18

Audit of Public Sector Undertakings

Question 1
ABG & Co., a Chartered Accountant firm has been appointed by C & AG for performance audit
of a Sugar Industry. What factors should be considered by ABG & Co., while planning a
performance audit of Sugar Industry?
(6 Marks, May, 2014)
Answer
Factors to be Considered While Planning the Performance Audit: While planning a
performance audit of Sugar Industry, the auditors should take care of certain factors which are
listed below(i)

to consider significance and the needs of potential users of the audit report.

(ii)

to obtain an understanding of the program to be audited.

(iii) to consider legal and regulatory requirements.

(iv) to consider management controls.
(v) to identify criteria needed to evaluate matters subject to audit.
(vi) to identify significant findings and recommendations from previous audits that could
affect the current audit objectives. Auditors should determine if management has
corrected the conditions causing those findings and implemented those
recommendations.
(vii) to identify potential sources of data that could be used as audit evidence and consider
the validity and reliability of these data, including data collected by the audited entity,
data generated by the auditors, or data provided by third parties.
(viii) to consider whether the work of other auditors and experts may be used to satisfy some
of the auditors' objectives.
(ix) to provide sufficient staff and other resources to do the audit.
(x)

to prepare a written audit plan.

The Institute of Chartered Accountants of India

18.2

Advanced Auditing and Professional Ethics

Question 2
Write short notes on the following:
(a) Areas of proprietary audit under section 227(1A) of the Companies Act, 1956.
(b) Supplementary audit under section 619(3) of the Companies Act, 1956.
(4 Marks each, November, 2012)
Answer
This question is redundant in view of the provisions of the Companies Act, 2013.
Question 3
Write short notes on the following:
(a) Comptroller & Auditor General of India were conducting supplementary audit U/s 619 (3)
(b) of the Companies Act, 1956 made certain comments on the reported foreign
exchange loss in the accounts of a Public sector company. The Board of Directors failed
to reply to the comments of C & AG in their report- Comment. (4 Marks, November, 2011)
(b) Propriety elements in CARO 2003.

(4 Marks, November, 2011)

Or

Explain the propriety elements in the Companies (Auditors) Report Order, 2003.
(8 Marks, November, 2006)
Answer
This question is redundant in view of the provisions of the Companies Act, 2013.
Question 4
Write a short note on General principles of propriety audit.

(4 Marks, May, 2011)

Or
Write a short note on General principles relating to propriety aspect. (4 Marks, November, 2008)
Answer
General Principles of Propriety Audit: Proprietary audit is concerned with scrutiny of
executive actions and decisions bearing on financial and profit and loss situation of the
company, with special regard to public interest and commonly accepted customs and
standards of conduct.
General principles of Propriety Audit are as under:
(i)

That the expenditure is not prima facie more than the occasion demands and that every
official exercises the same degree of vigilance in respect of expenditure as a person of
ordinary prudence would exercise in respect of his own money.

(ii)

That the authority exercises its powers of sanctioning expenditure which will not result in
any benefit directly or indirectly to such authority.

The Institute of Chartered Accountants of India

Audit of Public Sector Undertakings

18.3

(iii) That the funds are not utilised for the benefit of a particular person or group of persons
and
(iv) That, apart from the agreed remuneration or reward, no other revenue is kept open to
indirectly benefit the management personnel, employees or others.
Question 5
Write a short note on Supplementary Audit u/s 619(4) of the companies Act, 1956.
(4 Marks, November, 2007)
Answer
This question is redundant in view of the provisions of the Companies Act, 2013.
Question 6
Write a short note on Public Accounts Committee.

(4 Marks, May, 2007)

Answer
Public Accounts Committee (PAC): The parliament as well as each state legislative sets
up a public accounts committee to scrutinize the appropriation accounts and the report of
the auditors thereon. The committee also examines financial statements (together with the
auditors report thereon) of the State Corporation and other autonomous and semiautonomous bodies (except Government companies and those public undertakings which
assigned to the committee on public undertakings). The Public Accounts Committee satisfies
itself (i)

that the moneys (shown in the accounts) were disbursed legally on the service or
purpose to which they were applied.

(ii)

that the expenditure was authorised.

(iii) that re-appropriation has been made in accordance with the provisions made (i.e.
distribution of funds).

The Institute of Chartered Accountants of India