Public Accounting: In The India Government

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 Structure

Government Audit

Statutory Audit Specific Objective

Timings

Scope

Organization Structure

Specific Objectives

Private Audit

Timings

Government Audit

Scope

Statutory 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 • • • •

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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 AUDITORGENERAL 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.