Auditing is the independent, fair, and objective examination, checking, evaluation, and analysis of accounts related to financial transactions. Audit Act 2019, defines Audit as an examination of the accounts and accounts related to the business of the government offices; corporate bodies wholly owned by the Government of Nepal, Provincial Government or Local Level; bodies or institutions the audit of which is so specified by the Federal law as to be performed by the Auditor General and the analysis and evaluation to be made on the basis thereof, and this term also includes an act of follow-up audit.

The main bases of the audit are the Constitution of Nepal, Audit Act, laws, rules, guidelines, procedures, norms, agreements, decisions, decisions of parliament and parliamentary committees, formulated policies, strategies, action plans, standards, guidelines, and guidelines. Based on this, the audit is done and the report is issued.

According to Article 241 of the Constitution of Nepal and the Audit Act, of 2019, all government offices of the Union, province, and local levels, and wholly-owned organizations are examined on the basis of regularity, economy, efficiency, effectiveness, and propriety.

As per the Audit Act 2019, Nepal Government Sector Audit Standards, the basic principles of auditing promulgated by the International Organization of Supreme Audit Institutions (INTOSAI), identifying and evaluating risks based on audit guidance and best practices, formulating a plan, selecting samples to collect sufficient and relevant evidence during the audit, and conducting detailed tests, for that mainly by means of inspection, on-site inspection, questionnaires, inquiries, discussions, etc., information, details are obtained and essential tests, analytical tests, control tests, and compliance test methods are adopted.

Due to the tendency of the responsible persons and agencies involved in financial transactions to spend without sufficient evidence and basis without complying with the existing laws, irregularities are increasing. When recording the expenditure of government funds, it seems that the expenditure is increasing due to lack of the fact that the legal provisions, decisions, documents, and proofs prescribed for the verification of the expenditure are being spent.

Irregularities means transactions that have been conducted in a way that should not be carried out according to the prevailing law or that have not been kept and have been conducted in an irregular or unreasonable manner found during the audit. Falling into financial temptation is corruption. Corruption refers to the misuse of positions by officials and employees in government institutions to gain benefits for themselves or others. As the rate increases the number of financial irregularities tends to increase the corruption, and when it decreases, helps to maintain financial good governance.

In order to reduce irregularities, the responsible officials should strictly implement the existing financial laws, rules, orders, instructions, and procedures and not repeat the shortcomings pointed out in the past. It has also been found necessary to enhance the capacity of the human resources involved in internal and final audit work, including accounting responsible officers, responsible officials, heads of offices, and heads of financial administration related to financial transactions.

Auditing promotes financial accountability by providing assurance regarding the completeness, accuracy, validity, and utilization of financial transactions conducted. Auditing helps in promoting financial accountability by examining the matters prescribed by Section 8 of the Audit Act, 2075, and submitting a report on the receipt and use of public resources.

Integrity, independence, impartiality, confidentiality, and professional ethical conduct and values are the code of ethics of the auditor. Subjects such as professional behavior, activities, character, temperament, behavior, and socialization to be followed by the government auditor are related to the auditor's code of conduct. Regarding government auditing, the Code of Conduct of Government Auditors, 2013 has been issued and implemented by the office based on the Lima Declaration 1977 of the International Organization of Supreme Audit Institutions (INTOSAI) and the recognition of the International Auditing Standards (ISA) of Supreme Audit Institutions. In addition, the provisions in the existing Civil Service Act and Regulations and the Civil Service Employee Code of Conduct Regulations, 2008 are also being implemented.

According to the Audit Quality Assurance Review Handbook 2012, supervision by higher officials at each stage of the audit, monitoring of compliance with the code of conduct and internal control activities, peer review, and audit through activities including testing, evaluation, and reporting regarding the compliance of the content determined by the quality assurance guidelines in the issued audit reports are practiced by Office of the Auditor General, Nepal.

Audit evidence is the basis for confirming the opinion, conclusion, or report of the auditor or the supreme audit institution. Also, the details of the information and data collected by the auditor before arriving at the audit opinion and conclusion are audit evidence.

The audit report is made available to the relevant office after the completion of the audit, whereas according to Article 294 of the Constitution of Nepal, the annual report is the annual report that includes the main activities and actions observed from the audit. Such a report is submitted to the Right Honorable President and in relation to the report of the provincial government to the concerned provincial head.

Follow-up audit means audit retest or re-evaluation based on the evidence and documents attached with clarifications or responses submitted in relation to the irregularities pointed out in the internal or final audit report and based on suggestions or instructions received from the Public Accounts Committee of the House of Representatives.

As per Section 40 of the Financial Procedures and Financial Accountability Act 2019, the settlement of irregularities by the concerned authority is known as irregularity settlement whereas such documents or clarifications of irregularities settlement based on the evidence attached with the explanation or response to be submitted to the auditor and cleared the irregularities amount in the record is known as follow up audit.

The audit of propriety means the audit is not only for the test of compliance with rules and regulations, it may focus on the decisions and activities of the executive body which prioritizes the financial discipline, structure, compliance with policy rules, and the public interest and welfare of the said body. Section 9 of the Audit Act, of 2019 mentions things to be tested from the point of view of propriety.

In performance audit, in terms of evaluating aspects of economy, efficiency, and effectiveness in the management and use of resources, all or any two or one aspect is evaluated and a report is prepared with suggestions based on the results obtained. Performance audit is to ensure whether the maximum achievement has been achieved through the use of certain resources under efficiency and whether the set objective has been achieved under effectiveness or whether the expected achievement or effect has been achieved from the completed activities.