Public Accounting

In the India Government

 Audit
• Any evaluation process carried out
systematically for a defined purpose and
resulting in an opinion that is
communicated to the interested parties
through a report
 Types of Audit
Private Audit

Organizational Government
Structure Audit

Statutory Audit
Specific Objective

Timings

Scope
Organization Specific
Timings Scope
Structure Objectives

Private Government Statutory

Audit Audit Audit
 Government Audit

• Meaning and Scope

• Who conducts it
• Submission of Report
 Meaning and Scope
• Government audit is a control measure for
public accounting of government funds.
• It covers audit of all expenditure and
receipts done by the executive and audit
of commercial accounts maintained by
public enterprises
 Public enterprises

• Public enterprises are classified under 3

categories – departmental undertaking,
statutory corporations financed by
governments and government companies
set up under companies Act,1956
 Departmental undertaking
• Part of government departments.
• Operate both at the central and state government
levels.
• Perform service-oriented, trading or manufacturing
functions and are expected to function profitably.
• Operating results of these business-type undertakings
are kept separately in accordance with normal
commercial principles, but are integrated with the
accounts of their parent departments for government
accounting purposes.
• e.g. railways, posts and telecommunications
 Statutory Corporations
• Established by the statutes of the
respective legislatures.
• Operate both at the central government
level (e.g. Oil and Natural Gas
Commission, Indian Oil Corporation, and
Food Corporation of India)
• And state government levels (e.g. state
ware housing corporations)
 Government Companies
• Set up under companies Act,1956
owned or controlled by Government
• 51 per cent of the paid up share capital
is held by the central government or by
any state govern-ment - or partly or
wholly by both.
• Includes holding companies e.g. State
Trading Corporation of India, Minerals
and Metals Trading Corporation of India
 Who Conducts

• Account and Audit Department of GOI,

headed by Comptroller and Auditor
General of India (CAG) carries the audit
work.
 Constitutional Framework of India

• Article 148-151 of the Constitution

• Office of the CAG is appointed as the
Supreme Audit Institution in India
• CAG is entrusted with Government Audit
 COMPTROLLER AND AUDITOR-
GENERAL OF INDIA

• Appointment - by the President by warrant

under his hand and seal and shall only be
removed from office in like manner

• Tenure – 6 years or 65 years of age

• The salary and other conditions of service are

determined by Parliament or by law
 Duties
• To audit the receipt and expenditure of the
union and state governments along with
departmental undertakings.
• To audit the accounts of statutory bodies
or corporations depending upon the
nature of statute governing them.
• To audit the accounts of government
companies in accordance with provisions
of Cos. Act, 1956
 GOI Accounting
• Cash Basis – Actual cash receipts and
disbursement during the financial year
• Financial Year – 1 April to 31 March
• Principle of Lapse – Revenue arrears are
taken into account but budgeted
provisions not spent during the financial
year is not carried forward.
Structure of Government Accounts
• GOI accounting are prepared in 3 Parts
• A common bank account is maintained for
all 3 parts
• Consolidated Fund of India
• Contingency Fund of India
• Public Account of India
 Consolidated Fund of India

• Government Fiscal operations are

recorded here
• Credit all revenues and Debit all expenses
• Expenditure from Consolidated fund
account is based on legislature approval,
except those that are “Charged”
 Consolidated Fund of India

• Expenditure
– Government Business Expenditures
– Repayment of Internal Debt
– Repayment of External Debt
– Release of loans to state, Union
• Receipts
– Issue of Public Notification
– T-Bills
– Secured loans from Foreign Governments
– Secured loans from International Financial Institutions
– Recovery of loan Interest
 Contingency Fund of India

• Revolving Corpus
• Imprest , estimate for expenditure not
made, any fund withdrawn is recouped
from Consolidated Fund
• Primarily used for providing immediate
relief to victims of natural calamities
• Also for implementing new policy decision
of the government.
 Public Account of India
• Public money other than deposit in consolidated
fund
• Explicit approval of parliament not required to
incur expenditure
– Small Savings, Provident Fund
– Reserve fund
– Debt,
– Deposits and Advances
– Suspense and Miscellaneous
– Remittances
– Cash Balances
 Objectives of Audit

The broad objectives of audit are to ensure

legality, regularity, economy, efficiency and
effectiveness of financial management and
public administration mainly through assessment
as to:
• whether the financial statements are properly
prepared, are complete in all respects and are
presented with adequate disclosures (financial
audit)
 Objectives of Audit

• whether the provisions of the Constitution, the

applicable laws, rules and regulations made
there under and various orders and instructions
issued by competent authority are being
complied with (compliance audit) and
• the extent to which an activity, programme or
organization operates economically, efficiently
and effectively (performance audit).
 Financial Audit

• Purpose is to verify if the accounts of the

government are properly prepared and are
complete in all respects.
• CAG certifies the finance accounts and
appropriation accounts of the union and
each of the state having a legislative
assembly, irrespective of the agency that is
responsible for compilation
 Financial Audit

• Finance Accounts – shows the receipts and

disbursements of the government for the financial
year, both revenue and capital accounts,
accounts relating to public debt and assets and
other liabilities as prescribed
• Appropriation Accounts – Shows the comparison
of government expenditure with amount
authorized by legislature with explanation of
variations, if any
 Compliance Audit
• Examines the transactions relating to
expenditure, receipts, assets and liabilities
of the government.
• Audits all Expenditure and receipt relating
to Consolidated, Contingency and Public
accounts of GOI
 Transaction Audit
• Scrutiny of different aspects of individual
transactions.
• It includes
– Audit of Expenditure
– Audit of Receipts
– Audit of Stores and Stock
– Audit of Debt, Deposits, remittances
 Audit of Expenditure
• Audit of provision of funds (used for
specific purpose)
• Audit for rules and order
• Audit of sanctions (legally available)
• Audit of Financial Proprietary
 Audit of Receipts

• Examine all revenues and other debts due to

the government have been correctly
assessed, realized and credited to
Government account by designated
authorities.
• Examine the existence of a system for
effective check on assessment
 Audit of Stores and Stock

• Stores denote all articles and materials

purchased or acquired for the use of the
government.
• Stores – purchases, vendor- Receipts,
Issues, custody, Sale, and Balance in
Stock - Write off – Prices, Ledger
 Audit of Debt, Deposits,
Remittances

• CAG is entrusted to audit all transactions

of Union and States relating to
Contingency Fund and Public Accounts.
– Debt (part of contingency fund)
– Deposits ( part of Contingency fund)
– Remittances (part of Public Accounts)
 Transactions in Debt Deposits and
Remittances
• Borrowings
• Amortization of Debt
• Investments
• Deposits
• Loans and Advances
• Suspense Accounts
• Remittances Audit
 Performance Audit
• It is an independent assessment or examination
of the extent to which an organization,
programme or scheme operates economically,
efficiently and effectively.
• Economy – Minimizing cost of resources used
for an activity with regard to appropriate quality
• Efficiency – Relationship between output
( goods, services or other results) to Resources
• Effectiveness – extent to which objectives are
acheived
 Submission of Audit Report
• Audit reports of the CAG on the accounts of the
union or states and certified finance and
appropriation accounts are submitted to the
president or governor for being laid before
parliament or state legislature
• The reports of the CAG on public enterprises of
the central government are presented to
parliament and of the state governments to
respective state legislature.