law)

(Add a paragraph(s) discussing the disagreement on accounting policies – inappropriate

accounting method – qualified opinion.)
For example:
"As discussed in Note X to the financial statements, no depreciation has been provided in
the financial statements which practice, in our opinion, is not in accordance with Nepal
Accounting Standards or relevant practices. The provision for the year ended Ashad 3X,
20XX, should be XXX based on the specified method of depreciation using annual rates of
X% for the building and X% for the equipment. Accordingly, the fixed assets should be
reduced by accumulated depreciation of XXX and the loss for the year and accumulated
deficit should be increased by XXX and XXX, respectively."

In our opinion, except for the effect on the financial statements of the matter referred to in
the preceding paragraph, the financial statements give a true and fair view of (or ‘are
presented fairly, in all material respects,’) the financial position of the Company as of
Ashad 3X, 20XX, and of the results of its operations and its cash flows for the year then
ended in accordance with Nepal Accounting Standards or relevant practices and comply
with (Quote the relevant statute or law)... (For example: Company Act, 2053 / Commercial
Bank Act, 2031 e.t.c.)

AUDITOR
Date
Address"

NSA 08/final 14
 (b) Disagreement on Accounting Policies - Inadequate Disclosure - Qualified Opinion

"AUDITOR'S REPORT

(APPROPRIATE ADDRESSEE)

We have audited the accompanying balance sheet of the ABC Company as of Ashad 3X,
20XX, and the related statements of income, and cash flows for the year then ended. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Nepal Standards on Auditing or relevant

practices. Those Standards or relevant practices require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

(Quote the specific requirements of relevant statue and law)

(Add a paragraph(s) discussing the disagreement on accounting policy – inadequate

disclosure – qualified opinion.)
For example:
"On Ashad 3X, 20XX, the Company issued debentures in the amount of XXX for the
purpose of financing plant expansion. The debenture agreement restricts the payment of
future cash dividends to earnings after Ashad 3X, 20XX. In our opinion, disclosure of this
information is required by Nepal Accounting Standards or relevant practices."

In our opinion, except for the omission of the information included in the preceding
paragraph, the financial statements give a true and fair view of (or ‘are presented fairly, in
all material respects,’) the financial position of the Company as of Ashad 3X, 20XX, and of
the results of its operations and its cash flows for the year then ended in accordance with
Nepal Accounting Standards or relevant practices and comply with (Quote the relevant
statute or law)... (For example: Company Act, 2053 / Commercial Bank Act, 2031 e.t.c.)

AUDITOR

Date
Address"

NSA 08/final 15
 c) Disagreement on Accounting Policies - Inadequate Disclosure - Adverse Opinion

"AUDITOR'S REPORT

(APPROPRIATE ADDRESSEE)

We have audited the accompanying balance sheet of the ABC Company as of Ashad 3X,
20XX, and the related statements of income, and cash flows for the year then ended. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Nepal Standards on Auditing or relevant

practices. Those Standards or relevant practices require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion

(Quote the specific requirements of relevant statue and law)

(Add a paragraph(s) discussing the disagreement on accounting policy – inadequate

disclosure – adverse opinion.)

In our opinion, because of the effects of the matters discussed in the preceding
paragraph(s), the financial statements do not give a true and fair view of (or do not 'present
fairly') the financial position of the Company as of Ashad 3X, 20XX, and of the results of
its operations and its cash flows the year then ended in accordance with Nepal Accounting
Standards or relevant practices and comply with (Quote the relevant statute or law)... (For
example: Company Act, 2053 / Commercial Bank Act, 2031 e.t.c.)

AUDITOR

Date
Address"

NSA 08/final 16