overview of public sector auditing in india constitutional arrangement organizational arrangement...
TRANSCRIPT
Overview of Public Sector Auditing in
India
Public Sector Auditing
•Public sector audit is a form of legislative
oversight under constitutional arrangement over
the executive that ▫seeks to enhance accountability and promote
improvement in use of public resources
•Accountability is answerability for the way one
exercised power and control, mediated rights
and used discretions vested by law in public
interest.
• Constitution of India entrusted the
responsibility of public sector auditing in
India to the C&AG, assisted by IAA&D
• through Audits, CAG seeks to provide assurance to the Legislature about the functioning of the executive
• Constitution-Legislature-C&AG of India
• Constitution of India Article 148 to 151
• Duties and Power of C&AG Act 1971 (DPC Act)
Public Sector Auditing in India – Constitutional arrangement
CAG of the Union and the States
Other Federal Countries
Supreme Audit Institutions -SAIs
INTOSAI - 1953 “mutual experience benefits all”
UN Resolution 22 Dec 2011 – “strengthening Supreme Audit Institutions contributes in promoting the efficiency, accountability, effectiveness & transparency of public administration”
India- INTOSAI – Governing Board, 1 of the 4 Committees
affeAGgee
Resource
Mobilization
Resource allocation
Public Expenditure Management
Aggregate Fiscal Discipline
Legislature
Policy Executive
Public Service Delivery
Implementation
Regulators
CITIZENS as citizens with fundamental rights, as Tax payers, as service recipients,
broadly the SAI/Public Sector Auditing looks at the Executive/ Government in the following way.
Union Government comprises of about 50 Ministries with about 100 Demands for Grants and Railways
grouped into following sectors
▫Revenue Services Sector (Tax Departments)▫Economic Services Sector (Oil & Gas, Coal, other
Minerals, Industries, Power, Transport)
▫Social Service Sector (Health, Education, Culture, Social Welfare, Food Security, Rural Develop)
▫General Services Sector (Defence, Paramilitary, Administration, Legislature)
It is same in a smaller scale for all State Governments
Public Sector Audit looks at the departments as follows
A public sector entity is created to deliver a service. Primary function is to fulfil its service delivery mandate efficiently.
Their operational performance is expected to efficient- first responsibilityEntity to carry out their operations -provided with financial resources, budget. acquires all other resources like men, material, assets, land, building etc that they need for their activities. Procurement rules, GFR, FR&SR, Travel Conduct Rules, Budget Rules -to safeguard from- theft, loss, misuse, abuse, mismanage
Safeguard of resources at all the times by following the related rules is the second responsibility.Entities to keep an ‘account’ of all financial transactions and related administrative records ( sanctions)
Keeping an account of financial ‘transactions’ in the books of accounts --reporting within financial reporting framework – the third responsibility
Audited with an objective to examine
• ‘to what extent the entities service delivery operations are efficient and economical’ is performance audit.
• ‘to what extent entity could safeguard all the resources with which it is entrusted or responsible for - from theft, loss, mismanage, misuse, abuse, waste, by complying with rules compliance audit. (also natural resources)
• ‘to what extent the entity’s financial reporting is reliable’ i.e., to what extent correctly recognised, measured, the figures are classified, captured, reported in the financial statements is financial audit.
Audit of Central Government Departments is organized in the following lines
(about 50 Ministries with about 100 Demands for Grants)
▫Economic Services Sector (Oil & Gas, Coal, other Minerals, Industries, Power, Transport-Railways)
▫General Services Sector (Defence, Administration)
▫Social Service Sector (Health, Education, Culture, Social Welfare, Food Security, Rural Develop)
▫Revenue Services Sector (Tax Departments)
Audit of Central Government Departments
Audit of Economic Services Sector Departments
Audit of General, Social Services Sectors Departments
Audit of State Governments
Audit of 28 State Governments is carried out by
39 Accountants Generals (AGs)/PAGs assisted by
140 DAGs (Deputy AGs/Senior DAGs) organized into
Economic, Social, Revenue Services Departments
each State has its own cadre of AOs, AAOs, Auditors etc
AG (A&E) - Compilation of Accounts of the States and
Entitlements (Pension, PF of State Govt. Employees) in
25 States is by 27 AGs assisted by 75 DAGs. (in some only
DAGs) These office have their own cadre of Accounts
Officers, Asst. Accounts Officers, Accountants, Clerks etc.
Audit Assignments
The entire Audit activity is carried out in the form of Audit Assignments (Audits); i.e., audit of entities, subordinate offices etc of the Department/Ministries
carried out by Audit Teams (Audit Parties). It is lead by of 1 Audit Officer having 2 to 4 members -AAO, Auditors
Duration of the Audit Assignment or an Audit would vary from 1 week to 2 , 4, 6 or 8 weeks depending on the size & type of unit & type of audit. A larger Audit Assignment like Disaster Management would consist of several Audits carried out by a number of Audit Parties- locations
An Audit Assignment
Each Audit starts by having an Audit Objective
3 broad audit objectives; to what extent service delivery operations of the entity are efficient -Performance Audit
to what extent its accounting, book keeping and Financial Reporting is reliable – Financial Audit
to what extent entity could safeguard its resources from theft, loss, misuse, abuse, mismanage by complying the related Rules and instructions - Compliance Audit
Audit Objectives in turn will have sub-objectives
Whether procurement was as per prescribed rules?
Audit Criteria (against which measured)- related Rules
An Audit Assignment or An Audit
After identifying Audit Objective, Sub-Objectives and
Audit Criteria; the Audit Party selects the Sample
(4 of 15 purchase contracts - 2 years, sample of transactions)
Entry Conference: Audit Party explains the above to the
Executive to the Head of the Dept./Office. Less formal in
smaller audits (1 to 2 weeks).
explains period to be covered in audit & duration of audit
Pre-requisites: audit party to have necessary audit skills,
have knowledge of functioning of the entity, objective in
approach, display professional ethical behavior
Conducting an audit assignment consists of • Identifying the audit objective- which aspect to be
seen/checked• Audit criteria – on what criteria it should be checked• Audit checks- substantive testing, analytical procedures• Material significance of deviation- materiality• Audit evidence – to prove either way• Audit observations – communicating, replies • Exit Conference – Discussion • Audit conclusions- Audit Findings • Documentation of the entire process and evidence
Reports of the Audit Parties- Draft Inspection Reports
Vetted by Dir/DAGs formally issued - Inspection Reports
Significant audit findings processed through rigorous quality control Field & HQs –to include in Draft Audit Report the final approved version of which is CAG’s Audit Report
Audit Planning – Audit Output
each office has a number of audit parties – Dir/DAGs
each office has medium term 3 year Audit Plan
Annual Audit Plan at the beginning of the Year – which departments, which offices, how many days for each
Mandatory- Audit of Annual Accounts –Govts, PSUs, ABs
In all about 1500 audit parties – Central Govt. Depts. who audit about 15,000 ‘offices’ (units) in a year
About 2500 parties for State Govt. Depts. who audit about 35,000 ‘offices’ (units) in a year
In all 4000 teams produce about 50,000 Inspection Reports (IRs)- (Local Audit Reports) in a year.
Audit Output
Very significant & high monetary value audit findings in the Inspection Reports are processed for Audit Report
It goes through rigorous quality control process
In an year about 40 Audit Reports (Union Government) and 120 Audit Reports (State Reports) are presented to the Parliament and the Legislatures. Could be
Performance Audit, Compliance Audit, Financial, mix..
Discussed by Public Accounts Committees (PAC)-ATN
Audit Reports feature about 10% of the audit findings rest 90% remains in IRs - correspondence between the audited entity and the field audit office- ongoing
Audit Quality – Control
Quality & consistency in Quality – Auditing Standards
Auditing Standards IA&AD 1994 revised in 2002
Audit Manuals, Auditing Guidelines for each type audit
First Edition of Defence Audit Manual 1922, P&T 1928 Railway Audit 1931, Revenue Audit 1961, MSO 1963
International standards for public sector auditing- INTOSAI
International Standards of Supreme Audit Institutions-ISSAIs (इसा�ईसा)
Perquisites- Ethics, Independence, Objective & unbiased
Audit Quality Management Framework (AQMF)- Peer Reviews
(Book-keeping in public sector)Government Accounting
Financial reporting in public sector
(State Union (+ Rly) Finance Accounts
ABs, LBsFinancial Auditing
(Book-keeping in private sector)
Commercial Accounting
Financial reporting in private sector
(Commercial-Accounting Standards)
2 subjects in Semester-I 2 subjects in Semester-II 1 subject in Semester-II
Public Finance with introductory Economics (inhouse + NIPFP,
RBI,TISS)
Compliance Auditing
Performance Auditing
IT SkillsIT Audit
Public Expenditure, Revenue and Resource Management
Public Administration (e-learning, self learning module- modeled to meet the
requirement of performance audits)
Financial Management – 2 week IIM A