Nepal

The legal and regulatory framework for accounting and auditing in Nepal is established under the Companies Act 2006 and the Nepal Chartered Accountants Act 1997, as amended. The Companies Act 2006 sets out the requirements for the preparation and audit of financial statements for companies and requires the application of accounting and auditing standards issued by the relevant standard-setting bodies under prevailing legislation.

Standard-setting responsibility is assigned to the Accounting Standards Board (ASB) and the Auditing Standards Board (AuSB), which were established under the Nepal Chartered Accountants Act 1997. The ASB is responsible for issuing accounting standards, while the AuSB is responsible for issuing auditing standards applicable in the jurisdiction.

The financial reporting framework in Nepal follows a differential reporting approach. The ASB has developed Nepal Financial Reporting Standards (NFRS) based on International Financial Reporting Standards (IFRS Accounting Standards), which are required for publicly accountable entities, including listed companies, state-owned enterprises, commercial banks, financial institutions, and other entities meeting public interest criteria. Other entities apply Nepal Accounting Standards (NAS), NFRS for Small and Medium-sized Entities, or NAS for not-for-profit organizations, depending on their size and nature. The framework provides for differentiated reporting requirements across entity types while supporting convergence with international standards.

Statutory audit requirements are established under the Companies Act 2006, which mandates audits for all companies. Audits must be conducted by members of the Institute of Chartered Accountants of Nepal (ICAN). The AuSB issues Nepal Standards on Auditing (NSA), which are based on International Standards on Auditing (ISA) and are required to be applied in all statutory audits.

Recent developments indicate progress toward alignment with updated international standards. Nepal Standards on Auditing 2024 have been approved for phased implementation, with voluntary application beginning in July 2024 and mandatory application from July 2025, while certain quality management and related standards will become mandatory from July 2026. This reflects an ongoing transition toward incorporating more recent ISA and quality management standards into the national framework.

Overall, Nepal’s statutory framework reflects a structured standard-setting system with differential reporting requirements and a clear legal basis for financial reporting and auditing, supported by ongoing efforts to align national standards with international developments.

The accountancy profession in Nepal is regulated under the Nepal Chartered Accountants Act 1997, as amended, which establishes the Institute of Chartered Accountants of Nepal (ICAN) as the statutory body responsible for the regulation and development of the profession.

ICAN operates under a self-regulatory model with statutory authority and is responsible for overseeing the education, certification, registration, and professional conduct of Chartered Accountants in the jurisdiction. Its core functions include establishing and administering initial professional development and continuing professional development requirements, conducting professional examinations, issuing membership certificates and Certificates of Practice, maintaining registries of members, and setting ethical and professional standards. ICAN is also responsible for operating an investigative and disciplinary system and supporting compliance with accounting and auditing standards issued by the Accounting Standards Board and the Auditing Standards Board. In addition, ICAN has established a Quality Assurance Board to conduct quality assurance reviews of audit firms.

The Nepal Chartered Accountants Act 1997 protects the professional designations of Chartered Accountant and Registered Auditor. Membership in ICAN is mandatory for individuals seeking to use these designations and to provide accountancy and audit services in Nepal.

Entry into the profession is regulated by ICAN and requires completion of a Chartered Accountancy program, which includes formal education, professional examinations, practical experience, and additional professional training components. Candidates are required to complete a prescribed period of practical experience, typically three years, under the supervision of a qualified Chartered Accountant. ICAN also recognizes qualifications obtained from foreign professional bodies under mutual recognition and similar agreements, subject to additional requirements as determined by ICAN.

To provide audit services as a Registered Auditor, members must obtain a Certificate of Practice issued by ICAN. Eligibility for a Certificate of Practice requires membership as a Chartered Accountant and completion of practical training in auditing under a qualified practitioner. ICAN is responsible for issuing, renewing, and, where necessary, withdrawing Certificates of Practice in accordance with its governing legislation and regulations.

Overall, the regulatory framework reflects a centralized model in which ICAN serves as both the professional body and the statutory regulator, with responsibilities spanning education, licensing, standard-setting support, quality assurance, and enforcement.

Nepal does not have an independent public audit oversight authority for the audit profession. Audit regulation, including oversight of auditors and audit firms, is carried out under the Nepal Chartered Accountants Act 1997 by the Institute of Chartered Accountants of Nepal (ICAN), which serves as both the professional body and the statutory regulator.

ICAN is responsible for the registration, licensing, and regulation of auditors, as well as for establishing and enforcing professional, ethical, and auditing requirements. As part of its regulatory framework, ICAN has established a Quality Assurance Board (QAB), which is responsible for conducting quality assurance reviews of audit firms and monitoring compliance with applicable standards. The QAB operates with a degree of operational independence but remains within the governance structure of ICAN.

There is no separate authority responsible for independent public oversight of auditors comparable to those established in some jurisdictions. Accordingly, oversight of the audit profession in Nepal is characterized by a self-regulatory model, with ICAN exercising both regulatory and oversight functions. Nepal is not a member of the International Forum of Independent Audit Regulators, which further reflects the absence of an independent audit oversight body in the jurisdiction.

In parallel, the Office of the Auditor General operates as the supreme audit institution responsible for auditing public sector entities under the Constitution of Nepal. However, its mandate is limited to public sector audits and does not extend to the oversight of statutory audits performed by private sector auditors.

Overall, the audit oversight framework in Nepal remains centralized within ICAN, with no independent public oversight authority established to supervise the audit profession.

Institute of Chartered Accountants of Nepal (ICAN)

The Institute of Chartered Accountants of Nepal (ICAN) was established under the Nepal Chartered Accountants Act 1997 as the statutory professional accountancy organization responsible for regulating and developing the accountancy profession in Nepal. ICAN is an autonomous body with legal authority over membership, professional education and training, examination, certification, registration, professional conduct, and disciplinary arrangements within the jurisdiction.

Membership in ICAN is mandatory for professional accountants in Nepal. ICAN’s responsibilities include administering initial and continuing professional development requirements, conducting professional examinations, issuing Chartered Accountant Membership Certificates and Certificates of Practice, maintaining member registries, establishing professional conduct requirements, operating investigative and disciplinary arrangements, and supporting compliance with accounting and auditing standards issued by the Accounting Standards Board and the Auditing Standards Board. ICAN has also established a Quality Assurance Board to carry out quality assurance reviews.

ICAN serves as the principal professional accountancy organization in the jurisdiction and combines the functions of a professional body and statutory regulator. In addition to its national role, ICAN is a member of the International Federation of Accountants, the South Asian Federation of Accountants, and the Confederation of Asian and Pacific Accountants.

Under the Nepal Chartered Accountants Act 1997, the Quality Assurance Board (QAB) is responsible for supervising and carrying out quality assurance (QA) reviews in the jurisdiction. The QA system is operated within the regulatory framework of the Institute of Chartered Accountants of Nepal (ICAN).

The scope of the QA review system is currently limited. Reviews are conducted for audit firms performing audits of listed entities and other selected firms, including those auditing clients above specified thresholds, rather than covering all mandatory audits. Accordingly, the QA system is not yet fully operational across the entire population of audits in the jurisdiction.

The QA framework is therefore only partially aligned with the requirements of Statement of Membership Obligations 1, as it does not yet ensure regular inspections for all mandatory audits. ICAN has indicated that the system is being implemented in phases with the objective of expanding coverage over time.

Recent developments indicate progress toward strengthening the QA framework through the issuance of updated auditing standards. Nepal Standards on Auditing 2024 have been developed based on more recent International Auditing and Assurance Standards Board pronouncements and are being implemented on a phased basis. However, the quality management standards, including Nepal Standards on Quality Management 1 and 2, are not yet effective for mandatory application and are scheduled to become mandatory from July 2026.

Current Status: Partially Adopted

Under the Nepal Chartered Accountants Act 1997, the Institute of Chartered Accountants of Nepal (ICAN) is responsible for establishing and administering initial professional development (IPD) and continuing professional development (CPD) requirements for Chartered Accountants in the jurisdiction.

ICAN sets education requirements covering entry, professional education, practical experience, assessment, and continuing professional development. Candidates are required to complete a structured Chartered Accountancy program, including formal education, examinations, and a minimum period of practical experience, typically three years. ICAN also establishes mandatory CPD requirements for its members and monitors compliance through its regulatory framework.

ICAN reports that its education framework is periodically reviewed and updated to align with the International Education Standards (IES) issued by the International Accounting Education Standards Board. The most recent curriculum revisions were completed in 2023 and are being implemented from 2024, reflecting alignment with the revised 2019 IES.

At the jurisdiction level, the requirements for entry, professional education, practical experience, assessment, and continuing professional development are broadly aligned with the IES. The framework incorporates the key elements of IES 1 through 8 and is applied to all Chartered Accountants regulated by ICAN. Accordingly, the IES are assessed as Adopted.

Current Status: Adopted

Under the Nepal Chartered Accountants Act 1997, the Auditing Standards Board (AuSB) is responsible for establishing the auditing standards to be applied in Nepal. AuSB has issued Nepal Standards on Auditing 2024, which are based on the 2021 edition of the International Auditing and Assurance Standards Board Handbook and form the applicable national auditing framework. These standards are effective for mandatory application for audits of financial statements for periods beginning on or after 17 July 2025.

At the jurisdiction level, the framework reflects substantial convergence with International Standards on Auditing (ISA) and supports alignment with the requirements of Statement of Membership Obligations 3. However, as the standards are not yet fully aligned with the most recent ISA in effect at the time of the assessment, the jurisdiction has not adopted the latest version in full.

Accordingly, ISA are assessed as Partially Adopted. Nepal has adopted a post-2018 version of ISA for application in mandatory audits, but the standards are not yet fully updated to the current version in effect.

AuSB has also issued Nepal Standards on Auditing for Audits of Financial Statements of Less Complex Entities, effective from July 2026 with early adoption permitted.

Current Status: Partially Adopted

Under the Nepal Chartered Accountants Act 1997, the Institute of Chartered Accountants of Nepal (ICAN) is responsible for establishing ethical requirements for professional accountants in the jurisdiction. ICAN has adopted a national Code of Ethics based on the International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code).

The current Code of Ethics applied by ICAN is based on the 2021 edition of the IESBA Code. ICAN has completed a review and mapping process to incorporate subsequent revisions, including those effective in 2022, and is in the process of issuing an updated Code aligned with the 2022 IESBA Handbook.

As the most recent version of the Code in effect at the time of the assessment has not yet been fully adopted and made effective, the framework does not reflect full alignment with the latest international requirements. Accordingly, the IESBA Code is assessed as Partially Adopted.

Current Status: Partially Adopted

Under the Government of Nepal’s public financial management framework, the Accounting Standards Board has been entrusted with responsibility for developing public sector accounting standards. Nepal Public Sector Accounting Standards have been developed for use in the public sector and, based on the most recent credible sources identified, remain based on the 2017 cash-basis International Public Sector Accounting Standards.

At the jurisdiction level, this framework reflects partial alignment with the requirements of Statement of Membership Obligations 5, as Nepal has established IPSAS-based public sector standards but has not adopted accrual-basis IPSAS in effect as of the time of the assessment. More recent World Bank implementation materials also indicate that the government has been considering updates to NPSAS and a roadmap toward accrual accounting, which suggests the framework remains in transition rather than fully updated.

Current Status: Partially Adopted

Under the Nepal Chartered Accountants Act 1997, the Institute of Chartered Accountants of Nepal (ICAN) is responsible for establishing and operating an investigation and disciplinary (I&D) system for all professional accountants in the jurisdiction.

ICAN has established a formal I&D framework comprising a Disciplinary Committee and a Monitoring Committee, supported by a dedicated Disciplinary Division. The Disciplinary Committee is responsible for investigating complaints related to breaches of professional standards, ethics, and legal requirements and recommending sanctions to ICAN’s Council, while the Monitoring Committee identifies potential cases of non-compliance.

ICAN has issued Disciplinary Investigation Procedures (2019), which provide a formalized process for initiating, investigating, and resolving disciplinary cases.

ICAN conducted a self-assessment of its I&D system against the requirements of Statement of Membership Obligations 6 and reported alignment. At the jurisdiction level, the I&D system is operational and incorporates the key elements of investigation, discipline, and enforcement consistent with SMO 6 requirements.

Current Status: Adopted

Under the Nepal Chartered Accountants Act 1997, the Accounting Standards Board is responsible for establishing accounting standards in the jurisdiction. Nepal applies Nepal Financial Reporting Standards (NFRS) for listed companies and other publicly accountable entities. The International Financial Reporting Standards Foundation indicates that Nepal is converging with International Financial Reporting Standards (IFRS Accounting Standards) through NFRS, with the current framework based on NFRS 2018, which is converged with the 2018 IFRS Accounting Standards.

Although domestic publicly accountable entities are required to apply NFRS, the framework does not constitute full adoption of IFRS Accounting Standards as issued. NFRS are a converged national set of standards and include modifications and carve-outs, including more recent amendments issued by the Accounting Standards Board.

At the jurisdiction level, the framework is therefore only partially aligned with the requirements of Statement of Membership Obligations 7. While IFRS-based standards are required for publicly accountable entities, the applicable framework is not the IFRS Accounting Standards in effect as of the time of the assessment and as issued without modification.

Accordingly, IFRS Accounting Standards are assessed as Partially Adopted. Nepal requires an IFRS-based national framework for publicly accountable entities, but the standards applied are converged NFRS rather than IFRS Accounting Standards as issued and in effect.

Nepal has also issued NFRS for SMEs, based on the IFRS for SMEs Accounting Standard, which is mandatory for certain entities. However, as this framework is also adapted at the national level, IFRS for SMEs are not adopted as issued.

Current Status: Partially Adopted

Relevant Organizations

Accounting Standards Board Nepal Auditing Standards Board NepalInstitute of Chartered Accountants of NepalInternational Financial Reporting Standards Foundation

Relevant Legislation

Nepal Chartered Accountants Act 1997 Companies Act 2006

Relevant Publications

Accounting Standards Board Nepal, Nepal Financial Reporting Standards (NFRS) Accounting Standards Board Nepal, NFRS for SMEs Auditing Standards Board Nepal, Nepal Standards on Auditing 2024Institute of Chartered Accountants of Nepal, Code of Ethics 2023Institute of Chartered Accountants of Nepal, QAB Annual Report 2024–25International Financial Reporting Standards Foundation, Nepal Jurisdiction ProfileWorld Bank, Public Financial Management and IPSAS-related reports (Nepal)