Page 215 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes  Government companies and deemed Government companies set up under the Companies
Act 1956, where Government or Government-owned and controlled institutions own 51
percent or more of the paid up capital;
 Corporations set up under the specific Acts of legislature e.g., Life Insurance Corporation,
Unit Trust of India, etc.

Committee on Public Undertakings: The Committee on Public Undertakings exercises the same
financial control on the public sector undertakings as the Public Accounts Committee exercises
over the functioning of the Government Departments. The functions of the Committee are-
(a) to examine the reports and accounts of public undertakings.
(b) to examine the reports of the Comptroller & Auditor General on public undertakings.
(c) to examine the efficiency of public undertakings and to see whether they are being managed
in accordance with sound business principles and prudent commercial practices.
The examination of public enterprises by the Committee takes the form of comprehensive
appraisal or evaluation of performance of the undertaking. It involves a thorough examination,
including evaluation of the policies, programmes and financial working of the undertaking.
The objective of the Financial Committees, in doing so, is not to focus only on the individual
irregularity, but on the defects in the system which led to such irregularity, and the need for
correction of such systems and procedures.

12.1.1 Objective and Scope of Public Enterprises Audit

Under the Act of 1971, the scope and extent of audit is determined by the Comptroller and
Auditor General. Audit of public enterprises in India is not restricted to financial and compliance
audit; it extends also to efficiency, economy and effectiveness with which these operate and
fulfil their objectives and goals. Another aspect of audit relates to questions of propriety; this
audit is directed towards an examination of management decisions in sales, purchases, contracts,
etc. to see whether these have been taken in the best interests of the undertaking and conform to
accepted principles of financial propriety.
In examining the decisions of a management, the auditor examines that these were taken by the
competent authority after examination of all aspects (economic, technological, public interest)
on the basis of all the relevant information available at that time and taking into consideration
the different alternatives available to management and that the decisions were consistent with
the aims and objectives of the enterprise. Audit is an instrument of accountability. But an equally
important purpose of audit of public enterprises in India is to help the Government and the
enterprise managements improve their efficiency and effectiveness.
This is achieved by bringing out financial and operational deficiencies, inadequacies or
ineffectiveness of systems, shortfalls in performance, etc. and by analysing the causes of shortfall
from acceptable standards of performance. Financial performance is linked with physical
performance and issues of efficient and economic operations and management of resources are
highlighted. There is an increasing emphasis on audit being an instrument of improvement. But
the Comptroller and Auditor General do not make specific recommendations for improvement
though the areas and needs for improvement are highlighted in his reports. In the broader
context, Government audit encompasses two main elements, viz., (a) Fiscal Accountability: It
includes audit of provisions of funds, sanctions, compliances and propriety; and (b) Managerial
Accountability: It includes audit of efficiency, economy and effectiveness (This is often referred
to as efficiency-cum-performance audit).

210 LOVELY PROFESSIONAL UNIVERSITY