CHAPTER ONE

INTRODUCTION

1.1 Background

This internship report has been prepared as requirement for the Bachelor of Business
Management (BBM) program of Tribhuvan University (TU). It is a four year course
with 120 credit hours comprehensive bachelor degree program. It is further divided
into eight semesters. In last semester student should complete their internship project
which is equivalent to 6 credit hours. Since the BBM program is an integrated set of
practical and theoretical set of learning. This emphasizes to provide student a practical
knowledge. It aims to prepare students to become competent, confident, skilled and
socially responsive professional who can effectively support managerial,
entrepreneurial and leadership role in business and social organization. It is student
oriented course where students should be actively participated. Its syllabus has been
designed in such a way that it has tried to give student knowledge from almost every
field like management, psychology, sociology, Information Technology(IT), business
law, national and international business environment and banking sector too.

Simply this study is used for the partial fulfillment of BBM course affiliated to T.U.
The FoM, Tribhuvan University has its ultimate objective of educating students for
professional pursuits in business, industry and government. Although the course
design is very much practical in all the semesters with field work, report preparation
and presentations, the internship at the last semester aims in providing the students
with real world experience as to how the jobs in the organizations are performed,
what are the issues the business firms need to address and many others. The primary
goal of this internship is to provide an one the job exposure to the student and an
opportunity for translation of their theoretical knowledge in real life situation.

This internship report is mainly focus on audit at G & company, Butwal branch. It is
one of the leading audit firm of Butwal. This firm provides auditing, tax calculation,
accounting activities, and consulting services to individuals and business entity.

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1.2 Objectives of the Study

 The main objective of the report is to get practical knowledge about auditing
and accounting activities in Nepal.
 To incorporate theoretical knowledge into practice.
 To understand the nature of real life problems arising in the organizational
setting.
 To fulfill the partial requirements for the Bachelor of Business Management
(BBM) program of Tribhuvan University.

1.3 Methodology

Completion of internship is a combination of the different types of activities. It starts

from the selection of the organization for the internship, placement in different parts
of the organization andsources of data collection during internship. In terms of data
collection both primary as well as secondary source had been used. In case of primary
source, observation and personal interview with the staffs are used and in case of
secondary source, the brochures, published reports and documents about audit firms,
and other related websites had been used.

1.3.1 Organization Selection

Selection of the organization for the internship program is always a crucial task. The
important and initial part in the internship program is the selection of the organization.
It is the basis from which interns get the platform to learn something and analyze the
practical implication of the theoretical aspects learnt in the academic session. Most of
the students choose financial institutions and manufacturing organizations for
organizations. But unlike others, internee chose an audit firm G & company for
internship program because internee wanted to have general ideas on audit firms and
their activities. Recommendation letter was provided by campus to a particular firm.
Interne joined G &Company to get exposed to the real world of accounting and to
have firsthand experience as a management student internee wanted to know how
business firms do accounting activities.

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1.3.2 Placement

On 13th Baisakh 2074 internee was placed to G& Company, Butwal Branch to start the
internship. During the internship period, the intern was assigned the basic task of
auditing. Every staff and managers was supportive and friendly. The supportive and
friendly environment in the organization helped the internee to complete the
internship period through the proper guidance of the staffs of various departments.

1.3.3 Duration of internship

The duration of internship period has been defined for 45 days by Tribhuvan
University, so as per the specified period, internee worked in G &Company from
13thbaishak 2074 to 31stjestha 2074. The working period is 10am to 5 pm.The firm has
closely monitored attendance, performance and activities of intern at the
workplace.Internee thought those 45 days were really fruitful and it will definitely
help in upcoming days. It was the internship program that helps to internee to be
familiar with the organization culture, work environment and working procedure of
the G & Company.

1.3.4 Source of Data

Data required for the preparation of this report are collected by using both primary
and secondary sources:

a) Primary source of data

Primary data are those data which are collected in the field during the report writing.
The required information for the preparation of internship report was collected
through the discussion, observation and information provided by the manager of G &
Company.

b) Secondary source of data

The secondary data was collected from the secondary sources like: annual report,
broucher, related websites and other publication.

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1.4 Limitations
It is obvious that there arises some kind of limitation in everything, so in the case of this
internship report as well. There are some limitations that are faced at the time of this
internship report preparation and they are as follows:
a) The study is limited to only one firm.
b) Lack of adequate time to learn, complete and detailed works in just 45 days.
c) This report is prepared on the basis of available data and the information provided
by the particular firm and some data are collected through personal experience.
d) The firm staffs were preoccupied with their work so they had a little time to
interact with internee.

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 CHAPTER TWO

INTRODUCTION TO THE INDUSTRY

2.1 Introduction of Audit firms

An audit is a systematic and independent examination of books, accounts, statutory

records, documents and vouchers of an organization to ascertain how far the financial
statements as well as non-financial disclosures present a true and fair view of the
concern. It also attempts to ensure that the books of accounts are properly maintained
by the concern as required by law. Auditing has become such a ubiquitous
phenomenon in the corporate and the public sector that academics started identifying
an "Audit Society". The auditor perceives and recognizes the propositions before
them for examination, obtains evidence, evaluates the same and formulates an opinion
on the basis of his judgment which is communicated through their audit report.

The word audit is derived from a Latin word "audire" which means "to hear". During
the medieval times when manual book-keeping was prevalent, auditors in Britain used
to hear the accounts read out for them and checked that the organization’s personnel
were not negligent or fraudulent.

Audit is the systematic and scientific examination of the books of accounts and
records of a business so as to enable the auditor to satisfy himself that the Balance
Sheet and the Profit and Loss Account are properly drawn up so as to exhibit a true
and fair view of the financial state of affairs of the business and profit or loss for the
financial period.

Audit firms are those which performs auditing activitiesThus audit firms performs
those activities for private organization, government organization and for individuals
too. It helps to know the financial position of the business and fraud and error if done
by the concerned organization.The Institute of Chartered Accountants of Nepal
(ICAN) was established under a special act, The Nepal Chartered Accountants Act,
1997 which formulate the accounting standards in Nepal and regulate the audit firms
and charter accountant(CA) firms. Besides that Auditors Association of Nepal also
provides guidelines to the auditors.

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2.2 Evolution and Growth of Audit Industry in Nepal

Without already kept accounts or records, auditing word doesn’t exist. So, the history
of auditing is concerned with the accounts kept. The starting of scientific accountancy
is done by lucaPacioci of Italy in 1414AD but in Nepal, it was introduced only after
220 years i.e.only on 1771 BS on “LalAdda” and 1779 on “Mod Adda”. Before that
time, the concept of auditing was not even in the thoughts of any person. After the
beginning of accounts keeping, we can say that auditing was introduced legally only
after the establishment of “Kumari Chowk” in the period of Prithivi Narayan Shah.
“Kumari Chowk Adda” used to keep the accounts of governments department and
employees. In Nepal, after the establishment of Department of Auditor General in
2016 BS, the work of auditing was started as a continuous and compulsory process. It
audited only the governmental offices and state owned corporations as per the
provision of it but later, after the implementation of Company Act 2021BS, it audits
the private companies compulsorily.

At present, offices of government of Nepal and state owned corporations are audited
by the Department of Auditor General or the person appointed by it. But, for the other
private sectors, auditing is done by the Registered members of Institute of Chartered
Accountants of Nepal(ICAN).The Institute of Chartered Accountants of Nepal
(ICAN) was established under a special act, The Nepal Chartered Accountants Act,
1997 to enhance social recognition and faith of people at large in the accounting
profession by raising public awareness towards the importance of accounting
profession as well as towards economic and social responsibility of the accountants,
and to contribute towards economic development of the country. The Institute is an
autonomous body and the Council is fully authorized by the Act to undertake
accountancy profession in Nepal.

The history of auditing practices according to ICAN is listed below in the table

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Table No.1: History of Auditing in Nepal

Date Description
1934 The first ever Companies Act in Nepal legislated
New Companies Act enacted. Books of accounts to be maintained specified.
1956 Accounts to be audited by an auditor licensed by the Department of Industries
Auditors' Act legislated, which entrusted the Office of Auditor General (OAG) to
issue auditor's license and set qualification of auditors in four different classes of
Registered Auditors. Chartered Accountants with five years experience given
Class A license with unlimited authority to audit any organization. Others are
given license of Class B, C, and D depending upon the education and experience
as specified in the Auditors' Act. Disciplinary powers vested upon the Auditor
1974 General who was to receive recommendation from a Disciplinary Committee.
1978 Formation of the Association of Chartered Accountants of Nepal (ACAN) as a
voluntary social organization with an initial membership of 15 Nepali chartered
accountants. ACAN applied for registration under the Societies Registration Act
1979 New Companies Act enacted.
1982 ACAN registered under the Societies Registration Act. ACAN formally
inaugurated by the Minister of Finance
1984 ACAN invited to participate in the South Asian Federation of Accountants
(SAFA) as an Observer.
1985 SAFA formed a Committee to assist ACAN in recommending to the Government
for the formation of an accounting body in Nepal.SAFA committee submitted a
report.
1988 HMG formed a high level study group to recommend on the formation of an
autonomous self regulatory accounting body in Nepal.
1990 ACAN held a SAFA international seminar, which was inaugurated by the Prime
Minister who committed the formation of an accounting body in Nepal.
Accounting profession's image was uplifted.
1997 Nepal Chartered Accountants Act, 1997 received the royal seal on 30 January
1997. The Institute of Chartered Accountants of Nepal (ICAN) established. ICAN
to have two classes of members: Chartered Accountants and Registered Auditors.
Auditors' Act to be repealed upon the notification in the Official Gazette. All

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 Registered Auditors holding audit license invited to apply for the membership of
ICAN. First Council of ICAN formed on 1 August 1997. Membership of the
South Asian Federation of Accountants (SAFA) New Companies Act enacted
with revised provision on accounting and auditing.
1998 MOU on technical cooperation signed with the Institute of Chartered Accountants
of India. Membership of the Confederation of Asian and Pacific Accountants
(CAPA)
1999 Nepal Chartered Accountants Regulation 1999 came into effect on 29 September
1999 Launching of ICAN along with an international seminar HMG signed
technical assistance agreement with ADB for capacity building of ICAN for a
project of 12 months period.
2000 First CA Examination held in November 2000
2002 First Amendment of Nepal Chartered Accountants Act, 1997.ICAN was made the
only regulating authority in accounting profession when the Act was amended.
2003 ICAN became Associate Member of IFAC in 2003
2004 ICAN signed second MOU with ICAI in July 2004
2008 ICAN became full Member of International Federation of Accountants (IFAC) in
2009 November 2008
2013 Government of Nepal provided land to ICAN on 09 November 2009
ICAN signed MOU with Malaysian Instititute of Accountants (MIA) in 10
May2013
2014 Building Inauguration by Rt. Honorable president of Nepal on 13 July 2014
Source: Institute of chartered accountants of Nepal (ICAN)

2.3 Role of Audit industry in economy of Nepal

The audit firms regulated by ICAN plays a huge hole in development of Nepalese
economy through the role of mediators between the tax authorities/IRD and the tax
payers. Audit firm as a professional firm, it never encourage tax evasion and tax
avoidance but does tax planning to help their clients pay what they deserve in efficient
and timely manner to ensure maximum compliance to the laws so government can
collect maximum revenue and it obviously support the economy of the country. It also
supports the government with constructive suggestions towards the formulation and

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the revision of legislation in regards to commerce, trade, accounting, revenue etc. It
also support the economic development process by increasing the confidence among
investors and general public towards the capital market by pronouncing the standards
of discloses in financial reporting practices. By the help of audit firms the individuals
and organizations can pay the tax and revenue to government easily so government
can spend more on development sector. It plays the role of regulatory body so
accounting and auditing practices becomes fraud less and errorless in the country.

2.4 Present scenario of Audit industry in Nepal

The present scenario of audit firms under ICAN is very good because its role and
importance is increased. The need and importance of audit firms is increasing due to
increase in the number of business firms who pays tax to the government of Nepal.
The number of CA firms and audit firms are also increasing day by day because it acts
as a mediator between the tax authorities and the tax payers. The present scenario of
audit firms in Nepal are listed below in the table

Table No 2 Present Scenario of Auditing

Members Number

Chartered Accountants 732

Registered Auditors-B 1840

Registered Auditors-C 811

Registered Auditors-D 1186

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 CHAPTER THREE

INTRODUCTION OF THE ORGANIZATION

3.1 Profile of the G & Company

After the end of seventh semester we are entitled to fulfill the internship report for
undergraduate level BBM course of Tribhuvan University. Most of my friends
selected financial institution, and manufacturing organization. But unlike others, I
wanted to do something different, something not just limited to single sector and also
that would go hand in hand with my undergoing degree simultaneously.

I chose G & Company (an audit firm) for my internship program because I wanted to
have general ideas on audit firms and their activities. I joined G & Company to get
exposed to the real world of accounting and to have first experience on the same since
I am a student of Management faculty. I wanted to know how business firms do
accounting and what role does it play in the growth and development of business
activities.

G & Company is a individual firm established in 2058-05-04 BS and it’s registered in

VAT at 2068-04-01BS. Inland Revenue Department of Nepal provides this firm a
PAN number. It acts as coordinators and mediators between the tax authorities and the
tax payers. In its working as professional firm, it never encourage tax evasion and tax
avoidance but does tax planning to help their clients pay what they deserve in efficient
and timely manner to ensure maximum compliance to the laws.. The firm provides
auditing services including financial audit, vat audit, tax audit, due diligence, account
outsourcing, and consulting services. For their services they charged certain fees to
their clients. The firm specializes in consulting services in areas of property analysis,
business plan, accounting training to their parties etc. This firms has a Registered
Auditors (RA)and few part time Charter Accountants(CA)

The head office of the firm is located in Bhairahawa Rupendehi. It has two branches.
Branch office at Butwal Laxminagar and branch office at Yogikuti Butwal. In Butwal
Laxminagar Branch I perform my internship project as an internee.

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Objectives of G &Company

The objectives of G & Company are as follows:

1) The overall objective is to focus the activities towards improving the quality and
quantity of its specialized services(auditing, accounting, tax and business
consulting) and to become a leading audit firm in this region.
2) To expand and growth of the business at a rate that is both challenging and
manageable, serving the market with innovation and adaptability.

Mission Statement
G & Company exists to provide complete, reliable and high quality auditing and
consulting services to individuals and institutions, like business manufacturing,
trading, tourism, financial, governmental, non- governmental, medical, hydro power,
hotels, and any other sectors.

Vision Statement
The firm's vision is to be the premier auditing, accounting, tax and consulting firm by
every measure that matters.

Core Values
The values of the organization are as follows:
 Valuing People
We believe that our success depends first on people. By respecting people in
everything we do, we will develop and maintain high quality, mutually
beneficial relationships with our customers, professional auditor and chartered
accountants, other firms, vendors, community members and each other.

 Accountability
The accountability of the auditors plays a vital role for the success of G &
Company.
 Building Client Relationships
Good relationship with customers is key to success. We seek to earn long-term
client loyalty by developing a deep understanding ofeach client's business and

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 personal goals, by demonstrating reliability and integrity in our work and by
acting as an independent and objective advisor to our clients.
 Upholding Quality and Integrity
We will maintain an quality, honesty, respect, fairness and professional ethics
in our service which governs the actions and decisions of everyone within our
firm.

Corporate Social Responsibility

Corporate social responsibility (CSR) is the emerging aspect in Nepal. CSR activities
are not performed by G & Company yet.

3.2 Organization Structure

The firm’s organizational structure is more of a functional organization structure. The

Proprietor in the top most level. There is a senior executive manager under proprietor.
Under senior manager branch manager performs their job.. There are no departments
but three section are there. Under branch manager sectional head performs The whole
organization can be viewed as a single department and the work processes are done
through creation of teams/unit for particular work and service. The branch managers
create a team comprising of senior employees and staffs to perform a specific task
assigned by the clients. The size and duration of team depends upon the nature of
service offered and the requirement of the clients. The orders, command and decisions
flows from top to bottom while the reporting is done through bottom to top.
Organization structure is the specified path through which the formal command of
authority and responsibility flows. The organization structure of G & Company is
presented in the following diagram.

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 Fig 1: Organizational Structure

Proprietor

Senior Manager

Branch Managers

VAT Auditor Tax Auditor Financial Auditor

Staffs

3.3 Services provided by G & Company

The main services provided by G & Company are auditing, due diligence, account
outsourcing and consulting services which are as follows:

1. Auditing:

Audit is an official examination and verification of accounts and records, especially of

financial accounts of the organization. It also attempts to ensure that the books of
accounts are properly maintained by the concern firm as required by law. The various
types of auditing services provided by the organization are Financial Audit, VAT
Audit, Tax Audit, Due Diligence, etc. The most common types of audit are briefly
explained below:

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a) Financial Audits: In a financial audit, the assertions about which the auditor seeks
objective evidence relate to the reliability and integrity of financial and, occasionally,
operating information. This type of audit usually covers the basic set of financial
statements (Balance Sheet, Income Statement, Statement of Cash Flows, Statement of
Changes in Equity and notes to the financial statements).

b) VAT Audits: In a VAT audit, value added tax is calculated through the evaluation
of books of accounts like purchase book and sales book by identifying the VAT able
items and VAT free items of the concerned firm.

c) Tax Audits: In Tax audit, the evaluation and analyze of financial statement and
other concerned documents are made and final tax liability of individual and firm are
calculated which is payable to IRD.The firm also helps in tax management for
organizations. Organizations can acquire services like calculation of income tax,
management of Value Added Tax (VAT), Tax Deducted at Source (TDS), timely
filing and payment of tax to Inland Revenue Department, etc.

2. Due Diligence: Due Diligence is an extensive look at a company in order to make

the best informed business decision about a company. Due Diligence is that audit
which is carried out in order to find/estimate the actual financial position of the
organization before a large decision is about to take place like mergers and
acquisitions, loan agreement, or when the company's financials are going to be
presented to the public. Due diligence audit includes thorough investigations of the
books and records that can range from asset appraisals to day to day transactions. A
thorough understanding of internal controls and its effectiveness also become
necessary to ensure the risk for the business is as low as possible.

3. Account Outsourcing:
Outsourcing is gaining popularity as a way to reduce financial and operational risks
by making them easier to manage. Keeping this in mind, the firm provides accounting
services to various organizations. Business organizations can alleviate the burden of
staying on top of frequent changes to tax codes and accounting regulations and
provide increased levels of information transparency, visibility of controls and clarity

14
of accountability by outsourcing of accounting system.

4. Consulting Services:

The firm also offers advising and counseling services on matters relating to
accounting system, tax procedures, company establishment, and numerous other
financial matters to their clients.

3.4 Department
There is no such thing like departments and division in G & company. The whole
organization can be viewed as a single department and the work processes are done
through creation of teams/unit for particular work and service. But it has three
branches.

3.5 Product at Glance

G & Company is an audit firm which provides an auditing service. It is a service

oriented organization it does not have any specific product but its services are
auditing, accounting, and consulting services.

CHAPTER FOUR

ANALYSIS OF ACTIVITIES DONE AND PROBLEM SOLVED

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4.1 Activities Performed in the Organization

Internee was inducted as a team member in various audit and consulting assignment
where internees’ job and responsibility included vouching or entry of books of
account with the help of accounting software tally, preparation of working papers,
preparation of preliminary trial balance and financial statement like profit and loss
account, balance sheet, cash flow statement etc.

1. Vouching/entry of Books of account

I performed Vouching or entering the books of accounts of different firms. Thus now
days various accounting software are used to do a vouching, I used tally software to
perform vouching. Vouching is the act of checking evidential documents to find out
errors and frauds and to know the authenticity, accuracy and reliability of books of
accounts.
The main objectives of vouching are:
 To examine the accounting entries recorded in the books of accounts with
reference to documentary evidence known as vouchers.
 To examine the authenticity of the transactions recorded in the books of
account.
 To examine the adequacy and reliability of documentary evidence.

Thus, it is important for an auditor due to the following reasons:

a. Vouching is the backbone of auditing:

Main aim of auditing is to detect errors and frauds for proving the true and fairness of
results presented by income statement and balance sheet. Vouching is only the way of
detecting all sorts of errors and planned frauds. So, it is the backbone of auditing.

b.Vouching is the essence of auditing:

Auditing not only checks the accuracy of books of accounts but also checks whether
the transactions are related to business or not. All the transactions are performed after
the prior approval of concerned authority or not, transactions are real or not because

16
an accountant may include fictitious transactions to commit frauds. All these facts can
be found with the help of vouching. So, vouching is essential for auditing.

c. Vouching is important to see whether evidences are correct or not:

An auditor checks the books of accounts to detect errors and frauds. Frauds maybe
committed presenting duplicate vouchers. All the small and big amounts of frauds can
be detected with the help of vouching. So, all the evidential documents and records
are to be checked carefully and in detail by an auditor which is the scope of vouching.
Therefore, it can be said that vouching is the heart of auditing because without the
work of vouching, the work of auditing cannot be performed.

I performed the vouching of the firms BhairavBhadaPasal, Aayusha Traders and

Radha Trade and Suppliers during my internship period.

2. Preparation of Audit Working Papers:

I prepared audit working papers simultaneously while doing vouching. The doubtful
matters/transactions/entries were noted on the working papers. The entries without
supporting documents and evident were noted down. Similarly, transactions/entries
that require thorough checking of its supporting documents such as memorandum of
understanding (MoU), agreement papers, etc were noted for the purpose of reminder
for checking of these supporting in detail later. It was necessary to prepare working
papers while doing vouching. I prepared working papers form BhairabBhadaPasal
and Aayusha Traders. The audit working papers constitute the link between the
auditor’s report and the client’s records. Documentation refers to working papers
prepared or obtained by the auditor and retained by him in connections with
performance of his audit.

The main reasons/purposes for the preparation of working papers are:

 They constitute a permanent record of the objectives and scope of the audit, as
well as the work performed during the audit.
 Work papers organize and coordinate all phases of the audit.
 They contain the back-up material in support of the audit findings,
conclusions, opinions, and comments.
 They contain the basic material from which the audit report is prepared.

17
  They reflect the quality and reliability of the work performed by the auditor
substantiate and explain in detail the opinions and findings presented.

3. Preparation of Cost Sheet

If firms buys a product from foreign country calculating the tax rate is custom office
is needed so preparation of cost sheet helps to identify the actual tax rate payable. I
was assigned to prepare the cost sheet of Aayusha Traders.

4. Preparation of Preliminary Trial Balance

I was assigned to prepare the preliminary trial balance and financial statements of the
Radha Trade and Suppliers and Aayusha Traders upto 31 stjestha 2074.Preliminary
Trail balance is a summary of the balance of all accounts in the chart of accounts to,
firstly, make sure the books are balanced. Then, these account balances are used to
prepare financial statements such as Profit and Loss Account, Balance Sheet and Cash
Flows Statement. The trial balance is a worksheet on which all the general ledger
accounts with their debit or credit balance are listed. It is a tool that issued to alert
errors in the books of account. The total debits must equal the total credits. If they
don't equal, there is an error that must be tracked down.

5. Preparation of Financial Statements

Financial Statement is the statement prepared by the entity which records the financial
activities. It basically includes income statement, balance sheet and cash flow
statement. I was assigned to prepare the preliminary trial balance and financial
statements of the Radha Trade and Suppliers and Aayusha Traders upto 31 stjestha
2074 and analyze it

a) Income Statement

It is also known as a statement of financial performance or profit and loss statement. It

measures the profit or loss of business over a specified period. A profit and loss
statement summarizes the income for a period and subtracts the expenses incurred for
the same period to calculate the profit or loss for the business. It reflects the past

18
performance of the business and is the report most often used by small business
owners to track how their business is performing.

b) Balance sheet

It is a financial statement that summarizes a company's assets, liabilities, and

shareholders' equity at a specific point in time. The balance sheet gives investors an
idea of what the company owns and owes as well as the amount invested by the
shareholders. The balance sheet follows the formula assets = liabilities + shareholders'
equity. Each of the three segments of the balance sheet has many accounts within it,
documenting the value of each one. Accounts such as cash, inventory, and property
are on the asset side of the balance sheet, and accounts such as accounts payable and
long-term debt fall on the liability side. Accounts on a balance sheet differ by
company and by industry, as there is no set template that accurately accommodates
the differences between different types of businesses.

c) Cash Flow Statement

It is that financial statement, which provides aggregate data regarding all cash inflows
a company receives from both its ongoing operations, financing and external
investment sources, as well as all cash outflows that pay for business activities and
investments during a given quarter. Income statement uses accrual accounting method
and its benefit is that it strives to show a more accurate picture of the companies’
profitability. However, focusing on accrual based profitability without looking at cash
inflows and outflows is very dangerous, not only because companies can more easily
manipulate accounting profits than they can cash profits, but also because not having
a handle on cash can potentially make even a healthy company go bankrupt. The key
to financial analysis is to use both statements together. If there is incredibly high net
income, such net income should be supported by strong cash flow from operations
and vice versa. If this is not the case then investigation and follow up on such
discrepancies should be done.

6. Prepare the Application of tax clearance

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It is the application prepared by the owner of the firm to the Inland Revenue
Department (IRD) for Tax Clearance. Usually audit firm makes it on behalf of owner
of concerned firm. I was assigned to write the preliminary draft of tax clearance
application of Aayusha Traders.

7. Filing of e-returns for tax purpose:

I have also filled up the forms of e-returns on the website of Inland Revenue
Department, Government of Nepal for Aayusha Traders. In order to know what is
filing of e- returns we have to know the provision for payment of tax under Income
Tax Act 2002.

8. Filing of Estimate Income Tax Returns:

Taxpayers who derive or expect to derive any assessable income from a business or
investment shall pay tax for the year by three installments. Therefore, they are called
installment payers. Taxpayers with income solely from employment are not obliged to
pay tax in installments because their tax from employment income is collected by
withholding. Similarly, presumptive taxpayers are also not obliged to pay tax in
installments. Payment of tax by installments is fundamentally different from payment
of tax by withholding. Withholding requires a person’s tax to be paid by a third party,
whereas under an installment system the person pays his or her own tax. Every
installment payer has to submit for the income year ahead an estimate of his tax
payable. For that the estimated tax returns are to be utilized. The submission is due to
be made by the date for payment of the first installment, i.e. it shall be filed together
with the first installment. Since the first estimate has to be submitted after the income
year is half, the estimate should include the actual taxpayer’s facts of the first half of
the income year so that there is some thorough basis for the estimation of the possible
profit of the second half of the income year. In this estimate the following amounts
are to be specified:

 The assessable income to be derived for the income year from employment,
business, and investment.
 The source of this income.
 The taxable income to be derived for the income year. The tax to become
payable calculated without reduction for any medical tax credit.

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 The installments have to be paid as follows:
1. 40 % of the tax as estimated for the current income year less paid tax, i.e. less
amounts that have already been paid by the end of the month Poush
2. 70 % of the tax as estimated for the current income year less paid tax, i.e. less
amounts that have already been paid by the end of the month Chaitra
3. 100 % of the tax as estimated for the current income year less paid tax, i.e. less
amounts that have already been paid by the end of the month Ashad
If the amount of an installment calculated as above is less than Rs. 2000, the
installment is not required to be paid. If at the end of the year a final tax liability
remains to be paid, as, for example, a result of the income tax return filed at the end of
the year the income tax paid by installments is credited against this liability.

4.2 Problem Encountered and Solved:

Internee was assigned to solve various problems regarding accounting and auditing of
various business firms .While performing the task some problems are encountered.
Some of the general mistakes encountered are as below:

 The clients brought only the copy of the required documents without original.
 Most of the times firm’s documents were presented without the stamp.
 Sometimes signature of Registered Auditor is missed.
 Internet breakdown occurred during e-filing of tax.

Internee had to deal with various kinds of problems. Almost all problems, which
could be solved by him were solved with the support and proper guidance by the
manager and auditors. Internee was assigned as a assistant for financial auditor and
assigned to performed entry of books of account, identifying vat able items and vat
free items, prepare financial statement of the clients to assist him. I help to pointed out
a calculation mistake which was overlooked by the auditors as well as by managers
during report review and verification besides many numerous typing mistakes.

CHAPTER FIVE

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 CONCLUSION AND LESSON LEARNT
5.1 Conclusion

This internship helps to learn that auditing is very crucial to every organization.
Auditors prepare and present the financial statements in accordance with an
applicable financial reporting framework, including the design, implementation and
maintenance of internal controls relevant to the preparation and presentation of
financial statements that are free from material misstatements, whether from error or
fraud.G & Company as an audit firm plays a role of mediator between IRD and tax
payers.

Therefore, internee concludes that audit firm plays an vital role like auditing,
accounting, etc of the firm. Number of audit firms also increasing due to its need.
During the internship period internee had a good experience at G & Company. The
internship did not just provided with the opportunity to be a internee of G & Company
and learn its work activities for a career, but also helped to identify the strengths and
potentiality as a part of personal development.

5.2 Experiences and Lesson Learnt

Internship program proved to be a valuable opportunity to learn and get acquainted

with real world first hand workplace experience. It proved to be a valuable platform
where we could use the knowledge gained during our classroom in the practical
world. Through internship program, I got an opportunity to expose myself to the
working environment and unleash my potential. The past 45 days at G & Company
was an excellent opportunity for me to gain valuable experience in the auditing and
accounting field. The major skills and lesson that I was able learn during internship
period are as follows:

Practical knowledge of auditing and accounting

Our education system is more of parrot learning. Rather than doing real world
examples, we stick to typical traditional theoretical system of learning even in
practical courses like accounting. We were taught same sorts of practical problems.

So when I was exposed to the financial statements, I was totally shocked. We were
used to the hypothetical financial statements with limited number of items in trial

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balances and other financial statements like income statement, balance sheet etc. But
when I got exposed to the real ones, I found huge differences and contrasts with the
hypothetical ones that we are taught. So I got the opportunity to get acquainted with
the real world auditing and accounting practices.

Get idea about taxation system in Nepal

Another important thing I learnt during my internship was about the general taxation
system. I got familiar with various kinds of taxes like Income tax for individuals and
corporate organizations, Value Added Tax (VAT), Tax Deducted at Source (TDS)
that are prevalent in the country. In addition I became aware about the installment
method of payment of taxes and filing of advance tax and tax returns for the same.

Learn to work in a Team

I work in a team. It taught me how activities are to be performed in a team and impact
of behaviour of one on the work and performance of the other team member. I
realized what we studied was real. The proper team work lead to various benefits. On
the contrary, loafing by some team members could lead to negative impacts on the
overall team performance. I learned the importance of team work and learn how to
work in a team.

Knowledge on general operating procedures of audit firms:

Previously, I was unaware of general operating procedures of audit firms. But after
completing internship period, I got to learn the general views and guidelines regarding
working procedures of audit firm.

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