Kathmandu- The appointment of auditors at the Agricultural Development Bank (ADB) has come under serious legal scrutiny, with questions raised over clear violations of existing company law and disagreements emerging between the bank, auditors, and the Nepal Institute of Chartered Accountants (ICAN).
The controversy dates back to last year’s 18th Annual General Meeting (AGM) of the bank, which failed to appoint an auditor. Although the AGM is legally mandated to appoint auditors, determine their terms of service, and fix remuneration, the meeting instead passed an agenda stating that the auditor’s name would be approved later, citing the non-receipt of a list from the Office of the Auditor General. As a result, the AGM concluded without formally appointing an auditor, leaving the matter unresolved.
Subsequently, the Office of the Auditor General sent a list of auditors to the bank. Based on this list, ADB entered into agreements with Yuddharaj Oli of PYC and Associates, Mahesh Guragain of MGS and Associates, and Ashesh Raj Bahak of GP Raj Bahak and Company. The audit was completed accordingly, and the audit report was presented at the bank’s 19th AGM. However, it has now been revealed that the process followed for appointing the auditors was contrary to the law.
According to the Companies Act, 2063, if an AGM fails to appoint an auditor, the authority to do so lies with the Office of the Registrar of Companies. Section 113 of the Act clearly states that in the case of a public company listed on the stock exchange, the Registrar of Companies may appoint an auditor upon request from the board of directors. As ADB is a listed public company, its board should have formally requested the Registrar of Companies to appoint an auditor. This procedure was not followed.
Instead, the bank proceeded with the audit solely based on the list provided by the Office of the Auditor General, without any appointment by the Registrar of Companies. This deviation has raised serious questions about the legal validity of the audit.
Conflicting explanations have emerged from the bank and the auditors. One of the auditors claimed that the process was carried out after coordination with the Office of the Registrar of Companies. However, ADB’s Information Officer Him Lal Poudel denied this, stating that since the AGM had already approved the agenda to appoint auditors from the list sent by the Auditor General, there was no need to approach the Registrar’s office. He argued that once the AGM passed the agenda, other legal provisions did not need to be considered.
This position, however, contradicts Nepal Standards on Auditing (NSA) 210, which requires auditors to ensure that their appointment is legally valid before accepting an audit engagement.
The issue has further intensified as the bank’s 19th AGM has also concluded without appointing an auditor. For the second consecutive year, the bank has attempted to proceed with audit-related work without following the legally prescribed process. After concerns were reportedly raised within the Office of the Auditor General regarding the illegality of last year’s audit, the bank has now entered into internal legal consultations.
ADB has stated that it will also hold discussions with the regulator, ICAN. The matter is particularly sensitive as ICAN’s current councilor Aman Upreti serves as the bank’s internal auditor. Bank employees allege that assurances were given internally that the issue would not be challenged, citing the senior status of the auditors involved.
Within ICAN itself, differing views have surfaced. Some members argue that the case should be referred to the disciplinary committee, as the auditors failed to verify the legality of their appointment. Others, however, are reportedly attempting to resolve the issue quietly, claiming that questioning the work of former ICAN leadership could harm the institution’s reputation.
ICAN Chairman Nil Bahadur Saru Magar has stated that he was initially unaware of the ADB case. However, he clarified that for a listed public company, the AGM must appoint the auditor based on the recommendation of the Auditor General, and if that is not possible, the Registrar of Companies must appoint one upon request. In the case of ADB, the audit was conducted based solely on a list sent by the Auditor General, without involvement of the Registrar of Companies—an approach he acknowledged as incorrect.
The issue has now raised broader concerns about regulatory compliance, auditor accountability, and governance standards in state-influenced financial institutions.
