CHAPTER -4

ENVIRONMENTAL AUDIT PRACTICES

4.1 Introduction

Environment Audit in India

Audit acquires information and provides additional discipline on the internal process
to validate proper functioning of the distinct system. The concept of environmental
audit has experienced expressive growth and development over the decade globally.
Environmental audit should include not only all the constituents of what goes on by
the brand name, but also the impacts created thereupon and elimination or
minimization of any deleterious consequences. Industry can clearly benefit from a
critical self-examination of the processes and technologies it employs, to observe in
which areas there is opportunity for improvement and surmise the dormant problem
areas, particularly pollution and human health. Environmental audit is a very clear
part of that self-analysis. Environmental audit investigates the positive and negative
consequences of the activities of an enterprise on environment.

Environmental audit evaluates environmental performance and provides an in-depth

study of the company processes and any progress in realizing long-term strategic
goals. It is a vast area under the authority of companies, corporate stakeholders,
environmental protection organizations and departments of law and justice at all
levels of government in all the countries- underdeveloped, developing and developed.
Though third world governments do not exert much of the regulations as far as
environmental regulations and reporting are concerned, the urge to introduce
environmental accounting and audit standards is being felt in most of these countries.

Environmental audit is fundamentally a management tool comprising a methodical,

documented, periodic and objective evaluation of environmental organization,
management and equipment in order to know how well they are performing to
safeguard the environment with the help of facilitating management control of
environmental practices and assuring compliance with company policies, which
would include meeting regulatory requirements. Environmental auditing is a
discipline which has its origin in the United States and its importance is slowly
increasing the world over. Both private sector companies and public sector companies

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have become aware of the environmental management, health and safety risks. In the
absence of accepted practices of environmental auditing, different companies have
been working on environmental audit in different directions and perspectives. In
simple words, environmental audit is the examination of the correctness of
environment accounts.

4.2 Present policies

The Supreme Audit Institution of India through its various field offices has been
conducting compliance audit of government laws, rules and legislations as well as
performance audit of government programmes and schemes. Environmental audits
have been conducted by SAI India for the last 25 years. This process was formalised
with the introduction of specialized guidelines {MSO (Audit) 2002} for conduct of
environmental audits. This laid down broad guidelines to enable SAI India auditors to
examine whether the audit institutions gave due regard to the efforts of promulgating
sustainability development and environmental concerns, where warranted. With a
view to bring in a focused attention and consolidate the approach for better outputs
and infusing new techniques and tools, SAI India designated the office of the
Principal Director of Audit (Scientific Departments) as the nodal office for
Environmental Audit. This office undertakes exclusively, environmental audits of
central government.

The current work in the area of environmental auditing being done by SAI India
includes:

 Preparing ―Green Office Guidelines‖ which is a write-up for guiding SAI India
offices all over the country to reduce the detrimental effects of office operation on
the environment by more sustainable and efficient use of office resources. This
write-up had also been adopted by the Ministry of Environment of Forests and is
being circulated to all central government offices in India.

 Assisting the Ministry of Environment and Forests in preparing a policy for the
effective management of Waste in India. As representative of SAI India, Principal
Director (Scientific Departments) is a member of a committee which will evolve
policy and strategy for the better management of waste in India based on the
recommendations made by SAI India in its Audit Report on ―Management of
Waste in India‖.

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 Preparing guidelines for ―4th E—Integrating Environmental concerns in
Auditing‖ which is guidance on incorporating environmental concerns in all kinds
of audit.

The audits can be divided into five categories—(i) Air issues (ii) Water issues (iii)
Waste (iv) Biodiversity (v) Environment Management System. SAI India is an active
member of INTOSAI WGEA and ASOSAI Working Group on Environment.

 SAI India has been conducting month long International training programmes on
Environmental Audit. More than 100 participants from 40 countries have
participated over the years.

 SAI India is a member of the 8th ASOSAI Research Project on „Guidance on

conducting Environmental Audit‟ along with China Pakistan, Malaysia and Saudi
Arabia. The research group is in process of framing environmental audit
guidelines specifically suited for use by member ASOSAI nations.

 An Indo Polish joint seminar on Environmental Audit was held in November 2007
in Warsaw. The two countries are collaborating to share their experiences in the
field of environmental audit.

 SAI India also imparted specialized training in environmental audits to officers of

SAI Bhutan in July 2007.

 ASOSAI seminar in China on auditing air pollution issues was attended by

representatives of SAI India.

 India is a member in the INTOSAI Working Group on Environmental Audit and

has been actively participating in the committee deliberations.

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4.3 Application of policies

The current environment reporting in select marble companies are presented as under:

Table-4.1
Companies Environment Audit
Reporting Type
Quantitative Qualitative /Descriptive Both
Determinant of
Presence Physical
Environmental Disclosure Monetary
units 1-2 1 >1
pictorial
para page page
(MEMA) (PEMA)
Importance/ Weight age 1 2 1 1 2 3 4 5
Absence / Presence 0/1 0/1 0/1 0/1 0/1 0/1 0/1 0/1
RK Marble Pvt. Ltd
External Environmental Audit 0 0 0 0 0 0 0 0
Internal Environmental Audit 1 0 0 1 0 0 0 0
Mumal Marble Pvt. Ltd
External Environmental Audit 0 0 0 0 0 0 0 0
Internal Environmental Audit 1 0 0 1 0 0 0 0
Evershine Marble Pvt. Ltd
External Environmental Audit 0 0 0 0 0 0 0 0
Internal Environmental Audit 0 0 0 0 0 0 0 0
Chandna Marble Pvt. Ltd
External Environmental Audit 0 0 0 0 0 0 0 0
Internal Environmental Audit 0 0 0 0 0 0 0 0
Bapu Marble Pvt. Ltd
External Environmental Audit 0 0 0 0 0 0 0 0
Internal Environmental Audit 1 0 0 1 0 0 0 0

Environmental audits and Awareness: Audits are intended to quantify

environmental performance and environmental position. In this way they perform an
analogous function to financial audits. An environmental audit report ideally contains
a statement of environmental performance and environmental position, and may also
aim to define what needs to be done to sustain or improve on indicators of such
performance and position.

Environmental audits are reviews of a company's operations and processes for the
purpose of assessing compliance with environmental rules and regulations.
Environmental audits cover a broad spectrum of business activities and areas,
including buildings and building sites; activities and procedures; industrial and
commercial developments; and engineering hazard and operability studies. They can

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 range from legally mandated reviews of plant safety or emissions to voluntary
inspections of environmental practices. The term environmental audit means different
things to different people. Terms such as assessment, survey and review are used to
describe the same type of activity. Furthermore, some organizations consider that an
―environmental audit‖ addresses only environmental matters, whereas others use the
term to mean an audit of health, safety and environmental matters. Although there is
no universal definition, auditing, as practiced by many leading companies, follows the
same basic philosophy and approach summarized by the broad definition adopted by
the International Chambers of Commerce (ICC) in its publication Environmental
Auditing (1989). The ICC defines environmental auditing as: A management tool
comprising a systematic, documented periodic and objective evaluation of how well
environmental organization, management and equipment are performing, with the aim
of helping safeguard the environment.

The given table describes the audit practices by sample companies and also their
reporting of environmental awareness programmes and training organized for
employees.

Table-4.2
Result for audit and awareness efforts
External Internal Environmental
Training to % of
Environmental Environmental conservation
Employees Disclosure
Audit Audit seminar
RK Marble Pvt. Ltd 0 1 1 1 75%
Mumal Marble Pvt.
0 1 0 1 50%
Ltd
Evershine Marble
0 0 0 1 25%
Pvt. Ltd
Chandna Marble
0 0 1 1 50%
Pvt. Ltd
Bapu Marble Pvt.
0 1 0 1 50%
Ltd
Grand Total 0 3 2 5
% of Disclosure 0% 60% 40% 100%

It can be concluded from the above table that only 3 out of 5 sample companies are
conducting some kind of internal audit for environmental protection activities. No
company in the sample taken is performing external audit of their environmental

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protection and other related facts. Only 40% of marble companies are conducting
Environmental conservation seminar and but they all are giving some training session
of protection techniques. Company wise analysis also shows that RK Marble Pvt. Ltd
is disclosing 75 percent of information on audit and awareness as compared to other
companies like Mumal Marble Pvt. Ltd (50 percent), Evershine Marble Pvt. Ltd (25
percent), Chandna Marble Pvt. Ltd (50 percent) and Bapu Marble Pvt. Ltd (50
percent).

4.4 Future policies

A comprehensive assessment of compliance with government environmental

.regulations requires an analysis of facility performance against numerous
environmental statutes and implementing regulations. Until a policy is promulgated
on the state and government levels, environmental audits will not be completely safe.
The concern that environmental audits will be used against the company doing self
assessment has caused fewer audits than necessary to be under taken voluntarily.
Alternatively, the findings and conclusions in some audits are sanitized, reducing their
usefulness. It appears clear that legislation is needed and stands a good chance of
passage. With many states establishing audit privileges, EPA is under pressure to keep
pace. When such legislation passes, states like New Jersey will dramatically change
their treatment of audit privileges. There is a simple, sensible method for classifying
and subsequently choosing external auditors. It relies on matching needs with
knowledge and skill levels. There are important differences among auditors'
knowledge and skill levels and this has a substantial impact on audits. First, evaluate
and understand auditing needs. Is a focused or limited audit sufficient? The better the
need is understood, the better will be the decision to choose the external auditor. As
an example, a large international consulting firm is probably best qualified to audit the
effectiveness of worldwide environmental program operations for an international
firm or government organization. Alternately, to effectively audit the compliance
status of commercial real estate in New Jersey, the best firm could be the one closest
to the property with a good track record in that particular type of audit. These
differences are dramatic but they make an important point. Each company and each
auditor has its own style and strengths. These should be matched with a client's needs
and specific facilities to ensure the audit is meaningful.

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4.5 Suggestion

Environmental auditing provisions are most likely to be proposed in settlement

negotiations While environmental auditing is not yet fully evolved, it has followed a
predictable path of trends that indicate what auditing can become. First, as an
information-based process, environmental auditing is both enhanced and being shaped
by automated tools. Next, ethical issues will dictate tighter control of information,
influence auditor sele1ction, and shape auditing practices. In addition, environmental
auditing will inevitably become professionalized. Currently, diversification is making
auditing both broader and more focused. Environmental auditing through
globalization could pioneer the effective introduction and enforcement of worldwide
environmental standards. External auditor selection will continue to increase in
importance because of ethics, diversification, and specialization. As these trends
evolve, auditing will play an increasingly important role as a flexible and responsive
analytical tool for environmental management and compliance.

An effective environmental auditing system will likely include the following general
elements:

 Explicit top management Support for environmental auditing and commitment to

follow-up on audit findings. Management support may be demonstrated by a
written policy articulating upper management support for the auditing program,
and for compliance with all pertinent requirements, including corporate policies
and permit requirements as well as governing and local statutes and regulations.
 Management support for the auditing program also should be demonstrated by an
explicit written commitment to follow-up on audit findings to correct identified
problems and prevent their recurrence.
 An environmental auditing function independent of audited activities. The status
or organizational locus of environmental auditors should be sufficient to ensure
objective and unobstructed inquiry, observation and testing. Auditor objectivity
should not be impaired by personal relationships, financial or other conflicts of
interest, interference with free inquiry or judgment or fear of potential retribution.
 Adequate team staffing and auditor training. Environmental auditors should
possess or have ready access to the knowledge, skills, and disciplines needed to
accomplish audit objectives. Each individual auditor should comply with the
company's professional standards of conduct. Auditors, whether full-time or part-

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 time, should maintain their technical and analytical competence through
continuing education and training.
 Explicit audit program objectives, scope, resources and frequency. At a minimum,
audit objectives should include assessing compliance with applicable
environmental laws and evaluating the adequacy of internal compliance policies.
procedures and personnel training programs to ensure continued compliance.
 Audits should be based on a process which provides auditors: all corporate
policies, permits, and government, state, and local regulations pertinent to the
facility, and checklists or protocols addressing specific features that should be
evaluated by auditors.
 Explicit written audit procedures generally should be used for planning audits.
Establishing audit scope, examining and evaluating audit findings, communicating
audit results and following-up.
 A process which collects, analyzes, interprets and documents information
sufficient to achieve audit objectives.
 Information should be collected before and during an onsite visit regarding
environmental compliance Environmental management effectiveness and other
matters related to audit objectives and scope. This information should be
sufficient, reliable, relevant and useful to provide a sound basis for audit findings
and recommendations.
 Sufficient information is factual, adequate and convincing so that a prudent
informed person would be likely to reach the same conclusions as the auditor.
 Reliable information is the best attainable through use of appropriate audit
techniques.
 Relevant information supports audit findings and recommendations and is
consistent with the objectives for the audit.
 Useful information helps the organization meet its goals.
 The audit process should include a periodic review of the reliability and integrity
of this information and the means used to identify, measure, classify and report it.
Audit procedures, including the testing and sampling techniques employed, should
be selected in advance, to the extent practical, and expanded or altered if
circumstances warrant. The process of collecting, analyzing, interpreting, and
documenting information should provide reasonable assurance that audit
objectivity is maintained and audit goals are met.

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 A process which includes specific procedures to promptly prepare candid, clear
and appropriate written reports on audit findings, corrective actions and schedules
for implementation.
 Procedures should be in place to ensure that such information is communicated to
managers, including facility and corporate management, who can evaluate the
information and ensure correction of identified problems. Procedures also should
be in place for determining what internal findings are reportable to state or
government
 A process which includes quality assurance procedures to assure the accuracy and
thoroughness of environmental audits. Quality assurance may be accomplished
through supervision, Independent internal reviews, external reviews, or a
combination of these approaches.

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