How ACCA is playing a leading role in the development of Nepal's fledgling internal audit function.
Biraj Pradhan is ACCA’s International Assembly representative for the Middle East & South Asia and is the head of internal audit for Kathmandu University in Nepal. Neville de Spretter, a member of ACCA UK’s Internal Audit Network Panel, caught up with Biraj over lunch (pictured right) when Biraj was in London for the annual ACCA International Assembly meeting and discussed a wide range of internal audit topics.
Kathmandu University is the largest university in Nepal with schools in art, education, engineering, law, management, medical science and science. Its school of management – Kathmandu University School of Management (KUSOM) – recently signed a memorandum of understanding with ACCA and has good tie-ups with many international universities. The chancellor of the University is the Rt Honourable Prime Minister of Nepal, and the pro-chancellor is the Honourable Minister for Education.
The value of governance Governance has a special importance when you are going through change. Nepal is a growing economy and Biraj believes that good governance must form the main root of that growth. If internal controls are in place and internal audit is regarded as a business partner by the rest of the organisation – rather than just traditional 'policing' auditors – then they can provide a value added service. Building a robust system with good processes that employ, develop and improve on the best practices of the West will help the university to grow significantly. The university has previously followed traditional methods but Biraj is now helping to establish those good governance principles that will help the university build up its reputation further.
As head of internal audit, Biraj reports to the registrar, who is the head of finance and administration. The registrar and vice chancellor were appointed in 2013 and are forward looking individuals – they hired a qualified accountant to be the internal auditor for the first time in the university’s history. This new higher management is taking on the bigger challenge and hiring and retaining qualified accountants to ensure that they get the best advice and level of service.
The external auditor of the university is also ACCA qualified and works closely with Biraj to share knowledge and complement service. The internal audit function is part of the university and therefore subject to hierarchy and reporting lines, but the statutory auditor is independent and the close working relationship that Biraj has with him puts him in a strong position. The university is supported at the highest political level because of the importance of producing professionals to take the country forward – transparency is seen as critical in delivering those strategic objectives and consequently internal audit is in the spotlight.
International standards Neville was delighted to hear that Biraj and the university are adopting such a modern approach. Neville’s own work with the British Standards Institute resulted in the publication of BS 13500 in 2013 – Code of Practice for Delivering Effective Governance of Organisations.
Biraj explained that the university is an autonomous body so while they are incorporating international standards to a degree, they are taking a pragmatic approach and following the standards where they are in line with the aims of the university. Both men agreed that pragmatism and flexibility are needed.
BS 13500 is the over-arching code applicable around the world. Its purpose is to clarify the fundamental requirements for delivering effective governance of organisational performance, and asks, for example, whether an organisation has a clear and understandable set of strategic objectives in place. Does the organisation understand the risks that would prevent the delivery of those outcomes, and what activities are in place to mitigate risks to a tolerable, desired, affordable or acceptable level?
Biraj is very interested in the BS 13500 standard. He praised the drafting and oversight committees, saying 'It takes a lot of hard work to build these standards – I really salute the hard work behind all the experts who are brainstorming and doing all that research'.
The value of the ACCA qualification With any growing economy, education is the key to progress. There are approximately 150 ACCA members residing in Nepal. Many other Nepalese ACCA members reside in the UK, Australia and Canada because the ACCA Qualification is effectively a passport for your career. Those members in Nepal are incredibly proud of the ACCA Qualification and are forming a panel to provide professional support to new members. Having the ACCA Qualification makes you eminently employable in Nepal.
Differences between the UK and Nepal At Kathmandu University, Biraj’s open and productive relationship with the registrar has resulted in the streamlining of the accounting function and decentralisation. Random checks are used to ensure that processes are followed and there has been significant improvement in just 12 months but there is still a lot to do.
Conversely Neville highlighted that in the UK, many organisations are going the opposite route of centralising the financial accounting function and using big data through ERP systems so that managers have immediate real time access to financial and other performance data for decision-making. Non-financial managers are being trained to make better use of the data.
Biraj noted that in developed economies succ as the UK there is very good access to technology. He is familiar with the concept of big data but in Nepal they are still in learning mode so implementing the technology that would enable them to make use of big data will take time.
Integrated assurance Integrated assurance is another area of difference between the two countries – Biraj understands that integrated assurance is about integrating and aligning assurance processes to maximise risk and governance oversight and control efficiencies, and optimise overall assurance for the organisation, incorporating not just financial but also non-financial information such as brand, strategy, objectives, transparency of data, etc . But in terms of the university’s need to strengthen and confirm the basics of internal control and risk management there are a lot of things to be done before they can contemplate integrated assurance.
Biraj is in the early stages of following integrated assurance and getting the balance right between focusing on strategy and risk, and the need to ensure basics are in place and working effectively and robustly. Aligned to that is the need to make sure that there is effective working dialogue with all stakeholders, which Biraj achieves through weekly meetings with his chief executive (the registrar). It is an open and honest dialogue that is collegial and collaborative and consequently constructive. It ensures that the independent and objective remit of internal audit is fully recognised, understood and supported.
Neville de Spretter - a member of ACCA UK’s Internal Audit Network Panel
About ACCA's International Assembly ACCA’s International Assembly was formed in 1997. Its remit is to provide input into ACCA's strategy and development, through an advisory role to Council, and to convey to Council comments and suggestions from members around the world. It has a large number of representatives from across ACCA's increasingly diverse membership and meets in November each year.