GOVERNMENT AUDITING (Page-2/2)
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
- 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
(c) Associated terms;
(d) The corresponding amount in
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
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
- 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
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
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
- 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
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
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