Académique Documents
Professionnel Documents
Culture Documents
Submitted by
Sajesh Maharjan
Roll no: 10450124
PU Registration Number: 2009-2-45-0066
Pokhara University
Kathmandu
April, 2013
Acknowledgements
List of Tables:
1. Major Customers
9-10
2. Fines and Penalty on Failure to submit advance tax and tax return
21
22
22
23
List of Figures:
1. Organizational Structure
12
Table of Contents
Chapter I
Organization Profile
1.1 Background:
11
12
13
Chapter II
Job Profile and Activities Performed
2.1 Job Profile and Activities Performed:
15
23
24
Chapter III
Lessons Learnt and Feedback
3.1 Key Skill and Attitudes Learnt:
27
28
29
References
30
Annexure
31
Chapter I
Organization Profile
1.1 Background:
After the end of 6th semester, we were entitled to indulge in Internship Programme as
per the schedule of BBA-BI course of Pokhara University. Most of my colleagues
joined banks, especially A class licensed financial institutions for their internship.
Everyone was eager to have first hand experience in banking sector because we were
doing BBA-BI course. 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 under going degree simultaneously.
I chose J.B. Rajbhandary & DiBins for my internship programme because I wanted to
have general ideas on audit firms and their activities. I joined J.B. Rajbhandary &
DiBins to get exposed to the real world of accounting and to have first hand
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.
J.B. Rajbhandary & Dibins is a partnership firm established in 1994 A.D. The firm
provides auditing, due diligence, account outsourcing, project management and
consulting services. The firm specializes in consulting services in areas of: Country
Strategic Papers, Restructuring policies and Internal Control System Development,
Mergers/Demergers, Financial Controller/ Due Diligence Review/Special Review of
various Infrastructure projects on behalf of commercial banks; Forensic Audits, etc.
The firm is situated at Second Floor, North Wing, Sherpa Mall, Durbar Marg,
Kathmandu that occupies around 1600 sq ft of office premise.
Objectives:
The objectives of J.B. Rajbhandary & Dibins are:
The overall objective is to focus the activities towards its specialized services
(auditing, accounting, tax and business consulting) and to become a leader in this
niche in the country.
Growth - To expand the business at a rate that is both challenging and
manageable, serving the market with innovation and adaptability.
Financial Institutions
Nepal Rastra Bank
Global Bank Ltd.
Nabil Bank Ltd.
Rastriya Banijya Bank
Kumari Bank Ltd.
Nepal Bank Ltd.
Agriculture Dev. Bank Ltd.
Government Institutions
Nepal Water Supply Corp
Employees Provident
Fund
Nepal Drugs Ltd.
National Trading Ltd
Hetauda Cement Industry
National Trust for Nature
Conservation
Chilime Hydro Power Co.
Other Institutions
Butwal Power Co. Ltd.
Himal Media Pvt. Ltd.
Everest Express Travels
Rato Bungala School
Siddhartha Vanasthali
School
TEWA
Soaltee Hotel Ltd.
Ltd.
Citizens Investment Trust
DCBL Bank Ltd.
Ace Development Bank
Vibor Development Bank
Bhaju Ratna Finance Co.
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
10
staying on top of frequent changes to tax codes and accounting regulations and
provide increased levels of information transparency, visibility of controls and clarity
of accountability by outsourcing of accounting system.
Company Establishment: The firm also extends its services towards establishment
of organizations and corporation. The firm helps in registration in company registrar
office as per the company act 2063, acquiring of certificate of commencement of
business, etc.
Tax Management: 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, timely filing and payment of tax
to Inland Revenue Department, etc.
Consultancy and Training
The firm also offers advising and counseling services on matters relating to
accounting system, tax procedures, company establishment, and numerous other
financial matters. The firm provides consultancy services in areas of Country
Strategic Papers, Restructuring policies and Internal Control System Development,
Mergers/Demergers, Financial Controller/ Due Diligence Review/Special Review of
various Infrastructure projects on behalf of commercial banks; Forensic Audits, etc.
11
single department and the work processes are done through creation of teams/unit for
particular work and service. The senior managers create a team comprising of junior
managers and Articleships/trainees. 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.
Figure 1: Organizational Structure
Senior Manager
Audit
Senior Manager
Finance
Senior Manager
Project Management
Senior Manager
Consulting
Junior Managers
Articleships/Trainees
12
13
Customer:
Wherever I was assigned to work, I found the customers there; mostly give priority to
the quick delivery of the required services and reporting rather than the quality of
work and reports. I must say that the delivery performance of the organization is
better as they do not cross the estimated time period and most often the necessary
work and reporting is completed before the prescheduled deadline.
I feel that the quality of the work is good from the perspective of number of times the
report gets checked and verified before the final report is handed over to the customer.
Moreover, the quality of work not only depends upon the employees work
performance but also depends upon the role played by the customers. Because of the
quality of the work, delivery process and period, and the degree of customization
provided as per the need of the customers, I found high degree of customer retention.
Based on the customer retention rate and the delivery performance, I came to
conclusion that the customers are fairly satisfied with the services they acquire.
Internal business processes:
Since the organization provides auditing and consulting services, it requires high
degree of customer interaction and customization, internal business processes cannot
be automated and the mass production cannot be achieved. The quality and speed of
work not only depends upon the employees work performance but also depends upon
the role played by the customers. Since there are no different departments, there is no
duplication of activities across departments and there arises no questioning on process
alignment.
14
Chapter II
Job Profile and Activities Performed
2.1 Job Profile and Activities Performed:
I was inducted as a team member in various audit and consulting assignment where
my job and responsibility included vouching, preparation of working papers,
preparation of preliminary trial balance and financial statement, filing of e-returns for
taxation purpose and gratuity fund calculation. All these activities that I have
performed during my internship programme are the parts of the different services
offered by the organization to its customers. Thus, these activities are the
components/part of the organizational activities which aided in providing services to
its clients/customers.
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. According to
F R M De Paula, Vouching does not mean merely the inspection of receipts with the
cash book, but includes the examination of the transactions of a business together with
documentary and other evidence of sufficient validity to satisfy an auditor that such
transactions are in order, have been properly authorized and are correctly recorded in
the books.
I performed vouching at Shiva Shree Hydropower Pvt Ltd (Upper Chaku A
Hydroelectric Project 22.2 MW), Bluebird Investment Pvt Ltd and Machhapuchhre
Herbals Pvt Ltd.
I conducted vouching for a period from 13 Feb 2012 to 15 February 2013 at Shiva
Shree Hydropower Pvt Ltd since J.B. Rajbhandary & DiBins was appointed as the
financial consultant by the Lead Bank, Citizens Bank International Ltd for Capital
Expenditure Certification and Equity Certification for the partial disbursement of loan
under consortium financing.
15
Similarly, I did vouching for a period from 29th Mangsir 2068 to 31st Ashadh 2069 in
case of Bluebird Investment Pvt Ltd, for the preparation of preliminary trial balance
and financial statements for general accounting and tax purpose.
For Machhapuchhre Herbals Pvt Ltd, I performed vouching from 1st Baisakh 2069 to
15th Chaitra 2069 for the purpose of Fixed Assets Valuation and Net worth valuation
of the company for the purpose of term loan disbursement from Civil Bank Ltd.
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:
1. 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.
2. 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 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.
3. Vouching is important to see whether evidences are correct or not:
An auditor checks the books of accounts to detect errors and frauds. Frauds may
be 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.
16
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.
17
18
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.
19
year is half, the estimate should include the actual taxpayers 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
The installments have to be paid as follows:
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
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
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.
Filing of Returns of Income:
In addition to the estimate (during) an income year every taxpayer has to file a return
of income not later than 3 months after the end of each income year. . So, the due date
of filing annual tax returns for the income year 2068/69 (2011/12) is Asoj end 2069
(Mid October, 2012). However, a taxpayer may have this due date extended for a
maximum period of 3 months i.e. up to Poush end 2069 (mid January, 2013) in case
he files an application in the IRD with bonafide reasons for such extension.
By contrast to the estimate, this final return is based on the tax facts of the previous
year so that possible misjudgments or wrong estimates are then corrected. Therefore,
the taxpayer has, first, to submit an estimate for the year ahead. Second, as explained
20
above the taxpayer should scrutinize and adjust this estimate on the occasion of the
payments of the second and third installment. Third, at the end of the income year the
taxpayer has to file a tax return based upon the facts of the previous year. That leads
to an adjustment of the estimates and to a final tax liability. For the income tax return
the respective forms provided by the tax authorities are to be utilized. The income tax
return needs to be signed by the taxpayer or the manager. Furthermore, to be included
is a statement that the return is complete, true and accurate.
Table 2: Fines and Penalty on Failure to submit advance tax and tax return
Particulars
For failure to submit estimated
income statement
For delay in filing annual tax return
*Gross Assessable income of a person for a period means assessable income of the person for the
period calculated by including all the items of taxable income and ignoring all allowable expenses, for
the period.
21
The Labour Act 1992 has made provision for gratuity facilities to the permanent
employees to be provided by the employer under Chapter 6 section 39. According to
Labour Act 1992, every firm needs to maintain Gratuity fund for its permanent
employees. The gratuity fund is required to be deposited in NRB licensed/permitted
banks of financial institutions only.
In the event that any permanent worker or employee of the establishment who has
completed three years or more of service retires because of age or after having his
resignation approved, or leaves the service of the establishment in any other way, he
shall be entitled to gratuity in a lump sum at the following rates:
Table 3: Gratuity Rate and Calculation
Time
3-8 years
8-15 years
15 years and
above
Rate
1/2 of 1 month
Basic Salary
2/3 of 1 month
Basic Salary
1 of 1 month
Basic Salary
Years of service
Current date date of appointment of
permanent employee
Current date date of appointment of
permanent employee
Current date date of appointment of
permanent employee
Total
Gratuity
Rate * Years
of Service
Rate * Years
of Service
Rate * Years
of Service
Gratuity for the year, say FY 2012/2013 = Total Gratuity till 2012/2013 - Total
Gratuity till 2011/2012
I was lucky to get opportunity to learn gratuity calculation and also witnessed the
gratuity calculation of Fishtail Hotel, Lakeside, Pokhara. Gratuity fund is to be
calculated as the above mentioned procedure. However, since Fishtail Hotel had not
created any Gratuity fund in the past, the Gratuity fund was calculated on the
following way so that the Gratuity deposit can be financed by operating cash flows.
Gratuity Liability Calculation:
Table 4: Gratuity Liability Calculation:
Particulars
Opening Balance of Gratuity Liability
Less: Payment Before the Year
Previous Year Balance
Add: Current year Gratuity
Total Gratuity Liability
Amount
XXX
XXX
XXX
XXX
XXX
22
Particulars
Opening Balance Of Gratuity Fund
Add: Current Years Gratuity Deposit
Add: Previous Gratuity Liability Deposit
Closing Balance Of Gratuity Fund
Interest on Gratuity fund account (%)
Add: Interest on Gratuity fund account (amount)
Total Bank Balance of Gratuity Fund
Less: Payment for the year
Remaining Bank Balance of Gratuity Fund
Total Gratuity Liability
Less: Payment for the year
Remaining Gratuity Liability
Amount
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
23
was submitted to National Trading Limited. Had the report with calculation error was
submitted, it would have created a negative impact on the image and reputation of the
organization.
Similarly, while I was assigned at Shiva Shree Hydropower Pvt Ltd, there once
occurred a problem of carrying a huge file consisting of all the working papers and
documents to the office after 5 p.m. By the time we would have reached the office,
the office would have been closed. So, I told my senior colleague that I would take the
responsibility of the file and would bring the file in office next day. So, we didnt
have to leave our confidential documents at the customers office because of my
initiative.
When my team had just finished the assigned work at the client, until I was reassigned to other team for other customers, I had to stay in the office. I reached the
office at sharp 10:00 a.m. and found that no other articles and trainees had come to
office by that time. When I entered the meeting room, where articles and trainees used
to gather if they had no work, I found meeting room quite messy with many files and
documents spread over the tables and the sofa. So, I arranged the documents and put
the documents inside the respective files and stacked them in one of the corners of the
meeting room. It didnt look quite messy after my little effort.
24
that for such kind of friendliness and rapport, there is great role of informal talks. The
organization had a culture of having breaks time and again. Employees at levels used
to go outside the office premise to have some tea and cigarettes time and again. This
provided great opportunity for the new comers like me to get acquainted with the
organization and the employees.
Another important thing I got to observe during my internship was the punctuality at
workplace. I observed that employees tend to come to office mostly between 10:30
a.m. and 11:00 a.m. although the official time was 10:00 a.m. Since I had to attend
class till 9:00 a.m. and after having light breakfast near the college premise, I always
reach office before 10:00 a.m. and always had to sit alone for around half an hour
before some one arrives. When I was assigned for the job at one of the customers, I
found the same not only with my seniors but also with the employees of the client
organization. Thus, what I came to conclude is that we have become very lazy and
dont give importance to time and its value. We always find the other person or
activity to blame for our lateness and our habit or laziness.
The next thing I got to observe was the way audit firm operates. Before my internship
I had literally no idea how audit firm operates. I used to think that audit firms were
big organizations like that of banks and other financial institutions. But I found totally
different. Audit firms need not necessarily have big buildings and infrastructures. I
realized that their biggest assets are the human resources. Even if the audit firms are
small that can be accommodated to 4 5 small rooms, audit firms provides
employment to large number of people. Although J.B. Rajbhandary & DiBins was
accommodated at merely 1600 sq ft, it provided employment to around 55 employees.
It is possible because employees work at the clients office most of the time. If all the
employees were to work at office at the same time, no work would have been
completed as there would be no place even for standing. I got the opportunity to learn
the normal day to day operations of the audit firm. Audit firms provide various
auditing and consulting services to the customers based on the need of the customers.
Based on the nature and type of service to be offered, a team of expert comprising of
senior managers, junior managers and articles are created by the junior associate and
are assigned certain duties and responsibilities. Based on the instruction, the team
member performs their duties at the clients organization and prepares report
accordingly. The report prepared is reviewed and verified by the junior associates and
25
finally reviewed by the senior partner/s before the report is duly signed and submitted
to the client.
Another thing I got to notice was the investment behavior of employees of the
organization. Since all the employees are either chartered accountant, students of
chartered accountant, registered auditors, etc. I found huge degree of investment
behaviours and practices among them. They had investments on common stocks,
initial public offerings, mutual funds, etc. Since they are financial analysts, they
invests on stocks and securities based on the past organizational performance their
potential future performances rather than on speculation and other peoples behaviour.
I also realized that documentation is an important part of auditing process. It
constitutes a permanent record of the objectives and scope of the audit, as well as the
work performed during the audit. They contain the back-up material in support of the
audit findings, conclusions, opinions, and comments. I found huge number of big files
all over the place. The drawers and cabinets built to store files and documents were
full and the documents were even stored on the top of shelves, under the tables, over
the working spaces, etc. wherever there was space. I found documents which were 10
15 years old stored at the shelves. There were so many documents that files were
stacked one after another even at the top of the cupboards.
26
Chapter III
Lessons Learnt and Feedback
3.1 Key Skill and Attitudes Learnt:
Internship programme 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 programme, I got an opportunity to expose myself to the
working environment and unleash my potential. The past seven weeks at J.B.
Rajbhandary & DiBins was an excellent opportunity for me to gain valuable
experience in the auditing and accounting field. The major skills and attitudes that I
was able learn during internship period are as follows:
Simultaneous study and working skill:
The internship programme made me explore my potential and ability to work and
study parallel. I previously believed that I could not take work and study side by side.
But my internship programme helped me develop and enhance skill of studying and
working simultaneously.
Team work:
During my internship, I was inducted as a team member and was assigned various
activities that had to be performed 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 synergy benefits. On the contrary, loafing by some team members could lead
to huge negative impacts on the overall team performance. I learned the importance of
team work and some general skills required while working 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 and reporting practices.
27
28
on the eyes of customers and external people who visits the office. So proper filing
would help in avoiding such situation.
Giving more importance and slight strictness to punctuality:
During my internship, I found out that employees rarely reach the office by 10:00
a.m. I feel that the organization should take initiative on creating corporate culture of
reaching office on time since there his positive relationship between the punctuality
and work performance of the employees. So I recommend the organization to give
importance and imposing slight degree of strictness on the punctuality of the
employees.
29
References
Adhikari, M. D. (2011). Nepal Tax Facts. Kathmandu: Baker Tilly Nepal Pvt Ltd.
Importance of Vouching. (2012, February). Retrieved April 11, 2013, from Blogspot:
http://accountlearning.blogspot.com/2012/02/importance-of-vouching.html
Inland Revenue Department. (2002). Income Tax Act 2002 Handbook. Kathmandu:
Inland Revenue Government.
Mumbai, U. o. (n.d.). Introduction to Auditing. Retrieved April 16, 2013, from
University of Mumbai:
http://mu.ac.in/myweb_test/study%20TYBCom%20Accountancy%20AuditingII.pdf
30
Annexure
Bluebird Investment Pvt. Ltd.
Trial Balance Format
From 29 Mangshir 2068 to 31 Ashad 2069
Particulars
Capital
Lumbini Bank Long Term Loan A/c
Lumbini Bank Overdraft A/c
Serving Minds Pvt. Ltd.
TDS Payable
Audit Fee Payable
Inventory
Cash in hand
HGI Insurance Premium Expense
Prepaid HGI Insurance Premium
Audit Fee
Legal Fee
Interest Expenses
Bank charges and commission
Rent Expenses
Advertisement Expenses
Miscellaneous Expenses
Firm Registration Expenses
Printing and Stationary Expenses
Malpot Charges
Total
Dr. Amt
Cr. Amt
31
Bluebird Investment Pvt. Ltd.
Profit and Loss Statement Format
From 29 Mangshir 2068 to 31 Ashad 2069
Particulars
Income
Direct Cost
Gross Profit
Other Commercial Income
Commercial Expenditure:
Distribution Cost
Administrative Cost
Profit from Operation
Interest Expenditure
Depreciation
Income from subsidiary company
Income from other investment
Investment cost written off
Profit and loss from sales of assets
Loss on Business segregation
Abnormal Income or deficit
profit(loss) before tax
Income Tax
Profit After tax
Profit (Loss) Upto previous year
Profit/(Loss) Balance
Appropriation:
a. Ordinary Reserve Fund
b. Proposed Dividend
- On ordinary Shares
-on Preference shares
c. Other reserve fund
d. Income tax in respect to previous year
d. balance of profit & loss transferred to
balance sheet
32
33
Bluebird Investment Pvt. Ltd.
Cashflow Statement Format
From 29 Mangshir 2068 to 31 Ashad 2069
Particulars
A Cashflow from Operational Activities
1. Profit(Loss) before income tax
Add:
Depreciation
Preliminary and deferred expenses
2. Cashflow Before change in changeable capital
(Increase)/decrease in current assets
Increase /(decrease) in current liabilities
Operational cash flow
Net Cash flow from Operational Activities (1+2)
B Cash flow from Investing activities
a. Interest or Dividend
b. (Purchase) Sale of fixed assets/Investment
c. Increase or (decrease) in Loans or deposits
Current Period