M/s TAG & Associates, a Chartered Accountant firm was appointed by Comptroller and Auditor General to conduct performance audit of Wind power…

M/s TAG & Associates, a Chartered Accountant firm was appointed by Comptroller and Auditor General to conduct performance audit of Wind power Ltd., a public sector undertaking of Government of India for the financial year 2024-25. Wind power Ltd. is engaged in generation of wind power with setting up of wind power plants at distinct locations in the country. The audit is assigned with the objective and systematic examination of evidence for the purpose of providing an independent assessment of the performance of organization, program, activity, or function in order to provide information to improve public accountability and facilitate decision-making by parties with responsibility to oversee or initiate corrective action. The audit firm is concerned with Planning for Performance Audit. The audit manager Mr. G suggested the following procedures in the following sequence of steps for conduct of Performance audit: (1) Understanding the entity/programme (2) Defining the objectives and the scope of audit (3) Deciding audit approach (4) Developing audit questions (5) Determining audit criteria (6) Establishing time table and resources (7) Preparing Audit Design Matrix (8) Assessing audit team skills and whether outside expertise required (9) Intimation of Audit programme to audit entities Further, in the course of performance audit of Wind power Ltd., the engagement partner CA JP entrusted the audit work to four team members namely Mr. P, Mr. Q, Mr. R, Mr. S. The audit team is initially concentrated in deciding audit approach. CA JP suggested that there is no uniform audit approach prescribed that can be applicable to all types of subjects of performance audits. CA JP asked his team members to suggest a method for conducting the Performance audit. Mr. P suggested a method which involves a descriptive analysis of an entity, scheme or a programme.Mr. Q suggested a method which involves examination of available data relating to financials like earnings, revenue, or data relating to programme implementation like details of beneficiaries etc.Mr. R suggested a method which involves collecting information from members of a population to assess the interrelation of events and conditions.Mr. S suggested a method which involves review of the systems in place for planning, conducting, checking, and monitoring the activity. CA JP analysed the methods suggested by each team member. M/s TAG & Associates were appointed as statutory auditors of Indore Main branch of a public sector bank for the financial year 2024-25. Advances generally constitute a major part of the assets of the branch. There are substantial number of borrowers to whom variety of advances are granted. Hence, they felt that audit of advances requires major attention. M/s TAG & Associates are primarily concerned with obtaining evidence about the following while carrying out audit of advances: Amounts due to the bank are appropriately supported by loan documents.The stated basis of valuation of advances is appropriate and properly applied and recoverability of advances is recognized in its valuation.Advances are disclosed, classified and described in accordance with recognized accounting policies and practices and relevant statutory and regulatory requirements.Appropriate provisions towards advances are made as per RBI norms, accounting standards and generally accepted accounting practices. Audit approach of advances should encompass designing appropriate audit procedures to obtain audit evidence in all these areas. The engagement partner, CA R assigned the focus areas in advances to the members of audit team as follows: Mr. X was assigned to focus on evaluation of internal control on advances. Mr. Y was assigned to focus on substantive audit procedures on advances. Mr. Z was assigned to focus on recoverability of advances. Further during the course of audit, it was observed that in the case of Kiran Ltd., a trading company which has availed a cash credit facility of 10 crore from Indore Main branch, the drawing power was not arrived at by bank. As of 31st March 2025, the following details are provided regarding its stock, receivables (with ageing analysis), and creditors for calculating the Drawing Power (DP): Particulars Amount (in lakhs) Remarks Total Stock 900 Includes damaged stock of 60 lakhs. Total Receivables (Debtors) 800 Ageing details provided below. Creditors for Stock 140 Related to stock financed by creditors. Margin on Stock 25% As per bank sanction terms. Margin on Receivables 40% As per bank sanction terms. Sanctioned Cash Credit Limit 1000 Debtors' Ageing Analysis: Age Bucket Amount (in lakhs) 0 - 30 days 250 31 - 60 days 200 61 - 90 days 250 > 90 days (Overdue) 100 Total Receivables 800