Statutory Audit Requirements for Private Limited Companies in Nepal

Nepal's Companies Act 2063 does not leave statutory audit as a matter of company choice for most private limited companies. It is a legal obligation attached to the act of incorporation itself, and the compliance calendar around it — appointment, audit, filing — runs on a fixed rhythm tied to the Nepali fiscal year, not to when a company feels ready.

Prepared by Nishant Marasini and team · Position stated as at 22 September 2026

Who is required to have one

Under the Companies Act 2063, every private limited company is required to have its financial statements audited annually by an auditor licensed by the Institute of Chartered Accountants of Nepal (ICAN). This applies regardless of size — there is no general small-company exemption of the kind found in some other jurisdictions. A private limited company with modest turnover and two shareholders carries the same statutory audit obligation as a much larger one; what changes with scale is the complexity of the audit, not whether it is required at all.

The only companies that sit outside this default are specific categories the Act itself carves out, and in practice those exceptions rarely apply to an operating private limited company carrying on business — the general rule is that if a company is incorporated and operating under the Companies Act, its accounts get audited every year.

How the auditor is appointed

The first auditor of a newly incorporated company is typically appointed by the board of directors, within a defined period after incorporation, to hold office until the conclusion of the first annual general meeting. From the first AGM onward, the auditor is appointed by the shareholders at the AGM itself, to hold office until the conclusion of the next AGM — meaning the appointment is, in principle, renewed or changed by the shareholders every year.

A handful of conditions govern who is eligible to be appointed:

• The auditor must hold a valid certificate of practice from ICAN, either as an individual chartered accountant or through an ICAN-registered audit firm.
• The Act restricts an auditor from holding office beyond a defined maximum consecutive term at the same company — a rotation requirement intended to preserve independence over time, so the same individual auditor cannot simply be reappointed indefinitely without a break.
• Directors, their close relatives, employees of the company, and anyone with a material financial interest in the company are barred from being appointed as its auditor — the independence requirement is not just about firm rotation but about who is eligible to accept the appointment in the first place.

If shareholders fail to appoint an auditor at the AGM, or if a casual vacancy arises during the year, the Act provides for the Office of Company Registrar (or, in specified circumstances, the board) to appoint one, so that a company cannot simply go without an auditor by omission.

What the auditor's report actually certifies

The statutory audit report is not a general endorsement of the business. It is a specific opinion, addressed to the shareholders, on whether the financial statements presented by the company give a true and fair view of its financial position and the results of its operations for the year, prepared in accordance with the applicable accounting standards (Nepal Financial Reporting Standards, or the applicable framework for the company's category) and in compliance with the Companies Act.

In forming that opinion, the auditor also reports on specific statutory matters the Act requires to be addressed — among them, whether proper books of account as required by law have been maintained, whether the balance sheet and profit and loss account are in agreement with those books, whether the company has complied with the provisions of the Act relevant to the accounts, and whether any matters have come to the auditor's attention that suggest the company's business has been conducted in a way prejudicial to the interests of shareholders or contrary to the Act. A clean report is not simply "the numbers look fine" — it is a statement across all of these specific dimensions.

Filing with the Office of Company Registrar

Once the audited financial statements are approved at the AGM, the company is required to file them with the Office of Company Registrar as part of its annual compliance — alongside the annual return that reports the company's shareholding structure, directors, and other statutory particulars for the year. The audited accounts filed with OCR become part of the public company record, which is one of the reasons the quality and independence of the underlying audit matters beyond the shareholders themselves — lenders, prospective investors, and counterparties doing due diligence routinely pull a company's filed accounts from OCR as a first check.

Deadlines relative to the fiscal year

Nepal's fiscal year runs from Shrawan 1 to Ashad end (mid-July to mid-July on the Gregorian calendar), and the statutory compliance calendar is built around that year-end rather than the calendar year. The Act requires the AGM — at which the audited accounts are presented and approved — to be held within a specified period after the close of the fiscal year, which in practice means the audit itself needs to be substantially complete well before that AGM deadline, not merely started. Filing with OCR then follows within a further specified period after the AGM.

Companies that treat Ashad end as the point to start thinking about the audit, rather than the point by which the books should already be closed and largely reviewed, are the ones that routinely miss the AGM deadline — the audit itself is rarely the bottleneck; the delay is almost always in getting the underlying books finalised in time to start it.

Consequences of non-compliance

Failure to get accounts audited, to hold the AGM within the prescribed period, or to file the audited accounts and annual return with OCR within the prescribed period each carry consequences under the Companies Act. These include monetary penalties that can apply to the company and, in several provisions, personally to the directors responsible for the default — the Act does not treat these as company-only liabilities where directors can point to the company as the sole party at fault.

Beyond direct penalties, a company with a pattern of non-compliant filings faces practical consequences: OCR can flag or restrict further filings until outstanding returns are cleared, banks and financial institutions routinely require up-to-date audited accounts and OCR filing status before extending or renewing credit facilities, and a prospective investor's due diligence will surface gaps in the filing history immediately. In persistent cases of default, the Act also provides for regulatory action against the company itself, up to and including steps toward striking off — a consequence significant enough that most companies that fall behind treat catching up on filings as urgent once they realise the gap exists.