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Unit 12: Special Features of Audit

Introduction Notes

Audit is classified into various types, viz., audit under statute, audit of accounts of private firm,
audit of accounts of private individuals, audit of trust accounts. An auditor can adopt any one of
the modes to conduct his audit of an organisation, viz. continuous audit or periodical audit or
interim audit. Besides being a Chartered Accountant an auditor should possess certain other
qualities, such as knowledge of relevant laws, intelligence, tactfulness, vigilance, honesty and
integrity courage, impartiality, broadmindedness, patience, perseverance, maintaining secrecy
of his client, commonsense etc. In this unit we will discuss the Special features of audit of banks,
insurance companies, co-operative societies and non-banking financial companies.

12.1 Special Features of Audit of Public Sector Undertakings

The public sector undertakings differ from private sector undertakings in many ways and it is
necessary to keep them in mind before actually undertaking the audit of such undertakings. The
auditor should keep in mind the distinction between the audit of private sector undertakings
and that of public sector undertakings. This is quite necessary, as the professional accountants
are required to audit the accounts of both the types of undertakings.
The auditor of a private sector undertaking is, in general, required to undertake the verification
audit and has to give his opinion as to whether the profit and loss account and the balance sheet
exhibit true and fair state of affairs of the undertakings. He has nothing to do with the impropriety
of the actions of the management. He is not required to question the points of inefficiency of the
management.

Different Forms

These undertakings have been set up mainly in three forms, viz., departmental commercial
undertakings, statutory corporations and government companies. All these three forms differ
substantially from the point of view of their establishment, operations and operational autonomy.

Governing Acts and Provisions

A majority of these undertakings have been set up as government companies under the
Companies Act, 1956 just like any other company in the private sector. These companies are
governed by the provisions of the Companies Act. A few undertakings have been set up as
departmental undertakings and their operational autonomy is quite limited as they are under
the direct control of the government. Statutory corporations are governed by the special statute
and Act.

The public enterprises in India have been assigned a key role in the socio-economic development
of the country. These enterprises are industries supplying basic inputs to industry and agriculture,
such as coal, oil, steel, minerals and metals, cement, chemicals and fertilizers and heavy equipment.
Public utilities like the railways, postal and telecom services, electricity generation and supply,
road transport, etc. constitute another class of public enterprises. Thus in India the public sector
has achieved a dominant role in the national economy.
Public sector enterprises are organised through any one of the following modes:
 Departmentally managed undertakings which form part and parcel of Government
activities;

Example: Indian Railways, Postal Services, Security Printing Press , Canteen Stores
Department;

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