Understanding the Business

Entity
(A case study)
-Hansha Mishra
 Poll
• In your view how important is understanding a business entity for
planning a Performance Audit?
a. It is important but not critical
b. It is not important as we will gain knowledge while conducting our PA.
c. It is critical.
 Planning for an individual Performance audit

Steps in planning process

• Understanding the organisation
• Identifying and prioritising risks
• Assessing Controls in mitigating risks
• Formulating the Guideline, ADM
 Steps in planning process-1

Understanding the entity environment

• Entity’s business / programme strategy and objectives
• Resources
 Annual budget documents
 Annual / periodic performance reports
• Performance goals and standards, including accepted good practices
• Interviews with key personnel, if possible
• Entity’s business process / programme implementation structure
 Management and Organisational structure
 Reporting hierarchies
 Key decision points, including financials and key operating areas
 Background
The process of getting the Entrustment
Case study on audit of NOIDA
 Introduction
• History
The Infrastructure and Industrial Development Department (IIDD) of the Government of Uttar
Pradesh (GoUP) has eight Industrial Development Authorities (IDAs)- for planned industrial
development of these areas. Last audited in 2004-05.

• Mandate (UPIAD Act, 1976 (Sec 22)

Provided that in place or in addition to the Examiner, Local Fund Accounts, the State Government
may entrust the audit to the Accountant General, Uttar Pradesh or Controller and Auditor General
of India or to any other Auditor on such terms and conditions, in such manner, for such period and at
such time as may be agreed upon between him and the State Government.
 Logic for seeking entrustment-
• These Authorities were discharging various public functions.
• These were discharging functions of sale and transfer of land, for and on behalf of
State Government, and
• that the receipts payable into the Consolidated Fund were being retained in the Funds
of these Authorities. Being a receipt payable into the Consolidated Fund of the State,
such receipts are amenable to audit under section 16 of the CAG DPC Act.
• Further, the Authorities are acting as extension of the State Government. So, to ensure
accountability and transparency and in public interest, audit by a statutory
independent constitutional authority ie the CAG of India must be established.
• State government’s logic- audit of all the IDAs will be conducted by the
Director, Local funds Audit and not by the Accountant General
• Efforts for entrustment- letters
- meetings
- note submitted to the Governor
• Entrustment granted
• Operationalizing the entrustment- terms and conditions of audit
- understanding the entity
 Introduction to the entity

 NOIDA was constituted by Government of UP in 1976 under Section 3 of the

U.P. Industrial Area Development Act, 1976 (UPIAD Act).
 Industrial & Infrastructure Development Department (IIDD) of the
Government of UP is its administrative Department.
 In 1972, under the provisions of the U.P. Regulation of Building Operations
Act, 1958, the Government of Uttar Pradesh (GoUP) declared 50 villages of
the district Bulandshahr, situated close to Delhi as “Yamuna-Hindon-Delhi
Border Regulated Area” with the objective of regulating its development and
to address pressures of speculative land dealings in this area.
Contd….
 Subsequently, GoUP constituted (April 1976) the New Okhla Industrial
Development Authority (NOIDA) in the same region under Section 3 of the
Uttar Pradesh Industrial Area Development (UPIAD) Act, 1976 with the
objective of creating a planned, integrated and modern industrial city, well-
connected to Delhi
 Section 22 of the UPIAD Act which provides for audit either by the Director,
Local Fund Audit, or by the Comptroller and Auditor General (CAG) of India,
or any other auditor either in singular capacity or a combination thereof.
NOIDA, Management and Administration

Government of Uttar Pradesh (GoUP) constituted New Okhla Industrial

Development Authority (NOIDA) in March 1976 with the objective of
creating a planned, integrated and modern industrial city, well connected
to Delhi.
The management of the NOIDA is in the hands of a 11 member Board and
the day to day affairs are managed by a whole time CEO.
 IIDD
With respect to Noida is responsible for :
 Ensuring that all steps in the process of land acquisition for the
industries are completed in a time-bound manner.
 Issuing directions to NOIDA from time to time for efficient
administration of the UPIAD Act, 1976.
 Approval of the regulations framed by NOIDA for administration of
affairs
Contd…..

 Control of NOIDA by requiring them to furnish any

report/return and other information.
 Ensuring proper implementation of Master/Development Plans
by NOIDA
 Ascertaining that development works have been undertaken in
accordance with their plans
 Functions of NOIDA

 Acquiring land in the industrial development area, by agreement or

through proceedings under the Land Acquisition Act.
 Preparing a plan for the development of the industrial area.
 Demarcating and developing sites for industrial, commercial and
residential purposes in accordance with the plan.
 Providing infrastructure for industrial, commercial and residential
purposes.
Providing amenities.
Allocation and transfer, either by way of sale or lease or
otherwise, plots of land for industrial, commercial or residential
purposes.
Regulating the erection of buildings and setting up of industries.
Laying down the purpose for which a particular site or plot of
land shall be used, namely for industrial or commercial or
residential purpose or any other specified purpose in such area.
 Financial Position
To understand an entity for conducting its audit it is very important to
understand its financial position.
Status of finalization of accounts
 Parameters to be considered
Inherent Risk
Control Risk
Criteria for control Risk Score
Final Risk Value
Norms for Risk Value
 Planning process
• National Capital Region Planning Board (NCRPB)
for the preparation of a plan for the development of NCR and for co-
ordinating and monitoring the policies for the control of land-uses and
development of infrastructure in NCR so as to avoid any haphazard
development of the region.
• Regional Plan (RP) by NCRPB and
preparation of Sub-regional Plans (SRP) by the participating states
 Land acquisition process
• 1. Land acquisition
• 2. Resumption of land- Government land with Gram Samaj
• 3. Direct Purchase
Land allotment
Trend of allotment over the years
 Allotment categories
• Group Housing
• Commercial
• Institutional
• Industrial
• Farm house
• Sports city
Thank You