Railway Audit.ppt

Railway Audit, Role of Audit, Draft Para, Audit Objections

1. Audit:
Role of Audit, Audit Objections,
Draft Paras
DamodaraPrasad K, Sr.AFA (Retd.)
9491043283
[email protected]

2. C&AGI
•The Comptroller and Auditor General of India is the final or
supreme audit authority in India and created sui generis by
the Constitution of India (Art 148) for audit of the accounts of
the Union, the States and UTs. Thus, it is a Constitutional
body.
•His functions and powers are derived from articles 149 to 151
of the Constitution of India and duties are defined by an Act-
(DPC)1971, amended in 1976.
Constitutional provisions: Art 149-151
•C&AG shall perform such duties and exercise such powers as
prescribed under any law made by Parliament.
•The Accounts of the Government should be kept in such form
as prescribed by C&AGwith the approval the President
•The Reports of Union (UTs)/Statesshall be submitted to the
President/Governor and laid in Parliament/State Legislature.

3. C&AG: Duties
(a) To audit all expenditure from the Consolidated Fund of India
and to ascertain, whether the moneys shown in the accounts
as having been disbursed were legally availablefor, and
applicable to the service or purposeto which they have been
applied or charged and whether the expenditure conforms to
the authoritywhich governs it;
(b) To audit all transactions relating to Contingency Fund and
Public Account
(c) To audit all trading, manufacturing, profit and loss accounts
and balance sheets and other subsidiary accounts kept and
submit a Report.
•Assists PAC in scrutiny of Appropriation Accounts
•The scope and extent of audit are determined by the C&AG

4. Purpose & Objects of Audit-3 fold
•Firstly, accountancy audit : i. to check arithmetical
calculations, payments are supported by receipted vouchers
etc., with an object to detection of frauds, technical errors,
principle errors etc.; ii. to asses the adequacy of accounting
system and the system of IC .
•Secondly, appropriation audit: to check classification of
expenditure and receipts with an object to ensure that the
exp and earnings are allocated to the proper heads ; to check
that the expenditure is not exceeded funds allotted as part of
parliamentary control. This is full and complete.
•Thirdly, administrative audit: to check sanctions with an
object to check that the exp is incurred wrt the SoP. A
percentage check is applied here on the connected vouchers
and records

5. Safeguards available for independence
and freedom of C&AG
•His oath of office requires him to uphold the Constitution and
the laws and to discharge his duties without fear or favour,
affection or ill-will.
•Article 148 of the Constitution provides that the Comptroller
and Auditor General shall be appointed by the President
under his hand seal and shall only be removed from office in
like manner and on the like ground as a Judge of the Supreme
Court.
•It also provides that he would not be eligible for appointment
any other office of profit either under the Government of
India or the Government of any State

6. Safeguards….
•The salary and other conditions of service of C&AG shall be
determined by the Parliament under Law; and his salary,
leave, pension , age of retirement shall not be varied to his
disadvantage after his appointment.
•The administrative expenses of his office, including all
salaries, allowances and pensions payable to or in respect of
persons serving in that office, shall be charged, upon the
Consolidated Fund of India ie treated as Charged expenditure

7. C&AGI and Rlys
•C&AG is responsible for the audit of the accounts of Indian
Railways, but has no responsibility for compilationof the
same. C&AG is relieved of the responsibility for compiling the
accounts of Railway department from 1929 onwards.
•The from in which accounts of the Indian Railways should be
kept and changes in the accounting classification affecting the
recording of expenditure in finance and revenue accounts of
the Government of India are subject to his approval.
•Addl. Dy.C&AGI/Rlys (DAI) is responsible for scrutinising the
Railway portion of the Finance Accounts including Annual
Review of Balances and examining the Appropriation
Accounts prepared by the Railway Board for certifying their
accuracy and preparing the Audit Report.

8. Rly Audit organisation
•In Railways, C&AG is assisted by Addl. Dy.C&AGI. Subordinate
to him are DG/Railways, Principle Directors of Audit/DGA, Dy.
Directors, Senior/Divl Audit Officers etc., who are responsible
for conducting audit of the accounts of Indian Railways-
expenditure and receipt transactions, including stores and
stock accounts.
•The cost of Railway audit is borne by the Railway revenues-
Misc Exp.
•Audit duty is ex-Post facto and constitutional, while Accounts
job is concurrent and as of participative management.

9. Pr. Director of Audit is responsible for
•Detailed audit of the accounts of that Railway and for
conducting inspections of the records of the various offices of
that Railway.
•All expenditure and receipts of a Railway whether under
construction or openline, traffic and the account of stores,
stock and manufacture are audited wrt-
•the financial sanctions, pertaining to his Railway and
offices under his audit, accorded by the various Railway
authorities
•allocation of estimates sanctioned by those authorities
•general orders issued by the General Manager
•all sanctions pertaining to local traffic
•sanctions issued by the Railway Administration relating to
interchange traffic between two railways.

10. Object of Audit is to ensure
•that the system of accounts adoptedand used in the Accounts
Department of the Railways is suitable
•that check by the internal checkmechanism is sufficient,
•that the accounts are maintained, and the checks applied with
accuracy and
•that arrangements exist in the Railways Accounts offices to
ensure attention to the financial interestsof Railways.
•Auditing is done wrt code, manuals, instructions, sanctions,
orders etc.

11. Methodology
•Inspections
•Check of vouchers
•Applying percentage check/test check on vouchers, records
etc. periodically
•Check of accounts, initial records, books, documents etc
•Call for oral evidence
•Accounts Officers should ensure affording all facilities to Audit
in discharge of its statutory duties.

12. Communications from Audit
•Audit notesdetailing the irregularities discovered in the
course of audit of accounts office records
•Inspection reportsshowing the results of audit of the initial
records of executive offices and stations
•Special Letters: Specific reports of the more important and
serious irregularities discovered in the course of audit of
accounts and departmental offices and station records
•These are collectively called ‘Audit Objections’

13. Replies to Audit objections
•Audit Notes: are to be replied by the Accounts immediately.
•Audit Inspection Reports: initial remarks shall be obtained
within a 30days time of receipt. Audit rejoinderis further
observations of audit on the reply furnished by railways,
which shall be replied within a week’s time.
•All the replies/correspondence from the executives to Audit
should be routed through Accounts.
•Accounts and Other departments shall comply with the Audit
requisitions promptly. Otherwise, Audit will calculate the lost
man-hours on that account.
•Accounts officer is required to certify ‘recoveries made at the
instance of Audit’, as a result of audit check.

14. Closure of Audit objections
•Replies to Audit Inspection Reports and Audit Notes and Special
Letters/Reports should be scrutinised in the Accounts office and
sent to the Audit for closure.
•Accounts will maintain record of audit objection received, closed
and pending, department-wise and year-wise and submit report
to Hqrs/Board
•If objections are piling up, Bi-partite or Tri-partite meetings are
held at appropriate levels for expeditious clearance of audit
objections.
•The connected records on which objections have been raised
should not be destroyed till the objections are settled.
Audit Objections and Provisional Payments
•If Audit objects to any payments of a recurring nature and it is
considered necessary to continue them pending settlement of the
objection, the claims may be admitted provisionally.

15. Audit Report -Railways

16. Audit Report: Significance
•Addl.Dy.C&AGI/RlysisresponsibleforscrutinisingtheRailway
portionoftheFinanceAccountsincludingAnnualReviewof
BalancesandexaminingtheAppropriationAccountsprepared
bytheRailwayBoardforcertifyingtheiraccuracyand
preparestheAuditReport.
SignificanceofAuditReports
•Auditreportsprovideusefulhintsforfutureguidance
•AuditReportaresubmittedtoParliamentandthe
recommendationsofthePublicAccountsCommittee(PAC)
areconsideredbytheMinistryconcerned.

17. Audit Reports
•ThereportsoftheC&AGinrelationtotheaccountsofa
GovernmentwillbesubmittedtotheGovernment
concerned.TheGovernmentshallcauseeveryreportso
receivedtobelaidbeforeeachHouseofParliament/State
legislature.Thereafterthereportisdeemedtohavebeen
keptinpublicdomain.Tillsuchtimethecorrespondence
shallbekeptconfidential
•TheauditdonebyC&AGisbroadlyclassifiedintoFinance
Audit,Regularity/ComplianceAudit,PerformanceAuditand
ITaudit.Auditobjectionswhicharepickedupfor
incorporationintheAuditreport,willgenerallybefirst
processedasDraftParas

18. Audit Report: Stages
•DraftParagraph(DP):Allimportantcasesnoticedinaudit,
whichmeritinclusionintheReportoftheC&AGIarebrought
tothenoticeoftheRailwayAdministrationsthroughspecial
letters,notesofobjectionetc.,issuedtothePHoDandPFA
bythePDAoftheRailways.
DraftParagraphisthefirststageofpresentingauditview
pointforinclusionintheAuditReportasAuditpara.Railway
shouldavailfullopportunitytopresentitscase.
•ProvisionalPara(PP)
Inthesestages,ifrailwayrepliesareconvincing,theParas
aredroppedandifnotconvinced,thesamewillbeescalated
tonextstage.
•AuditPara(AP):Finalstage,AuditParafindingplaceinthe
AuditReportforRailwaysunderrelevantchapters

19. Draft Para
•The PDA sends the draft paragraphs to the General Manager.
•He shall also send simultaneously copies of the draft paragraphs
with connected correspondence, to the PFA, the Head of the
Department concerned, to facilitate prompt action and detailed
examination of the points brought out in the draft paragraph.
•The General Manager should send the reply to the Draft paragraph
within six weeks.

20. Draft Para
Accounts scrutiny
•The Railway Administration (PFA, on behalf of GM), should furnish
reply to the PDA, simultaneously giving copy to the Railway Board.
The reply should have the personal approval of the GM.
•Needless to say that the reply from executive should have the
approval of PHoD.
•Accounts should verify the facts and the line of reply is to the
point. It should be a statement of authoritative facts.
•Calculations furnished in the key documents to the Draft Para and
the conclusions arrived at are correct. If not correct, clear reasons
should be furnished.
•The reply should be total and comprehensive, leaving no point left
uncovered.

21. Annexures to the DP reply
•The reply should be sentence-wise in juxtaposition to the
Draft para contents.
•It should be accompanied by the following-
–A brief history of the case together with the Audit
contention
–Railway defense
–A chronological summary of the case where there has
been unusual delay in dealing with the subject matter.
–Remedial action called for or taken to avoid similar cases in
future.
–Disciplinary aspects, if any where individual lapses have
been brought to light.

22. Audit Report: Provisional Paras
•DPsforwhichrailwaysnotfurnishedremarks,orhad
furnishedremarksbutAuditnotconvincedanddecidedto
includeinAuditreportaresenttoRBasProvisionalParas
(PPs)
•Railwaysaregivenonly2weekstimetofurnishreply
(Sentense-wise)toProvisionalParaswiththeapprovalof
GMtoRlyBoard.
•TherepliesfurnishedbyrespectiveDirectoratestoPPswill
beconsideredbyAuditatRBandthePPsforwhichreplies
eithernotreceivedorarefoundnotconvincingwillbe
incorporatedinAuditReport-RailwaysasAuditParas.

23. AR: Audit Paras and ATNs
•OnreceiptofAuditReport,DraftActionTakenNote(ATN)
intheprescribedproformaalongwithPara-wiseremarks
aresenttoRailwayBoard.
•PACwillselectafewAuditParasfordiscussionwiththe
GMandPHODsandsubmititsrecommendationsto
Governmentforitsconsideration.
•RailwayBoardsendsATNtoAudit;acceptedATNand
commentsofAuditthereon,ifany,willbecommunicated
backtoZonalRailways.

24. For further reading
•Chapter IX of Finance Code
•Para 113 to 116 of Accounts Code
•Appendix I to Accounts Code

25. Key Concepts
•C&AGI is supreme audit authority
•Created sui generis under article 148, hence it is a constitutional
body. Functions are derived from Art 149-151
•Safeguards for independence and freedomof C&AGI:
appointment, status, Charged exp, no office of profit, no
downward revision of pay&otherbenefits
•Purposes of audit: 3-fold Accountancy, Administrative & Approp
•Methodology:Inspections and Voucher check
•Audit objections: Audit Notes, Inspection Reports and Special
letters/reports
•Audit Reports-Stages: Draft Paragraph -to be replied within 6
weeks with GM’s personal approval, Provisional Para-to be replied
within 2 weeks with GM’s personal approval, and Audit Para in
Audit Report-for which ATN need to be submitted

26. MCQs-1
•1. Audit: Arrange in the order of occurrence:
i. Audit Para ii. Draft Para iii. Provisional Para iv. Action Taken
Note
A.ii,iii,iv,i B. ii,iv,i,iii C. iv,i,ii,iii D. ii,iii,i,iv
Ans.D
•2. Check of Audit : Choose correct answer
A. Post Check B. Internal Check C. ex. Post-facto D. Internal
Audit
Ans. C
•3. Which of the following is the highest audit authority in
India
A. C&AG B. FC (Rlys) C. Member (Finance) D. PFA
Ans. A

27. MCQs-2
•4. Which of the following is NOT in the 3-fold
purposes/objects of Audit
A. Appropriation audit B. Administrative audit C. Accountancy
audit D. Internal audit
Ans. D
•5. Initial stage of Audit Para in CAG audit report is referred to
as
A. Audit Note B. Inspection Report C. Special Letter D. Draft
Paragraph
Ans. D
•6. What is the time limit prescribed for replying to a
Provisional para on zonal railway?
A.2 weeks B.4 weeks C.6 weeks D.8 weeks
Ans. A

28. MCQs-3
•7. Whose approval is required for furnishing Draft Para reply
to Audit on zonal railway?
A. approval of PHoD B. approval of PFA C. Personal approval
of GM D. approval of GM
Ans. C
•8. Draft Para reply: find odd one
A. Sentence-wise remarks B. Action Taken Note C. Chronology
of the events D. Audit contention in brief
Ans. B
•9. Communications from Audit/Audit objections: Find odd one
A. Audit Note B. Inspection Report C. List of Objectionable
Items D. Special Letter
Ans. C

29. MCQs-4
•10. C&AG functions are enshrined under Articles Nos --in
Constitution of India
A. 266 (1) to (3) B.149-151 C. 112-115 D. 116
Ans. B
•11. C&AG pay and allowances is treated as ---
A. Railway Revenue B. Charged expenditure C. Misc.
expenditure D. None of these
Ans. B
•12. Status of CAGI is that of
A. Supreme Court judge B. High Court judge C. Member of
Parliament D. CJI of Supreme Court
Ans. A

30. MCQs-5
•13. CAGI duties, powers and conditions of service are
enumerated under which Act?
A. Act of 1979 B. Art. 149-151 C. Act of 1969 D. Act of 1971
Ans. D
•14. Which is not a methodology of railway audit?
A. Voucher Check B. Inspections C. Internal audit D. Internal
check
Ans. D
•15. Audit objections: find odd one
A. Audit Note B. Audit Inspection Report C. Special letter D.
Provisional Para
Ans. D

31. MCQs-6
•16. Railway Audit dept expenditure is
A. Misc exp under MH 3001 B. Charged expenditure C.
Railway Earnings D. IRFA debit
Ans. A
•17. Finance audit is
A. Audit of financial position and Appropriation accounts B.
Audit of Accounts office C. Audit of Finance sanctions D. Audit
of Capital expenditure
Ans. A
•18. Audit: Rejoinder means
A. Audit objection B. Audit observations on the reply
furnished to the Audit objection C. Draft Para D. Action Taken
Note
•Ans. B