4     The following paragraphs elaborate on the above basic postulates for auditing standards.

4.1   The SAI should comply with the INTOSAI Auditing Standards in all matters that are deemed material.

  • The SAI should establish a policy by which the standards are followed for the various types of work carried out by the SAI to ensure that the work and products are of high quality.
  • In general terms, a matter may be judged material if knowledge of it would be likely to influence the user of the audit report.
  • Materiality is often considered in terms of value but the inherent nature of an item or a group of items may also render a matter material as for example mandatory disclosure requirements of statutes regardless of the amounts involved.
  • In addition to materiality by value and by nature, a matter may be material because of the context in which it occurs, for example, considering an item relating to:

(a) The overall view given to the financial information;

(b) The total of which it forms a part;

(c) Associated terms;

(d) The corresponding amount in previous years.

4.2    The SAI applies its own judgment to the diverse situations that arise in the course of Government auditing.

  • It would be impracticable to establish a code of rules, sufficiently elaborate, to cater to all situations and circumstances which an Auditor might encounter. In the observance of Auditing Standards, therefore, the Auditor must exercise his judgement in determining the auditing procedures necessary in the circumstances, to afford a reasonable basis for his opinion and the content of his report.
  • In regard to audit of financial statements of public sector enterprises, the SAIs audit objectives may be akin to the objectives of audit in private sector. Correspondingly, for the audit of financial statements of the corporate sector, the government auditor may apply standard audit practices issued by the Institute of Chartered Accountants.

4.3   With increased public consciousness the demand for public accountability of persons or entities managing public resources has become increasingly evident so that there is a need for the accountability process to be in place and operating efficiently.

  • The broad aim of SAI is to safeguard the financial interests of the State and to uphold and promote public accountability and sound and economical financial management practices.
  • Audit assists the legislatures in the exercise of financial control over the executive Government.
  • The executive Government and not Audit is responsible for enforcing economy and efficiency in the expenditure of public money. It is, however, the duty of Audit to bring to light wastefulness, failures, system weaknesses, deficiencies and the circumstances leading to infructuous expenditure.
  • The entities managing public resources include commercial undertaking, e.g., entities established by statute or public sector undertakings established under the Companies Act in which the Government has a controlling interest. Irrespective of the manner in which they are constituted, their functions, degree of autonomy or funding arrangements, such entities are ultimately accountable to the Supreme law making body.

4.4 Development of adequate information control, evaluation and reporting systems within the Government will facilitate the accountability process.

  • Management of the audited entity is responsible for correctness and sufficiency of the form and content of the financial reports and other information.
  • As a special arrangement dictated by mandate, the Accounts and Entitlement offices working under the SAI compile the financial reports of the State Governments based on the initial accounts rendered to them by the respective State Government agencies. Such offices also, in some states, maintain the accounts of long term loans given to Government servants the Provident Fund accounts and the Entitlement accounts of Government personnel. Also, the SAI advises the President of India on the form of Government accounts.

4.5    Appropriate authorities should ensure the promulgation of acceptable accounting standards for financial reporting and disclosure relevant to the needs of the Government and audited entities should develop specific and measurable objectives and performance targets.

  • SAI shall advise the Government for the promulgation of acceptable accounting standards for financial reporting and disclosure relevant to the needs of Government. The audited entities should develop specific and measurable objectives and performance targets.

4.6   Consistent application of acceptable accounting standards should result in the fair presentation of the financial position and the results of operations.

  • The Auditor often expresses an opinion on the performance of an auditee and based on comparison of the information given in the financial statements over a period of time. Consistency in following the accounting standards will facilitate expression of a fair opinion.

4.7   The existence of an adequate system of internal control minimises the risk of errors and irregularities.

  • It is the responsibility of audited entity to develop adequate internal control systems to protect its resources. It is also its obligation to ensure that controls are in place and functioning to help ensure that applicable statutes and regulations are complied with and that probity and propriety are observed in decision making. However, this does not relieve the auditor from submitting proposals and recommendations to the audited entity where controls are found to be inadequate or missing.
  • Auditors should make use of the INTOSAI guidelines on evaluation of Internal Controls and reporting thereon.

4.8     Legislative enactment exists to facilitate the co-operation of audited entities in maintaining and providing access to all relevant date necessary for a comprehensive assessment of the activities under audit.

  • An Auditor has a right to inspect any office of accounts of the Union or of a State, to require that any books, papers and other documents which are relevant to the transactions to be sent to him and to put such questions to the persons in charge of the office or make such observations and call for such information as he may require for the preparation of any account or report which it is his duty to prepare.
  • Information about an audited entity acquired in the course of fie Auditor's work must not be used for purposes outside the scope of audit. and formation of an opinion or in reporting not in accordance with the 'Auditor's responsibility. It is essential that Audit maintain confidentiality regarding audit matters and the information obtained while carrying out audit engagements.

4.9    All audit activities shall be within the mandate of SAL

  • The term 'Audit' includes Financial Audit, Regularity Audit and Performance Audit. In pursuance of the Constitutional responsibility, the SAI is empowered to decide the nature, scope, extent and quantum of audit including the form and content of the audit reports in respect of audit to be conducted by him or on his behalf.

4.10    SAI should work towards improving techniques for auditing the validity of performance measures.

  • The expanding audit role of the auditors will require them to improve and develop new techniques and methodologies to assess whether reasonable and valid performance measures are used by the audited entity. Wherever practicable the auditors should acquaint themselves with techniques and methodologies of other relevant disciplines.

4.11     SAI should avoid conflict of interest between the auditor and the entity under audit.

  • The SAI performs its role by carrying out audits of the various public sector entities and by reporting the results in conformity with Reporting Standards. To fulfill this role, the SAI needs to maintain its independence and objectivity. The application of appropriate general auditing standards assists the SAI in satisfying these requirements.


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You are here    --   Chapter  --  I     ( Government Auditing )

Chapter  --  II    ( General Standards in Government Auditing )

Chapter  --  III   ( Field Standards in Government Auditing )

                                Chapter  --  IV  ( Reporting Standards )