"My company is too small to need an audit." It's one of the most common misconceptions among new business owners in Nepal — and it's completely wrong. Whether you registered a one-person company last month with zero transactions, or you run a mid-sized private limited firm that hasn't turned a profit yet, the law does not care about your size, your revenue, or how active your business has been. If your company is registered, you are required to have it audited every single fiscal year.
This guide breaks down exactly who is required to conduct a statutory audit in Nepal, the legal provision that makes it mandatory, and a sector-by-sector view so you can quickly confirm where your entity stands.
The Legal Basis: Companies Act 2063, Section 111
The requirement comes directly from the Companies Act, 2063 (2006), which governs how companies are formed, managed, and reported on in Nepal. Under this Act, every company — public or private — must appoint an auditor, and that auditor must be independently licensed to practice under the Institute of Chartered Accountants of Nepal (ICAN). The appointment is typically made at the Annual General Meeting, though the board of directors may appoint the first auditor before the company's first AGM.
Once an auditor is appointed, the company's financial statements — balance sheet, profit and loss account, and supporting books of accounts — must be examined and signed off on annually. This audited report then gets filed with the Office of the Company Registrar and, in most cases, with the Inland Revenue Department alongside the company's tax return. Skipping this step is not a paperwork oversight the authorities tend to overlook; it is treated as a compliance failure with real financial and legal consequences for the company and its directors.
No Turnover or Size Threshold — This Applies Universally
Unlike some countries where small businesses below a certain revenue threshold are exempt from mandatory audits, Nepal draws no such line. The audit requirement is not based on annual turnover, number of employees, paid-up capital, or how much business activity actually took place during the year. A private limited company with zero transactions in a fiscal year is just as obligated to file an audited financial statement as a public company with hundreds of millions in revenue.
The only thing that changes as a company grows is the addition of extra compliance layers on top of the basic audit requirement — for example, companies with paid-up capital above a certain size must also form a formal audit committee. But the underlying obligation to be audited every year never disappears, regardless of company size.
Sector-by-Sector Breakdown: Who Exactly Is Covered
Private limited companies. Every private limited company registered with the Office of the Company Registrar must appoint an auditor and file audited accounts annually, regardless of how small the operation is.
Public limited companies. Public companies face the same core requirement, with additional governance layers — including restrictions on how long the same auditor can serve consecutive terms, capped at three terms for a public company's auditor.
One-person companies. A single-shareholder structure does not create an exemption. Even a company owned and run by one individual must still appoint an independent, ICAN-registered auditor rather than relying on internal review.
Foreign-invested companies. Companies with foreign shareholding are subject to the same Companies Act audit obligations as domestic companies, on top of separate reporting duties tied to the Foreign Investment and Technology Transfer Act. Foreign investors sometimes assume a lighter compliance load applies to them; in practice, it's the opposite — there's more reporting, not less.
Dormant or zero-revenue companies. A company that did no business at all during a fiscal year still needs an audited “nil” financial statement filed. Dormancy is not a recognized exemption under the Act unless the company has been formally struck off the register.
NGOs registered under the Companies Act. Non-profit entities incorporated as companies under the Companies Act (as opposed to those registered separately under the Association Registration Act) fall under the same statutory audit obligation as any other registered company.
Banks and financial institutions. Institutions regulated under the Banks and Financial Institutions Act (BAFIA) 2073 face statutory audit requirements on top of direct supervision by Nepal Rastra Bank, along with additional risk-based and IT audit obligations and more frequent reporting cycles.
Insurance companies. Insurers are subject to statutory audits under the Companies Act as well as sector-specific oversight from the insurance regulator, including solvency and actuarial reviews that go beyond a standard financial audit.
Listed companies on NEPSE. Companies listed on the Nepal Stock Exchange face statutory audit obligations under the Securities Act in addition to the Companies Act, along with a requirement to publish audited results within a set period after year-end and, for certain companies, supplementary periodic reviews.
Quick Self-Check Checklist
Ask yourself the following. If you answer "yes" to the first question, an annual statutory audit almost certainly applies to you.
• Is your entity registered with the Office of the Company Registrar under the Companies Act 2063?
• Did your company exist for any part of the fiscal year, even with no transactions?
• Do you have foreign shareholders, or are you a bank, insurer, or NEPSE-listed company?
• Has your company ever skipped filing an audited financial statement with the OCR or IRD?
• Do you currently have an ICAN-registered chartered accountant appointed as your auditor?
If you answered "no" to the last question while answering "yes" to the first two, that's the gap to close before your next filing deadline.
Conclusion
There is no version of "too small," "too new," or "too inactive" that removes a registered company in Nepal from its statutory audit obligation. From a one-person private company with no revenue to a NEPSE-listed bank, the Companies Act 2063 draws every registered entity into the same basic requirement: appoint an independent, ICAN-registered auditor and file audited accounts every fiscal year. The specifics of what additional layers apply — audit committees, actuarial reviews, quarterly disclosures — depend on your sector and size, but the core obligation itself never goes away.
If you're unsure whether your company's filings are up to date, or you need help appointing a qualified auditor before your next AGM, it's worth getting a compliance review done now rather than after a penalty notice arrives.
Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. Statutory audit requirements can vary based on specific company circumstances. Please consult an ICAN-registered Chartered Accountant for advice tailored to your situation.
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