- Audit is a constitutional function (Articles 149-151).
- The authority empowered to spend public money is answerable to the Parliament.
- A check is needed to ensure proper utilization of the fund to ensure that it serves the purpose. This check is known as Audit.
- Railways Audit was separated from Accts in 1929.
- Scope and extent of Audit is determined by C&AG.
Functions of Audit
- Audit of all expenditure from Consolidated Fund of India
- Audit of all Receipts into Consolidated Fund of India
- Audit of all transactions relating to Contingency Fund & Public Account
- Audit of all Trading, Manufacturing, P&L Account, Balance Sheets and other subsidiary accounts
- Audit of all accounts of Stores & stocks held
- Report on the transactions so audited
In Railways Auditing is done by two means viz. Internal and external Auditing.
Internal Auditing is done by Accounts department of Railways. It is done for the purpose of giving financial advice, to consider proposals involving finance, to maintain accounts, and to formulate Railway Budget. In the process records are scrutinized, Stores and tools & Plants are verified, executive orders involving finance are verified, and traffic earnings and accounts are checked to avoid loss of revenue.
The Controller & Auditor General of India (CAG) controls External Auditing. All expenditures incurred from consolidated fund of India are subjected to External Auditing. The Director of Railway Audit of Railway Board assisted by Chief Audit Officers, Divisional Audit Officers, are responsible for the external auditing in Railways. It is a post-audit and in the process the records and accounts are scrutinized.
Their functions are:
- Auditing sanctions involving finance.
- Auditing Rules and General orders involving finance.
- Auditing Tender documents involving finance.
- Auditing Accounts maintained by Account Department.
- Inspection of Record and Vouchers.
- Auditing estimates prepare for projects.
- Checking internal audit mechanism and to ensure the accounting system adopted is suitable and adequate for its purpose.
Methodology of Audit
- Test check of vouchers
- Inspection of offices
- Check of financial sanctions
- Check of all orders/sanctions issued by GM & other officers
- Check of all receipts and payments & accounts
- Check of tenders & Contracts
- Check of procedures and systems
Communication from Audit
- Specific Reports- related to more important and serious irregularities noticed.
- Audit Notes-on irregularities related to Account Branch in Part- I and II.
- Inspection Reports- on irregularities related to Executives and Stations in Part- I and II.
- Petty Objections.
Disposal of Audit Reports
- Audit reports should be promptly attended to and reply sent. Audit Note Part-II, Inspection Report Part-II are closed at Account level. Audit Note Part-I and Inspection report Part-I are to be replied to Audit through the Accounts office.
Special letters and Notes or Objections or Factual Statement
These relate to important cases noticed during regular audit and inspections meriting inclusion in the Audit Report to the CAG. Prompt action at higher levels is called for in these cases. Failure to do so will lead to inclusion to a Draft Para in the Audit Report to CAG. Draft Para is a serious report of Audit and reply to be sent within 8 weeks by the Executive and Accounts covering the following aspects:
- History of the case with copies of relevant records.
- Sentence-wise remarks.
- Chronological summary of the case where there is an unusual delay.
- Remedial action taken and
- Disciplinary action taken or proposed on the individual lapses referred.
The audit done by C&AG is broadly classified into
- Regularity Audit - Relates to provision of funds, Rules and regulations and Sanction of expenditure
- Propriety Audit - Propriety Audit also looks at wisdom and economy of any expenditure and brings to light cases of improper expenditure or waste of public money.
- Performance Audit - To ensure that Government programmes have achieved the desired objectives at lowest cost and given the intended benefits.
The audit report of CAG is and considered by the Public Accounts Committee and presented to the Parliament. So Audit Reports are given prompt attention.