During the course of an audit of a state government department, the Office of the Comptroller & Auditor General of India (CAG) observed that the…

CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · May 2024
During the course of an audit of a state government department, the Office of the Comptroller & Auditor General of India (CAG) observed that the prescribed law in the state defined a "flat" based on the following two criteria in a premises: Dwelling units exceeding a threshold limitBuildings with a total area surpassing a threshold limit However, it was noted during the audit that the relevant database did not include a column for entering the area of the building. Consequently, a certain number of buildings were identified as flats even though they had fewer dwelling units than the threshold limit. In the absence of data regarding the area, the audit team directed physical verification of these flats. The physical verification confirmed that these buildings were incorrectly classified as flats, resulting in the department under collecting water charges. Identify type and nature of audit being performed by Office of Comptroller & Auditor General of India. To whom report of such audit was likely to have been submitted

Suggested Answer and Working Notes:

(a) In the given case, it is a “Compliance Audit” performed by Office of Comptroller & Auditor General of India. Compliance audit is the independent assessment of whether a given subject matter is in compliance with the applicable criteria. This audit is carried out by assessing whether activities, financial transactions and information comply in all material respects with the regulatory and other rules which govern the audited entity. Compliance auditing is concerned with: - (a) Regularity- adherence of the subject matter to the formal criteria emanating from relevant laws, regulations, and agreements applicable to the entity. (b) Propriety- observance of the general principles governing sound financial management and the ethical conduct of public officials. While regularity is emphasized in compliance auditing, propriety is equally pertinent in the public sector context, in which there are certain expectations concerning financial management and the conduct of officials. Under Article 151, audit reports of the C&AG relating to the accounts of the Central/ State Government should be submitted to the President/Governor of the State who shall cause them to be laid before Parliament/State Legislative Assemblies. In the given situation, the report relates to the State Department. Therefore, report was likely to have been submitted to Governor of state to be laid before State legislative assembly.

Topics: Overview of Audit of Public Sector Undertakings

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