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INTOSAI Auditing Standards

Introduction
The INTOSAI Auditing Standards reflect a consensus of best practices among
SAIs. As such, it is clear that the standards codify generally accepted professional
practices, which are applied in carrying out an independent external audit, which may
also encompass the audit of activities with an environmental perspective
It follows from what was agreed at XV INCOSAI that an SAI should to the full
extent appropriate take the INTOSAI Auditing Standards into account when planning,
conducting, and reporting on an environmental audit.
In order to explain how the INTOSAI Auditing Standards might apply to
environmental auditing, and to identify relevant issues or risks resulting from their
application, this section of the guide sets out:

A summary of the essential requirements of each basic postulate and auditing

standard.

Particular issues or risks to be addressed.

Possible strategies or responses to these issues or risks.

This guide does not constitute an INTOSAI Auditing Standard. As its title suggests,
it has been prepared to provide guidance on conducting audits of activities with an
environmental perspective.
Basic Postulates
The SAI should consider compliance with the INTOSAI auditing standards in all
matters that are defined material.
A matter may be judged material if knowledge of it would be likely to influence a
stakeholder or other user of the statement or audit report in which it is contained.
Materiality is often considered in terms of value, but the inherent nature or characteristics
of an item or group of items may also render the matter material. For example,

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compliance with national and international agreements, as well as certain aspects of
performance auditing, may have a significance to users or stakeholders that is quite
different from its materiality by value.
Furthermore, the importance attributed to the environment and sustainable
development by nations often increases significantly over time. Matters, which were not
significant originally, may well become significant.
Each SAI should establish a policy on which postulates and standards should be
followed in carrying out environmental auditing to ensure that the work and products are
of high quality.
The terms of the audit mandate of the SAI override any accounting or auditing
conventions with which they are in conflict. However, the SAI should recognize the
global nature of environmental matters and seek the removal of incompatibilities in its
own circumstances, where these may inhibit the adoption of desirable standards.
The nature of environmental audits may also necessitate increased co-operation
between auditors, Concurrent, co-ordinated, or joint audits of specific matters may need
to be undertaken. Situations may also arise where the country, which is the subject of the
audit, is not a signatory of the relevant international accord. While this may be a sensitive
issue, it is suggested that the SAI consider stating this fact in its report.
With increased public consciousness, the demand for the public accountability of
persons or entities managing public resources has become increasingly evident so that
there is a greater need for the accountability process to be in place and operating
effectively.
This postulate concerns all entities that have an impact on the environment. They
may be categorized into three groups:

Entities whose operations directly or indirectly affect the environment, whether that
be positive or negative such as by rehabilitations or (conversely) pollution and
utilization.

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Entities with power to make or influence environmental policy formulation and

regulation whether internationally, nationally or locally.

Entities which have the power to monitor and control the environmental actions of
others.
These different impacts may complicate the accountability arrangements and SAIs

should be aware of the need to also consider the holistic impact on the environment and
address the accountability process itself where necessary. Each SAI should consider the
most appropriate approach bearing in mind its own mandate.
Development of adequate information, control, evaluation and reporting systems
within the government will facilitate the accountability process. Management is
responsible for the correctness and sufficiency of the form and content of the
financials reports and other information.
At the highest level, the government is responsible for determining what
information it needs to ascertain whether its environmental objectives are being realized,
hoe the achievement of its objective is to be measured, and how often it wants the
information.
The entity and its management are directly responsible for the correctness and
sufficiency of information on the entitys impact on the environment, be it with regard to
financial performance, assets or liabilities, compliance with legislation, or other
prescriptions for its performance. This obligation applies to entities in all three groups
listed in paragraph 110.
Situations are likely to arise in practice, however, where there is a lack of relevant
legislation providing for the disclosure of relevant environmental information, or where
there is a lack of disclosure for some other reason. In such situations the SAI should
report the shortcoming and may also have to consider the possible effects on its audit
opinion.

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The SAI may also need to give some attention to the fact that environmental
damage or restoration can imply real costs for the organization concerned. With the
growth of environmental regulation this will increasingly be likely.
When SAIs promote improvements to legislation or other prescriptions, they should
encourage audited entities to report impartially on their own environmental performance,
albeit a violation or lack thereof.
Appropriate authorities should ensure the promulgation of acceptable accounting
standards for financial reporting and disclosure relevant to the needs of government,
and audited entities should develop specific and measurable objectives and
performance targets.
Much developmental work is still required before acceptable accounting standards
for financial reporting and disclosure are likely to be in place for environmental matters.
For example, it may not be achievable at present to place a value on virgin forest or a
well-stocked fishing ground. Similarly, the liability associated with the restoration of
environmental damage may not be easily quantifiable or may be dependent on unreliable
and inaccurate estimates.
SAIs should work accounting standards setting organizations to help ensure that
proper accounting standards are developed, while the audited entities should also be
encouraged to set measurable and clearly stated environmental objectives. However, an
SAI should avoid the possibility of appearing to have a conflict of interest as a result of
both setting the standards and auditing against them.
Consistent application of acceptable accounting standards should result in the fair
presentation of the financial position and the results of operations.
Consistent application of accounting standards and of disclosure for environmental
matters, particularly when reviewing several accounting periods, will have to be phased
in as new standards which relate to the environment are set. This is likely to be an ongoing process for some time and SAIs should pay particular attention to the achievement
of fair presentation.

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Audit issues related to financial statement items affected by environmental matters,

particularly liabilities, contingencies, commitments or asset impairment provisions, are
often complex. Environmental costs, liabilities (including contingent liabilities) and
assets should be recognized, valued and reported on in accordance with generally
accepted accounting practice.
The existence of an adequate system of internal control minimizes the risk of errors or
irregularities.
Adequate internal control is equally of critical importance in the context of
environmental auditing. Internal control is, in the first instance, the responsibility of the
audited entity, although the auditor should submit proposals where controls are found to
be inadequate or non-existent. This is more likely to be the case with regard to
environment-related matters than with many others and the SAI should be prepared for
this.
It is important to recognize that, in order to encourage audited entities to institute
effective systems of internal environmental control, the SAI should avoid using the
findings and conclusions on their internal environmental controls to put the entities in a
negative light.
Legislative enactments would facilitate the co-operations of audited entities in
maintaining and providing access to all relevant data necessary for a comprehensive
assessment of the activities under audit.
Where this is compatible with the mandate of the SAI, it may be necessary to
review the provisions and requirements, which apply, to its responsibilities in respect of
maintaining and gaining access to relevant environmental data and information. Where
this is not the case, the SAI should report the fact and endeavor to rectify the situation.

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All audit activities should be within the SAIs audit mandate.

The full scope of government auditing regularity (financial and compliance) and
performance also applies to environmental auditing.
During an audit of financial statements, environmental issues may include the
following:
Initiatives to prevent abate or remedy damage to the environment.
The conservation o renewable and non-renewable resources.
The consequences of violating environmental laws and regulations.
The consequences of vicarious liability imposed by the state.
Compliance auditing with regard to environmental issues may relate to providing
assurance that governmental activities are conducted in accordance with relevant
environmental laws. Standards and policies, both at national and (where relevant)
international levels.
Performance auditing of environmental activities may include:

Ensuring that indicators of environment-related performance (where contained in

public accountability reports) fairly reflect the performance of the audited entity.

Ensuring that environmental programmes are conducted in an economical, efficient

and effective manner.

SAIs should work towards improving techniques for auditing the validity of
performance measures.
Environmental auditing adds a special challenge to the expanding role of auditors
and their responsibility to improve and develop new techniques and methodologies to
assess whether reasonable and valid environmental performance measures are used by the
audited entity. This is a good example of where auditors should avail themselves of
techniques and methodologies of relevant other disciplines.

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SAIs should avoid a conflict of interest between the auditor and the entity under audit.
The SAI needs to maintain both the fact and perception of its independence and
objectivity in carrying out the reporting the results of environmental audits.
General Standards
The general auditing standards include standards which apply both to the auditors
and to the SAIs and include the aspects of independence, competence and due care.
The auditor and the SAI must be independent.
The auditor and the SAI must be, seen to be, independent and objective in carrying
out environmental audits. They should be fair in their evaluations and in reporting on the
outcome of audits.
The auditor and the SAI should therefore not become involved in (for example) the
actual calculation of environmental costs and benefits. They should restrict themselves to
auditing the calculation and reporting on the fairness, or otherwise, of the financial
statements as a whole.
The auditor and the SAI must possess the required competence.
The wider the SAIs mandate and the more discretionary in nature, the more
complex becomes the task of ensuring quality of performance across the whole mandate.
This applies directly to environmental auditing and may often be addressed by making
use of teams or by obtaining special expertise from experts in the field.
SAIs and their auditors and other who carry out environmental audits should
demonstrate at least the following level of expertise and attributes:

Adequate knowledge in all respects of auditing and capability of performing

financial, compliance and performance audits.

Adequate knowledge of environmental auditing acquired by training and practical

experience.

An independent and unbiased approach.

Adequate human relations and communication skills.

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Specialists may be involved in various stages of developing accounting estimates to assist
management, which may include the following:
Identifying situations where estimates are required.
Gathering the necessary data on which to base estimates.
Developing assumptions as to the most likely outcome.
Determining the amount of an estimate (which may include, for example,
determining the costs of remedial action planned by the entity) and considering
the financial statement disclosure.
If the SAI employs external experts, it must exercise due care to assure itself of
their competence and ability for the particular tasks involved. The SAI remains
responsible for ensuring that the auditing standards are applied. Obtaining advice from an
external expert does not relieve the SAI of responsibility for the opinions formed or
conclusions reached on the audit.
Because environmental expertise is an emerging specialty involving individuals
with diverse educational and professional backgrounds and experience, it may be
particularly difficult for the auditor to obtain reasonable assurance about the experts
reputation of competence and to be satisfied that the experts work is appropriate for
audit purposes. The auditor should therefore at least consider the following:
The educational background of the expert.
The length of time the expert has practiced.
The relevancy of the experts work experience.
Accreditation by a professional body.
The auditor will need to carry out appropriate procedures to be satisfied that the
work carried out by an expert is satisfactory for the purposes for which it is intended and
to gain an understanding of the following matters:
The nature and purpose of the experts report
The assumptions and methods used.
The experts objectively and the risk that this may be impaired.

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The auditor and the SAI must exercise due care and concern in complying with the
INTOSAI auditing standards. This embraces due care in specifying, gathering and
evaluating evidence, and in reporting findings, conclusions and recommendations.
This standard applies equally to environmental auditing and may present particular
difficulties in establishing standards for acceptable audit evidence on which to base
findings, conclusions and recommendations.
Other general standards, which are applicable in an environmental auditing
context, are the following:
The SAI should adopt policies and procedures to recruit personnel with suitable
qualifications.
The SAI should adopt policies and procedures to develop and train SAI employees to
enable them to perform their task effectively and to define the basis for the
advancement of auditors and other staff.
The SAI should adopt policies and procedures to prepare manuals and other written
guidance and instructions concerning the conduct of audits.
The SAI should adopt policies and procedures to support the skills and experience
available within the SAI and identify those skills which are absent; provide a good
distribution of skills to auditing tasks and a sufficient number of persons for the audit;
and have proper planning and supervisions to achieve its goals at the required level of
due care and concern.
The SAI should adopt policies and procedures to review the efficiency and effectiveness
of the SAIs internal standards and procedures.
Field Standards
The purpose of field standards is to establish the criteria or overall framework for
the purposeful, systematic and balanced steps or actions that the auditor has to follow.

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These steps and actions represent the rules of research that the auditor, as a seeker of
audit evidence, implements to achieve a specific result.
The auditor should plan the audit in a manner which ensures that an audit of high
quality is carried out in an economic, efficient and effective way and in a timely
manner.
The auditor should collect information about the audited entity. This should, where
applicable, also include relevant environmental information such as:
The legal mandate of the entity.
The entity approach to environmental issues, including its policy and objectives
and the existence of an environmental management system.
Laws and regulation governing the entitys environmental responsibilities or its
role in determining those of others. This aspect would include identifying legal
requirements imposed on the entity or those which it imposes on others such
as reporting requirements, emission limitations arising from its activities, or
responsibilities to restore degradation which it has caused.
The existence of environmental assets and liabilities and any changes which may
have occurred in them during the financial period under review. Examples of such
liabilities are the costs of decommissioning a refuse disposal site operated by a
local authority, or to providing for such costs during the useful life of the site.
The objective and scope of the environmental audit should be clearly defined. In
addition to the financial, compliance and performance aspects usually encountered, there
may be an expectation (whether explicit or implicit) of the provision of additional
environment related audit assurance. For instance, the SAI may be expected specifically
to attest to the entitys assertions about the effectiveness of its environmental
management systems or its environmental disclosures.
The work of the audit staff at each level and audit phase should be properly supervised
during the audit, and documented work should be reviewed by a senior member of the
audit staff.

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The specific needs of environmental auditing may require additional procedures to

be carried out. For the assurance required it may also be advisable to make use of a
specialist in the SAI to carry out a review of the planning and field work from an
environmental perspective.
The auditor, in determining the extent and scope of the audit should study and evaluate
the reliability of internal control.

In order to address environmental issues in a structured manner, management

should ideally design and document the key elements of its environmental management
system. This may embrace the following aspects, amongst others:
Identifying applicable legislative and regulatory requirements.
Establishing and maintaining policies and procedures to provide reasonable
assurance that the entity complies with those requirements.
Evaluating and monitoring the entitys compliance with external requirements,
environmental policies and procedures.
Specifying reports that satisfy legal, regulatory or other requirements.
The auditor should study and evaluate the internal control measures instituted by
management for environmental matters and determine the extent of reliance that can be
placed on them. The extent of the study depends on the objectives of the audit and the
degree of reliance intended.
In conducting audits a test should be made of compliance with applicable laws and
regulations. Audit steps and procedures should provide reasonable assurance of
detecting errors, irregularities, and illegal acts that could have a direct and material
effect on the financial statements.

The subject matter for an environmental compliance audit is normally

managements assertion that it has complied with all relevant rules. This assertion may be
given explicitly or implicitly- i.e. simply by default.

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Non-compliance with applicable laws and regulations is often tested with two
perspectives in mind. On the one hand, the entity may (for example) be undertaking
activities, which are not in terms of its mandate. While the financial statements may fairly
present the state of affairs and the results of these operations, the SAI may be expected
nevertheless to report on such a deviation in the interest of public accountability.
On the other hand, there may be a high risk of a material misstatement in the
financial statements, such as through the omission of a provision or liability in respect of
future expenditure to restore environmental damage and/or to provide for a penalty for
non-compliance
Competent, relevant and reasonable evidence should be obtained to support the
auditors judgements and conclusions regarding the organization, programme, activity
or function under audit.
Material misstatements in the financial statements of an environmental nature are
more likely to be of omission or understatement, rather than of overstatement. Most of
the related evidence available to the auditor is therefore likely to be persuasive rather than
conclusive. Audit evidence is likely to be obtained as a result o enquiry, audit procedures
or management representations other than those directed specifically at account balances
or to classes of transactions.
The audit evidence sought would therefore need to focus on matters of the
following nature:
Liabilities that are not based on contractual obligations.
Accounting estimates that do not have an established historical pattern.
Recent or evolving environmental laws and regulations.

In addition, where environmental liabilities are quantified, they will often be based
on estimates. This will consequently affect the procedures that the auditor is likely to
apply in obtaining adequate audit evidence. The approach applied should comply with
that used when auditing other accounting estimates including assessing the
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reasonableness of the assumptions, recalculating and evaluating the method followed, and
reviewing the qualifications and experience of the person responsible for preparing the
estimate.
Auditors should analyse the financial statements to establish whether acceptable
accounting standards for financial reporting and disclosure are complied with.
Given the nature of likely environmental misstatements in the financial statements,
the auditor should analyse the statements from an environmental perspective to identify
areas, which should be followed up. Of particular importance is likely to be the
appropriateness of accounting policies and the existence and disclosure of contingent
liabilities.

Reporting Standards

Written audit reports should be submitted to the management of the audited entity
as well as to its governing body, with reference to the particular circumstance of the SAI.
Depending on the nature of the audit, the report may include an opinion on the financial
information or on various other matters such as compliance with the mandate of the
audited entity, performance or (the subject of this guide) environment-related activities.
It may be necessary to pay particular attention to the wording in reports on the
completeness of environmental assets and liabilities as well as on the audit assurance
given about accounting estimates.
At the end of each audit the auditor should prepare a written opinion or report, as
appropriate, setting out the findings in an appropriate form; its content should be easy
to understand and free from vagueness or ambiguity, include only information which
is supported by competent and relevant audit evidence, and be independent objective;
fair and constructive.

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With regard to regularity audits, the auditor should prepare a written report, which
may either be a part of the report on the financial statements or a separate report, on
the tests of compliance with applicable laws and regulations. The report should contain
a statement of positive assurance on those items tested for compliance and negative
assurance on those items not tested.

It is for the SAI to which the auditor belongs to decide finally on the action to be taken
in relation to fraudulent practices or serious irregularities discovered by the auditors.

With regard to performance audits, the report should include all significant instances
of non-compliance that are pertinent to the audit objectives.

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Auditing Standards in Indian Audit and Accounts Department

-Some aspects
Financial Statement Audit
The Auditor should examine and analyse the financial statements to establish
whether acceptable accounting standards for financial report and disclosures are compiled
with. Analysis of financial statements should be performed to such a degree that a
rational basis is obtained to express an opinion on the statements. In the audit of
Government accounts, it also extends to ascertain whether the moneys shown in the
accounts as having been disbursed were legally available for and applicable to the service
or purpose to which they have been applied or charged and whether the expenditure
conforms to the authority which governs it.
Financial statements analysis aims at ascertaining the existence of the expected
relationships within and between the various elements of the financial statements,
identifying any unexpected relationships and any unusual trends. The Auditor should,
therefore, thoroughly analyse the financial statements and ascertain whether.
a) the financial statements are accurate and complete and are consistent with the
primary records, books and ledgers;
b) the financial statements are prepared in accordance with the accounting standards
and laws, if any, governing them;
c) the financial statements are presented with due consideration to the circumstances
of the audited entity;
d) sufficient disclosures are presented about various elements of financial statements
including any unusual items; and
e) the various elements of financial statements are properly evaluated, measured and
presented.

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The methods and techniques of financial analysis depend to a large degree on the nature,
scope and objective of the audit and on the knowledge and application skill of the
Auditor.
In the audit of Government accounts, the Auditor should satisfy that not merely the
expenditure does not exceed the provision but also that it is within the scope and
intention of the provision. Expenditure arising out of the adoption of a new policy or
provision of a new facility, or a substantial extension of a previous specific commitment
of facility is outside the scope and intention of the provision.
In the course of financial statement audit, efforts should be made to identify areas,
transactions etc. which would require further examination for regularity or value for
money audit.
Audit of Government Companies
The duties and responsibilities of the Audit in regard to Government companies extend to
giving directions to statutory auditors as to the manner in which their accounts shall be
audited as well as conducting a supplementary or test audit of the accounts.
Audit should review and comment upon, or supplement, the audit report of the statutory
auditor in such manner as may be considered appropriate.
A supplementary or test audit of the companys accounts may also be conducted and the
supplementary or test audit shall be in conformity with the prescribed Auditing
Standards.
Audit Evidence
Due professional care should be exercised in specifying, gathering and evaluating
evidence during audit.
This standard places responsibility on the audit organization and the Auditor to use sound
professional judgement in their work. Due care denotes the appropriate element of care
and skill which a professional auditor would be expected to employ having regard to the

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complexity of the audit task, including careful attention to planning, gathering and
evaluating evidence and forming conclusions.
Audit should consider materiality and significance of evidence in planning the audit,
selecting the methodology, designing the audit tests and proceedings as well as in
deciding whether a matter requires disclosure in an audit report. Materiality and
significance depend on quantitative as well as qualitative aspects.
Sufficient, competent and relevant evidence should be obtained to support the audit
conclusions regarding the organization, project, programme, activity, transaction etc.
subjected to audit.
Audit conclusions and observations must be based on evidence. The evidence should be
complete, comprehensive and reliable to arrive at objective, proper and correct
conclusions.
Sufficient, competent and observations must be based on evidence. The evidence should
be complete, comprehensive and reliable to arrive at objective, proper and correct
conclusions.
The Auditor should have a sound understanding of the techniques and procedures such as
inspection, observation, enquiry and confirmation to collect audit evidence. The
techniques employed should be sufficient to reasonably arrive at audit conclusions.
The Auditor should adequately document the audit evidence in working papers. Adequate
documentation is important for several reasons. It will:
a) confirm and support audit conclusions;
b) increase the efficiency and effectiveness of the audit;
c) serve as a source of information for preparing audit reports, answering queries
from the audited entity, or from any other party;
d) serve as evidence of the Auditors compliance with the Auditing Standards;
e) facilitate planning and supervision;
f) help the Auditors professional development;

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g) ensure that delegated work has been performed satisfactorily and
h) provide evidence of work done for future reference.
Audit evidence should meet the basic tests of sufficiency, relevance and competence.
(i) Sufficiency: Sufficiency is the presence of adequate, actual and convincing evidence
to support the audit observations and conclusions. Where appropriate, scientific sampling
techniques/methods should be used to establish sufficiency.
(ii)

Relevance: Relevance refers to the relationship of the evidence to its use. The

information used to prove or disprove an issue is relevant if its has logical and sensible
relationship to that issue. Information that does not, is irrelevant and therefore, should not
be included as evidence. Collection of evidence involves use of scarce audit resources
and what is not relevant should not be collected.
(iii)

Competence:

To be competent, evidence should be valid and reliable. In

evaluating the competence of evidence, the Auditor should carefully consider whether
reasons exist to doubt its validity or completeness. If so, the Auditor should obtain
additional evidence or reflect the situation in the report.
The working papers turned in by the Auditor on conclusion of an audit assignment should
include interalia.
(i)

the division and distribution of duties and functions amongst the audit
personnel;

(ii)

the size of the sample and the specific units/entities/records etc. selected for
direct substantive testing and actually audited;

(iii)

the records/document requisitioned and made available;

(iv)

the audit memoranda issued for eliciting evidence;

(v)

the replies and response to the audit memoranda;

(vi)

the testimonial evidence, if any relied upon; and

(vii)

analysis of evidence cross-referenced with primary evidence.

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The content and the arrangement of the working papers reflect the degree of Auditors
proficiency, experience, knowledge and application. Working papers should be
sufficiently complete and detailed to enable an Auditor having no previous connection
with the audit subsequently to obtain from them what work was performed to support the
conclusions. Working papers are the link between field work and the audit reports.

Reporting Standards
On the completion of each audit assignment, the Auditor should prepare a written report
setting out the observations and conclusions in an appropriate form; its content should be
easy to understand and free from vagueness or ambiguity, include only information
which is relevant and supported by sufficient and competent audit evidence and be
independent, objective, fair, complete and accurate, constructive and concise as the
subject-matter permits.
Reporting standards constitute the framework for the audit organization and the Auditor
to report the results of audit.
These standards are to assist and not to supersede the prudent judgement of the Auditor in
making his audit observations and conclusions.
The expression Reporting embraces both the audit opinion on a set of financial
statements and the conclusions included in the Auditors report on completion of audit of
an entity.
The audit report should be complete: This requires that the report contains all pertinent
information needed to satisfy the audit objectives, and to promote an adequate and correct
understanding of the matter reported. It also means including appropriate background
information.
Accuracy requirement demands that the evidence presented is true and the conclusions
are correctly portrayed. The conclusions should flow from the evidence. The need for

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accuracy is based on the need to assure the users that what is reported is credible and
reliable.
Objectivity requires that the presentation throughout the report be balanced in content
and tone. The audit report should be fair and not be misleading and should place the audit
results in proper perspective. This means presenting the audit results impatiently and
guarding against the tendency to exaggerate or over-emphasis deficient performance. In
describing shortcomings in performance, the Auditor should present the explanation of
the audited entity and stray instances of deviation should not be used to reach broad
conclusions.
Being convincing requires that the information presented should be sufficient to
convince the users of the reasonableness of the audit observations and validity of the
audit conclusions.
Clarity requires that the report be easy to read and understand. Use of straightforward,
non-technical language is essential. If technical terms and unfamiliar abbreviations are
used, they should be clearly defined. Both logical organization of the material and
accuracy and precision in stating the facts and in drawing conclusions are essential to
clarity and understanding.
Being concise requires that the report be not longer than necessary to convey the
message. Too much of detail detracts from a report, may even conceal the real message
and may confuse the readers. Needles repetitions should be avoided. Although, there
exists room for considerable judgement in determining the content of the reports,
complete and concise reports are likely to receive greater attention.
Being constructive requires that the report also include well thought out and wellarticulated suggestions, in broad terms, for remedying the defects, deficiencies and
weakness noticed. Utmost care should be taken in presenting the suggestions, which
should be done with due regard to the requirements of rules and orders, operational
constraints and the prevailing milieu. The suggestions incorporated in the report should

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be discussed with the entities with sufficiently high level functionaries and as far as
possible, their acceptance obtained.
Timeliness: The audit report should be made available promptly to be of utmost use to
all users, particularly to the auditee organizations and/or Government who have to take
requisite action.

ENVIRONMENT AUDITING
Audit objectives and scope
3.19.1

The objectives of Environment Audit are to ensure that appropriate and adequate

policies and procedures are in place and are duly complied with in order to achieve the
goal of sustainable development, i.e. development without destruction of the environment
and without foreclosing the options for future needs. The interests of the industry and
environment have, thus, to be mutually supportive.
3.19.2

The scope of Environment Audit would extend to examination of:

(i)

the environmental appraisal and impact assessment procedures in the

Central Government for developmental activities;

(ii)

the extent of compliance with the related Government legislation and

regulations;

(iii)

the effectiveness of waste minimization and pollution control programmes

and programmes for the conservation and utilization of energy, water and
other natural resources like flora, fauna, wild life, etc.

The scope of audit would also extend to an examination of the environmental policies and
initiatives of Government and of the measures taken to respect its international
commitments in this sphere.

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Audit Approach
3.19.3

Environment Audit would be conducted within the broad framework of

Regularity and Performance Audit.

Issues for audit scrutiny

Environmental Impact Assessment (EIA)
3.19.4

The objectives of EIA are to identify and evaluate the potential beneficial as well

as adverse impact of development projects on the environmental and ecological systems.

It is a useful aid for decision-making, based on an understanding of the environmental
implications, including social, cultural and aesthetic concerns, which could be integrated
with the cost-benefit analysis of the projects concerned.

3.19.5 The Ministry of Environment and Forests has made EIA mandatory in a
Notification issued in January 1994 and amended in May 1994 in respect of twenty-nine
specified categories of developmental activities, including industrial projects, thermal
power plants, mining activities, river valley and hydroelectric schemes, and infrastructure
projects. In evaluating the EIA procedures, Audit will examine the following:
(i)

Documents submitted by the project proponents which include:

a) Feasibility Reports;
b) site clearance in respect of site-specific projects mentioned in the EIA
Notification;
c) No Objection certificates from the State Pollution Control Boards
(SPCBs) and other local authorities;
d) Environment Impact Assessment Reports;
e) Environment Management Plans;
f) Risk analysis and Emergency Preparedness Plans in the case of
projects involving hazardous substances;
g) Rehabilitation Plans in respect of projects likely to lead to large scale
displacement of the population; etc

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(ii)

Minutes of meetings of Expert Appraisal Commitments in the Ministry,

along with Reports of their site visits with a view to ascertaining the
adequacy and efficacy of the appraisal procedures in the Ministry.

(iii)

Reports on public hearings, if any, held in respect of particularly

controversial projects.

(iv)

Adherence to prescribed time schedule for completing the impact

assessment.

(v)

Recommendations of Appraisal Committees forming the basis of

environmental clearances and conditions attached there to and deviations,
if any, therefrom

3.19.6

In terms of the EIA Notification, on commissioning of the projects, the project

entities are required to submit half-yearly reports of compliance with the conditions
stipulated in the environmental clearances. These are to be examined in the Ministry. Six
Regional Offices of the Ministry located at Bangalore, Bhopal, Bhubhaneshwar,
Chandigarh, Lucknow and Shillong also undertake post-project monitoring of the cleared
projects. The adequacy of the action taken in the Ministry on the compliance reports with
particular reference to deficiencies, if any, and of the post-project monitoring by the
Regional Offices should be examined in audit.

3.19.7 Cases of non-compliance with the conditions subject to which environmental

clearances are accorded are brought to the notice of the SPCB concerned, which may
then initiate action against the defaulting entities. The action taken in this regard would
also need to be reviewed in audit for possible comment.

Prevention and Control Pollution

3.19.8

The Policy Statement for Abatement of Pollution issued by the Ministry of

Environment and Forests in 1992, provides instruments in the form of legislation and
regulation, fiscal incentives, voluntary agreements, educational programmes and
information campaigns in order to prevent, control and reduce environmental pollution.

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Various acts promulgated by the Ministry, besides the local Zoning and land use laws of
the State and Union Territory Governments govern and regulate the establishment and
functioning of any industry. Evaluation by Audit of the impact of various initiatives taken
to prevent and control pollution will involve the following:

(i)

Scrutiny of the Acts promulgated by the Central, State and Union

Territory Governments to prevent and control pollution, with a view to
critically examining their adequacy and efficacy in controlling or
preventing pollution.

(ii)

Examination of the adequacy of the monitoring systems and mechanism in

the Ministry to ensure compliance with these Acts through the Central and
State Pollution Control Boards.

(iii)

Review of monitoring by different monitoring stations of the Central and

State Pollution Control Boards of air (including noise) and water quality
status intended for ensuring adherence by industries to the prescribed
emission and effluent standards.

(iv)

Polluting units seeking consent under the Water (Prevention and Control
of Pollution) Act 1974, or the Air (Prevention and Control of Pollution)
Act 1981, or both and authorization under the Hazardous Wastes
(Management and Handling Rules), 1989, are required to submit an
Environment Statement to the SPCB concerned. This enables the units to
take a comprehensive look at their industrial operations, facilitates
understanding of material flows and ensures that they focus on areas
where waste reduction and consequently savings in input costs are
possible. Submission of these statements, wherever required, should be
watched in audit. Consents given by the SPCBs to establish and operate
the polluting units and the adequacy of the arrangements for a regular
review of these units by the Boards and of the action taken against
defaulting units should also be examined.

(v)

The Central Pollution Control Board has identified 1,551 large and
medium industries in 17 categories as highly polluting ones. These are

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required to install the necessary pollution control equipment within the
specified time frame. The Central and State Pollution Control Boards are
also required to monitor compliance with the standards prescribed in this
regard. The reports of these Boards should be scrutinized with a view to
ascertaining the adequacy of the monitoring. The follow-up action taken
on these reports and the action taken against defaulting units should be
review in audit.

3.19.9

Audit should also review in depth, from the ECPA, VFM or 3Es perspective,

specific programmes and projects, such as the Ganga Action Plan, Taj Protection
Mission, Development and Promotion of Clean Technologies, Hazardous Substances
Management, etc. implemented or under implementation by the Ministry of prevention
and control of pollution.
Conservation of Natural Resources, including Forestry and Wild Life
3.19.10 The scope of Audit would extend to an in-depth review and evaluation of several
policy initiatives and action programmes undertaken by the Ministry for the conservation
and sustainable use of natural resources, including forestry and wild life.
A.

Forestry

3.19.11

The Forest (Conservation) Act, 1980, as amended from time to time, checks the

indiscriminate diversion of forest land for purposes unrelated to forestry. The State and
Union Territory Governments are required to submit formal proposals received by them
from various investors and project entities to the Ministry, if these involve the diversion
of more than 20 hectares of forest land. The proposals will contain a map of the area,
details of the flora and fauna, the measures proposed for compensatory afforestation, etc.
An Advisory Committee in the Ministry scrutinises these proposals. Proposals involving
diversion of forestland of area between 5 and 20 hectares are to be processed by the
Regional Chief Conservator of Forests concerned in consultation with a State Advisory
Group, consisting of representatives of the State Governments concerned. Proposals
involving diversion of forestland of up to 5 hectares can be decided by the Regional

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Chief Conservator of Forests concerned under his delegated powers. Audit may examine
the processing of these proposals at different levels with a view to establishing that such
decisions as are arrived at are in conformity with the provisions of the Act and the
recommendations of the Advisory Groups. Audit shall also examine adherence to the
conditions stipulated in the clearance accorded by the authorities concerned and the
action, if any, taken against defaulters. Adequacy of the monitoring machinery to ensure
adherence to the stipulated conditions could also be ascertained in the course of audit.

3.19.12

The Ministry of Environment and Forests funds various conservation

programmes such as the National Forestry Action Programme, Wetland Conservations

Programme, Biodiversity Conservation, Conservation of Medical Plants, etc Similarly,
autonomous bodies like the National Afforestation and Eco-Development Board fund
schemes in the States with the mandate of promoting afforestation and ecological
restoration with special attention to degraded forest areas. These specific programmes
and initiatives should be reviewed in depth from the ECPA perspective. The Joint Forest
Management enunciated in National Forest Policy, 1988, envisaging the involvement of
the local populace in the development and protection of degraded forests, along with
catering to their subsistence needs, is yet another initiative the success of which would
need to be examined.

B.
3.19.13

Wildlife
Audit scrutiny in relation to activities for the preservation of wild life would

extend to the enforcement of the Wildlife (Protection) Act 1972, through the offices of
the Regional Deputy Directors of Wildlife Preservation located at Kolkata, Chennai Delhi
and Mumbai with the assistance of the State Wildlife Departments. Further, the Ministry
has initiated specific programmes and schemes, such as Development of National Parks
and Sanctuaries, Project Tiger, Project Elephant, etc. for the conversation of wild life.
Autonomous bodies such as the Wildlife Institute of India, Central Zoological Authority,
National Zoological Park, etc., are also engaged in this sphere. Achievements under these
programmes and schemes and the functioning and performance of various autonomous
bodies in achieving the intended objectives could be reviewed and evaluated by Audit.

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Environmental Survey, Research, Education, Training and Information
Environmental Survey
3.19.14

The Ministry of Environment and Forests carries out surveys of natural

resources of flora and fauna through its subordinate offices and institutes. The surveys of
flora are conducted by the Botanical Survey of India, with its headquarters at Kolkata and
its nine circle/field offices. Similarly, the Zoological Survey of India with its
headquarters at Kolkata and sixteen regional stations located throughout the country,
undertakes surveys and exploration of fauna in different ecosystems and conservation
areas like national parks, wildlife sanctuaries, etc. The Forest Survey of India, with its
headquarters at Dehra Dun and four zonal offices at Bangalore, Kolkata, Nagpur and
Shimla, is entrusted with the responsibility for the survey of forest resources in the
country.
3.19.15 Based on a performance appraisal of these agencies, Audit will critically examine
the efforts of the Ministry in mapping and exploring the countrys natural diversity,
collection and conservation of endangered species of plants and animals and preparation
of the related database.
Environmental Research
3.19.16 In order to advance scientific understanding and to generate information for
developing strategies, technologies and methodologies for better environmental
management, the Ministry of Environment and Forests supports various research and
development schemes. Chief among them are the Environment Research Programme,
Ecosystems Research Scheme and Action-Oriented Research Programme for Eastern and
Western Ghats. Audit scrutiny will extend to an appraisal of the formulation,
implementation and monitoring of these programmes with particular reference to the
thrust areas defined by the Ministry. The guidelines relating to project management
discussed in paragraphs 3.18.4 to 3.18.9 will also be of relevance in this context. Audit
could also review and evaluate with advantage the performance of autonomous bodies
under the Ministrys administrative control, such as the G.B. Pant Institute on Himalayan
Environment, Indian Council of Forestry Research and Education (ICFRE) and the

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Wildlife Institute of India, which are engaged in research activities respectively in the
spheres of environment, forestry and wildlife.
Environmental Education, Training and Information
3.19.17 The Ministry of Environment and Forests is also involved in the organization and
management of education plans and extension activities in the fields of forestry, wildlife
and environment through its institutes and autonomous bodies. The Ministry has
launched environment awareness campaigns and has established Eco Clubs and seven
centers of excellence with a view to strengthening awareness, research and training in
priority areas of environmental science and management. The functioning and
performance of these agencies and the extent to which they have achieved the intended
objectives could be examined in audit. An Environment Information System (ENVIS) has
been established in the Ministry with centers located all over the country with the
objectives of information collection, storage and dissemination to the user groups
concerned in the fields of environment and wildlife and associated spheres. The
achievement of the objectives envisaged under the programme could also be ascertained.
International Co-operation
3.19.18

The Ministry is the nodal agency in the country for implementation of the

initiatives taken by the United Nations Environment Programme (UNEP) and the South
Asia Co-operative Environment Programme. It also functions as the nodal agency for
participation in international agreements relating to the environment such as the
Convention on International Trade in Endangered Species, Vienna Convention for
Protection of the Ozone Layer, the Montreal Protocol, Basel Conventions on Biological
Diversity and Climate Change, etc. The Ministry also handles bilateral cooperation,
matters relating to regional bodies such as SAARC, ESCAP, etc.
3.19.19

Audit would examine various international agreements with a view to

ascertaining whether the countrys interest have been adequately safeguarded by these
accords. The measures taken by the Ministry to respect and honour its various
international commitments would also be key areas for audit scrutiny.

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