Terms of Reference (TOR) For External Audit for Nepalese fiscal year

Terms of Reference (TOR)

For

External Audit for Nepalese fiscal year

2081/2082

Rastriya Rojgar Prawardhan Kendra (RRPK), Sarlahi

04 July 2025

1.    Background:

RRPK is a leading non-governmental, non-profit making social development organization of province number 2. RRPK was established in 2061 BS (2004AD) by a team of active professionals with long experience in the field of Education (formal, informal and non-formal), integrated community development, specifically community organization, health and disability, HIV and AIDS, Community forestry, gender and empowerment, good governance, child rights, Livelihood, Safe Migration, DRR and WASH. RRPK is registered under Society Registration Act, 2034, at the District Administration Office of Sarlahi. It is affiliated with the Social Welfare Council (SWC) Nepal and is a member of NGOCC and Federation Sarlahi. RRPK started its social development programme in Sarlahi district from 2005.

RRPK, Salahi is undertaking a solicitation of request for proposals from Audit firms who are interested to perform annual statutory audit and tax audit required by RRPK as set in the scope of work below. 

2.    Objective 

The objective of the audit of the Financial Statements is to enable the auditor to express a professional opinion(s) on the financial position of RRPK at the end of fiscal year 2081/2082, and on funds received and expenditures incurred for the relevant accounting period.

The books of accounts provide the basis for preparation of the financial statements by RRPK and are established to reflect the financial transactions. RRPK maintains adequate internal controls and supporting documentation for transactions.

3.    Scope of the Work

Statutory audit, also known as external audit or financial audit, is a mandatory examination of a RRPK’s financial statements and records to ensure their accuracy, compliance with accounting standards, and adherence to relevant laws and regulations. It generally includes the following key aspects:

a.    Financial Statements Examination:

Reviewing the balance sheet, income statement, cash flow statement, and statement of changes in equity to verify their accuracy and completeness. Ensuring that the financial statements conform to applicable accounting standards or Generally Accepted Accounting Principles (GAAP).

b.    Compliance with Laws and Regulations:

Verifying that the financial statements comply with relevant statutory and regulatory requirements, such as tax laws, company law, and industry-specific regulations. Ensuring that the financial statements provide a true and fair view of the company's financial position. 

c.    Internal Controls and Systems:

Evaluating the company's internal controls and accounting systems to assess their effectiveness in preventing and detecting fraud, errors, or irregularities. Identifying weaknesses in internal controls and making recommendations for improvements.

d.    Substantive Testing:

Conducting substantive testing procedures, including sample testing of transactions and account balances to detect material misstatements or irregularities. Analysing supporting documentation, invoices, contracts, and other evidence to support the figures in the financial statements.

e.    Audit Opinion:

After completing the audit procedures, the auditor provides an audit opinion that expresses their professional judgment regarding the fairness of the financial statements. The audit opinion may be unqualified (clean), qualified, adverse, or a disclaimer, depending on the findings of the audit.

f.    Communication with Stakeholders / Management/Executive Board:

Communicating the audit results and findings to various stakeholders, including shareholders, executive board/Management and or senior staff board of directors, management, and regulatory authorities. Providing recommendations for improvements in financial reporting, internal controls, and compliance.

g.    Special Audit Procedures:

In some cases, statutory auditors may be required to perform additional procedures or investigations, such as fraud examinations, forensic audits, or special-purpose audits.

It's important to note that the scope of statutory audit may expand or be tailored to address specific risks or concerns unique to the company or industry being audited. The primary objective is to provide an independent and objective assessment of a RRPK’s financial statements to enhance transparency, accountability, and trust among stakeholders. Additionally, statutory audit serves as a vital tool for ensuring legal and regulatory compliance in the business environment.

4.    FINANCIAL STATEMENT (FUND ACCOUNTABILITY STATEMENT)

The following financial statements will be prepared for the Nepali fiscal year 2081/2082. The financial statement shall include: 

• Fund Accountability Statements (FASs) of each project implemented by RRPK including FAS for Internal Core Fund of RRPK with related notes for explanations
• Consolidation of Fund Accountability Statements of all projects to produce financial statements of organization.

5.    MANAGEMENT LETTER 

The Audit Reports shall include a management letter assessing whether RRPK has complied with all conditions of the existing rules and regulation of Donors, RRPK as well as the Nepal government rules and regulation. It will contain the following:

• Key recommendations.
• Assessment of risk, identifying any control weakness as High, Medium or Low Priority. 
• Follow up of the previous audit report recommendations.  

Management responses should be obtained from the Administration and Finance department staff and integrated and compiled by the external auditors.

6.    TAX AUDIT REPORT

The audit company shall also submit a tax audit report for the submission of the Income Tax Return for the said fiscal year as per the relevant Income Tax Act, Rules and Regulations. The format of the Tax Audit Report shall be as per the prevailing practices.

7.    LABOUR AUDIT REPORT

The audit company shall also perform a labour audit and report for the submission of the said fiscal year as per the relevant Labour Act, Rules and Regulations. The format of the Labour Audit Report shall be as per the prevailing practices.

8.    RESPONSIBILITY FOR PREPARATION of Financial statements

RRPK Administration and Finance department will provide necessary information and will prepare required basic reports which will provide the details of expenses and summary report of total income and expenditure. The audit report will accordingly be prepared by the audit company.

9.    PERIOD TO BE COVERED BY FINANCIAL STATEMENTS

Financial Statements will cover the periods of Nepali Fiscal year 2081/2082 starting from 16th July 2024 to 16th July 2025.

10.    Confidentiality

For all matters related to this Audit and Audit Report, the Audit Company is responsible to RRPK and has the responsibility of absolute confidentiality.  All the correspondences regarding the Audit shall be formally recorded and submitted to RRPK. The assignment described above must be completed within three months of the end of the respective fiscal year and the working schedule and programme will be agreed as per RRPK’s convenience.

11.     Fees / Budget

The organization shall pay audit fee (lodging fooding, transportation including local travel) as proposed and agreed upon with the audit firm. 

12.    DOCUMENT TO BE SUBMITTED TO RRPK – Working experience minimum 3 years. 

• Latest Tax clearance certificate 2080/81
• legal document /Pan/Vat registration certificate
• Form Registration Certificate/ Institute of chartered accountants of Nepal (Certificate)
• Company Profile
• Technical & Financial Proposal.
• Working experience in the related work/services.

13.    Tentative Timeline:

• Contract sign: 15 July 2025
• Audit start Date: 17 July 2025
• End date: 22 July 2025
• Report date: 26 July 2025

14.    Payment Schedule: Will be as per the contract/agreement. 

15.    Bid Assessment:

After evaluation of the proposals by the Procurement Committee, RRPK will make award to the applicant, whose proposal provides the best value, considering both technical and financial factors. 

• Financial-60%, value for money 
• Technical - 40%, previous working experiences, profile, update legal documents

16.    AUDIT REPORT TEMPLATE

Audit report template should be as per the annexure mentioned in this TOR.

Annexure: Template for Audit Report

Independent auditor's report 

To members of Rastriya Rojgar Prawardan Kendra (RRPK)

Opinion {Qualified Opinion}

We have audited the accompanying programme financial statements of Rastriya Rojgar Prawardan Kendra (RRPK), Statement of Financial Position, Statement of Income and Expenditure and Statement of Cash Flow for the year ended and notes to the financial statements, including a summary of significant accounting policies for the period from [Start Date] to [End Date].

In our opinion, {except for the effects of the matter described in the Basis for Qualified Opinion section of our report,} the accompanying financial statements of RRPK for the period [Start Year] - [End Year] are prepared, in all material respects, in accordance with the with the generally accepted accounting principles in Nepal.

Basis for opinion {Basis for Qualified Opinion}

{[Description of qualification(s)]}

We conducted our audit in accordance with Nepal Standards on Auditing (NSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of RRPK in accordance with the handbook of code of ethics for professional accountants issued by Institute of Chartered Accountants of Nepal (ICAN), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

{Emphasis of matter

We draw attention to [description of the matter to be emphasised]. These circumstances have not caused us to modify our opinion.}

Management's responsibilities for the programme financial statements

The management is responsible for the preparation of financial statements that give a true and fair view in accordance with generally accepted accounting principles, and for such internal control as the management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the management is responsible for assessing the organization’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intend to liquidate the organization or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the programme financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with NSAs will always detect a material misstatement when it exists. 

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 

As part of an audit in accordance with NSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the organization’s internal control;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the organization;
• Conclude on the appropriateness of the managements’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the organization’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the organization to cease to continue as a going concern; and
• Evaluate the overall presentation, structure, and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

For and on behalf of

Audit Firm Name

Signing CA Name

Designation

[City], [date] 

UDIN No. [..]

Request For Proposal

Anti corruption -Bribes

Child Safeguarding Policy Agreement

Conflict of Interest

Self Declaration

Submission Process:

Technical/financial proposal as per RFP requirements should be submitted via email  rrpkprocurement@gmail.com  or in the sealed envelope of hardcopy document with the subject “Request for proposal for External Audit for Nepalese fiscal year 2081/2082  of RRPK” by  PM, 11th July 2025. Technical/financial proposal received after the specified date and time of the invitation will not be considered.

Rastriya Rojgar Prawardhan Kendra (RRPK)

Malangwa, Sarlahi 046 - 521487