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ISSAI Compliant Works Audit Manual
OFFICE OF THE COMPTROLLER & AUDITOR GENERAL OF BANGLADESH
Preface
The Supreme Audit Institution (SAI) of Bangladesh has always been trying to keep itself abreast of the developments in the world of public sector auditing. For the guidance of public sector auditors across member nations the INTOSAI -the global forum of the Auditors General issued International Standards of Supreme Audit Institutions, commonly known as ISSAIs in 2010. Effective application of these professional standards by the SAI of Bangladesh will certainly enhance the quality and efficiency of government auditors and help them in discharging their responsibilities. Accordingly ISSAI compliant Works Audit Manual has been prepared.
This Works Audit Manual is an important deliverable under the current development project, i.e. Strengthening the Public Expenditure Management Programme (SPEMP-B). International and national consultants, the concerned audit directorate and the evaluation team deserve special appreciation for contributing to this valuable product. Meanwhile pilot audit has been carried out in line with the draft version of this Manual. From now on works audit will be conducted as per the Manual and other auditing standards and codes.
A Manual of the Works Audit Department was published in 1980 by the then office of the Accountant General (Works and WAPDA). This earlier Manual will continue to be used side by side with this Works Audit Manual based on ISSAIs.
The present Manual derives its authority from articles 128 and 132 of the Constitution of Bangladesh and the Comptroller and Auditor General (Additional Functions) Act, 1974 and subsequent amendments thereof.
This Manual is a living document. It will be updated periodically. Any suggestion to improve it will be welcome. However, while applying the Manual if any error or omission is detected or noticed , the matter may please be brought to the notice of the Office of the Comptroller and Auditor General of Bangladesh immediately for due rectification.
Masud AhmedDated: Dhaka, June, 2016 Comptroller and Auditor General of Bangladesh
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PUBLIC WORKS AUDIT MANUAL
Table of Contents GLOSSARY.............................................................................................................................1
CHAPTER-1............................................................................................................................11
1.1 INTRODUCTION.............................................................................................................11
1.2 OBJECTIVE OF THE MANUAL.........................................................................................11
CHAPTER-2: PUBLIC WORKS................................................................................................13
2.1 INTRODUCTION.............................................................................................................13
2.2 FUNCTIONS OF PUBLIC WORKS DEPARTMENT..............................................................13
2.3 AUDIT RESPONSIBILITIES OF KEY PERSONNEL AT PWD...............................................14
2.4 THE WORKS AUDIT DIRECTORATE................................................................................18
2.5 DUTIES AND RESPONSIBILITIES OF KEY AUDIT PEERSONNEL WORKING AT WORKS AUDIT DIRECTOORATE:..............................................................................................18
CHAPTER-3: PUBLIC WORKS – ACCOUNTS OVERVIEW........................................................23
3.1 ADMINISTRATIVE APPROVAL........................................................................................23
3.2 TECHNICAL SANCTION..................................................................................................23
3.3 APPROPRIATION AND RE-APPROPRIATION..............................................................23
3.4 EXCESSES OVER AMOUNT ADMINISTRATIVELY APPROVED..........................................24
3.5 MODIFICATIONS IN EXPENDITURE SANCTION..............................................................24
3.6 TECHNICAL SANCTION................................................................................................24
3.7 MODES OF OBTAINING CASH IN PUBLIC WORKS DIVISIONAL AND SUB-DIVISIONAL OFFICES......................................................................................................................25
3.8 RECEIPTS CREDITED TO REVENUE BEFORE ACTUAL REALIZATION..............................25
3.9 REMISSION OR REFUND OF REVENUE...........................................................................25
3.10 MUSTER ROLLS AND MEASUREMENT BOOKS.........................................................26
3.11 REGISTER OF WORKS..................................................................................................26
3.12 MANUFACTURE ACCOUNTS......................................................................................27
3.13 CHARGES THAT ENTER INTO THE ACCOUNTS OF A WORK CARRIED OUT IN A WORKSHOP................................................................................................................27
3.14 APPROPRIATION AUDIT OF PUBLIC WORKS EXPENDITURES......................................28
3.15 ACCOUNTS OF WORK OF A DIVISION FALLING INTO ARREARS....................................28
CHAPTER 4: PUBLIC WORKS: ESTIMATE, MEASUREMENT & INVOICING............................30
4.1 PREPARATION OF ESTIMATE........................................................................................30
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4.2 DRAWING AND DESIGN.................................................................................................31
4.3 EXCEPTIONS..................................................................................................................32
4.4 SANCTIONED ESTIMATES OF LARGE WORKS OR PROJECTS...........................................32
4.5 ANNUAL MAINTENANCE ESTIMATES............................................................................32
4.6 POWERS OF SANCTION OF DETAILED ESTIMATES........................................................33
4.7 REVISION OF ESTIMATES...............................................................................................33
4.8 MEASUREMENTS...........................................................................................................33
4.9 BILLS FOR WORKS DONE...............................................................................................34
4.10 CHECK OF MEASUREMENTS........................................................................................34
4.11 MAINTENANCE OF STANDARD MEASUREMENT BOOK................................................35
4.12 MAINTENANCE OF REGISTERS IN THE EXECUTIVE ENGINEER’S OFFICE.....................37
4.13 RECALL AND RE-ISSUE OF MEASUREMENT BOOKS.....................................................37
CHAPTER- 5: AUDIT PROCESS: GENERAL.............................................................................39
5. 1 GENERAL TASKS...........................................................................................................39
5.2 PLANNING.....................................................................................................................39
5.3 FIELD WORK..................................................................................................................40
5. 4 EVALUATION AND REPORTING.....................................................................................40
5. 5 AUDIT QUALITY ASSURANCE........................................................................................40
5. 6 AUDIT TEAM.................................................................................................................41
5.7 DOCUMENTATION.........................................................................................................43
5.8 COMMUNICATION..........................................................................................................43
CHAPTER 6: AUDIT PROCESS: PLANNING............................................................................45
6.1 INTRODUCTION.............................................................................................................45
6.2 AUDIT STRATEGY AND PLAN.........................................................................................45
6.3 FUNDAMENTAL AUDITING PRINCIPLES........................................................................47
6.4 PROCESSING INFORMATION........................................................................................49
6.5 UNDERSTANDING THE AUDITED ENTITY AND ITS ENVIRONMENT (ISSAI 4100, Para 6.4).............................................................................................................................50
6.6 UNDERSTANDING INTERNAL CONTROL OF THE AUDITED ENTITY.............................50
6.7 DEVELOPING SCOPE AND OBJECTIVES..........................................................................51
6.8 DEVELOPING CRITERIA................................................................................................51
6.9 SETTING THE MATERIALITY........................................................................................52
6.10 IDENTIFYING AND ASSESSING RISKS...........................................................................54
6.11 SAMPLING................................................................................................................58
6.12 SAMPLE SELECTION................................................................................................58
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6.13 METHODS OF SAMPLE SELECTION.......................................................................58
6.14 SELECTING THE SAMPLE: STATISTICAL SAMPLING...........................................59
6.15 SELECTING THE SAMPLE: NON-STATISTICAL SAMPLING..................................60
6.16 KEY ITEM SELECTION.............................................................................................61
CHAPTER-7: FIELD AUDIT....................................................................................................62
7.1 INTRODUCTION.............................................................................................................62
7.2 EXAMPLES OF AUDIT FINDINGS....................................................................................62
7.3 HIGH VALUE WORKS ANALYSIS.....................................................................................69
7.4 AUDIT OF RECORDS RELATING TO MONTHLY ACCOUNTS.............................................72
7.5 AUDIT OF TRANSFER ENTRIES......................................................................................73
7.6 AUDIT OF CASH BOOK....................................................................................................73
7.7 AUDIT OF EMPLOYEE RELATED EXPENSES...................................................................76
7.8 AUDIT OF ACQUITTANCE ROLLS....................................................................................77
7.9 AUDIT OF BUDGET AND EXPENDITURE STATEMENT....................................................78
7.10 AUDIT OF REGISTER OF BUDGET ALLOTMENT............................................................78
7.11 AUDIT OF REGISTER OF CONTINGENCIES....................................................................79
7.12 AUDIT OF VEHICLES................................................................................................79
7.13 AUDIT OF DIVISIONAL ACCOUNTANT’S OBJECTION BOOK...........................................81
7.14 AUDIT OF MISCELLANEOUS REGISTERS......................................................................81
7.15 AUDIT OF AGREEMENTS..............................................................................................81
7.16 AUDIT OF REGISTER OF DEPOSITS..............................................................................82
7.17 AUDIT OF REGISTER OF ADVANCES FOR SUPPLIES.....................................................83
7.18 AUDIT OF REGISTER OF WORKS..................................................................................83
7.19 AUDIT OF MEASUREMENT BOOK.................................................................................84
7.20 AUDIT OF MATERIALS AT SITE ACCOUNTS AND ANNUAL CLOSING BALANCE CERTIFICATE..............................................................................................................84
7.21 AUDIT OF NOMINAL MUSTER ROLLS...........................................................................85
7.22 AUDIT OF SCHEDULE OF RATES...................................................................................85
7.23 AUDIT OF REGISTER OF ARBITRATION AND COURT CASES.........................................86
7.24 AUDIT OF REGISTER OF REVENUE...............................................................................86
7.25 AUDIT OF WORK FILES................................................................................................86
7.26 AUDIT OF STOCK REGISTERS.......................................................................................87
7.27 AUDIT OF TOOLS AND PLANT ACCOUNT......................................................................87
7.28 AUDIT OF SURVEY REPORTS OF OBSOLETE ITEMS......................................................88
7.29 AUDIT OF MONTHLY ACCOUNTS OF RECEIPTS AND ISSUES OF TOOLS AND PLANT..........88
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7.30 AUDIT OF STORES ACCOUNTS..................................................................................89
7.31 AUDIT OF SANCTIONS..................................................................................................89
7.32 AUDIT OF ACCOUNTS OF JUNE.........................................................................90
CHAPTER 8: EXAMPLES OF PROGRAMME BASED AUDIT CHECKLIST......................92
8.1 Audit of Monthly Accounts.........................................................................................92
8.2 AUDIT OF BUDGET AND EXPENDITURE.........................................................................96
8.3 AUDIT OF ANNUAL DEVELOPMENT PROGRAMME................................................97
8.4 AUDIT OF ANNUAL PROCUREMENT PLAN (APP) UNDER REVENUE BUDGET.................99
8.5 AUDIT OF LAND ACQUISITION...................................................................................100
8.6 AUDIT OF CASH BOOK..................................................................................................101
8.7 AUDIT OF TENDER.......................................................................................................104
8.8 AUDIT OF MEASUREMENT BOOK...............................................................................107
8.9 AUDIT OF REGISTER OF WORKS..................................................................................108
8.10 AUDIT OF RECEIPTS..................................................................................................110
8.11 AUDIT OF PAYMENT..................................................................................................113
8.12 AUDIT OF AGREEMENTS...........................................................................................115
8.13 AUDIT OF BILL...........................................................................................................117
8.14 AUDIT OF SETTLEMENT WITH TREASURIES.............................................................120
8.15 AUDIT OF DIVISIONAL ACCOUNTANT’S OBJECTION BOOK.........................................122
8.16 AUDIT OF CONTRACTORS LEDGER............................................................................123
8.17 AUDIT AS PER PUBLIC PROCUREMENT REGULATIONS.............................................125
8.18 AUDIT OF REGISTER OF CONTINGENCIES.................................................................129
8.20 AUDIT OF ESTABLISHMENT BILLS AND SERVICE BOOKS...........................................133
8.21 Audit Checklist for other departments dealing with works........................................136
CHAPTER 9: AUIDIT OF PUBLIC PROCUREMENT.............................................................159
9.1 Procurement Process.................................................................................................159
9.2 Procurement Process –Works/Goods........................................................................171
CHAPTER 10: REPORTING..................................................................................................178
10.1 INTRODUCTION.........................................................................................................178
10.2 REPORTING...............................................................................................................179
10.3 AUDIT OPINIONS.......................................................................................................184
10.4 OBSERVATIONS: CAUSE, EFFECT AND RECOMMENDATIONS.....................................187
10.5 FOLLOW UP...............................................................................................................188
ANNEXTURES....................................................................................................................189
ANNEXTURE –A: EXAMPLE OF ENGAGEMENT LETTER.........................................................191
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ANNEXTURE-B: EXAMPLE: UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT........196
ANNEXURE –C: UNDERSTANDING INTERNAL CONTROL..................................................204
ANNEXURE – D: EXAMPLE: AUDIT PLANNING MEMORANDUM.........................................227
ANNEXURE- E: EXAMPLES: COMPLIANCE AUDIT PROCEDURES FOR SELECTED SUBJECT MATTERS..................................................................................................................233
ANNEXURE- F: EXAMPLES: COMPLIANCE DEVIATIONS.............................................234
ANNEXURE –G:Example of ISSAI Compliance Audit Plan on Civil Aviation Authority . .237
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Glossary
1. Administrative Approval
This term denotes the formal acceptance by the administrative department concerned of the proposal for incurring any expenditure on work initiated. It is, in effect, an order to Public Works Department to execute certain specific works at a stated sum to meet the administrative needs of the department requiring the work.
2. Advance Payment
Advance payment means a payment made on running account to a contractor for work done by him but not measured.
3. Appropriation
Appropriation is the allotment of a particular sum of money to meet expenditure on a specified object. An appropriation is intended to cover all the charges, including the liabilities of past years to be paid during the year or to be adjusted in the accounts of it. It is operative until the close of the financial year.
4. Assets
In the accounts of works this term indicates all outstanding or anticipated credits which have to be taken in reduction of final charges. Examples of such assets are recoveries of advances or recoverable payment and sale proceeds or transfer value of surplus materials.
5. Contract and Contractor
The term “Contract” means any kind of undertaking, written or verbal, express or implied, by a person not being Government servant for the construction, maintenance or repairs of one or more works for the supply of materials in connection with the execution of works or the supply of materials. The term ``Contractor” means a person or firm that has made such an undertaking but often its use is restricted to contractors for the execution of works or for services in connection therewith.
6. Cash
The term Cash includes legal tender, coin, notes, cheques and notes payable on demand. A small supply of revenue stamps may be kept as part of the cash balance. Government securities, deposit receipts of banks, debentures and bonds accepted as
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security deposit, are not treated as cash. Pre-dated cheques and drafts are not treated as cash until, they are due for encashment. Service stamps and false coins are not treated as cash.
7. Compliance Audit Guidelines
Compliance audit guidelines comprises the ISSAI 4000 which is general introduction to guidelines on compliance audit, ISSAI 4100 is compliance audit guidelines for audits performed separately from the audit of financial statements. Such work may be carried out as part of a performance audit or as a separate audit type. ISSAI 4200 is compliance audit guidelines applicable to the audit of financial statements.
8. Cash Order
Cash order is a payment order issued by a Sadar Treasury on a Sub-Treasury under its jurisdiction in favour of the person to whom money is due or who is responsible for its disbursement and is payable in lump .
9. Contingencies (Works)
When used in respect of the accounts of works the term “Contingencie” indicates the incidental expenses of a miscellaneous character which cannot appropriately be classified under any distinct subhead or sub work, yet pertain to the work as a whole.
10. Direct and Indirect Receipt
Direct Receipts are those revenue receipts which are realized in connection with a work or project either by officers of the Public Works Department or other departments and are brought to account directly as appertaining to the work or project. Indirect Receipts are those receipts which pertain, or are incidental, to a scheme or work, but cannot be taken directly into such detailed accounts of it are incorporated in the regular accounts of the receipts of the Department.
11. Direct and Indirect Charges
Direct charges are those charges pertaining to project or job which are incurred directly for its execution and are included in the regular accounts of it. 'Indirect charges' are those charges which pertain, or are incidental to work, project, workshop jobs or manufacture job, but which are not incurred directly or solely in connection therewith and thus cannot be taken directly into such detailed account of it as are incorporated in the regular accounts of the expenditure of the department.
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12. Deposit Works
This term applies to works of construction or repair the cost of which is met, not out of Government funds but out of funds from non- Government sources, which may either be deposited in cash or otherwise placed at the disposal of the Divisional Officer. Works executed for Municipalities and other public bodies fall under this category when the cash is chargeable either to cash deposits made for the purpose or to their credit balances at treasuries.
13. Division and Divisional Offices These terms are used to denote respectively the executive charge held by a Divisional Officer and the head office of such a charge. Thus the office of an independent executive sub-divisional office and also that of superintendent of a workshop working independently of a Divisional officer are also denoted by these terms.
14. Divisional Officer
This term is applied to an executive officer of the public Works who is not subordinate to another executive or disbursing officer of the Department, even though the executive charge held by him may not be recognized as a “Division” by the government concerned. Thus the officer in charge of an independent sub-division is also treated as a Divisional Officer for the purposes of this manual.
15. Final Payment
Final payment means the last payment on running account made to a contractor on the completion or termination of his contract and in full settlement of the account.
16. Framework Contract“Framework Contract" means a contract, effective for a given period of time between one or more Procuring Entities and one or more Suppliers establishing the terms governing the Procurement of Goods and related Services with regard to price and where appropriate, the quantity or quantities envisaged.
17. Force MajeureForce Majeure means an event or situation beyond the control of the Contractor, a Supplier or Consultant that is not foreseeable, unavoidable and its origin is not due to negligence or lack of care on the part of the Contractor. Such events may include, but not be limited to, acts of the Government in its sovereign capacity, wars or revolutions or acts of God like fires, floods, epidemics and quarantine restrictions, and freight embargoes.
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18. Issue RateThe term denotes the cost per unit fixed in respect of an article on the stock of the department at a valuation, for the purpose of calculating the amount creditable to the sub-head concerned of the stock account by charge to the account or service concerned, when any quantity of that article is issued from stocks. This does not take into account the storage charges.
19. Imprest An imprest is a standing advance of fixed sum of money given to an individual to enable him to make certain classes of disbursements which may be entrusted to his charge by the Divisional Officer or the Sub-divisional Officer in accordance with such rules and subject to such restrictions, as may be laid down by the local administration. The imprest should not be closed. It is recouped.
20. Intermediate Payment Intermediate payment is the term applied to a disbursement of any kind on a running account, not being the final payment. It includes an ``Advance Payment’’, a “Secured Advance”, and an “On Account Payment", (other than the final payment on running account) or a combination of both.
21. Labour
When a separate materials account is kept for one or more sub-heads of an estimate and the term labour is used in connection with such an account it denotes all charges pertaining to each of those sub-heads other than (1) the cost of materials issued direct and (2) carriage and incidental charges in connection with the materials.
22. LiabilitiesWhen used in respect of accounts of works, this term includes all anticipated charges which are adjustable as final charges, but have not been paid, regardless of whether or not they have fallen due for payment or having fallen due, have not been placed to the credit of the persons concerned in a suspense head subordinate to the account of the work concerned.
23. Local Loan Works Local Loan Works are the works executed by the Public Works Department on behalf of Municipality, Port, Trust, or other Corporation, when the cost of the works is to form part of a loan given to it by the Government for the purpose of cost of materials if recorded separately in the accounts.
24. Lump Sum Contract
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Lump sum Contract is a contract for a complete work which a contractor agrees to execute with all its contingencies for a fixed sum subject to such conditions the Government may lay down.
25. Major Estimate Major Estimate is the estimate for a work when the sanctioned amount of works expenditure exceeds approved amount or any other limit which may be fixed by competent authority.
26. Market Rate
The term indicates the cost per unit at which the article or an article of similar
description, can be procured at a given time at the stores godown, from the public
markets suitable to the division for obtaining a supply thereof.
27. Muster RollMuster Roll is the roll prepared for work done, by daily labour engaged departmentally. One or more Muster Rolls should be kept for each work, but Muster Roll should never be prepared in duplicate. Labourers may be paid more than once in a month. The daily attendance should be recorded in the Muster Roll. It is the initial record upon which the accounts of the works are based.
28. Measurement BookMeasurement book is the initial record of the greatest importance in the Public Works Department. A detailed account of actual measurements in quantities of work done otherwise than by daily labours on lump sum contracts and of all supplies made by a contractor are kept in a Measurement Book in prescribed form. The Measurement Books should, therefore, be considered as very important records. All the Books belonging to a Division should be numbered serially and register of them should be maintained in the prescribed form in the Divisional Office.
29. New Road ConstructionCompletely new embankment and road pavement including bridges, culverts and any necessary slope protection.
30. On Account Payment
It means the payment made on a running account to the contractor in respect of work done or supplies made by him and duly measured. Such a payment may or may not be for the full value of work or supplies. If it is an intermediate payment, it is subject to the final settlement of the running account on the completion of the contract of the work or supplies.
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31. OperationOperation indicates the charges incurred on the manufacturing operations connected with specific jobs. The term is used in respect of the accounts of manufacture and work shop transactions.
32. Out-turn
Out-turn denotes the value of the finished products or of the work done, in cases in which the articles brought not supplied departmentally of manufacturing operations connected with specific jobs.
33. Original works Original works include new constructions whether of entirely new works or of additions and alterations to existing works and also all repairs to newly purchased or previously abandoned buildings required or bringing them into use. Repairs include primary operations undertaken to maintain in proper condition buildings" and works in ordinary use.
34. Primary and Secondary Units of AppropriationFor purposes of financial control, the grant allotted to each head of account is divided into primary units of appropriation, e.g. the grant for civil works is divided into: Original works, repairs, establishments, etc. Any subdivisions of the primary units, e.g. (a) Original works into Major works, Minor Works, etc. (b) Establishment into Pay of Establishment, other charges, etc. are known as secondary unit of appropriation.
35. Running AccountRunning Account means the account with a contractor when payment for work or supplies made to him at convenient intervals subject to final settlement of the account on the completion or determination of his contract.
36. Re-appropriationRe-appropriation means the transfer of funds from one unit of appropriation to another under such unit within a grant.
37. Rate of Cost and Inclusive RateRate of cost means generally the total cost of a work or supply divided by its quantity. In accounts it represents the recorded cost per unit, as arrived at by up to date final charge on a subhead by dividing the up-to-date progress thereof. Inclusive Rate of Cost means the rate of cost of the entire work relating to a sub head including the cost of materials if recorded separately in the accounts.
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38. Secured Advance
Secured Advance is a term applied to an advance made on the security of materials brought to site of a work, to a contractor whose contract is for the completed Item of work.
39. Sub-head and Sub-workSub-head means the sub-divisions into which the total cost of work is divided for purposes of financial control and statistical convenience. As for example, in the case, of a construction or maintenance of a work, excavation, brick work, concrete wood work, etc. are treated as Sub-heads of it.
Sub-work means a distinct unit of a large work consisting of several buildings or smaller works or groups thereof if that unit is sufficiently large or important to be kept distinct for the purposes of accounts. As per example, in the case of irrigation projects, the Head Works, Main Line, each branch of a canal, the drainage and protective works, etc. all form separate sub-works. A sub-work may have several sub heads of it.
40. Supervision Charges
This term is ordinarily applied to the charges which are levied, in addition to book value and storage charges, in respect of stock materials sold or transferred and are intended to cover such items of the expenditure incurred on the stores as do not enter their book value and are not included in the storage charges.
41. Storage Rate and Storage Charges These expressions denote, respectively, the percentage rate fixed for and charge levied on, all issues of stock to cover such actual expenditure, as incurred after the acquisition of the stores, on work-charged establishment employed on handling and keeping initial accounts, the custody of stock and the maintenance of the store godown or yards, etc.
42. Sectional OfficerThis designation is used to describe those officials, usually non-gazetted subordinates, who are placed in responsible executive charge of works or stores under the order of the officer in charge of recognized subdivision, and the accounts of whose transactions are, therefore, ultimately incorporated in those of the sub division.
43. Technical Sanction
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Technical Sanction is the order of the competent authority sanctioning properly detailed estimate of cost of work of construction or repair proposed to be carried out in Public Works Department. Ordinarily, such sanction can only be accorded by the Govt. Ministry of Public Works or by such authorities of the Ministry to whom the power has been delegated by Government. Sanction accorded to a work by any other department of the Govt. is regarded merely as an administrative approval of the work.
44. Temporary AdvanceWhen a disbursing officer makes a remittance to a subordinate officer to enable him to make a number of specific petty payments on a muster roll and other voucher which has already been passed for payment, the amount remitted should be treated as Temporary Advance. The account of a Temporary Advance should be adjusted as soon as possible.
45. Works Accounts ExpenditureThe construction or maintenance of a work expenditure is incurred through cash stock charges and adjustments which may also include charges incurred in other divisions or as departmental charges leviable under the rules of the Government and include the cost of the work. The cash, store and adjustment transactions pass into the general accounts of the division. However, as the units of classification adopted in the general accounts in respect of expenditure are the heads of account not designated to correspond with individual estimates for works or contract, accounts have to be maintained in sub divisional and divisional offices for recording (1) the cost of individual works, and (2) the transactions of individual contractors.
46. Works Expenditure and Works OutlayThese terms are used to indicate respectively the expenditure and the capital charges, on the special service connected with the convenient repair and maintenance of works. The charges falling under these categories may be met when under rules; any receipts are taken in reduction of the charges, but they do not include the cost of the general services, tools and plants and establishment, or any charges not taken to final heads of account.
47. Works SlipThe Divisional Officer is primarily responsible for providing information of the probability of excess over the estimated cost of work and should report any such probability to the Superintendent Engineer at once, describing the nature and cause of the excess and asking for orders. This report should be made on the
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Works Slip Form. This form shows name of work, month, sub-heads, unit, quantity, rate, cost etc. as per estimate and as executed. It also shows probable cost of work remaining to be done and value of work already done but not brought to account.
(Ref: Central Public Works Accounts Code)
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CHAPTER-1
1.1 INTRODUCTION
The Directorate of Works Audit originally established as the Directorate of Audit and Accounts, WORKS and WAPDA started functioning from 18th May 1964. After liberation of Bangladesh it has been renamed as the Office of the Accountant General WORKS & WAPDA, Bangladesh. The Directorate was further renamed as the office of the Accountant General (WORKS & WAPDA) in July, 1977.
Since the departmentalization of government accounts in 1984, three Chief Accounts Offices were created for Works, Roads & Highways and Local Government Division and the accounting functions were given to these three Accounts Offices separated from Works Audit Directorate.
The directorate of Works Audit was formally created in 1985 entrusted with the audit of works related activities of Public Works Department, Roads and Highways Department, and Department of Public Health Engineering, local Government Engineering Department, Facilities Department (Ministry of Education), Water and Power Development Board and Rajdhani Unnayan kattripakkha (RAJUK). Later the Directorate was assigned with task of audit of works related receipt and expenditure incurred by 8 ministries covering entities like Public Works Department, Roads and Highways Department, Civil Aviation Authority, Local Govt. Engineering Department, Public Heath Engineering Department, Rajdhani Unnayan kattripakkha and other city Development Authorities, Education Engineering Department, Dhaka Electricity Supply Authority, Public Health Engineering Department, Directorate of Government Accommodation, Water and Sewerage Authority, Bangladesh Water Development Board, Bangladesh Power Development Board, West Zone Power Distribution company, Bangladesh Rural Electrification Board, Civil aviation Authority, National Housing Authority, Urban development authority, Bangladesh Road Transport Authority, Bangladesh Road Transport Corporation, etc.
1.2 OBJECTIVE OF THE MANUAL
This manual is developed largely having relevance to the provisions of Civil Public Works Code and course related to Roads & Highways Department and Local Government Engineering Department etc to help the Works Audit Directorate carry out its tasks;
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To use it as a generic manual having reference to all types of Works expenditure e.g. building construction, roads and bridges etc.;
To make it mainly relevant to ISSAI compliant audit;
To help drawing reference where financial audit or performance audit include audit of works expenditure;
To make it compliant with internationally recognized good practice as set out in the International Standards for Supreme Audit Institutions (ISSAIs);
To provide a framework of reference containing broad guidelines to encourage consistent practice among different audit teams with respect to planning, fieldwork, evaluation, reporting and follow-up procedures relevant for all public works audit;
To assure it as user friendly so that auditors can readily find a reference they want and use material having a sensible structure and accurate index for effective auditing;
To make it stand alone as a source of reference as far as possible but can cross refer to other manuals to avoid the need for excessive detail.
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CHAPTER-2
PUBLIC WORKS
2.1 INTRODUCTION
In 1786 during the period of the British rule in this subcontinent, a Military Board was set up to look after all public works. Later in the year 1854 the then British Government established the Public Works Department responsible for the construction of roads, buildings, railways as well as flood control, irrigation and military works. In 1947 with the partition of India and Pakistan, the responsibility of construction work for the Central Government of Pakistan was vested with the Central PWD. A Construction and Building Directorate (C&B) was entrusted with all construction works for the Provincial Government of the then East Pakistan which later became an independent country named as The Peoples’ Republic of Bangladesh.
After the liberation of Bangladesh in 1971, the country inherited two separate organizations for the construction and maintenance of Government Buildings: The Central PWD and the Buildings Directorate of the Provincial Government. These two entities were merged into one department in 1977 to form the present Public Works Department (PWD).
2.2 FUNCTIONS OF PUBLIC WORKS DEPARTMENT
The main functions of Public Works department are:
Construction of Buildings for Other Agencies on a Deposit Work Basis Preparation of Book of Schedule of Rates and Analysis of Rates for Construction &
Maintenance of Public Buildings Construction of National Monuments Preparation of Book of Specifications and Code of Practice Procurement of Materials & Equipments required for Construction Work Design and Construction of Public Buildings except those of Roads and Highways
Department (RHD), Bangladesh Tele Communication Company Limited (BTCL), Postal Department
Repair and Maintenance of Public Building(s Acquisition and Requisition of Land for construction Work Valuation of Land and Property and Fixing of Standard Rent.
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2.3 AUDIT RESPONSIBILITIES OF KEY PERSONNEL AT PWD
The responsibilities assigned to key personnel engaged in the PWD as per its organogram pertaining to audit are described below:
THE CHIEF ENGINEER: The Chief Engineer is responsible for the efficient administration and general
professional control of public works within its jurisdiction, and is its chief professional adviser in all matters connected with them.
It is the duty of the Chief Engineer to recommend to the minor local Government transfers and postings of Superintendent Engineers. Transfers of Divisional Officers and of other establishment are within his competence.
The Chief Engineer exercises a concurrent control, over the duties of the officers of the department in connection with the maintenance of the accounts, and will give all legitimate support to the officers concerned in enforcing strict attention to the regulations concerning the disbursement of money, the custody of stores and the submission of accounts. He will have no authority over the Audit in regard to audit matters, but will have a claim on him for assistance and advice in matters relating to accounts and finance. He will arrange that the Audit is kept fully cognizant of all proceedings and proposals, to enable the latter to fulfill his functions.
The Chief Engineer will prepare, annually, the portion of the budget estimates relating to the works under his control. It will be his duty to administer the grant, and, with this object, to keep a close watch over the progress of the expenditure against it, with a view to seeing that no excess is permitted to occur, and that, if additional funds are necessary, application for the same is made. It will, further, be his duty to see that the grant is fully spent in so far as is consistent with general economy and the prevention of large expenditure in the last months of the year, and that any money that is not likely to be needed during the year is promptly surrendered so as to allow its re-appropriation for other priority or important purposes by the proper authority.
The general supervision and control of the assessment of revenue from irrigation works, within the limits of his charge, will rest with the Chief Engineer, who will frame the necessary estimates and watch carefully the progress of the realizations during the course of the financial year.
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THE SUPERINTENDENT ENGINEER:
The executive unit of the public works department is the Division, in charge of which a divisional officer, who is accountable to the Superintendent Engineer for the execution and management of all works within his division.
The Superintending Engineer should examine the books of Divisional Officers and their subordinates, and oversee that matters relating to the primary accounts are attended to personally by the Divisional and the Sub-Divisional Officers and that the accounts fairly represent the progress of each work. It will also be his duty to examine the registers of works and when he considers it necessary, he may require a Divisional Officer to report to him monthly or at longer intervals, on a Works Slip, the total expenditure to date under each sub-head of a work, in contrast with the , sanctioned estimate. It will thus be seen that it rests with the Superintending Engineer to investigate excesses over sub-heads with a view to deciding whether or not a revised estimate will be required for the work. When a revised estimate is required, it will also devolve on the Superintending Engineer to see that it is submitted in due time to the sanctioning authority.
It will be the duty of the Superintending Engineer to inspect the various works in progress within his circle, and to satisfy himself that the system of management prevailing is efficient and economical, that the different stores are duly verified according to the rules laid down, and that there is no accumulation of stock in any division beyond its requirements. He is also responsible that no delay is allowed to occur in the submission of completion reports. He should, further, so far as may be possible, inspect periodically all important public buildings and other works within his jurisdiction.
DIVISIONAL OFFICER: The Divisional Officer, the Executive Engineer is required to take the necessary
steps for obtaining cash for the works under his control, to keep accounts, and to submit them punctually to the Audit Officer under the rules for the time being in force. He is responsible for the arrangements for account keeping in which matter he will be assisted by his Divisional Accountant, and he must see that his accounts are posted from day to day and that -if the Accountant carries out his duties regularly and punctually. The responsibility for the correctness, in all respects, of the original records of cash and stores, receipts and expenditure, as
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also for seeing that complete vouchers are obtained rests with the Divisional Officer, who will, before submitting the monthly accounts, carefully examine the books, returns and papers from which the same are compiled.
The Divisional Officer is held primarily responsible for affording information in cases of probability of excess of actual over estimated cost of work, and should report any such probability to the Superintending Engineer at once, describing the nature and cause of the excess. This report should be made on the 'Works Slip' Form. Divisional Officers must also submit the Works Slip, with such explanation as will enable the Superintending Engineer to pass orders on the case, on the occurrence, or the probability of the occurrence, of any irregularity in the rate or cost of a sub-head. All important liabilities not brought to account should also be noted on the Works Slip.
A Divisional officer is required to report immediately to the Superintending Engineer any important accident or unusual occurrence connected with his division and to state how he has acted in consequence and watch over the progress of expenditure.
It is an important function of the Divisional Officer to keep a constant watch over the progress of expenditure as he is ultimately responsible for keeping the expenditure within the allotments for the division. He should accordingly keep himself informed of such circumstances as may affect the progress of expenditure, in order to take early steps for obtaining extra funds or surrender probable savings, as may be necessary. The progress of expenditure on works or other items is watched individually month by month for which there are specific appropriation through the Works Contingent Register. In respect of works or items at Divisional Officer's disposal, he watches the progress of expenditure against appropriations by maintenance of a record of the expenditure in the form of a (i) progressive abstract showing, month by month the up to date expenditure of the year, and of the grant, in the form of a (ii) register showing the appropriation and re-appropriation ordered from time to time.
In this review of expenditure, undercharged liabilities play an important part and their effect on individual and lump sum appropriations is, therefore, watched. Anticipated credits which will ultimately be taken in reduction of the expenditure chargeable against any individual or lump sum appropriation should also be taken into account. This review is of special importance in the last three or four months of the year.
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SUB DIVISIONAL OFFICER:Sub Divisional Officers are accountable to the Divisional Officer for the management and execution of works within their Sub-Divisions. This designation is applied primarily to an official, whether a gazetted officer or not, who holds the charge of a recognized subdivision under a Divisional Officer. But when the immediate executive in charge of any works or stores has not been constituted as a regular sub divisional officer , but is held responsible by the Divisional Officer himself, the later is also treated as the Sub divisional Officer in respect of such charge. When a Divisional Officer holds the immediate charge of a recognized subdivision in addition to his own duties as the executive head of the division, he is treated as the Sub divisional Officer in respect of the charge of the subdivision.
DIVISIONAL ACCOUNTANT Divisional Accountant engaged by SAI is given three fold important responsibilities:
As Accountant i.e. as the compiler of the accounts of the division in
accordance with the prescribed rules and forms from the data furnished to him.
As primary Auditor i.e. as the representative of the Audit Department charged with responsibility of applying certain preliminary checks to the initial accounts, vouchers, etc.
As Financial Assistant i.e. as the general assistant and adviser to the Divisional Officer in all matters relating to the accounts and budget estimates to the operation of financial rules generally.
The Divisional Accountant is expected to see that the rules and orders in force are observed in respect of all the transactions of the Division which come within his sphere of duties. If he considers that any transaction or order affecting receipts or expenditure is such as would be challenged by the Audit Office it is his duty to bring this fact to the notice of the Divisional Officer with a statement of his reasons and to obtain the orders of that Officer. It will then be his duty to comply with the orders of the Divisional Officer, but if he has been overruled and is not satisfied with the decision, he should at the same time make a brief note of the case in the Register of Divisional Accountant's Audit Objection, and lay the register before the Divisional Officer so that the latter may have an opportunity either of accepting the Divisional Accountant's advice on reconsideration and ordering action accordingly, or of recording, for the information of the Audit Office his reason for disregarding that advice. An objection recorded in this register should not be considered as finally disposed of until it has been reviewed by the Audit Office for whose inspection the
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register should be made available at all times. If no audit inspection takes place in two years and entries have been made in the register during the period since the last inspection, the Register, or if the entries are few, an extract therefrom should be submitted to the Audit Office along with monthly accounts for review.
The Divisional Accountant should examine the accounts returns of Sub-divisional Officers on receipt to see:-
(i) That they have been received in a complete state. (ii) That all sums receivable are duly realized and on realization credited to the
proper head of accounts as well as the personal account, if any, of the contractor, employee or other individual.
The Divisional Accountant should see without the orders of competent authority, the expenditure authorized are not exceeded or surplus receipts realized are not utilized towards additional expenditure. He should watch the receipts with a view to bringing to the Divisional Officer's notice and obtain that officer's order overall marked deviation from the provision for such credits in the estimates of works.
2.4 THE WORKS AUDIT DIRECTORATE
The major focus of the Directorate General of Works Audit Directorate is on works receipt and expenditure incurred by 8 ministries covering entities like Public Works Department, Roads and Highways Department, Civil Aviation Authority, Local Govt. Engineering Department, Public Heath Engineering Department, Rajdhani Unnayan Kattripakkha (RAJUK) and City Development Authorities, Education Engineering Department, Dhaka Electricity Supply Authority, Public Health Engineering Department, Directorate of Government Accommodation, WASA, Bangladesh Water Development Board, Bangladesh Power Development Board, West Zone Power Distribution company, Bangladesh Rural Electrification Board, Civil aviation Authority, National Housing Authority, Urban development authority, Bangladesh Road Transport Authority, Bangladesh Road Transport Corporation, Dhaka Electricity Supply Company (DESCO), Dhaka Power Distribution Company (DPDC) etc.
2.5 DUTIES AND RESPONSIBILITIES OF KEY AUDIT PEERSONNEL WORKING
AT WORKS AUDIT DIRECTOORATE:
Director General To work as an administrative chief and to discharge of administration of the
Directorate. To be responsible to the CAG for the whole function as to audit of the
auditable organizations/ entities.
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To prepare draft audit report, to collect approval of CAG on it and to make arrangement for printing.
To attend the meeting of the Public Accounts Committee, Public Undertaking Committee and Estimate Committee.
In the matter of approving the advance draft para from serious financial irregularities,
To issue Demi-Official Letter to the Secretaries (Principal Accounting Officers) of the concerned Ministries before inclusion of draft para in the CAG’s audit report.
To supervise office discipline. To prepare plan, give instruction, supervise and to delegate power to the
officers/employees to perform their duties of audit effectively and efficiently. To appoint from grade 11 to grade 20 employees as per rules & regulations of
the Government. To perform his duties as the Accounting Officer of all accounts of expenditure
within the budget allocation. To review and settle the replies given on Advance Paragraphs by the audited
entity. To ensure active participation of subordinates in the bilateral and tripartite
meetings with auditee organization in the settlement of pending audit observations
To appoint Divisional Accountants and post them to self accounting units like Roads and Highways Department and Public Works departments
Director To extend all sorts of co-operation to Director General with a view to
conducting his office properly. To supervise the work of all sectors and sections. To prepare audit plan, brief the audit team and to visit & monitor the work of
audit team. To review and examine the tour programme. To control, visit and conduct the internal affairs as per rules. To perform any duty entrusted by the government or by the higher authority. To attend tri-partite meeting. To evaluate Advance Paragraphs and select Draft paragraphs for approval of
Director General. To coordinate internal administration of respective sectors along with audit
responsibilities of Deputy Directors
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To ensure monitoring of field audit teams as and when required To work as team leader and coordinate issue based/ performance audit/
entity wide audit as and when required To ensure effectiveness of Quality Assurance Committee 1 and Quality
Assurance Committee 2 for quality audit observation
Deputy Director
To visit and supervise the work of branches of the sectors. To monitor and visit the field work of audit team. To evaluate the AIR received from audit team. To implement instructions given by the OCAG, DG and Director. To take appropriate actions on the minutes of bi-lateral and tri-partite
meetings and undertake crash programme with a view to resolving the unsettled audit objections and to ensure appropriate persons to attend the meetings.
To review and settle the replies of the general audit observations. To review the audit replies of the advance paras and to issue orders so as to
settle subject to the approval of the DG through Director. To write-up annual confidential report of the employees and officers working
under him and to counter signs them. To charge any duties entrusted by the higher authorities. To attend the bi-lateral and tri-partite meetings. To work as team leader for special/ performance/ pilot audit as and when
required To provide in house training and audit briefing for the sub ordinates as well
as to the audit team members To ensure regular submission of calendar of returns to higher authority at
designated time To monitor the quality of the team and update them with advise regarding
financial and service related matters. To ensure effectiveness of Quality Assurance Committee 2
Audit and Accounts Officer
To conduct audit as a team leader.
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To prepare audit report.
To attend the bi-lateral and tri-partite meetings and undertake crash programme with a view to resolve the unsettled audit objections.
To supervise the section where he is posted. To allocate duties of employees of the section. To maintain all kinds of registers and to make them updated continuously. To participate in audit as a member of audit team. To monitor the status of settlement of pending audit observations through
examining broadsheet registers. To ensure that each column of broadsheet register of unsettled audit
observations is updated on regular basis.
To review the audit replies of general paragraphs and submit those for approval of Deputy Director.
To act as head of audit team where assigned.
To provide in-house training to subordinate staff. Any other duties entrusted by the higher authority.
Superintendent
To attend bi-lateral and tripartite meetings (if Necessary) with AAO and other higher authority.
To assist team leader preparing the audit report. To implement allocated duties to conduct audit assigned by higher authority.
To supervise the section where he is posted. To allocate duties of employees of the section. To maintain all kinds of registers and to make them updated continuously. To participate in audit as a member of audit team. To monitor the status of settlement of pending audit observations through
examining broadsheet registers. To ensure that each column of broadsheet register of unsettled audit
observations is updated on regular basis.
To review the audit replies of general paragraphs and submit those for approval of Deputy Director.
To ensure regular submission of all reports to higher authority. To ensure maintains of guard file relating to office orders of OCAG, Ministry of
Finance and Ministry of Public Works.
To provide in-house training to subordinate staff.
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Auditor
To submit any file and documents to higher authority kept by him as and when necessary.
To participate in audit as a member of audit team. To perform duties according to job description while working in the audit
team and concerned section. To recommend disposal of audit observations on the basis of the reply from
the auditee. To perform duties entrusted by the higher authority. To ensure all inward diaries are recorded in appropriate registers and
noticed to the higher authorities. To submit them to the higher authority for necessary actions in respective
files without delay.
To maintain guard files relating to office orders of OCAG, Ministry of Finance and Ministry of Public Works.
Note: The Director General will be required to assign specific responsibilities to all the officers in the Works Audit Directorate for each audit and the performance of officers can then be monitored accordingly. For High Profile Audits and studies of public significance, the DG may like to raise the level of the audit team by substituting Audit & Accounts Officers/Assistant Director with Deputy Directors and Directors. In such cases the Director General need to supervise and monitor directly and actively the activities of all concerned.
The roles and responsibilities which are specified in this section pertain only to the Audit Cycle. For other functions like clerical record keeping, administration, budgeting etc, the existing job descriptions available in the Works Audit Directorate should also be used for
defining the key tasks in each area.
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CHAPTER-3
PUBLIC WORKS – ACCOUNTS OVERVIEW
3.1 ADMINISTRATIVE APPROVAL
For every work (excluding petty works and repairs) it is necessary to obtain, in the first instance, the concurrence of the competent authority of the administrative department requiring the work. The formal acceptance of the proposals by that authority is termed "administrative approval" of the work, and it is the duty of the local officer of the department requiring the work to obtain the requisite approval to it. An approximate estimate and such preliminary plans as are necessary to elucidate the proposals should be obtained from the Public Works Department.
3.2 TECHNICAL SANCTION
Subject to the provisions for each individual work proposed to be carried out, except petty works, petty repairs, and repairs for which a lump sum provision has been sanctioned a properly detailed estimate must be prepared for the sanction of competent authority. This sanction is known as the technical sanction to the estimate and, except in cases such as are referred to in C.P.W.D. Code must be obtained before the construction of the work is commenced. As its name indicates, it amounts to no more than a guarantee that the proposals are structurally sound, and that the estimates are accurately calculated and based on adequate data. Such sanction will be accorded by the officer of the Public Works Department authorized to do so.
In the case of an original work, other than a petty work, the countersignature of the local head of the department on behalf of which its execution is proposed, or of such other officer of lower status as may have been empowered to accord administrative approval to it, should be obtained to the plans and estimates in token of his acceptance of them, before technical sanction to the latter is accorded. If, subsequent to the grant of technical sanction, material structural alterations are contemplated, the orders of the original sanctioning authority should be obtained, even though no additional expenditure may be involved by the alterations.
3.3 APPROPRIATION AND RE-APPROPRIATION
Appropriation or re-appropriation represents the allotment of particular sum of money to meet expenditure on a specified object. It is operative only for the official year for which it is made.
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It follows from the provisions of paragraphs of C.P.W.D. Code that, except in cases where the omission of one or more of the stages therein referred to is permissible under other rules, it is a fundamental rule that no work shall be commenced or liability incurred in connection with it until administrative approval has been obtained, a properly detailed design and estimate have been sanctioned, expenditure sanction has been accorded and allotment of funds made. If in any case, whether on grounds of urgency or otherwise, an executive officer is required by superior authority to carry out a work or incur a liability which involves an infringement of these fundamental rules, the orders of such authority should be conveyed in writing.
On receipt of such written orders or in cases of emergency, on his own responsibility, the officer may proceed to carry out the necessary work, subject to the condition that he immediately intimates to the Audit Officer concerned that he is incurring an unauthorized liability and states approximately the amount of the liability which he is likely to incur.
3.4 EXCESSES OVER AMOUNT ADMINISTRATIVELY APPROVED
When the expenditure upon a work exceeds, or is found likely to exceed, the amount administratively approved for it by more than 10 per cent or the limit prescribed whichever less is, a revised administrative approval must be obtained from the authority competent to approve the cost, as so enhanced. No revised administrative approval is, however, necessary if the excess is covered by requisite expenditure sanction.
3.5 MODIFICATIONS IN EXPENDITURE SANCTION
Any excess over the amount to which expenditure sanction has been given requires a revised expenditure sanction which would be applied for as soon as such an excess is foreseen.
3.6 TECHNICAL SANCTION
This is the order of the competent authority, sanctioning a properly detailed estimate of the cost of a work of construction or repair proposed to be carried out in the Public Works Department. Ordinarily, such sanction can only be accorded by the Government, Ministry of Works or by such authorities of the Ministry to whom the power has been delegated by the Government. Sanction accorded to work by any other department of Government is regarded merely as an administrative approval of the work.
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3.7 MODES OF OBTAINING CASH IN PUBLIC WORKS DIVISIONAL AND SUB-DIVISIONAL OFFICES
Cash is obtained by disbursing officers of the department in two ways, viz. directly by bills drawn on the CAO/DAO and by means of cheques. For payment of pay and allowances of Government servants on the regular establishment not charged directly to works certain heads of offices and other officers draw bills on the CAO/DAO prescribed forms in accordance with the prescribed rules. All other disbursements are made by Divisional Officers who may empower Sub-divisional Officers to make disbursements on their behalf. If the Divisional Officer considers it necessary, for the main tenancy of efficient control over the disbursements of his division to set monthly limit on the drawings of any of his Sub divisional Officers, he may do so, fixing either a standing limit or a fresh limit either every month or whenever necessary. All such limits may be raised or lowered subsequently, under intimation to the Sub-divisional Officer and to the Treasury Officers concerned or the Bank. It is permissible to draw money from time to time from the designated Bank by cheque to replenish the cash chest. When there be a guard or not, disbursers must draw cheque for the minimum of cash actually required to meet current disbursements, and if it is found at any time that the balance in hand is larger than it is required to meet the anticipated expenditure of the next month or of the next fifteen days if the Bank is not situated at an inconvenient distance, the surplus should be returned into the nearest treasury.
3.8 RECEIPTS CREDITED TO REVENUE BEFORE ACTUAL REALIZATION
It is not permissible to take credit for revenue to be received until it is realized; but Divisional Officers are responsible that demands are made as revenue falls due, that steps are taken with a view to effecting prompt realization of all revenue, regular or occasional, and that proper records are kept to show in respect of all items of revenue, recurring or non-recurring, the assessment made, the progress of recovery and the outstanding debts due to Government.
Note: The object of this rule is that credit of revenue should not be afforded to head concerned until it is realized that all classes of revenue, whether accruing from rights and from property of any kind, from leases of rights and concession or from any other source are properly
watched.
3.9 REMISSION OR REFUND OF REVENUE
Before a remission or refund of any kind, otherwise in order is allowed, the original demand or realization, as the case may be should be traced and a reference to that remission, or repayment should be so recorded against the original entry in the cash
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book and other account so as to make the entertainment of a double or erroneous claim impossible. A certificate of such a note having been made should be given in all vouchers for refunds. Any acknowledgement previously granted should be taken back if possible and destroyed and a note of replacement being, in any case, recorded on the counterfoil of the receipt.
After check every voucher should be enfaced with the word "checked” over the dated initials of the Divisional Accountant, as well as of any clerk who may have applied a preliminary check. Vouchers not submitted to audit should be 'cancelled' by means of a perforating or endorsing stamp and, kept carefully, to be made available for test audit whenever demanded by the Audit Officer.
The results of the examination of accounts and vouchers received from Sub-divisional Officers should be intimated to them in all cases in which it is necessary to obtain further information, accounts, vouchers, certificates, etc. or to direct them to correct the relevant records of their offices to avoid the recurrence of any irregularity. The procedure may be prescribed by the Divisional Officer. The records connected with the results of the examination should be retained so as to be available for the audit inspection by the Audit Office.
3.10 MUSTER ROLLS AND MEASUREMENT BOOKS
Muster Roll is the roll prepared for work done, by daily labour engaged departmentally. One or more Muster Rolls should be kept for each work, but Muster Roll should never be prepared in duplicate. Labourers may be paid more than once in a month. The daily attendance should be recorded in the Muster Roll. It is the initial record upon which the accounts of the works are based.
Measurement book is the initial record of the greatest importance in the Public Works Department. A detailed account of actual measurements in quantities of work done otherwise than by daily labours on lump sum contracts and of all supplies made by a contractor are kept in a Measurement Book in prescribed form. The Measurement Books should, therefore, be considered as very important records. All the Books belonging to a Division should be numbered serially and register of them should be maintained in Form 92 in the Divisional Office.
3.11 REGISTER OF WORKS
Permanent and objective record of the expenditure incurred on all works carried out during a financial year should be maintained in the divisional office. The Registers of Works are posted monthly from Works Abstracts. A separate folio or set of folios of form C P.W.A. 40 should be assigned to each Major Estimate but
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entries relating to two Major Estimates can be made on a single page of form prescribed in the Central Public Works Accounts Code.
Before the date of submission of the monthly accounts to the Audit office, the posting of the Registers of Works should be completed and the registers should then be laid before the Divisional Officer for review. The monthly account of each work should be initialed and dated by the Divisional Officer in the column set apart for the purpose, in token of his having examined the entries and found them correct.
3.12 MANUFACTURE ACCOUNTS
The detailed accounts of the expenditure on a manufacture are maintained in the same way as the accounts of a work and in addition, an account is kept of the quantities and values of the products of the manufacture. The two sections of the accounts are known respectively as the "Operation" and the "outturn" accounts.
For recording the progress of the transactions of a manufacture account Form 42 of Central Public Works Accounts named “Register of Manufacture" is used as the ordinary forms of the Register of Works are unsuitable in this case.
A Manufacture Accounts is debited directly with (1) the value of raw materials issued from stock or obtained otherwise; (2) the cost of the labour employed and (3) other incidental charges connected with the operations; such as the cost of lands, special plants, etc. If the manufacture is undertaken on behalf of other divisions, departments or of local bodies or individuals, charge should be made on account of establishment and tools and plant if leviable under the rules for outlay on works undertaken on their behalf.
A manufacture account is credited with the value of the manufactured articles and of the surplus materials sold or otherwise disposed of. The outturn account should show, month by month, the quantities and values of each class of articles manufactured, compared with the corresponding figures shown in the estimate (if any).
3.13 CHARGES THAT ENTER INTO THE ACCOUNTS OF A WORK CARRIED
OUT IN A WORKSHOP
Charges made against work carried out in a workshop can be categorized as follows:(i) Direct charges pertaining exclusively to any job are debited at once to the
account of that job and those of a general nature are treated in the first instance, as general charges (under one or more suitable headings) and
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appropriated subsequently amongst the jobs concerned in accordance with a definite procedure.
(ii) Indirect charges:(a) Supervision charges.(b) Interest as Capital cost of building, plant and machinery.(c) Maintenance charges of buildings, plant and machinery.(d) Depreciation of buildings, plant and machinery.(e) Establishment charges.
If the cost of job is recovered in advance, it is credited to the head "Public Works Deposits" and the adjustment of the cost is made against this deposit. If, however, the cost is not recovered in advance the cost of the operations is charged monthly to the head, Miscellaneous Public Works Advances pending recovery.
3.14 APPROPRIATION AUDIT OF PUBLIC WORKS EXPENDITURES
For the purpose of appropriation audit some additional caution is required like the following:
(f) It is important to see that the progressive expenditure does not exceed the divisional allotment sanctioned for individual works or for group of works or item of expenditure. The Works Audit Register affords facilities for conducting this check. If, in any case, the up-to date expenditure is in excess of allotment or is not covered by allotment, a suitable entry should be made in the Objection Statement, except when such expenditure is not open to objection under General Financial Rules.
(a) The Works Audit Department is not responsible for the check of expenditure against the grants for the whole country.
(b) In cases not covered by clause (b) in which two or more Divisional Officers are authorized to incur charges relating to a unit of appropriation against lump sum allotment placed for the purpose at the disposal of a single higher authority, and the audit office, at the request of the Government, has undertaken to audit the collective charges against the allotment, he will prescribe the arrangements for conducting the necessary check. It will be necessary in such cases to collect the audited expenditure figures of the division concerned in suitable summaries.
3.15 ACCOUNTS OF WORK OF A DIVISION FALLING INTO ARREARS
If the accounts of work of a division falls into arrears or if there are signs of any confusion therein, the matter should receive the prompt and careful consideration of
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the Audit Officer or the higher authorities of the Public Works Department to take necessary steps to remedy the defects, but also, suggest for consideration such remedies as may appear suitable, and if necessary, render such temporary help as he may be in a position to give. In serious cases, it may be advisable for the Deputy Director or a Gazetted Officer of the office of the Works Audit Directorate to visit the Divisional Office and discuss the situation personally with the Divisional Officer and the Divisional Accountant.
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CHAPTER 4
PUBLIC WORKS: ESTIMATE, MEASUREMENT & INVOICING
4.1 PREPARATION OF ESTIMATE
This requires historical details relating to the initiation of reasons leading up to the proposal and its general purpose including reference to previous correspondence, documents and specifications, where necessary. Following aspects must be taken into consideration before preparing estimates:
Design- A description of the original proposals and those finally adopted particularly with regards to location, sitting and design, also with reference to specifications calculations and drawings, where necessary.
Scope- An explicit statement as to what work is covered and not by the estimates, also reference as to what arrangements are being made for any portions which are not included in the estimate.
Rates- Particulars as to how the rates have been arrived at, giving references in the standard schedule of rates and also to the details accompanying the estimates, where necessary with any special explanation connected therewith.
Cost- Cost of the work and a comparison with the amount originally provided under any previous administrative sanction, or detailed estimates in case of revision.
Method- The method proposed for carrying out the work whether by lump sum contract, item rate tender, petty contract or daily labour, or any combination of these.
Establishment- Details of any provision made in the estimate for work charged establishment, when necessary.
Construction plan- Any special methods of construction to be adopted with reference to specification, etc., and details of the arrangements that have been made for the necessary construction plant, tools, etc.
Land- Arrangements for acquisition of land, when necessary. Time- Time of starting and estimated time of completion of the work. Full
reference should be made to the plans accompanying the estimates in support of details. This is not intended to be exhaustive and any other points of importance, especially such as demand knowledge of local conditions, must be included.
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4.2 DRAWING AND DESIGN
Projects when submitted by the Executive Engineers for sanction should be comprehensive, supported by complete details and based on drawings and calculations of design, where necessary. In order to cause this, they should be prepared under the following heads:
• Buildings including internal service installations, for example, water (filtered and unfiltered); sanitary and electrical and furniture.
• Main roads, outside the boundary walls of the buildings under construction necessary for the layout.
• Boundary walls or fences, gateways, roads and paths, grassing shrubberies and trees connected with the garden layout.
• Electrical power in connection with mains, or service connections outside the boundary of compounds.
Irrigation supply in connection with channels, pipes or canals outside the boundary of the compound:
a. water supply,b. storm water drainage,c. sewerage.
Special tools and plant as defined in C.P.W.A. Code which may be necessary during construction.
Stock and suspense account which may be necessary to open up in connection with the project.
Miscellaneous works, such as leveling, dismantling of old buildings further and other items which do not fall under the above heads.
Departmental charges, when necessary. Land acquisition.
In preparing estimates in the central office the Quantity Surveyor should base the estimates on the schedule of rates in force in the locality. For rates not available in the schedule, the Divisional Officers, should be referred to. Similarly estimates prepared in the Divisions should primarily be leased on the current schedule of rates if any, and items not provided for in such schedule should be based on the current market rates which should be properly analyzed with reference to the basic rates for these materials. Such items are those not included in the schedule of rates in force, referred to above should be clearly indicated and a note given to the effect that they represent the current market rates.
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4.3 EXCEPTIONS
All Lump sum estimates for emergent repairs should be carefully scrutinized by the Executive Engineer on the spot before he sanctions it.
In taking up a work with sanctioned estimate, it should always be seen that the proposed expenditure during a financial year is always covered by an allotment of funds and it is only in the case of an extremely urgent-work that if funds are not immediately available, it should be started in anticipation of an allotment of funds under the orders of competent authority.
In the case of petty requisitions, it would save time if the Executive Engineer instructs contractors to endorse a note on the requisitions stating the rates at which it is agreed that the work should be carried out, instead of entering into an agreement in a separate form.
4.4 SANCTIONED ESTIMATES OF LARGE WORKS OR PROJECTS
The responsibility for bringing materials modifications of or deviations from the sanctioned estimates of large works or projects to the notice of the competent authority should rest primarily with the executive and not with audit.
If materials modifications of- or deviations from the sanctioned estimates of large works or projects are indicated in case of audit of the monthly accounts of the Divisional Officers the matter should be reported to higher audit for action.
Any changes in the estimates of expenditure should be reported to the Government of Bangladesh, Public Works Department by the 1st May and funds that cannot be economically spent should be surrendered as early as possible to enable Government to reappropriate them to other works.
If the expenditure of Executive Engineer falls below their expectations, explanation regarding lapses will not be called for, as there is really no such thing as a lapse.
4.5 ANNUAL MAINTENANCE ESTIMATES
In order to avoid audit objections for want of sanctioned estimates, all expenditure on repairs should be kept within the lump sum limits prescribed by the Superintendent Engineer which will hold good as regular sanctions year after year until modified and that detailed estimates should be prepared before those limits are exceeded.
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4.6 POWERS OF SANCTION OF DETAILED ESTIMATES
Executive Engineers are empowered to sanction detailed estimates for original works in respect of residential buildings as such works are administratively approved by the Government. In the case of repairs to residential buildings the powers should be exercised by the Superintendent Engineers as before and not by Executive Engineers.
4.7 REVISION OF ESTIMATES
In the cases in which the tenders for a work, when received are based on rates substantially lower than those upon which the sanctioned estimate was framed, an officer, of rank not lower than that of Divisional Officer, in charge of the work, is competent to sanction a revised estimate for it on the basis of the tenders received. Even though the amount of such revised estimate may exceed that to which he is ordinarily empowered to accord sanction, if at any time either before or during its construction, he finds the original estimate for it to be excessive. In according sanction to such revised estimate, he should at the same time reduce correspondingly the appropriation made to meet the cost of the work. The Divisional Officers' power to pass excesses over such revised estimates will be restricted to 5 per cent of the reconstructed estimate and to the limit of his powers to sanction estimates technically. Other provisions in case of variation or additional work PPR 2008 should be followed.
4.8 MEASUREMENTS
Each set of measurement should commence with entries stating- Writing up of Measurement Books.
The following subsidiary instructions are laid down for the writing up of Measurement Books and are printed at the beginning of all Measurement Books.
The Measurement Book is the basis of all account of quantities whether of work done by contract or by labour employed departmentally or of materials received and should be so kept that the transactions may be readily traceable in the account of the Department. Measurement Book in CWPA Form should be considered as very important accounts record and maintained very carefully and accurately as they may have to be produced as evidence in a court of Law.
All the books belonging to a Division should be numbered serially and a register should be maintained in Central Public Works Accounts Code Form showing the serial number of each book, the subdivisions to which issued, the date of
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issue and the date of its return so that its eventual return to the Divisional Office may be watched.
A similar register should be maintained in the sub divisional Office showing the names of the sub divisional and Section Officers to whom the Measurement Book have been issued. Books no longer in use should be withdrawn promptly even though not completely written up.
Sub divisional Officers are required to submit the Measurement Books in use to the Divisional office from time to time so that at least once a year, the entries recorded in each book may be subjected to a percentage check by the Divisional Accountant under the supervision of the Divisional Officer.
When an office or a subordinate in executive charge of work or stores is transferred, he should make over the Measurement Books issued to him to his successor and in the prescribed register in C.P.W.A.
4.9 BILLS FOR WORKS DONE
A bill for works done should contain: full name of work as given in estimate, location of work, name of contractor, number and date of agreement, date of written order to commence Work, date of actual completion of work, date of measurement, and reference to previous measurements.
4.10 CHECK OF MEASUREMENTS
Subject is always to the discretion of the officer concerned in the matter of selection of works and items thereof. For this purpose the following rules must be invariably observed by all concerned:
(1) The sub divisional officer (Executive Engineer) preparing a bill must satisfy himself that work has actually been done in accordance with the claim preferred. He should personally inspect all works of any magnitude before authorizing final payments in connection therewith.
(2) The Sub divisional officer (Executive Engineer) is further expected to measure all important works himself and to test check about 50 per cent of the measurements judged by their money value made by his subordinates.
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(3) Similarly, the Divisional Officer (Executive Engineer) is expected to test check about 10 percent of the measurements made by his subordinates.
(4) The percentage prescribed in sub paras 2 and 3 should be checked with reference to the final measurements of a works and not with reference to each running bill.
(5) The test check referred to above should, as far as possible, be carried out before the payment is made.
(6) The individual items checked should be clearly identifiable in the Measurement Book. The items checked should be attested by the dated initials of the checking officers.
(7) A collective record of all the checks carried out from time to time should be retained at the end of Measurement Book in the prescribed form as per Central Public Works Accounts Code.
4.11 MAINTENANCE OF STANDARD MEASUREMENT BOOK
Standard Measurement Books which will invariably be within legible in ink only, are maintained by the Public Works Department for the purpose specified in the Central Public Works Account Code. The work of preparing those books will ordinarily be undertaken in accordance with a programme for each Sub-Division or such other suitable unit as may be fixed by the Divisional Officer.
All the standard Measurement Books thus maintained in a Division will be numbered in an alphabetical series, so as to be readily distinguished from ordinary books in Central Public Works Accounts Code. A similar register will be maintained in each sub division showing the books belonging to it. These registers must be kept under lock and key in the custody of the Divisional or the Sub Divisional Officer concerned.
In view of the fact that these books will form the basis of both annual repair estimates and contractors’ bills for works done, they should be written up either by the Sub Divisional Officer himself or by a member of the Subordinate engineering services under his orders. Each set of measurements taken by the latter class of official should, however, be fully checked by the sub divisional officer concerned, after which it should be examined by the divisional officer and declared in writing in the book itself as finally approved by him for one or both of the purposes specified above. Until this is done, book will not be entered in the register of standard Measurement Books nor will a number be assigned to it.
Thereafter the standard Measurement Books will be brought up to date, under the supervision of the Sub Divisional Officer with reference to any additions or alterations which may be carried out to the building work concerned within one
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month of the account of the estimate there for. All such corrections will be duly attested by the Sub divisional Officer.
The Divisional Officer (Executive Engineer) will also be expected to exercise a check over the completion of standard Measurement Books from time to time by personally examining each book at least once a year. To this end the programme of work should ordinarily be as follows:
As soon after the close of the official year as possible, the Sub Divisional Officer concerned will arrange for a personal examination of these books with a view to satisfying himself that have been brought up to date with reference to the additions, alterations or special repairs carried out in the building or work during the preceding year and ensuring their submission, on such date as may be fixed for the purpose, for the inspection of the Divisional Officer (Executive Engineer).
On receipt in the Divisional Office, the books will be compared with the register of standard Measurement Books in order to ensure that all books have been submitted for inspection. They will then be subjected to such scrutiny as the Divisional Officer (Executive Engineer) may direct.
A comparison of these books with the accounts of expenditure and the record of connected measurements relating the estimates for additions, alterations or special repairs to buildings and works in the division should however form a feature of the check to be applied.
Finally a report should be made to the Superintending Engineer so as to reach him not later than the 31st July of each year, to the effect:
(i) that all the standard Measurement Books of the division have been inspected by the Divisional Officer (Executive Engineer);
(ii) that the entries made therein have not been tampered with;(iii) that all corrections due to additions or alterations to the building or
work concerned have been carried out; and(iv) that the books are reliable and upto date records.
When a payment is based on standard measurements the following certificates should invariably be recorded on the bill in his own hand writing by the Sub divisional Officer preparing, examining or “Certified that the whole of the work billed for herein has been actually done and that no portion thereof has been previously billed for in any shape". For the purpose of efficient check, the check should be exercised not by
attempting to check any large proportion of the bills which would only delay
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payments but by checking bills prepared by different subordinates chosen at random.
In selecting bills for check, the checking officer should pay the greatest attention to bills for repairs, earth work, road work, etc., where the measurement of work done do not necessarily correspond with the details of the estimate. The Sub Divisional Officer should invariably check measurements when inspecting outstation. The Executive Engineer's check will ordinarily be of a general nature and will not necessarily involve a check of the detailed measurements in all cases.
In all bills on which payments are made a reference to the number and page of the Measurement Book checked should be quoted in order to indicate that the Officers-in-Charge have tested and accepted the data on which the charges are based.
4.12 MAINTENANCE OF REGISTERS IN THE EXECUTIVE ENGINEER’S OFFICE
The register should show: Total number of bills prepared each month; Number of bills checked by the Executive Engineer during the month; Number of bills partially checked by the sub divisional officer; Number of bills either checked in detail or prepared wholly by the Sub Divisional
Officer; In each case the number of the bill checked, the nature of the work whether
building repairs, earth work, materials, building works etc., the locality and whether a running or final bill should be noted;
It is further enjoined upon the Executive Engineers, and Sub divisional Officers that the percentage of bills to be checked should be in accordance with their money value and not by the number of bills;
In regard to the question whether the money value for the purpose of percentage check should be the full value of a bill a part of which has been checked or the value of the part only which is actually checked the percentage should be calculated on the money value of the entire bill an on that of the parts checked.
4.13 RECALL AND RE-ISSUE OF MEASUREMENT BOOKS
Measurement Books outstanding in Sub-Divisional Officers for over two years should be called in and only the completed Measurement Books should be recorded finally, but the partially used up books should be re-issued to the Sub Divisional Offices every two years.
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Government has prescribed that 25 percent of the entries, in the Measurement Books of the Chittagong Hill Tracts Division should be checked by the Divisional Accountant.
The Officer-in-charge (Dredger engineer-in-charge) of laid up vessels is empowered to do the work of verifications of materials and record of measurements in the Measurement Books.
The actual lead of earth work from the centre of the borrow pit to the centre of the bank and or the actual lift from the bottom of the pit from which the earth was excavated to the level of the bank where the earth was thrown should be recorded in the Measurements Books in order to determine the number of extra leads and/or lifts and the extra leads or lift must always be recorded in feet by actual measurement instead of by numbers.
Except when the work is done by small patches the measurements of land, plastering and white-washing should be taken separately.
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CHAPTER- 5
AUDIT PROCESS: GENERAL
5. 1 GENERAL TASKS
As the process of audit involves a number of tasks to be performed at different stages, a general list can be put suiting all nature of audit equally applicable to Works audit. These are enumerated below:
5.2 PLANNING
The task of audit requires an effective planning .This generally requires:-
Determining audit objectives and scope. Preparing/Issuing entity engagement letter. Preparing audit planning memorandum. Revising memorandum on post-planning changes. Scheduling important dates. Preparing tour programme. Pursuing information requested from entity officials. Preparing materiality assessment. Computing expected aggregate error and planned precision. Preparing audit risk assessment. Preparing inherent risk assessment. Documentation of the internal control questionnaire – general computer
controls. Documenting internal control questionnaire – application controls. Developing control risk assessment. Documenting analytical procedures assurance Updating optimum combination of procedures. Documenting source of audit assurance. Listing all applicable laws and regulations. Collecting updated and related government instructions issued by Ministry of
Finance, Ministry of Public Affairs and Ministry of Public Works. Preparing key item selection. Recording points for attention at next audit. Documenting audit planning checklist. Documenting quality assurance checklist. Distributing the work among the audit team members based on auditable
documents.
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List of summary of audit queries indicating amount of money involved and mentioning the name and designation of audit team members indicating who raised /identified audit query. Moreover, for doing proper planning, relevant portion of Financial and Compliance Audit Manual may be consulted.
5.3 FIELD WORK
At the examination level at field tasks generally required to be performed are:
Documenting Summary of Analytical Review Procedures Performed. Documenting Details of Analytical Review Procedures Performed. Preparing Compliance Summary. Updating of Audit Steps given in the Audit Programmes, if needed. Execution of Audit Steps as per the Audit Programme. Ascertaining Execution of relevant Audit Programme. Maintaining working files by each member of audit team with date and initial
at every page of working paper.
5. 4 EVALUATION AND REPORTING
Evaluation of the audit performed at field level and their reporting require a set of actions to be performed generally:
Documenting Compliance-with-Authority or Violations. Documenting Audit Completion Checklist. Memorandum Supporting Signature. Recommending Auditor’s Opinion. Following up the Continuity Schedule. Referencing to the Quality Assurance Checklist.
5. 5 AUDIT QUALITY ASSURANCE
To assure quality of audit some tasks generally required to be performed are the following:
Review that Planning has been carried out as per the recommended planning process.
Assigning appropriate staff, required strength and skill set of the audit team. Preparation, revision and approval of the Audit Budget. Ensuring that audit programmes are in place as required in Audit Policy
Checklist.
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Review that Planning has been carried out as per the recommended planning process.
Ensuring revision of the planning decisions, if required. Supervision of all phases of execution as per the tasks assigned. To ensure review of audit working papers. To ensure executing audit steps as per audit programme. Ensuring reporting and monitoring of audit activities with reference to
execution task list. To ensure detailed review and approval of monetary errors, compliance with
authority violations and internal control deviations found. Ensuring tools for the auditor’s opinions and statements used. Ensuring Documentation of Audit Completion Checklist. Reviewing the Quality Assurance Checklist.
5. 6 AUDIT TEAM
The formation of audit team and adequate preparation for the examination to be carried out in the field by the team generally require a lot of educating which mean:
Briefing on audit planning, formation of audit team and working days, etc. Introductory discussion on auditable units/ institutions. Functional relation of the organization under audit with controlling ministries
and divisions. Freedom of the organization under audit in respect of financial and
administrative matters. To define the nature of the organization to be audited. Review of previous years audit reports and inspection report and any media
report on specific issues of the auditable unit. Weaknesses, limitations, omission and errors etc. are to be identified and necessary instructions on the matter of how the unsettled audit observation, if any is to be given.
List of unsettled audit observations are to be supplied to the audit team and necessary instructions on the matters to be taken from the Director General, Director & Deputy Director relating to the previous audit observations or of objective/substantial verification on recovery of money are to be given.
Review of classification of financial irregularities as found in the previous audit report of the organization to be audited.
Review of decision, if necessary, of the PAC on audit observations of the concerned organizations submitted early to the PAC.
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Investigation/Inquiry report, if any, accomplished by proper authority or concerned ministries and divisions are to be discussed.
Inspection report, if any conducted by concerned ministries, divisions and Principal Accounting Officer.
Internal audit report. Financial report of entities approved by proper authority along with balance
sheet. Annual report, if any. Any oral or written complaint/allegation on financial matters involving officials
of auditable units Checklist and collection of government orders issued by the Ministry of
Finance and Ministry of Public Affairs related to audit Annual accounts certified by Chartered Accountants. Discussion on necessary portions of Auditing Standard, Audit Manual, Audit
Code and Code of Ethics, etc. Discussion on matters of issue of audit query sheet, issue of demand scrutiny of
vouchers and sampling, etc. Instructions to be given on matters of interview before start of auditing with
head of the organization/unit under audit and consultation on audit. Necessary special instructions to be given to chief of audit team on matters of
job distribution, monitoring, supervision and drafting of audit observations, etc. Importance to be given on matters of regular, necessarily all time consultation
and interaction with the personnel concerned about audit observations. Collection of views and replies of the organization under audit on each audit
observation. In case of discarded replies audit observations are to be settled by mentioning suitable logic/argument.
The audit observations are to be justified by appropriate evidence, applicable rules and regulations, govt. orders/instructions and original documents such as cash book, extract of related files, cheque book, counter-foil of cheque book, ledger, broadsheet and register, etc.
Instructions on process of sampling of vouchers. Instructions on internal control systems along with substantial example
collected from field level. Duplicate copy of evidence submitted for audit observations are to be attested
by a responsible officer of a unit under audit with signature along with full name on stamp seal.
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5.7 DOCUMENTATION
The Fundamental Auditing Principles state that audit evidence gathered must be adequately documented (ISSAI 300, 3.5.5 and 3.5.6).
Documentation in regard to compliance audits includes documenting sufficiently matters that are significant in providing evidence to support the conclusions drawn and the report issued. The audit documentation should be sufficiently complete and detailed to enable an experienced auditor, having no previous connection with the audit, to understand what work was performed in support of the conclusions (ISSAI 300, 3.5.7).
Documentation takes place throughout the entire audit process. Public sector auditors prepare compliance audit documentation on a timely basis, and maintain such documentation which records the criteria used, the work done, evidence obtained, judgements made and review performed.
Public sector auditors prepare relevant audit documentation before the auditor's report is issued. Audit documentation is retained for an appropriate period of time.
Further relevant guidance for documentation on compliance audits may be found in ISSAI 1230.
5.8 COMMUNICATION
Good communication with the audited entity throughout the audit process may help make the process more effective and constructive. Communication takes place at various phases and at various levels, for example: During the initial planning phase, including discussing with the appropriate level
of management, and those charged with governance as appropriate - i) Within the limits of laws and regulations - the audit strategy, timing, logistics, ii) Responsibilities, suitable audit criteria and other elements of planning.
During the performance phase and throughout the audit, including gathering evidence and making inquiries of relevant persons as appropriate- Significant difficulties encountered during the audit, as well as instances of
material non-compliance are promptly communicated to the appropriate level of management, or to those charged with governance.
Other less significant findings that are not deemed material, or do not warrant inclusion in the public sector auditor's report, may also be communicated to management during the audit. Communicating such less significant findings may also help the audited entity to remedy instances of
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non-compliance and avoid similar instances in the future. For this reason, many public sector auditors communicate all identified instances of non-compliance to management.
During the reporting phase, including issuing written reports on a timely basis to the intended users, the audited entity and others as appropriate.
Further relevant guidance on communication may be found in: ISSAI 1260 Communication with those charged with Governance IFAC's ISAE 3000 International standard and Assurance Engagement
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CHAPTER 6
AUDIT PROCESS: PLANNING
6.1 INTRODUCTION
The Works Audit Directorate is required to prepare an Annual Audit Plan covering audit operations pertaining to all types of audit. (ISSAI 4100, Compliance Audit Guidelines Chapter 6)
Individual audits must be planned to ensure that: Appropriate and sufficient evidence is obtained to support the auditor’s
opinion; The ISSAIs are complied with; The necessary work is performed.
6.2 AUDIT STRATEGY AND PLAN
Planning the audit so that it will be performed effectively involves discussions with the auditee, and developing an overall audit strategy and an audit plan. Both the audit strategy and the audit plan should be documented in writing. Planning is not a distinct phase of the audit, but is a continual and iterative process. The overall audit strategy and plan are updated as necessary throughout the audit. Planning also involves considerations related to the direction, supervision and review of the engagement team. In establishing the overall audit strategy for the compliance audit, consideration is given on the following points:
The objectives, scope, subject matter, criteria and other characteristics of the compliance audit, taking into account the mandate of the SAI and the elements contained in the compliance audit definition;
Reporting responsibilities and objectives, as well as to whom and when such reporting will take place, and in what form;
Significant factors that may influence the direction of the audit; Materiality and audit risk assessment; Knowledge gained from previous or related audits; Composition and work allocation of the audit team, including any need for
experts; Timing of the audit; The audit plan includes:
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A description of identified criteria related to the scope and characteristics of the compliance audit and to the legal, regulatory or appropriations framework;
A description of the nature, timing and extent of risk assessment procedures sufficient to assess the risks of non-compliance, related to the various audit criteria;
A description of the nature, timing and extent of planned audit procedures related to the various compliance audit criteria and risk assessments.
A description of sampling procedures. Planning further involves:
Obtaining a general understanding of the legal, regulatory and appropriations framework, as well as relevant, agreed upon terms and conditions applicable to the scope of the audit and to the audited entity;
Obtaining an understanding of management's assessment of applicable laws and regulations including management's internal controls that help ensure compliance with authorities;
Obtaining an understanding of the relevant authorities, including rules, laws, regulations, policies, codes, significant contracts or grant agreements etc; and
For audits of propriety – obtaining an understanding of relevant principles of sound public sector financial management and expectations regarding the conduct of public sector officials.
The planning phase involves in detail the following: Determining the overall objectives and scope of audit; Understanding the entity’s business; Assessing materiality, planned precision; Entity’s system of internal controls; Determining the components by which the audit will be conducted; Assessing Inherent Risks and Control Risks; Determining the appropriate mix of tests of internal control, analytical
procedures and substantive tests of details.
Based on the information noted above, head of the office is responsible for planning the activities and associated resource requirements in conducting audit. It should also be noted that the ISSAIs require that auditors should adequately document the audit evidence in working papers, including the basis and extent of planning, work performed and the findings of the audit. Therefore, the audit team leader is responsible to check
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that the planning file is complete and provides evidence of the basis and extent of planning work performed by the audit team.
While reviewing the planning phase, the functionaries entrusted with the quality assurance of audit should check that the various steps have been completely followed in all respects.
A major component of a regularity audit is the verification that the entity has complied with applicable laws and regulations. The audit team should enlist all applicable laws and regulations on this form for checking the entity’s compliance with laws and regulations.
For further guidance on audit planning and audit criteria may be found in ISSAIs 1210 Agreeing the Terms of Audit Engagements. and 1300 Planning an
Audit of Financial Statements IFAC Assurance Framework and ISAE 3000 International standard and Assurance
Engagement
6.3 FUNDAMENTAL AUDITING PRINCIPLES
The Fundamental Auditing Principles state that 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 (ISSAI 300 3.1.1).
Planning the audit needs to be knowledgeable of the compliance requirements that apply to the entity being audited (ISSAI 300, 3.4.3).
Auditors plan and perform audits while maintaining an attitude of professional skepticism in order to establish the legal basis for performing the audit, such as the mandate of the SAI, including the responsibilities of public sector auditors, and the constitutional status and responsibilities of the audited entity.
The subject matter and the subject matter information is one of the first steps to be carried out in planning and performing a compliance audit.
In some cases the subject matter may be set out in the relevant law or audit mandate. In other cases the selection of the subject matter is a strategic choice to be made by OCAG and is based on risk assessment and professional judgment.
Planning is a process of deciding what to do and how to do it before some action is required. It means laying out a course of action that we can follow that will help achieve desired goal.
Developing a general strategy and detailed audit procedures.
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Determining the audit scope, timing, objectives, criteria and methodology to be used and the resource required to ensure that the audit achieves the predetermined level of assurance in an efficient manner.
Vital area of the audit which is primarily conducted at the beginning of the audit process provides resource continuity in the event of staff turnover of audit organization.
Attention is devoted to important areas of the audit and assist in proper assignment of work to assistants and in coordination of work done by other auditors and experts.
Effectiveness of effort throughout the office based on a clear understanding of the areas to be audited and the audit objectives that lead to a better judgement comes through good planning. It provides a basis for regular monitoring of the audit progress by senior management.
Discuss elements of auditors’ overall plan and certain audit procedures with the entity's management and staff to improve the efficiency of the audit and to coordinate audit procedures with work of the entity's personnel.
Ensuring that planning is carried out in accordance with ISAAIs as well as auditing policies, standards, manuals, guidelines and practices of SAI.
Obtaining relevant information regarding laws and regulations that might have a significant impact on the audit objectives.
Preliminary survey audit (an audit that aims at conducting an initial study of specific issues to help prepare the audit task plan).
Identification of sources (e.g. media, findings of auditee's internal audit, inspection and other control bodies) as background for audits.
Determining list of activities for audit. Highlighting of special problems foreseen when planning the audit. Ensuring that members of audit team have a clear and consistent
understanding of the audit task plan. Follow-up is made of issues in previous related audits. Understanding the finance, accounting and other relevant functions of the
organization. Identification of key elements of internal control system of auditee. Using appropriate analytical procedures. Identification and analysis of relevant ratios and comparative figures. Identification of trends or deviations from predicted amounts. Identification of sampling method and sampling population.
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Choice of relevant performance indicators. Assessment of inherent and control risks. Establishment of materiality criteria and thresholds. Establishment of degree of confidence decided for audit. Choice of appropriate experts/consultants. Preparation of budget and schedule for audit. Assessment of reasonable resources necessary to undertake audit. Assessment of staff requirements and team allocated for audit. Investigation and settlement of queries raised during review stage. Drawing up, approval, review of audit task plan by supervisors, if applicable. Other procedures and practices used in the planning phase of an audit.
6.4 PROCESSING INFORMATION
The Compliance Audit Guidelines cover compliance audit at all levels of government audit. As a consequence, the guidelines are applicable as appropriate for a combination of entities for which an audit across the entities is planned and performed.
Evidence gathered must then be evaluated as a basis for forming conclusions and for reporting purposes.
In auditing the accounts of expenditure and of receipts, an auditor should bear in mind that audit should be conducted on broad principles.
The prescribed checks should be observed in spirit and not merely in letter as opposed to the spirit.
While auditing financial irregularity of any transaction or document, it should be considered whether it infringes any of the standards of financial propriety.
Whether the point is strictly enjoined either in the codes or local orders from which no systematic or intentional deviations can be recognized without special sanction.
Evidence gathered on non compliance of rules and regulations, orders and instructions should be so processed that those pertain to the objectives and criteria set.
6.5 UNDERSTANDING THE AUDITED ENTITY AND ITS ENVIRONMENT (ISSAI
4100, Para 6.4)
Determining the subject matter and suitable criteria are among the first steps in performing compliance audits. The process of determining the subject matter and
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the criteria involves public sector auditors obtaining an understanding of the audited entity and the circumstances surrounding the audit. This understanding provides public sector auditors with a frame of reference to be used in applying professional judgement throughout the entire auditing process. An understanding of the entity, its environment and relevant programme areas is especially important as it will be used in determining materiality and in assessing risks.
[
6.6 UNDERSTANDING INTERNAL CONTROL OF THE AUDITED ENTITY
o Understanding internal control is normally an integral part of understanding the
entity and the relevant subject matter. The Fundamental Auditing Principles explain that in performing an audit, public sector auditors understand and evaluate the reliability of internal control (ISSAI 300, 3.3.1). In compliance audit, this includes understanding and evaluating controls that assist management in complying with laws and regulations (ISSAI 300, 3.3.2).
o The particular type of controls evaluated depends on the subject matter, and the
nature and scope of the particular compliance audit. In evaluating internal control, public sector auditors assess the risk that the control structure may not prevent or detect material non-compliance (ISSAI 300, 3.4.6). The internal control system in an entity may also include controls designed to correct identified instances of non-compliance. Public sector auditors obtain an understanding of internal control relevant to the audit objective, and test controls on which they expect to rely. The assurance derived from the assessment of the internal controls will help the auditors determine the confidence level and hence, the extent of the audit procedures to perform.
Further guidance on understanding the audited entity may be found in-
ISSAI 1315: Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment.
INTOSAI Implementation Guidelines for Performance Auditing Section 3.3: Understanding the programme and Appendix 1, Subsection 2- Formulating the audit question or defining the audit problem.
INTOSAI Guidelines for Internal Control Standards for the Public Sector. IFAC’s ISAE 3000: Assurance Engagements Other Than Audits or Reviews of
Historical Financial Information.
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6.7 DEVELOPING SCOPE AND OBJECTIVES
The overall audit objective is affected primarily by the type of audit to be performed. The audit objective may be significantly different depending on whether the auditor is performing a financial audit, a compliance audit, or a performance audit.
To illustrate, the objective of a financial audit is normally to express an opinion as to whether the financial statements properly present, in all material respects, the government’s financial position, the results of its operations, its cash flows and its expenditures and receipts by appropriation. To see that the sums expended have been applied, in all material respects, for the purposes authorized by Parliament and have in all material respects been booked to the relevant grants and appropriations and determine whether there have been any change to the type of audit performed or the entity to be audited.
6.8 DEVELOPING CRITERIA (ISSAI 4100, Compliance Audit Guidelines, Chapter 6.3)
Criteria may be formal, such as a law or regulation, ministerial directive or the terms of a contract or agreement. It may be less formal such as a Code of Conduct, principles of propriety, or they may relate to expectations regarding behaviour.
Administrative guidelines used as criteria should be in compliance with laws and regulations. The sources used as a basis for the audit criteria can be a part of the compliance audit.
Criteria under varied perspectives/ characteristics :
Relevant criteria provide meaningful contributions to the information and decision making needs of the intended users of the audit report. Reliable criteria result in reasonably consistent conclusions when used by another auditor in the same circumstances.
Complete criteria are those that are sufficient for the audit purpose and do not omit relevant factors. They are meaningful and make it possible to provide the intended users with a practical overview for their information and decision making needs.
Objective criteria are neutral and free from any bias on the part of the auditor or on the part of management of the audited entity. This means that criteria cannot be so informal such that assessment of the subject matter information against the criteria would be very subjective, and may lead other public sector auditors to reach a very different conclusion.
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Understandable criteria are those that are clearly stated, contribute to clear conclusions and that are comprehensible to the intended users. They are not subject to wide variations in interpretation.
Comparable criteria are consistent with those used in similar audits of other similar agencies or activities, and with those used in previous audits of the entity.
Acceptable criteria are those to which independent experts in the field, audited entities, the legislature, the media and the general public are generally agreeable.
Criteria should be made available to intended users such that they understand the nature of the audit work performed and the basis for the audit report.
Once suitable criteria have been identified based on the characteristics set out above, they then must be appropriately operationalised for the particular circumstances of each audit so as to be able to reach meaningful audit conclusions.
If public sector auditors make use of guidelines, check-lists or other materials provided by the audited entity or other administrative authorities for the purpose of identifying the suitable audit criteria, they must take due care in assuring through appropriate audit procedures that the material used adequately reflect the applicable law, regulation, etc.
In situations where the audit criteria are, for whatever reason, not considered suitable, the SAI may encourage the appropriate bodies to formulate clearly the general principles to be followed in public sector entities for such matters.
Further guidelines may be found in: ISSAI 1210 and 1300 INTOSAI Implementation Guidelines for Performance Auditing Part 1 and
Appendix 2 IFAC’s assurance Framework and ISAE 3000
6.9 SETTING THE MATERIALITY
Materiality is often considered in terms of value but the inherent nature or characteristics of an item or group of items may also render a matter material--for example, where the law or regulation requires it to be disclosed separately regardless of the amount involved. (ISSAI 100, 1.0.10)
The principles explain that in cases where compliance audit is carried out in relation to performance auditing, materiality by nature or by context is a more important consideration than materiality by amount (ISSAI 400, 4.0.29).
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The determination of materiality for planning purposes may be straight forward. This might be the case in situations where a law or regulation, or agreed-upon terms establish an unconditional requirement for compliance, for example if the constitution prohibits overspending in relation to the approved budget.
Materiality consists of both quantitative and qualitative factors. In performing compliance audits, materiality is determined for planning purposes, evaluating the evidence obtained and the effects of identified instances of non-compliance, and purposes of reporting the results of the audit work.
Other matters that may be considered material at a lower level of value or incidence than the general determination of materiality include fraud, intentional unlawful acts or non compliance, incorrect or incomplete information to management, the auditor or to the legislature (concealment), intentional disregard for follow-up of requests made by management, authoritative bodies or auditors, events and transactions made despite knowledge of the lack of legal basis to carry out the particular event or transaction.
In other cases the determination of materiality is normally a matter for professional judgement.
When evaluating evidence obtained, the determination of materiality may be influenced by quantitative factors such as the number of persons or entities affected by the particular subject matter, or the monetary amounts involved.
Public expectations and public interest are also qualitative factors that may impact the public sector auditor's determination of materiality. The seriousness of the non-compliance is also considered. While not necessarily unlawful, instances of excess spending over appropriations authorized by the legislature or introduction of a new service not provided for in the approved appropriations, may be serious instances of non-compliance by their nature.
In evaluating the materiality of any non-compliance identified, matters such as the criteria, the conditions, the cause and the effect of non-compliance are also considered. Moreover, for determining materiality relevant section of Financial and Compliance Audit Manual may be consulted.
Further Guidelines may be found in : ISSAI 1320 : Materiality in Planning and Performing an Audit and 1450:
Evaluation of Misstatements Identified during the Audit
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INTOSAI’s Implementation Guidelines for Performance Auditing Section 5.3, Sub section – Materiality, relevance and objectivity and Appendix 3 part 1.22,Subsection- Sufficiency of evidence
IFAC’s ISAE 3000 international Standard on Assurance Engagement
6.10 IDENTIFYING AND ASSESSING RISKS (ISSAI 4100, Chapter 6.8)
Identifying and assessment of risks involve a sense of judgement having consideration on the factors like-
Systems may be improperly designed or function ineffectively Controls may be circumvented Evidence may be concealed or withheld Irregularities as may occur in the Divisional offices (PWD) requiring
consideration for risk assessment are like the following: Expenditure without a sanctioned estimate; Expenditure without a sanctioned tender; Expenditure without an allotment.
The following are examples of factors that may be considered in assessing risk in a compliance audit. The list is not intended to be exhaustive, and the factors will depend on the particular audit circumstances.
Are the audited entity's objective, mandate and legal capacity clearly stated and readily available?
Have there been recent changes in mandate, objectives or programme areas? Are program areas or relevant subject matters clearly identifiable? Do program areas overlap considerably with other entities such that there is a
risk of duplication or of fragmentation? What is the legal basis of the entity (ministry, directorate, agency, etc) and
from where does it derive its authority? Does the audited entity have clearly defined roles and responsibilities, and
related authority attaching to these? Are these roles, responsibilities and authorities clearly communicated and
understood throughout the entity? If the entity is part of a hierarchic structure, and another entity is responsible
for supervision of the audited entity, how does such supervision take place? Does the organization focus on risk assessment and risk management,
including risks of non-compliance, in its operations? Have there been recent organizational changes? Are any activities outsourced to other entities?
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If activities are outsourced, how is compliance and performance monitored? Are there other potential risks associated with outsourcing? Do personnel have adequate competence and ethical behavior? Do personnel seek relevant information and is relevant information easily
accessible? Is information communicated on a timely basis in the organization? Are there any aspects of organizational structure that could give rise to great
risk of fraud? To which level of government does the particular entity belong and does it
have relations to other levels of government? What are the responsibilities (constitutional or other) of the relevant minister,
or of entity management? What is experience in dealing with the entity's external environment vs.
administrative management? Is there management consensus, or are differing views freely expressed? How is the organisation management comprised? What are programme areas of social economic political focus, visibility and
sensitivity? How does the working relationship between governance and executive
management function? Are there any areas of particular public interest? What is the experience in relation to one entity exercising unfavorable
influence on other related entities in the public sector hierarchy? Are there any political considerations that could give rise to greater risk of
fraud? Do laws and regulations contain requirements for political neutrality related to
the use of resources and funds, and what is past experience in this area? Is it clear which laws, regulations and authorities apply to the audited entity
and the particular subject matter? Are there overlaps or inconsistencies between different sets of legislation? Is the entity a lawmaking body, and if so what impact can the lawmaking
process have on the rights of individuals? If the entity is a lawmaking body, has it delegated any authority to other
entities, such as regulatory authorities or private sector entities? Is relevant legislation relatively new, or is it well established? If new, is it clear in terms of form and content such that it may be clearly
understood and applied?
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If well established, has legal precedent been consistent such that the legislation is clearly understood and applied?
Is the relevant programme area subject to significant application of judgement in its operations?
If a significant amount of judgement is applied, is this done in accordance with the intentions behind the laws and regulations?
If a significant amount of judgement is applied, is it applied consistently? Are other bodies involved in interpreting or supplementing the relevant
legislation? Has the entity carried out its duties on a timely basis such that individual rights
have not been compromised, and there have not been significant negative financial consequences due to passiveness?
Have channels for complaints and appeals for affected parties been used appropriately?
Have any individual's/organization’s rights been compromised in any way through the entity's interpretation and application of particular legislation or regulations?
Are there any aspects of laws, regulations or other authorities that could give rise to greater risk of fraud?
Are there any significant events or transactions that may give rise to significant risks or fraud risks (eg. significant procurement contracts, long term construction contracts, dealings in financial instruments such as foreign exchange contracts, significant loans or financial speculation, etc)?
Does the entity possess the necessary authority and competence to enter into and carry out significant events and transactions?
Have experts been engaged in connection with significant events and transactions?
If experts have been engaged, what precautions have been taken to ensure the incompetence and objectivity?
How is the work of experts monitored? Is there stability in the management team or have there been changes in key
personnel? How members of management are recruited (open and transparent processes
with real competition or token process)? Is management actively involved in assessing risk on a continual basis? Has management considered the consequences of changes in the entity
environment and the impact this may have on the audited entity? Is management conservative in its approach or more willing to take risks?
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What initiatives has management taken to identify and avoid significant risks that could have an adverse impact on the entity?
Are risk evaluations that are performed throughout the entity effectively communicated to management at the appropriate levels?
Does management actively monitor and evaluate the consequences of the indecisions and actions?
Have previous audits identified instances of non-compliance, fraud, unlawful facts, unethical behaviour, management bias, etc?
How does management balance the achievement of programme objectives with the need to manage risk, and ensure compliance with laws and regulations, etc?
In performing compliance audits, public sector auditors assess risk and perform audit procedures as necessary throughout the audit. This is done in order to reduce risk to an acceptable low level in the particular circumstances, so as to obtain reasonable assurance as the basis for the auditor's conclusion.
The risks and the factors that may give rise to such risks will vary depending on the particular subject matter and circumstances of the audit. In general, public sector auditors consider the three elements of audit risk – (1) Inherent risk -the risk of a material misstatement occurring in the first place, (2) Control risk-the risk the entity’s system of internal control will not prevent or detect
a material misstatement, and (3) Detection risk- the risk that any material misstatement that has not been corrected
by the entity’s internal procedures will not be detected by the auditor. in relation to the subject matter and the particular situation. In addition, the probability that the matter will occur, and the possible consequences arising if the matter should occur, are also taken into account in assessing risk.
Further guidance on risk assessment and fraud risks may be found in:
ISSAI 1240: The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statement, and ISSAI 1315: Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, and ISSAI 1550: Related Parties
INTOSAI’s Implementation Guidelines for Performance Auditing Part 3.2 Sub section – Risks or uncertainties
IFAC Assessment Framework and ISAI 3000
6.11 SAMPLING
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Sampling is only one source of audit assurance. To obtain assurance in support of his/her assessment, the auditor uses review, inquiry, observation and walk-through procedures, as well as sampling. For substantive tests, the auditor also uses analytical procedures and the testing of individually significant transactions. The objective of sampling is to reduce detailed checking to a minimum consistent with the required level of overall audit assurance. Moreover, for proper sampling relevant portion of Financial and Compliance Audit Manual may be consulted.
6.12 SAMPLE SELECTION
In preparation for performing the substantive tests of detail, the audit team must select samples of items to be tested. The following are some of the sampling techniques which can be used for the Compliance Audit:
6.12(a) Statistical sampling
Statistical sampling is the selection of a sub-set from a population in such a way that each sampling unit has an equal and known chance of selection. Examples of statistical sample are Monetary Unit Sampling (MUS) and random sampling.
6.12(b) Non-statistical sampling
Non-statistical samples are samples selected by other means which are intended to approximate the representative character of a statistical sample. However, they lack the objectivity of a statistically selected sample. Examples of non-statistical sampling are haphazard or judgemental sampling, random sampling can also be non-statistical if the sample size is not chosen objectively but say set at 50 because that was what was done last year.
6.13 METHODS OF SAMPLE SELECTION
There are several sample selection methods that are very good at ensuring that the sample is representative of the population from which it is selected, as follows:
1. Random;
2. Fixed interval (systematic);
3. Cell (random selection); and
4. Stratified random.
(1) Random selection
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Random selection involves numbering all of the items in the population and then using a random number table or software programme to select, for example, 200 random numbers. The auditor, then, identifies the sampling unit that corresponds to each number. This method is difficult to use unless the sampling units are already pre-numbered (pre-numbered sales invoices, for example) or can easily be numbered.
(2) Fixed interval (systematic) selection – (Monetary Unit Sampling)
This method involves selecting with a random start and then choosing items at a fixed interval.
(3) Cell (random interval) selection – (Monetary Unit Sampling)
This method essentially combines the previous two methods. The auditor divides the population into cells and then picks a random item from within each cell.
(4) Stratified random selection
Using this approach, the population is first stratified based on monetary ranges, type of expenditure etc., and then a random sample is drawn from each range. This could be used, for example, to weight an attribute sample to the larger dollar items or specific expenditure types, or to check that at least one sample item is drawn from each expenditure type.
6.14 SELECTING THE SAMPLE: STATISTICAL SAMPLING
Monetary Unit Sampling
Monetary Unit Sampling is a method where the probability of an item's selection for the sample is proportional to its recorded amount (probability proportional to size).
In MUS the population is considered to be composed of individual monetary units, as opposed to physical transaction vouchers like individual supplier voices, cash disbursements, etc. The auditor selects an individual Taka from the population and uses it as a hook to catch the voucher in which it occurs, so that it can be audited. Under MUS, all sampling units (individual Taka) will have the same chance of being selected. This means that, the larger the supplier invoice, the greater the chance of it being selected.
For further explanation, imagine that you are testing three vouchers. Voucher 1 has a value of 1 Taka, voucher 2 has a value of TK. 100,000 and voucher 3 has a value of TK.1. With simple random sampling each voucher has a 1 in 3 chance of being selected and
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therefore lower value vouchers are as likely to be selected as higher value ones meaning that there is a higher probability than with MUS that material error will not be identified. With the same vouchers under MUS imagine that each Taka is an individual monetary unit, you have 100,002 individual monetary units and, therefore, the two lower value vouchers each have a 1 in 100,002 chance of being selected and the higher value voucher a 100,000 in 100,002 chance of being selected; therefore there is a higher probability that the higher value item with greater risk of material error is selected.
MUS is the most efficient way of sampling where an error rate is expected to be low, it is designed to use the lowest possible sample size to provide assurance that no material error is present.
Minimum Sample Sizes
Statistically small sample sizes can reduce the quality of the assurance achieved, as the sampled items may not be representative of the population. To address this risk, the minimum sample size for any MUS sample is 5 items, with a minimum of 10 items when testing specific risks.
The “standard” sample selection technique with MUS is fixed interval (systematic) selection. Cell (random interval) selection can also be used if the population has been downloaded into a computer and CAATs is being used to do the selection. Random selection is also possible, but contains all of the difficulties of cell selection. In addition, it has a further disadvantage – should fixed interval or cell selection be used, the sample size will automatically be adjusted for any over or under-estimations of the population value. With random selection, this will not occur. Hence random selection is rarely used with MUS. For both fixed interval selection and cell selection, the auditor needs to know the sampling interval.
6.15 SELECTING THE SAMPLE: NON-STATISTICAL SAMPLING
To select a non-statistical sample that approximates a monetary unit sample, the auditor needs to find a way to bias the sample towards the larger monetary items. Some form of value-oriented selection requires high value selection of item.
In addition to selecting a random sample for testing, the auditor should also make sure that the items of particular high value are tested, as any errors in these items could have a material impact on the accuracy of the Financial Statements as a whole. Therefore, the auditor will identify the high value items which will receive individual
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attention (and will remove them from the population of items from which the samples are selected).
The auditor will identify the high value items and will cross-refer each item to the working papers that records the audit tests performed on that item.
6.16 KEY ITEM SELECTION
As with high value items, the auditor may also want to individually review items which are unusual and which warrant special attention. Generally, these items will include transactions that cause an account to show a negative balance (e.g. an asset account with a credit balance) or unusual non-recurring items. The auditor will use judgement and experience to help identify these key items.
Therefore, the auditor will identify the key items which need individual attention and will remove them from the population of items from which the samples are selected.
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CHAPTER-7
FIELD AUDIT
7.1 INTRODUCTION
The steps and procedures designed to obtain sufficient, competent and relevant evidences that will produce a reasonable basis for the auditor’s judgements and conclusions are provided in ISSAI 4000, 4100, 4200. Evaluating the entity’s internal control systems and assessing the risks that the control systems may not prevent or detect instances of non- compliance are a normal part of performing compliance audits. Field audit involves gathering of evidence to allow auditor to conclude against each audit finding, develop observations whether performance is consistent and support the audit recommendations and conclusions. The evidence gathering involves designing the audit procedures or tests i.e. audit programmes, carrying out the procedures or tests/gather evidence and analyze evidence against criteria to develop observations. So, the responsibility/activity of the Audit Team is to gather evidence on objective, obtain management representation, evaluate internal control, evaluate performance of the audited entity, develop audit observations, develop recommendations, document fieldwork and prepare audit report.
Evidence can be collected by examination of records checking physical existence of property, non expendable assets, work completed ,inventory and the work procedures being followed etc, obtaining information from knowledgeable and involved persons, checking arithmetical accuracy of sources documents and an analysis of relationship between several data.
7.2 EXAMPLES OF AUDIT FINDINGS
(1) The examples of audit findings may be classified under the following heads: Expending of money on objects on which there is no sanctioned estimate or
appropriation or expending money in excess of sanctioned estimate of appropriation.
Delay in taking action on audit observations. Disregard or neglect of the financial interests of the government. Irregular use of government money or property. Irregular action or manipulation of accounts with a view to avoiding audit
observation or financial rules. Manipulation of accounts to prevent lapse of grants. Rush of expenditure in June.
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Breaches of the canons of financial propriety and contracts. Non compliance of rules and orders.
(a) Expenditure not covered by sanctioned Estimates or Appropriation.: In any system in which works have to be executed on a large scale it is essential, if economy is to be ensured, that a programme should first be mapped out, based on consideration of the need for and the relative importance of the works, their estimated cost and the funds available. It is equally essential if the programme is to be carried out, that the estimate of the cost of each work should be as accurate as possible and adhered to in actual working. Under any other procedure, one or other of the following results detrimental to the tax payers' interest is likely to occur:
A more expensive work is carried out than the occasion demands, or A work of comparatively minor importance is executed while a more urgent
work has to be deferred, or A work costs more than it ought to.
(b) Delay in taking action on audit observations. The value of audit is greatly detracted and its efficiency seriously impaired if
the action by the executive on audit objections is delayed or not taken in the in the proper spirit.
(c) Disregard or neglect of the financial interests of Government, the irregularities of this class may relate to-
Carelessness resulting in double payments or loss, etc.; Carelessness in keeping cash; Failure or neglect to carry out rules laid down for the guidance of officers in
maintaining accounts; Execution of agreements; Materials accounts, stores accounts and accounts of tools and plants; Materials supplied to contractors; Residential quarters; Execution of non-government works; Failure to act with ordinary prudence and care and loss of Government
money or stores; Misstatement of facts in travelling allowance journals or measurement books; Carelessness in realizing government revenue; and Carelessness in record of measurements.
(d) Carelessness resulting in Double Payments, Loss, etc.-
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Double or excess payments to contractors, suppliers or other authorities due to careless recording of measurements or preparation of bills, credit notes, etc.
Loan of tools and plant to contractors without an acknowledgement being taken leading to loss.
(e) Carelessness in keeping cash- Money deposited with a clerk instead of being paid into treasury and
subsequently stolen. Government collections, undisbursed pay, etc., kept in private custody and
stolen.(f) Failure or neglect to carry out rules laid down for the guidance of officers in
maintaining accounts- Money put into double locks without check resulting in shortage. Misappropriation due to lack of supervision of cash account and failure to
check receipts. Fictitious claims made or figures -altered in fair copies of bills sent to treasury
for encashment (correct amounts being shown in office copies, and the amounts drawn in excess being misappropriated). Discrepancy between the foil and the counterfoil of a cheque resulting in a fraud.
Vouchers and sub vouchers not checked with the contingent register. This results in payments not actually made being shown as made the excess being misappropriated.
Endorsement on a cheque drawn in favour of a contractor forged and the cheque cashed from a treasury and the amount misappropriated: Frauds and embezzlements are rarely discovered in the normal course of
audit because those who perpetrate them usually adopt precautions with the object of defeating audit. Besides audit has no control over the initial accounts maintained in the administrative or executive offices or over the system under which revenue is collected. All frauds reported have, therefore, been discovered either by the Administrative or Executive Officers. What audit can do is to see that expenditure is covered by properly signed vouchers/bills that it is incurred' against proper sanction. It is the Executive and administrative officers who are primarily responsible for prevention of frauds and embezzlements.
(g) Execution of agreements- Non-execution of agreements; Payment made prior to execution of agreements which reduce the
subsequent agreements to a more formality;
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Excessive rates paid as a result of the want of a previous agreement; Extra-items and enhanced rates billed for in final contract certification which
are not covered by accepted agreements or provided for in sanctioned estimate when it is too late to submit a revised estimate or revised agreement;
Percentages above the schedule rates at which the contractors tendered, calculated also on the special rates for certain items not provided in the schedule of rates and this payments made to the contractors to which they were not entitled.
(h) Materials accounts, stores accounts and accounts of tools and plants- Materials certified to as at site of works although not in existence at site or
existent in quantities different from those certified; Certificates of count of stores and tools and plant and of materials at site of
works furnished although there was no actual count; Unserviceable nature of stores not reported in order to cancel the purchase
of useless items; Purchase of or order for articles prior to sanction of competent authority.
(i) Materials supplied to contractors- Contractors’ receipts not forwarded to the divisional office and in
consequence the recovery due from the contractor not affected; Materials issued to a contractor charged finally to works; Recovery effected from a contractor at stock rates although to the rate at
which recovery should have been effected as per agreement was higher than the stock rates.
(j) Failure to act with ordinary prudence and care and loss of government money or stores-
Work abandoned owing to mistakes in the original plan and lay out; Work paid for though not done resulting in fraud; Stores or road materials wing to proper accounts not having been
maintained.; Loss of cash occurred because of not having been counted at the proper time.
(k) Misstatement of facts in Measurement Books- False entries made in Measurement Books (MB); Measurements made from plans and estimates and not from the work itself
at site; Discrepancies between dates in measurements and those in traveling
allowance journals;
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Stores paid for towards the end of June on bills verified by the Sub-Divisional Officer and certified as "checked and found correct" although the stores were not actually received till July or later;
There was no check measurement at all in a sub-division for over a year; Large and unjustifiable excesses in measurements were discovered or
checking the measurements; No trace of a work measured could be found; Over payments noticed in running bills which were apparently due to widely
wrong measurements in the first instance; Some work measured twice resulting in double payment; Standard Measurement Books incomplete and unattested; Irregular cancellation of recorded measurements.
(l) Irregular use of government money or property- Cash balance used for private purposes and a false certificate of account
granted; A false certificate of payment sent to audit although no payment made; Revenue realized& utilized to meet expenditure instead of depositing into
Bank as required by the rules; Money drawn for payment of compensation for land kept in private custody
for a year or more; Misappropriation of wages of labourers; Same thumb impression against two or more payees; Muster rolls contained names of men who had never been employed
normally termed as ‘ghost workers’.
In the Public Works Department, delay generally occurs in acknowledgements of payees, reaching the audit office even in ordinary circumstances owing to the system of payments by cheques through sub divisional officers. It is imperative that disbursing office should not only check their accounts with vouchers in every case but invariably see that there is no undue delay in obtaining the vouchers. The absence of this check indicates the neglect of an elementary duty of a disbursing officer.
(2) Manipulation of accounts:The irregularities of this type may be made with the object of:
Avoiding the necessity for obtaining proper sanction, or. Manipulation to conceal irregular procedure.
Instances under each group are noted below:
(a) Avoiding the necessity for obtaining proper sanction-
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Expenditure incurred on one work for which there was no sanctioned estimate or allotment or on which the sanctioned amount had already been spent was charged to another work or to stock with which it had no connection and was subsequently written back.
Inadmissible allowances paid under different guides to bring them within the power of the spending authority, e.g., entertainment of regular establishment or payment of rewards to members of the regular establishment charged as expenditure of works establishment; pay of office assistant charged as contingencies.
Splitting up of bills for supply of materials to bring them within the power of the disbursing officer and thus to avoid the need for higher authority’s sanction.
It may be mentioned that, incurring expenditure in excess of one's power through misrepresentation of facts is a breach of a fundamental financial rule.
Payments for work done not made for want of sanctioned estimate or allotment or made only to the extent to which the sanction admitted, the balance being paid next year.
It is necessary to point out that delay in payment puts contractors or labourers to loss and raises their prices for works to be executed.
(b) Manipulation to conceal irregular procedures- Entries of measurements made from the estimate instead of from the
actual work.
(c) Manipulation of accounts to prevent lapse of grants-
Payment made at the end of June for materials that actually not received at that time.
Payments made at the end of June for work shown as done but which was only expected to be done, and refunded in the following year when it was found that the work had not been done.
Works measured on the 30th June or shortly before and paid for at once before the completion of necessary preliminaries e.g. check measurements, sanction of estimates, acceptance of agreements, audit by the divisional officer.
Payments made at the end of June on quantities not properly measured, e.g. on measurements recorded from the contractor's bill or on measurements of bricks in the brickfield when the contract was for delivery at site of works or stock.
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Materials purchased in June long before they were actually required and transferred to other works in the following year.
Money drawn from treasury at the end of June for articles shown as received but not actually received.
Money drawn from treasury to use up a grant and kept in a safe not being required for immediate disbursement.
(d) Rush of expenditure in June:
The payments at the end of June are so numerous in some divisions that it seems impossible or improbable that the ordinary rules of check could be applied. Some of the irregularities connected with the rush of payments are noted below:
Bills not properly checked with agreements. Bills paid on measurements recorded by subordinates without being
checked. Majority of vouchers not submitted to audit with accounts through
delayed payments. Cheques drawn in June and held over for delivery in the next financial
year. Running account bills paid on hand receipts prior to check of the detailed
bills.
Instructions to be followed with a view to avoid rush of payments: Prompt payments to be made for works done. An unduly large portion of the value of work done not to be held over or
payment in final bill in June. Work done in June should ordinarily be paid in July. Surrenders should be made freely in time so that there may be no delay in
making final allotment. The Superintending Engineer should be able to foresee what amount
allotted, remaining unspent and to be surrendered in time. Submission or payment of bills for materials not received is strictly
forbidden. Purchase or issue of materials from stock which cannot be used on works
for a considerable time should not be made during the month of June. All adjustment for value of materials should be made during the month in
which such issues are made. All adjustments of a fictitious nature made for the purpose of utilizing
grants are strictly forbidden.
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Cheques should not be drawn at the end of the year unless it is intended and unless it is fully expected that they will be made over to the payees at once.
Payments on hand receipts, i.e., prior to receipt and check of detailed bills should be discouraged, especially at the end of the year.
Breaches of the canons of financial propriety and contracts: Sanctions approved for expenditure not pertaining to works made. Transactions conducted ignoring prima facie requirement of protecting. Overspending of government fund and spending more than the occasion
demands.
Non compliance with instructions regulating the handling of contracts including:
Such matters as the certification of the receipt of goods and services and the certification of amounts due.
Splitting up of transactions favouring individual and group interest.
Non compliance of rules and orders:
Contracts made without following the provisions as prescribed in PPR. Non compliance of provisions enunciated in CPWA and instructions and
orders issued by the relevant ministries for whom or by whom the work expenditure is made.
7.3 HIGH VALUE WORKS ANALYSIS
Important high value works executed (either completed or on-going) during the audit period should invariably be scrutinized in depth with reference to all concerned documents right from the investigation to completion reports. The analysis should cover the following points:-
Acceptance of necessity: A brief of the proposed work, the present mode how the requirement is
being met the difficulties/disadvantages faced now and how the new proposal will enhance economy, efficiency and effectiveness.
The competent authority who accepted the necessity and the reasons justifications for the acceptance.
Administrative approval/sanction: Details of administrative approval, number and date inter-alia stating
approving authority and his competency, estimated cost, probable period of completion etc.
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Technical sanction: Details of technical sanction and date, inter-alia stating the sanctioning
authority and its competency, amount of technical sanction, comparative study of technically sanctioned work with those administratively sanctioned etc. It should be ensured that the technical sanction will contain only those works that find a place in the administrative approval.
Provision of Funds: The funding pattern for the work (viz. the source of finance and its flow) may
be stated. If the work is to be funded obtaining loan from external agencies (i.e. other than Government), the flow of funds should synchronize with progress of work and current requirements. Obtaining funds from external agencies in advance of the requirement may result in locking up of funds and avoidable payment of interest, which should be avoided.
Land acquisition: Land acquisition and clearance of encroachment, if any, if required for the
work may be done before the award of contract for the smooth progress of work.
Tendering of work and conclusion of contracts: All procedures required in conclusion of contracts should be looked into.
Points like number of tenderers, re-tendering and the reasons there of, award of contract, amount, period of contract, payment terms etc., should be brought out clearly. Economy, efficiency and effectiveness to be ensured while awarding the contracts payment of advance to contractors and its nature, provision of materials, etc. may also be looked into in the narration.
Operation of Contracts (Contract Management): All aspects relating to the work stipulated, period of completion, payment
terms, cost escalation etc., be looked into in detail and analyzed. Extension of time (EOT), if any, may be critically examined and justification ascertained to ensure avoidance of escalation of payments.
Progress of work and payments to contractors: Payments to contractors are to be made with reference to the value of work
done. For this, the work done in terms of quantity as entered in the MB may be examined in detail with reference to the quantity of work ordered. The work done in terms of quantity may be transcribed in terms of value of work done with reference to the contract rates. The contractor’s ledger and the abstract of payments be correlated with the MB. Any variation in quantities
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of work done in MB when compared to the quantity of work ordered should be investigated and justified.
Physical Completion: The completion of work as per contractual terms be ensured.
Financial completion: Financial completion should be ensured soon after physical completion of
work. Handing-over of the facility to the user’s satisfaction be ensured. Aspects regarding arbitration, court cases, recovery of liquidated damages
etc., may also be analyzed critically and commented on. The audit comments on the analysis of the work should be clearly stated, if
there are no comments, that fact should be clearly stated. Works Expenditure:
Since these civil works, in most cases, are carried out through private contractors, careful supervision, monitoring and control in every phase of construction is essential. Although the primary responsibility of overseeing such activities rests with the executing agency, it is incumbent on the auditors, auditing the concerned entity, to examine each operation thoroughly and meticulously to give reasonable assurances that all such undertakings have been implemented, economically and efficiently, within the budget amount, stipulated time-frame and handed over in defect-free condition. The issues that deserve attention are:
Awarding contract to parties incapable of performing the job, Lack of proper supervision and monitoring, Stoppage of work due to budget overrun, Use of substandard materials and equipment, Poor work quality from non-compliance with specification, Non-competitive rates, Non-completion of work according to design, Payment for work not done, Payment made for unauthorised work, Changing scope of work during execution, Financial support to contractors not covered by rules or through
manipulation, Loss from defective agreement or non-implementation of agreement, Inadequate documentation and absence of good accounting practice,
and Non-tender item/additional work involving substantial amount.
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7.4 AUDIT OF RECORDS RELATING TO MONTHLY ACCOUNTS
Audit Procedure: Check whether the monthly accounts of the selected month had been
compiled correctly. Check whether the various figures in the monthly accounts were traceable in
the respective ledgers, registers, etc. Check whether the totals of various records for the selected months were
correct and have been carried over to the accounts correctly. Check whether vouchers, cheques, etc., received were checked with the
records kept in the Division and their genuineness and correctness ensured. Check whether the vouchers paid from Treasury and cheques were verified
with Treasury records also. Check whether the arrangement for custody of cash is adequate. Whether the
cash box has been embedded. Check whether the duplicate keys have been entrusted to Treasury Officer for
safe custody and they have been obtained, verified and returned periodically at the time of change of incumbency of Divisional Officers.
Check whether all sub divisional accounts have been incorporated. Check whether June (supplementary) adjustment have been made correctly
and without omission. Check whether the classifications noted in the selected month transactions was
correct. Check whether allocation between revenue and capital heads was correct. Check whether expenditure to be incurred out of advances from the
contingency. Check fund had been debited correctly and the expenditure incurred did not
exceed the amount of advance. Check whether separate subsidiary accounts have been kept in respect of
schemes assisted by Donor, etc. Note: For further description please see examples given in table form on Monthly Accounts.
7.5 AUDIT OF TRANSFER ENTRIES
Audit Procedure: Check whether transfer entries have been approved by competent authority
and they contain details for the amounts adjusted.
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Check whether the reasons for the transfer entries have been recorded in adequate detail and they are acceptable.
Check whether transfer entries have been made to reverse adjustments made in the past without justification.
Check whether value of materials has been transferred to works, without physical transfer or without the necessity for the work.
Check whether attempt has been made to conceal frauds by effecting transfer entries.
7.6 AUDIT OF CASH BOOK
Audit Procedure:Check whether the disbursing officer checked all the entries in his cash book as soon as possible after the date of their occurrence and whether he put initial in the book, dating his initials after the last entry checked. The cash book should be signed by him at the end of every month. The following are some of the more important check that he should exercise which are to be checked during audit:
Compare each entry of payment with gross amount chargeable as shown in the connected voucher, seeing at the same time that it bears ( i) a payment order recorded by himself or the Divisional Officer and (ii) the certificate of dis-bursement signed by himself or an authorized subordinate and ticking off each voucher as it is passed.
See whilst examining the postings of vouchers on the payment side, that all deductions shown in the vouchers (other than deduction creditable to the head of account or work to which the payment relates) are posted as receipt on the receipt side of the cash book.
Compare each entry of payment into the Treasury with the Treasury Officers receipt on the chalan or his pass book and satisfy that the amounts have been actually are deposited into the Treasury.
Verify the totaling of the cash book or have this done by some principal subordinate (other than the writer of the cash book) who should initial it as correct.
Verify the total of the postings in the "Bank or Treasury” column on the payment side by reference to the memoranda record by himself on reverse of the counterfoils of cheques.
It should be seen specially that all receipts of cash as shown in the counterfoils of receipt books, which have been used by the Divisional Officer or which are still in Sub-Divisional Offices are traceable under proper dates and with correct particulars, in the cash book. In respect of
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counterfoils of receipt books used by officers other than the Divisional Officer which have already been recorded after check by the Divisional Accountant only a small percentage of the items need to be traced.
It should be seen that the entries in the current month's cash books are correct and that the resultant book balance agree in each case, with the cash in hand plus the amount of imprests and temporary advance, which should be supported by the latest acknowledgement of the officers concerned as recorded in the last accounts or elsewhere. The verification of the actual balances of cash is not incumbent upon the Inspecting Officer and it should always be dispensed within cases in which the officer in charge of the cash chest is not present at the station. If in any case, cash balance pertaining to a cash book is counted, a simultaneous count of all cash balances in charge of the disbursing officer or other custodian of the cash chest is desirable. A note of the count, specifying the amount counted both in words and figures should be made in the cash book or the account concerned.
It should also be seen that all recent transactions relating to new imprests and temporary advances or to additions, reduction or closing of the imprest, as the case may be, and the account should then be abstracted and incorporated in the Cash Book in prescribed manner.
The imprestholder is responsible for the safe custody of imprest moneys and he must at all times be ready to produce the total amount of the imprest in vouchers or in cash.
When money is received by a Government officer on behalf of Government, it should at once be brought to account in the cash book immediately and a formal receipt should invariably be granted to the payer.
While Auditing : It should be seen specially that all receipts of cash as shown in the
counterfoils of receipt books, which have been used by the Divisional Officer or which are still in Sub-divisional Officers, are traceable under proper dates and with correct particulars in the cash book.
In respect of counterfoils of receipt books used by officers other than the Divisional Officer which have already been recorded after check by the Divisional Accountant, only a small percentage of the items need to be traced.
It should be seen that the entries in the current month's cash books are correct and that the resultant book balances agree in each case with the cash in hand
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plus the amount of imprests and temporary advances which should be supported by the latest acknowledgement of the officers concerned recorded in the last accounts or elsewhere.
The verification of the actual balances of cash is not incumbent upon the Ins-pecting Officer and it should always be dispensed with in cases in which the Officer in Charge of the cash chest is not present at the station. If in any case, cash balance pertaining to a cash book is counted a simultaneous count of all cash balances in charge of the disbursing officer or other custodian of the cash, chest is desirable.
A note of the count, specifying the amount counted both in words and figurers should be made in the cash book or the account concerned.
It should also be seen that all recent transactions relating to new imprest and temporary advances or to additions to existing one, are in order and that the memorandum of uncashed cheque, etc. as recorded in the divisional cash Book of a selected month is correct in all respects.
Moreover: Check whether the cash book is maintained in the prescribed printed form. Check whether pages have been machine numbered and certificate of count of
leaves recorded on the front page. Check whether all the leaves are available for the period covered by audit. Check whether the entries have been attested by the officer in charge of cash
book. Check whether cash book is closed daily and payment and receipt sides are
balanced. Check whether closing balance of previous day has been correctly brought
forward as opening balance of the next day. Check whether Cash Book Receipt (CBR) numbers were noted for each
transaction. Check whether bill or receipt-wise details have been recorded. Check whether cash balance has been periodically verified and certificate
recorded. Check whether total of the entries has been certified by a person other than
the writer of the cash book. Check whether there are too many or unattested corrections and over writings.
(An intelligent scrutiny should be made to see whether these are bonafide ) Check whether the totals of the transactions of selected months have been
independently verified during audit.
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Check whether cash was retained unnecessarily for a long period without prompt remittance into treasury or disbursement to parties.
Check whether salaries etc remaining undisbursed for over 3 months remitted into treasury or short drawn in subsequent bills.
Check whether balance was written at the end of month. Check whether imprests /temporary advances relating to earlier periods have
been settled and the balances were indicated against the names of the officers holding them.
Check whether certificates of possessing the balances have been obtained from the Officers concerned to ensure their responsibility for the amounts.
Check whether cash book entries for the whole period of audit have been generally scrutinized and a list of important and peculiar items of transactions has been taken and relevant files called for to examine in detail.
Check whether classifications for receipts/payments were correctly noted. Check whether cash book, undisbursed pay register, etc., were correctly
maintained.Note: For further elaboration please refer the examples given in table form on Cash book audit.
7.7 AUDIT OF EMPLOYEE RELATED EXPENSES
Audit Procedure: Check that proper particulars are entered in audit register for Gazetted Officer
and in scale audit register for Non Gazetted employees. Check that office order or establishment order for new appointment is issued
by concerned head of department and amount is paid according to said order and entitlement.
Check that acknowledgement of payment to employees is received from employees / Drawing and Disbursement Officer (DDO).
Check that DDO certified the payment to Non Gazetted employees. Check that payroll officer prepares monthly schedule of employees. Check that relevant officer enters all the payments into register and prepares
payroll advice note for bank in case of cheque payment and payroll credit advice for direct bank transfer.
Check that payment to employees is reconciled with concerned department. Check that the employee is identified in audit/scale audit register; and that
payment was made to correct payee. Check that proper personal files of all the officers with all necessary particulars
are maintained.
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Check that service book maintained for Non Gazetted employees and certified by DDO.
Conduct a reconciliation (and/or check a batch of transactions) between (Direct Credit Advice / Payroll Advice / DDO monthly statement) and monthly schedule of Employees’ Salaries and Compilation Sheet.
Check that the deductions are correct (according to the GP Fund and as modified from time to time / other deductions in accordance with rules and regulations governing deductions such as rent deductions, loans and advances, etc.)
Check that the amount of the first payment was correct according to the joining date of the new employees and according to their Payroll Register.
Check that the amount of the last payment was correct according to the date of last day of employment in section and according to their payroll register – compare pay slips with Last Pay Certificate issued.
Check that payroll payments are correctly identified in the Compilation Sheet under payroll object and correctly coded according to the Chart of Accounts by checking that the net pay and deductions have been correctly coded according to the Chart of Accounts codes (classification chart).
Check that the total pay (gross, net and deductions) are correctly presented in the Compilation Sheet of the selected month.
7.8 AUDIT OF ACQUITTANCE ROLLS
Audit Procedure: When separate register is maintained, check whether entries have been
verified with those in the bills for selected months. Check whether total was verified independently for selected months. Check whether each item bore dated acknowledgement (stamped wherever
necessary). Check whether the date-wise disbursements agreed with cash book postings. When payment was made to an endorsee, check whether proper order has
been taken and proper acknowledgement in figures and words has been obtained.
Check whether certificate of disbursement to the persons entitled to receive the amount has been recorded in acquittance rolls.
Check whether there were cases of erasures/overwriting leading to suspicion. When payments have been made by money orders, check whether payees’
acknowledgements had been obtained and filed.
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7.9 AUDIT OF BUDGET AND EXPENDITURE STATEMENT
Audit Procedure: Check that expenditure is not in excess of the budget. Check that no expenditure has been sanctioned against which the budget has
not been provided. Check that saving was properly surrendered or not and case of the excess
saving has been pointed out or not. See that the expenditure was sanctioned within the competency.
7.10 AUDIT OF REGISTER OF BUDGET ALLOTMENT
Audit Procedure: Check whether the register of budget allotments was maintained and the
details were supported by reference to allotments. Check whether progressive expenditure had been noted and flow of
expenditure watched periodically under various heads of accounts. Check whether timely action had been taken to get additional funds or to
surrender surplus funds. Check whether rush of expenditure was there? Whether any effort was taken
to avoid it. Check whether register of liabilities has been maintained and the liabilities also
were taken into account to watch availability of funds. Check whether abnormally large variations between allotments and actual
were investigated. Check whether details for charged appropriation and expenditure there from
had been separately kept.
7.11 AUDIT OF REGISTER OF CONTINGENCIES
Audit Procedure: Check whether Register of contingencies was maintained in the prescribed
form with detailed head-wise particulars. Check whether allotments had been noted at the top and availability of funds
verified wherever bills were drawn. Check whether office copies of all the contingent bills were produced. Check whether cases of major items were scrutinized in detail with reference
to stock registers, issue registers, etc. Check when more than one copy of invoice was obtained for purchases etc.
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Check whether precaution had been taken to mark the duplicate, triplicate copies, etc suitably to prevent fraudulent use.
Check whether stock certificates have been recorded on invoices. When Sales Tax had been paid for purchases, check whether admissibility and
correctness under Sales Tax law has been verified. Check whether only the concessional rate, not exceeding Sales Tax available for
government purchases had been paid. Check whether demands have been issued for government purchases and
concessional rate of comparative statement availed. Check whether any payment had been made towards additional Sales Tax.
(which based on turnover liability has to be borne by the dealers only) For purchase of petrol, spares, etc, check whether cross check was made with
entries in log books of vehicles. Check whether purchases of books, furniture etc., have been verified with the
stock register for books, furniture, etc. Check whether the purchase of service stamp was accounted for in the stamp
account. Check whether payment of rent, etc., for buildings hired for various offices,
verified with fixed charges register, etc.
7.12 AUDIT OF VEHICLES
Audit Procedure: Check whether the register of vehicles had been maintained with full details of
vehicles -purchase, renewals, repairs, transfer to other offices, etc. Check whether the log book was maintained in the prescribed form and entries
were made and attested by concerned officers. Check whether purpose of journey, route of journey, kilometer readings etc.,
have been entered and whether the readings appear to be reasonably correct. Check whether tested mileage has been noted. Check whether details of purchase of petrol/diesel/CNG have been entered,
monthly closing done and consumption of petrol/diesel/CNG with tested mileage has been compared.
Check whether for non-official or for other uses, hire charges have been recovered.
Check whether the vehicle has been retained for unreasonably long period for repairs, etc.
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Check whether all the vehicles supplied to the office were actually necessary for the office with the approval of competent authority and were put to optimum use.
Check whether there were cases of theft, accident, loss etc. of vehicles & whether appropriate action was taken thereon.
Check whether there were cases of idle wages of crew or idleness of vehicles for want of crew.
Check vouched account. Checks whether requisition from concerned officer/ official/driver for repair
has been received. Check whether estimate has been obtained from three motor workshops. Check whether committee report has been prepared. Check whether NOC has been obtained. Check whether comparative statement has been prepared and signed by the
committee after obtaining quotations. Check whether sanction of the competent authority has been obtained to incur
expenditure. Check whether purchase of spare parts has been made from sales tax
registered firm and sale tax invoice obtained. Check whether replacement of tyres/ battery has been made after spending
prescribed life/covered prescribed distance. Check whether entry of repair/detail of spare parts replaced has been made in
the history sheet/ consolidated register of repair. Check whether replaced parts have been received back and entered in the
register of unserviceable articles. Check whether Income Tax has been deducted / deposited into government
treasury at the time of payment. Check whether actual payee receipt has been obtained from suppliers after
payment. Check whether payment has been made through bank draft/cheque/pay order. Check irregular excess drawal of POL (over and above the prescribed limits). Check log books. Check petrol register. Check whether monthly consumption of POL was within the limits prescribed. Check whether calculation for consumption of POL for local duty and outside
the municipal limits was calculated separately. Check whether recovery was made in case of excess consumption of POL than
prescribed limits.
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7.13 AUDIT OF DIVISIONAL ACCOUNTANT’S OBJECTION BOOK
Audit Procedure: Check whether the book was maintained and closed regularly. Check whether entries, if any, in the register were scrutinized and discussed
with the Divisional Accountant and the Divisional Officer. Check whether a note sent to Chief Accounts Officer (Works) on the entries in
the register. Check whether all the sub divisions have been inspected by the Divisional
Officer/Divisional Accountant annually. Check whether the reports of their inspection were perused and important
points therein examined in detail.
7.14 AUDIT OF MISCELLANEOUS REGISTERS
Audit Procedure: Check whether the various miscellaneous registers were scrutinized e.g. Stamp
account, register of stationery articles, forms, library books, trunk call register, register of fixed charges, register of land and properties, register for non-government deductions, etc.
7.15 AUDIT OF AGREEMENTS
Audit Procedure: Check whether a Register of Agreements is maintained, noting serially the
agreements executed at Divisional / Higher level. Check whether the agreements had been entered into in the proper form,
signed on all pages and have been kept in safe custody. Check whether the details in the agreement schedule had been correctly taken
from the selected tenders. Check whether the reasons for supplementary agreements had been
examined. Check whether deviations from the agreement conditions had been approved
by the authority who executed the original agreement. Check whether conditions regarding deduction of Income Tax (and surcharge
thereon) incorporated and recoveries made correctly. Check whether the wordings in the Agreement had been correctly made and as
per the prescribed form.
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Check whether conditions regarding appointment of technical assistants had been incorporated according to the Government Orders (Qualification, number or same T.A for more than one work, etc.).
Check whether Security Deposit had been obtained and is in the approved Form.
Check whether fresh conditions other than those in the tender notice have been included, if so, the effect thereof was scrutinized.
7.16 AUDIT OF REGISTER OF DEPOSITS
Check whether the deposits had been correctly categorized under the heads. Check whether the securities had been kept in safe custody. Check whether the securities were produced for verification and found correct. Check whether the securities had been pledged in favour of the Divisional
Officer. Check whether matured securities had been retained without renewal or
encashment. Check whether the minus balances under deposits were analyzed. Check whether action had been taken to debit the excess expenditure on
works over the deposits received to watch recovery of additional funds. Check whether refund of security deposit had been made only after observing
formalities. Check whether items to be lapsed were still held under miscellaneous deposits. Check whether major cases under miscellaneous deposits were analyzed to see
that the head was not operated to circumvent rules. Check whether any work creating an asset which belonged to government, was
routed through deposits instead of through the Consolidated Fund.
7.17 AUDIT OF REGISTER OF ADVANCES FOR SUPPLIES
Audit Procedure: See whether advances had been made only as per rules and under proper
orders. See whether proper security had been obtained, wherever necessary. See whether levy of interest had been specified and interest was collected,
wherever prescribed. See whether there were delays in receipt of supplies and in adjustment even
after receipt of supplies.
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See whether adequate action had been taken by the Division to get supplies or refund of advance (and interest) promptly.
In the case of delayed supply of cement, see whether the interest imposed for not supplying cement by stipulated time had been collected.
See whether a few major outstanding cases were analyzed in detail by the party.
7.18 AUDIT OF REGISTER OF WORKS
Audit Procedure: Check whether separate Registers were maintained for major works and minor
works. Check whether all works had been entered and postings were made up-to-
date. Check whether postings for selected months were checked with other relevant
records. Check whether reference to sanction and amount of sanction has been noted. Check whether expenditure incurred was within the sanctioned amount. Check whether in respect of works-in-progress, there was continuity in
postings. In respect of cases where there were no postings for several months, check
whether the cases were scrutinized to see that the work had been completed or the work abandoned/held in abeyance/ not progressing for any reasons.
In respect of completed works, check whether action had been taken to prepare completion reports.
Check what was the position regarding delay in preparing completion reports. Check whether forfeiture of EMD, SD etc., had been ordered and credits taken
wherever necessary, when works had been terminated. Check whether there was locking up of capital in view of slow progress of work
and a list of such cases had been prepared with details for a comment in the Inspection Report.
7.19 AUDIT OF MEASUREMENT BOOK
Audit Procedure: Check that the measurements were made in proper document/Measurement
Books. Check that goods were received as per order and paid for what was received.
Identify any shortfall by comparing purchase order and good received note.
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Check that the invoices and payments have applied proper prices and include correct freight charges if applicable.
Check that advance payments have been reflected in the invoice and correspondingly deducted from payment.
Check arithmetical accuracy. Check applicable guarantees, service support. Check that no payments were made for maintenance/replacement parts that
were covered by warranties. Check in case of late delivery, whether any penalties apply under contract and
if so, whether payment was adjusted accordingly.
7.20 AUDIT OF MATERIALS AT SITE ACCOUNTS AND ANNUAL CLOSING
BALANCE CERTIFICATESAudit Procedure: Check whether material at site accounts had been prepared for major works
and up-to-date entries had been made. Check whether postings had been test checked from issue registers, daily
sheets, invoices, transfer entries, stock accounts, etc. Check whether the materials mentioned in the agreement only had been
supplied to contractors. Check whether there was surplus issue of materials. Check whether recovery for materials issued to contractors had been promptly
effected. Check whether proper storage facilities were there. Check whether periodical physical counting of materials had been done by
authorized officers. Check whether annual closing balances certificates had been prepared by the
division and sent to Chief Accounts Officer. Check whether the above mentioned statement was prepared correctly with
reference to sub division statements. Check whether the statement showed quantity-wise details for book balance
and physically verified balance. Check whether for shortage in quantity action was taken to fix responsibility. Check when the physical balance was more than book balance, were the cases
analysed to investigate the difference. Check whether the reasons for the difference in value between book balance
and physically verified balance were properly explained.
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Check when the physically verified quantity and value noted there against did not tally, whether the cases were examined in detail.
7.21 AUDIT OF NOMINAL MUSTER ROLLS
Audit Procedure: See whether NMR appointments were authorized. See whether payments were made only according to Rules. See whether acquittance had been taken and prescribed certificates had been
recorded.
7.22 AUDIT OF SCHEDULE OF RATES
Audit Procedure: See whether the items indicate any ambiguity. See whether for new items and new rates data had been scrutinized. See whether the rates in a district/circle vary abnormally from those in other
districts/circles. See whether payments for extra items and supplementary had been made at
the rates calculated from the S R. See whether analysis rate made on the basis of variation in schedule of rates
and market price is bonafide.
7.23 AUDIT OF REGISTER OF ARBITRATION AND COURT CASES
Audit Procedure: See whether the registers were maintained with up-to-date details. See whether prompt action had been taken to file counter
petitions/affidavits/appeals etc. See whether there was settlement of cases. See whether action had been taken to vacate stay, etc. wherever necessary. See whether there were consequences in view of long pendency of
arbitration/court cases. See whether action had been taken to settle matters out of court, wherever
possible. See whether proper liaison was being made with Attorney General to see that
the cases were properly and promptly handled.
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In the cases where department had won, see whether prompt action was taken to realize government dues.
See whether interest was paid due to delay in making payment in accordance with the decisions of the Arbitrator/Court.
See whether payments made in satisfaction of arbitration award/Court decision were accounted as charged expenditure.
7.24 AUDIT OF REGISTER OF REVENUE
Audit Procedure: Check whether proper registers had been maintained to watch prompt
demand/collection of revenue. Check whether demands were raised promptly and collections made. Check whether the demands were raised correctly. Check whether proper action was taken to collect the arrears with
interest/penalty, if any. Check whether write-off/remissions of revenue were ordered by the
competent authority and reasons were acceptable.
7.25 AUDIT OF WORK FILES
Audit Procedure: Whether a few work files were called for and examined in general. Whether the audit notes of the Divisional Accountants had been perused and
action taken thereon verified. Whether there were cases of works awarded to higher bidders/
abandonments/ major deviations/object not achieved/major defects reported/ public complaints, etc.
7.26 AUDIT OF STOCK REGISTERS
Audit Procedure: Check whether closing balances of previous year have been counted for as
opening balance in next financial year. Check whether stores received have been correctly recorded in the stock
registers i.e. quantity, specification rate and cost has been shown in the stock register.
Check entries in the stock register regarding receipt and issuance of stores have been checked /signed by the officer in charge.
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Check separate stock register for consumable and non-consumable items have been maintained.
Check balances shown in stock register have been physically checked/ verified periodically/ annually.
7.27 AUDIT OF TOOLS AND PLANT ACCOUNT
Audit Procedure: Whether this was kept in three parts. Whether entries for the equipment purchased as seen from the accounts,
vouchers etc., had been traced in the T & P Account. Whether prompt action had been taken in respect of shortages. Whether obsolete items had been listed and action taken for disposal. Whether there were cases of equipment declared as obsolete within a short
period of their procurement. When equipment is transferred to other Divisions, whether acknowledgements
are obtained and action taken promptly to get them back. Whether hire charges had been realised as per rules and orders. Whether equipment had remained idle for long periods.
7.28 AUDIT OF SURVEY REPORTS OF OBSOLETE ITEMS
Audit Procedure: Check whether only really obsolete items had been surveyed and reported. Check whether best price was fixed by competent officer and value fetched
was reasonable. Check whether adequate publicity was given for the disposal. Check whether disposal was ordered/conducted/accepted by competent
officers. Check whether items declared obsolete had their age. The audit party should ensure completeness while auditing and satisfy itself
that the executives had adhered to the entire latest circulars/ orders/ instructions/ manuals/codes/rules/acts applicable subject for reference.
7.29 AUDIT OF MONTHLY ACCOUNTS OF RECEIPTS AND ISSUES OF TOOLS AND PLANT
Audit Procedure: For account of receipt of Tools and Plant:
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See that items are properly classified under the various groups. Check the reference to voucher number and date or adjustment of value given
in the last column. See that entries in respect of the receipt back of articles lent or sent out are
made in red ink with reference to the original entries in the account of issues of Tools and Plant.
Account of Issues of Tools and Plant: See that except in cases of articles lent or sent out temporarily, there is a
formal acknowledgement of receipt and a survey report. See that, except in cases in which, (1) issues are made free of cost under
proper authority or (2) a write off without any recovery of cost has been duly authorized, the transfer value or sale proceeds, as the case may be of each issue have been credited to revenue in the register of revenue realized .
See that, in all cases of write off sanctioned by competent authority, the orders passed by it regarding the disposal of stores have been duly complied with.
7.30 AUDIT OF STORES ACCOUNTS
Audit Procedure: See that there is no unnecessary accumulation of stock materials of any
class and action has been taken for the disposal of the surplus and unserviceable stock if any.
See that issues of stock materials to works are classified correctly under the two categories issues to “Contractors” and “Issues Direct to Works”. That the rules of government are observed in respect of “issues to Contractors” and that contractors are charged correctly in all cases and do not derive directly or indirectly any unauthorized monetary benefit or aid in consequence of any arrangement in force.
See that "Issue Rates" and "Storage Rates" are fixed in accordance with the rules prescribed by government.
See that in case a contractor desires the issue to him for use on a works of materials which exist in government stock but the supply of which was not provided for in the contract, the materials are not issued except under the express authority of the Divisional Officer and at such rates as fixed by the government.
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See that a few selected items of stock which were certified by the Divisional officer, as having been certified, should be examined in detail to see that both the quantity and value accounts thereof were duly corrected in accordance with the recorded results of the verification.
See that all important items of new purchases should be examined that the purchases have been made to the advantage of Government either by inviting tenders or through comparison of quotations from different markets dealing with the stores purchased.
See the action has been taken with regard to the adjustment of profits and losses due to revaluation, stock-taking or other causes, and that there are no serious indications of any serious disregard of rules.
A few items of market rates filled in the register should be examined to see that they are based on the latest quotations or other reliable information.
7.31 AUDIT OF SANCTIONS
Audit Procedure: Ordinarily the sanctions to expenditure should be examined with reference to
the rules regulating the financial powers of the sanctioning authorities concerned. Here audit has not only to see that the expenditure is covered by a sanction, either general or special, but it has also to satisfy itself that the authority sanctioning it is competent to do so in virtue of the powers vested in it by the provisions of the constitution or of the rules or orders made there under or by the rules of delegation of financial authority made by a competent authority and that the sanction is definite and needs no reference either to the sanctioning authority itself or to any other higher authority .When a sanction to expenditure has been examined and admitted as regular and correct the audit of expenditure against the examined sanction, becomes a simple matter.
For auditing the expenditure on a work, it is essential that there should exist a technical sanction of competent authority to a detailed final estimate of cost. The administrative approval of the department concerned of the Government of Bangladesh or of departments concerned of the Government of Bangladesh or of departments under the control of the Local Government Expenditure sanctions of authorities higher than the Executive Engineer to special items in estimates for petty works should be audited centrally, even through the estimates are not audited centrally, the audit of expenditure against such sanctions may be left to the Divisional Accountants, subject to check of his work during the local inspections. The certificates of audit of sanctions may be
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entered in the sanctions themselves and it is not necessary to enter the sanctions in Part V of the work audit register.
7.32 AUDIT OF ACCOUNTS OF JUNE
Audit Procedure:Check that: The grants and allotments of the year for all works and services lapse on the
last day of June. The annual maintenance and repair estimates also lapse on that date, unless the government has prescribed any other month of the year as the last month of the working year for any class of such works. All expenditure brought to account in Divisional Officers' accounts towards the close of the year, especially during June, should, therefore, be scrutinized with vigilance, and it should be seen (1) that the charges against the allotments and estimates of the year then closing, as brought to account, are regular, (2) that the liabilities and assets of one year are not brought to account in another year (3) that in order to secure compliance with the provisions of these respective rules, the Divisional Officers have not employed irregular methods of dealing with the liabilities and assets of the year as may either have caused actual loss or expense to government or any possibility result in loss or extra expense or may be otherwise detrimental to financial efficiency.
In the audit of the accounts of other months of the year also, as well as at local inspections of Public Works Offices, these procedure should be borne in mind.
If the June accounts of any division, or the statement of cheque issued during June received from it, indicate an un- usual and serious rush of payments towards the close of that month, it is necessary to investigate the causes and the effects of the rush and the hurried payments which it must have involved.
The closing cash balance of the Monthly Account for June will be supported by the original reports and the certificate.
In public works construction, maintenance and receipt of supplies, compliance of standards and codes become essential requirements. Audit should ensure that the items in use or in possession are verified to find their physical existence.
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CHAPTER 8
EXAMPLES OF PROGRAMME BASED AUDIT CHECKLIST
8.1 Audit of Monthly Accounts
Key Risks : The main risks are:-
1. Lack of neatness and completeness 2. Supported schedules are not complete 3. Supported schedule are not enclosed4. Related vouchers are not separated and enclosed with the particular schedule5. Accounts compilations is not in due forms and manner6. Monthly Accounts is not submitted in due time.
Audit Objectives:1. Observe that the accounts are compiled in due forms and manner2. Find out the correctness of the compiled accounts following prescribed digital
codes by Controller General of Accounts/Chief Accounts Officer.
Documents to be obtained:1. Monthly Accounts2. Cheque register3. Revenue Register4. Day books5. Schedule of dockets6. Cash books7. Deposit Register.
Audit programme:
The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by Monthly Accounts of Divisional Officers Certificate of Cash:
1. Examined whether “Memo of miscellaneous cash receipts are paid into treasuries”?
2. Whether details of receipts shown on the reverse tally with those noted in the schedule of revenue of
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Audit steps Checked by June Accounts – closing cash balance?
3. Whether supported by original reports of all disbursing officers including a certificate of the Divisional officer to the effect that he has obtained and retained in his office an acknowledgment in respect of each item of imprest or temporary advance shown in the Cash Balance Reports of the Division for 30thJune?
4. Whether the balances certified therein are equal, in the aggregate to the closing cash balance shown in the monthly accounts?
5. Whether the causes and effects of the rush and hurried payment are to be investigated?
Schedule of Revenue: 6. The amount of revenue brought into cash account
needs to be accompanied by proper schedules, head-of-account-wise.
7. Whether any amounts are credited to realised revenues before they are actually realised?
8. Whether amounts shown under "Recoveries of expenditure" are actually creditable to the heads and are traceable in schedule docket of percentage recoveries?
9. Whether receipts representing the sale proceeds of stores or other property of transfer values are supported by survey Report and Sale accounts (i.e.)
i) Whether the disposals have been authorised by competent authority?
ii) Whether full value has been accounted for or if there is loss, was it sanctioned by competent authority?
10. Whether all refunds have been authorised by competent authority?
ii) If a court order is complied with whether the original Court order accompanies refund schedule?
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Audit steps Checked by iii) Whether suitable note explaining the amount refunded has been recorded against the original receipt entry?
11. Whether action is taken by the Division for regularisation of excess over estimate / allotment?
12. Whether the prescribed certificate is recorded by Divisional Accountant when it is necessary?
13. Whether the schedule of works expenditure is enclosed for each Head of Account separately?
Schedule of Deposit works14. Whether cash receipt is verified with memo of
receipts? 15. Whether excess expenditure is charged to Monthly
Public Works Accounts and relevant entries made in the Schedule of Monthly Public Works Accounts?
16. Whether particulars of all unaffected deposit works are shown in Part II of the Schedule?
17. Whether action is taken to refund the excess deposit or realise the excess expenditure made when the works are shown as completed?
18. Whether verification is done when report of progress of expenditure accompanies the Schedule as prescribed in Monthly Public Works Accounts?
Schedule of Settlement with Treasuries19. Whether the difference is 'nil' at the end of the year?
20. Whether effective action is taken by the Divisional Officer to clear the differences?
21. Whether the vouchers give the details of name of work, estimate sanction numbers (Divisional DR, Circle CR), Measurement Book page number and necessary certificates that the quantities purchased were taken to log book/ stock account as the case may be?
22. Whether all the vouchers have a pass order given by Executive Engineer?
23. Whether the pass order is given for the gross amount and pay order for net amount and payment details like
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Audit steps Checked by cheque number, date, CB voucher number and the month have been stated?
24. Whether all payments by cheque were made only after obtaining an advanced stamped receipt from the payee?
25. Whether all the vouchers are original and not duplicate or Xerox copies?
26. Whether other relevant certificates such as ‘payment not made already’ were furnished by Sub Divisional Engineer or Executive Engineer?
Schedule of Deposits27. Whether debits are adjusted to the extent of
corresponding credits and there is any minus balance?
28. Whether the certificate at the front of the Schedule has been recorded correctly in respect of items converted into any form of interest bearing securities?
29. Whether lapsed deposits have been credited to Government account when the schedule for June A/c is checked?
Conclusion:
In my opinion, subject to the observations in the working papers referred, the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
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8.2 AUDIT OF BUDGET AND EXPENDITURE
Key Risks:1. Irregular budget distribution 2. Miss coding in budget distribution3. Intentional booking of expenditure of one head to another head
Audit objectives: Verification of Budget with Mid Term Budgetary Framework allocation. Check budget authorization. Verify that allocation of one coded fund spent to another code. Verify whether unspent amount surrendered to Govt. in the last day of financial
year.Documents to be obtained:1. ADP (Annual Development Programme , GOB )2. ADP (Annual Development Programme, Foreign Aided )
Reimbursable project aid portion (reimbursable payment ) Direct project aid portion ( Direct payment)
3. Revenue budget Periodical maintenance budget Routine maintenance of budget
4. Establishment budget, expenditure not included in divisional cash book, expenditure made through CAO/ DAO office.
Audit programme:
The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit Steps Checked by W/P1. Whether yearly budget allotted by competent
authority?2. Whether Code and sub-code wise allocation and sub-
allocation of fund was made?3. Whether excess over expenditure is made than the
allotted budget?4. Whether less expenditure is made than the allotted
budget?
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Audit Steps Checked by W/P5. Whether allocation of fund in one code is spent against
another code?6. Whether unspent amount is surrendered to
Government in the last day of financial year?7. Whether routine maintenance budget unspent for the
work as defined work?8. Whether establishment budget under designated code
verified with competent sanction, bill, voucher, register etc?
Conclusion:
In my opinion, subject to the observations in the working papers referred, the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________
Reviewed by_____________________ Date ____________
8.3 AUDIT OF ANNUAL DEVELOPMENT PROGRAMME
Key Risks : Absence of proper approval of Development Project Proposal ( DPP ) Absence of appropriate revision of Development Project Proposal ( DPP ) Execution of work not done in accordance with the instruction of approved DPP Not following procurement matrix as in DPP Split up in single package Physical and financial progress not being made.
Audit Objectives:
Examination of execution of ADP in time as per procurement matrix.
Documents to be obtained: DPP Progress report
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Tender Notification
Audit programme The following programme is a guide to assist the auditor in identifying and
addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit Steps Checked by W/P1. Whether DPP is approved?2. Whether DPP is revised?3. Whether estimate is prepared following approved rate
schedule?4. Whether tender method followed as per direction of
DPP? 5. Whether a single package of work is splited up?6. Whether any price escalation than the estimated price is
made?7. Whether any major variation with DPP is made?8. Whether any variation with tendered work is made? 9. Whether in case of aided or loan project reimbursement/
direct payment is done properly?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
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8.4 AUDIT OF ANNUAL PROCUREMENT PLAN (APP) UNDER REVENUE BUDGET
Key risk: Approval of APP Recast of APP Tendering method Disagreement of actual work done with approved APP
Audit Objectives:Identification of work done according to APP following rules and orders.
Documents to be obtained: APP and revised APP Progress report Tender documents
Audit programme The following programme is a guide to assist the auditor in identifying and
addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit Steps Checked by W/P1. Whether APP is approved?2. Whether APP is revised?3. Whether estimate is prepared following approved rate
schedule?4. Whether tender method followed is justified for
procurement in question?5. Whether single package of work is splited up?6. Whether any variation of work is made?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
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8.5 AUDIT OF LAND ACQUISITION
Key Risks:The main risks are:-
1. Over estimation2. Delay in approval of estimate by the ministry3. Non record in land acquisition registers4. Advance payment before approval of estimate5. Excess or over estimate of land requirement
Audit Objectives:1. To assess land requirement2. To verify the justified estimation of land value
Documents required:1. Estimate submitted by Divisional Commissioner2. Approved estimate3. Approved Development Project Proposal
Audit programmeThe following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by W/P1) Whether register of land to be acquired had been maintained?2) Whether revenue authorities had been promptly
addressed to acquire land?3) Whether any work had been taken up where land
acquisition would be difficult or impossible?4) Whether details of land acquired had been noted in the
Register of land and properties?5) Whether there were cases of surplus or unnecessary
acquisition of land?6) Whether the works were seriously affected due to delay
in land acquisition?7) Whether cost had been paid correctly?8) Whether land award statements had been scrutinized?
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9) Whether payment had been made according to the new procedure prescribed by Government?
10) Whether advances made to revenue authorities previously and pending payment due to delay in award for land acquisition had been obtained back and credited to Consolidated Fund?
11) Whether there were cases of payment of interest due to delay in making payment for compensation?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.6 AUDIT OF CASH BOOK
Key Risks:The main risks are:
1. Cash actually not in existence.2. Cash may not be recorded.3. Cash may not be recorded correctly in due time.4. Miss classification in receipt and payment side of cash book.5. Over writing in cash book.6. Cash book not written and verified by different persons other than those who are
designated for that purpose. 7. Regular balance in cash book not maintained
Audit Objectives:1. Understanding the internal controls over custody of cash.2. Design and perform audit tests of cash and bank balances.3. Recognize the possible fraud and errors of cash and bank balances.
Documents to be obtained:1. Cash book
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2. Cheque book3. Pass book4. Cash remittance book5. Challans6. Money receipt books7. Bank reconciliation statement8. Cheque and money receipt book issue register9. Advice of cheque issued
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by W/P Whether the cash book is maintained in the
prescribed printed form? Whether pages have been machine numbered and
certificate of count of leaves recorded on the front page?
Whether all the leaves are available for the period covered by audit?
Whether the entries have been attested by the officer in charge of cash book?
Whether cash book is closed monthly and payment and receipt sides are balanced?
Whether closing balance of previous month has been correctly brought forward as opening balance of the next month?
Whether CBR numbers were noted for each transaction?
Whether bill or receipt-wise details have been recorded?
Whether cash balance has been periodically verified and certificate recorded?
Whether total of the entries has been certified by a person other than the writer of the cash book?
Whether there are too many or unattested
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Audit steps Checked by W/Pcorrections and over writings?
Whether cash was retained unnecessarily for a long period without prompt remittance into Treasury or disbursement to parties?
Whether salaries etc remaining undisbursed for over 3 months remitted into Treasury or short drawn in subsequent bills?
Whether balance was written at the end of month? Whether imprests /temporary advances relating to
earlier periods have been settled and the balances were indicated against the names of the officers holding them?
Whether certificates of possessing the balances have been obtained from the Officers concerned to ensure their responsibility for the amounts?
Whether cash book entries for the whole period of audit have been generally scrutinized and a list of important and peculiar items of transactions has been taken and relevant files called for to examine in detail?
Whether classification for receipts/payments was correctly noted?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
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8.7 AUDIT OF TENDER
Key Risks:1. Inappropriate method of tender2. Improper circulation of tender notice3. Improper arrangement for tender opening 4. Improper evaluation process5. Inappropriate assessment of competitive bidding 6. Violation of negotiation clauses 7. Delay in finalization of tender8. Tender documents are not prepared following standard form
Audit objective:1. Adequate regulations have been made for all qualified participants.2. Lawful Tender processes are followed.3. Evidence and records are preserved properly.4. Lawful evaluation methods are followed.
Documents to be obtained:1. Tender notice2. Paper cuttings 3. Tender register4. Tender opening report5. Standard tender document6. Tender evaluation report
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year ------------------
Audit steps Checked by W/P Whether Tender processing procedure is followed
according to Public Procurement Act guideline? Whether Tender is competitive? Whether Documents submitted with tender is verified
and found correct? Whether the entries in the Tender Register were made
by the Divisional officer himself? Whether details of number of tender schedules
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Audit steps Checked by W/Pprepared and sold and certificate for destruction of unsold schedules have been recorded?
Whether details of tender received have been noted and only those tenderers who had purchased tender schedules have quoted?
Whether reasons for non-acceptance of lowest tender recorded?
Whether any negotiation was made after opening the tender and was it with the lowest or any other tenderer?
Whether signatures of tenderers present at the time of opening of tenders have been obtained?
Whether the cost of tender form realized was correct? In respect of special cases and where lowest tender
has not been accepted whether the files were called for and scrutinized in detail?
Whether the tabulation of tenders has been made correctly and calculations were correct?
Whether there was long delay in finalizing tenders? Whether there were serious consequences owing to
the delay in finalizing tenders? Whether the list of registered tenderers was
maintained and fees have been collected regularly? Whether tender notices and conditions were prepared
in the prescribed form? Whether tender conditions contained any ambiguity
or lacuna or error? Whether tenders have been called for and accepted by
the competent authority? Whether tender notices were published and given
publicity as ordered by Government from time to time?
Whether sufficient time was allowed to quote tender? Whether extension of time granted to give tenders
was given adequate publicity? Whether conditions regarding VAT, Excise duty etc,
had been stated beyond ambiguity?
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Audit steps Checked by W/P Whether issue rates of materials and hire charges of
equipment supplied departmentally have been mentioned beyond ambiguity?
Whether the issue rates include storage charge? Whether recovery at separate rates for bitumen
supplied in bulk and in drums had been specified? Whether tender conditions stipulate payment only
after inspection and measurement by department? Whether reference to queries had been correctly
indicated? In the case of tenders/quotations for departmental
sale whether conditions regarding recovery of VAT Tax and Income Tax wherever applicable had been specified and actually realised?
In cases where tenderers had backed out after receipt of acceptance notice, whether the Earnest money had been forfeited and further penal action, if necessary, had been taken?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.8 AUDIT OF MEASUREMENT BOOK
Key Risks :1. Actual measurement not recorded during the working time.
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2. Measurement record not checked by higher authority in time.3. Recorded measurement over written.4. Measurement not recorded as work done. 5. Correctness of measurement not checked.
Audit objective: Ensure correctness of record measurement. Examining non fulfillment of rules in maintaining of Measurement Book.
Documents to be obtained:1. Issue register of measurement book2. Measurement book3. Technical specification book of concerned department
Audit Progrmme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by Whether the stock register of Measurement Books
has been maintained?
Whether completed Measurement Books were promptly obtained, reviewed and recorded?
Whether the Measurement Book entries contained over-writings / erasures / corrections in measurements?
Whether cross reference to bills, cheques, etc. had been made in Measurement Books for passed bills?
Whether previous payments made had been correctly deducted from up-to date bills?
Whether paid items had been scored off by diagonal lines?
Whether signature of contractor had been taken in token of correctness of measurements recorded?
Whether there had been check measurements by the Sub Divisional Engineer/Executive Engineer to the extent prescribed?
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Audit steps Checked by Whether date of check measurement preceded the
date of measurement? Whether the items of work were written in full and
the measurements recorded indicated that all the components had been executed?
Whether dismantled materials had been taken to account and disposed of properly?
Whether the instructions printed on the M Books had been followed by the officers?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.9 AUDIT OF REGISTER OF WORKS
Key Risks:
1. Record not maintained for major and minor work.2. Cumulative record of physical progress of major work not preserved.3. Maintenance history of Roads, Buildings and other establishments not preserved.4. Cumulative Financial progress of major work not maintained.5. Component wise execution with comparison of original project proposal not kept
in prescribed form.
Audit Objective:
To observe the record of physical and financial progress of Major and Minor works.
Documents to be obtained:1. Major works register2. Minor works register3. Monthly accounts
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4. Paid vouchers 5. Dockets6. Day books7. Register of fund received8. Allotment letters of fund9. Verified grant and expenditure statement
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by 1) Whether separate Registers were maintained for major works
and minor works? 2) Whether all works had been entered and postings were made
up-to-date?3) Whether postings for selected months were checked with
other relevant records?4) Whether reference to sanction and amount of sanction has
been noted? 5) Whether expenditure incurred was within the sanctioned
amount?6) Whether in respect of works-in-progress, there was
continuity in postings?7) In respect of cases where there were no postings for several
months, whether the cases were scrutinized to see that the work had been completed or the work abandoned/held in abeyance/ not progressing for any reasons?
8) In respect of completed works, whether action had been taken to prepare completion reports?
9) What was the position regarding delay in preparing completion reports?
10) Whether forfeiture of Security Deposit had been ordered and credits taken wherever necessary, when works had been terminated?
Conclusion:
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In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.10 AUDIT OF RECEIPTS
Key Risks:The main risks are:
1. Receipt books not properly maintained2. Receipts not signed by the competent authority3. Unattested corrections, erasures, overwriting made 4. Disagreement of cash balance with receipts amount
Audit Objectives: 1. Understand the internal controls over record and maintenance of all receipts.2. Recognize the possible fraud and errors of cash receipts.
Documents to be obtained:1. Stock register for receipt book2. Issue register of receipt book3. Counter foil of used receipt book4. Indent for receipt book
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by 1) Whether there is a stock register for receipt books? 2) Whether all blank receipt books have been entered therein as
soon as they were received, quoting reference to the letter?3) Whether the letter forwarding the blank receipt books was
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Audit steps Checked by verified and correct accounting of blank books ensured?
4) Whether dates of bringing into use and completion of use were noted correctly in the stock register?
5) Whether all blank receipt books in stock were produced and verified and they were kept in safe custody?
6) Whether issue of receipt books within the office bears acknowledgement of the officer concerned and issues to other offices were supported by proper acknowledgement of the Head of the other Office or other empowered Officer?
7) Whether the balances were physically verified and certified during changes of incumbencies of the posts concerned?
8) Whether receipt books were in printed forms, machine numbered and certificate of count of pages was recorded?
9) Whether counterfoils of all receipt books used during the period covered by Audit were produced and they were in order on general scrutiny (for selected months, pages should be counted) and no original receipts which were to be issued to parties have been retained in the office?
10) Whether the Receipts have been signed by the competent officer?
11) Whether amounts have been written in words and figures correctly and there were no unattested corrections, erasures or overwriting?
12) Whether details as per receipts were traced in the cash book on the relevant date?
13) When a receipt was cancelled, whether both counterfoil and original receipt were available and they bore cancellation entries?
14) Whether demand drafts/cheques received were taken as, receipts on the date of receipt itself and their final disposals were watched through Register of valuables or in other prescribed manner?
15) Whether self cheques were taken in the Receipt side of the cash books on the date of withdrawal itself?
16) Whether bills drawn from treasuries as per Treasury Bills Book were taken as receipts on respective dates?
17) Whether there were over writings, corrections, erasures, etc.,
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Audit steps Checked by in the Treasury Bills Book?
18) Whether more than one Treasury Bills Book was maintained to draw bills from a treasury, if so, whether the approval of the competent authority for that purpose was shown and the necessity was satisfied?
19) Whether adequate scrutiny was made on the bills audited and returned by the Treasury?
20) Whether deductions from bills towards receipt heads have been taken in receipt side of the cash book?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.11 AUDIT OF PAYMENT
Key Risks:The main risks are :-
1. Fakeness of remitted challan2 Paid vouchers being duplicated
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3. Overwriting in cheque and in counter foil 4. Delay to remit DD/ cheque received from others5. Improper maintenance of advice to the bank for payment
Audit Objectives: 1. Understand the internal controls over payment2. Design and perform audit tests of cheque book and challan3. Recognize the possible fraud and errors of paid voucher
Documents to be obtained:1. Cheque book register2. Cheque issue register3. Cheque book 4. Cash remittance book5. Challans6. Cash book 7. Advice of cheque issue
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by 1) Whether each entry in the cash book for selected months was
traced in vouchers, acquittance rolls or other records to verify actual payment on the relevant date?
2) When aggregate figure is noted in cash book & whether the total of individual disbursements has been verified?
3) When payment was made for major purchases & was register of stocks verified in proof of having taken to stock?
4) Whether any sub-voucher required to be sent to CAO has been kept in the office?
5) Whether all sub vouchers not required to be sent to CAO have been cancelled preventing their fraudulent use?
6) Whether remittances into treasuries were supported by proper challans?
7) Whether the cheque and cash columns were correctly posted?8) Whether the register of cheques and source of receipt of
cheques were verified?
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Audit steps Checked by 9) Whether intimation to Treasury had been given whenever new
cheque books was brought into use?10) Whether counterfoils of all used cheque books and all
unused/incomplete cheque books were produced?11) Whether the cheque leaves have been machine numbered and
certificate of count of leaves recorded?
12) Whether all the leaves were available in the books used during the selected months?
13) Whether cheques had been signed {counterfoils initialed) by the delegated Officer?
14) For cancelled cheques, whether both counterfoils and original cheque leaves were available and they bore cancellation entries?
15) Whether amounts have been written in figures and words in cheque/counterfoils and are correct?
16) Whether cheque books in use/still to be used are kept in safe custody?
17) Whether the cheques bore the entry for crossed cheques/Account payee wherever required?
18) When a single cheque was issued for two or more items, whether the total has been verified?
19) Whether deductions have been made from bills and gross figure has been noted as expenditure?
20) Whether the deductions have been taken in receipt side noting relevant head of account?
21) Whether self cheques have been taken in receipt side as cash? 22) Whether D.D./Cheques received from others were promptly
sent to Treasury for collection and entered in the Cash book on the dates of sending to Treasury?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
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Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.12 AUDIT OF AGREEMENTS
Key Risks:1. Interest of procuring entity and contractor’s agreement may conflict2. Pre-condition of contract agreement may not fulfill3. Agreement document not in standard format4. Agreement not signed in due time5. Agreement not signed by competent authority.
Audit Objectives: 1. Understand the internal controls of procurement process2. Recognize the possible fraud and errors of agreement
Documents to be obtained:1. Agreement register2. Agreements.
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by
1. Whether as Register of Agreements is maintained, noting serially the agreements executed at Divisional head quarter?
2. Whether the agreements had been entered into in the proper form, signed on all pages and have been kept in safe custody?
3. Whether the details in the agreement schedule had been correctly taken from the selected tenders?
4. Whether the reasons for supplementary agreements had been examined?
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Audit steps Checked by 5. Whether deviations from the agreement conditions
had been approved by the authority who executed the original agreement?
6. Whether conditions regarding deduction of Income Tax (and Surcharge thereon) incorporated and recoveries made correctly?
7. Whether the wordings in the Agreement had been correctly made and as per the prescribed form?
8. Whether agreement signed within the tender validity time?
9. Whether Security Deposit had been obtained and is it in the approved Form?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.13 AUDIT OF BILL
Key Risks:The main risks are:-
1. Arithmetical incorrectness2. Disagreement with measurement record 3. Disagreement with the rate of bill of quantity
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4. Manipulation in record measurement 5. Incorrect calculation6. Not following standard measurement rule
Audit Objectives: 1. Understand the internal controls over bill checking system.2. Identify any wrong calculation by omission or commission.
3. Recognize the possible fraud by misstatement.
Documents to be obtained:1. Bill2. Measurement book 3. Contract agreement4 Material statement
5. Test reports 6. Certificates as specified
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------.
Audit steps (for First & Final Bill ) Checked by 1) Whether the bill amount is arithmetically accurate
and agrees when total quantity is multiplied with the rate per unit?
2) Whether the voucher have the reference of Measurement Book and page No. item wise?
3) Whether there has been an acknowledgement for the gross amount by the payee/contractor?
4) Whether the memo of payment is taken up to see mandatory deductions like IT, VAT, SD etc at the rates applicable as on date?
5) Whether the voucher also gives details of measurement by the Sub Assistant Engineer/Sub Divisional Engineer and check measurement by the Sub Divisional Engineer /Executive Engineer with relevant reference to Measurement Book page Number?
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Note: Subject to availability of agreements with the Auditors in the section, the rate per unit quantity may also be verified for accuracy.
Audit steps (for Final Bill ) Checked by 1) Whether the bill is in the prescribed form and
contains all the relevant details such as agreement number, name of the work etc?
2) Whether the first part of the bill (account of work Executed) gives details regarding the value of agreement and contains value of work actually executed, value of works not executed and value of items that were measured and paid for?
3) Whether the value of items omitted in different items of work as shown in the comparative statement tally with the details in part I?
4) Whether the total value of work done not exceed the value of lump sum contract. In cases of deviation whether necessary supplementary agreements etc. were drawn and references furnished?
5) Whether in the second part of Final bill, which certificates by both the contractor and bill preparing officers along with details like dates of measurements, dates of super check measurements and references to pages of Measurement book in respect of this particular work are furnished?
6) Whether third part of this form “Memorandum of payments” gives details of deductions made before arriving at the final payment to be made to the contractor?
7) Whether the deductions made outside the head of account of the relevant work IT, VAT, Security deposits are retained at the Division?
8) Whether there is an endorsement regarding payment along with cheque details and contractor’s signature for the gross amount?
9) Whether the bill shows the date of commencement of work, date of measurement, check measurement etc?
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Audit steps (for Final Bill ) Checked byAudit steps (For Hand Receipts)
1. Whether all the details such as name of work, head of account, estimate number (DR/CR number), estimate amount, Measurement book reference number, cheque number, amount, Cash Book Voucher number and the purpose for which payment had been made in hand receipt?
2. Whether the Certificates were given in hand receipt that the bill had not been paid previously?
3. If it is not a payment of advance whether it is supported by claimant’s bill?
Note: If the agreement is available in the section, checks on the above aspects should be carried out with the copy of the agreement.
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.14 AUDIT OF SETTLEMENT WITH TREASURIES
Key Risks:The main risks are:-
1. Remittance into Bank by challan amount and Form DAO 10 may differ. 2. Cheque drawn to bank for payment and Form DAO 11 may differ.
Audit Objectives:1. To verify the pairing of individual item of receipt / cheque properly done. 2. Recognize the possible fraud in case of cash remittance and cheque drawn.
Documents to be obtained:
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1. Treasury challans2. Register of remittance 3. Cash books4. Cheque register5. Monthly accounts6. Form DAO-10 & 117. Form -19
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by W/P1. Whether the register of remittances (classification
was also to be shown against each item) and the register of cheques drawn were maintained?
2. Whether opening balances in the schedules were verified with the closing balances of previous month?
3. Whether the amount shown in ‘Remitted into treasury' agreed with the total amount accounted as "Public Works Income Remittances" in the Register/ Cash Book/Monthly account?
4. Whether form District Accounts Offfice (DAO) -10 for remittance and form District Accounts Office (DAO-11) for payment are collected from DAO?
5. Whether form -19 consolidated report of remittance and payment submitted with monthly accounts?
6. Whether individual item-wise details have been obtained from DAO in respect of the figure 'Amount accounted by DAO and the certificate bore the signature and seal of DAO?
7. Whether amount shown in cheques drawn, agreed with the details of cheques drawn in the register of cheques drawn and as per cash book/accounts?
8. Whether the amount relating to Cheques paid by
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Audit steps Checked by W/Pbank was supported by a list containing cheque number, amount and date of payment and also bearing the signature and seal of DAO?
9. Whether pairing of individual items of receipt/cheque properly done with reference to Division lists and DAO lists? (The independent pairing is to be done by the Party for selected months)
10. Whether only the unpaired items were taken to explain the closing differences?
11. When a remittance was made by D.D/Cheque, and the amount credited by DAO was for net amount after deduction of collection charges, whether suitable adjustments made in the Division accounts and necessary action taken to realize collection charges from the parties?
12. Whether any cheque was paid by bank without revalidation when the period of validity of the cheque had expired?
13. Whether adequate action has been taken by the Division in respect of closing balance details?
14. When amounts accounted for in Division as “Remittances into bank” were not reflected in the DAO list of Remittances in the same month or next 12 month, whether the original challans have been verified to ensure correctness of remittance?
15. Whether the Division had taken action with Bank to ascertain details of credits appearing in DAO but not in Division and necessary adjustments were carried out early?
16. Whether in respect of cheques accounted for in DAO list but not in Division, the cheque number, etc. were available and the cheques related to the Division?
Conclusion:
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In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.15 AUDIT OF DIVISIONAL ACCOUNTANT’S OBJECTION BOOK
Key risks: Divisional Accountant may ignore the applicable instructions for maintaining
propriety.Audit Objectives:
To see the Divisional Accountant’s observation on irregularities following the codal rules.
Document to be obtained: Objection book Form-60 ( as described in Central Public Works Accounts Code )
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by1. Whether brief particulars of the transaction or order
placed under objection by the Divisional Accountant?2. Whether description of objection is briefed (Rules and
orders to be quoted)?3. Whether Amount placed under objection Dated
initials of the Divisional Accountant?4. Divisional Officer’s replies (with reason for not
admitting the objection)?5. Is there any remark by the Inspecting Officer?
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6. Whether the objection of Divisional Accountant is admissible?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.16 AUDIT OF CONTRACTORS LEDGER
Key Risks:The main risks are
1. Missing record of interim payment 2. Missing record of mobilization advances3. Missing record of secured advances4. Missing record of material issued 5. Missing records of IT and VAT deductions6. Inappropriate calculation of IT, VAT and other deductions.
Audit Objectives: To see the contractor wise transactions
Document to be obtained: Contractor ledger Day book Vouchers Material issue register Advance payment register Hand receipts
Audit programme:
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The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by1. Whether the ledger was maintained up-to-date?2. Whether postings of interim payments, material issued,
advances had been made promptly and correctly? 3. Whether totals were correct? 4. Whether there was delay in recovery of dues from
contractors; if so, whether reasons had been analysed in major cases?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.17 AUDIT AS PER PUBLIC PROCUREMENT REGULATIONS
Key Risks: Violation of rules and provisions of PPR Attention not being given to value for money in the process
Audit Objectives: To examine and assesses the departmental system and controls that are in place over the procurement process, the specific objectives of the audit are to determine whether:
Procurements were done in accordance with the Public procurement act 2006, public procurement regulation 2008, subsequent related law and order and best practice.
Procurement was done with due consideration to value for money.
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Adequate system and control were in place over the procurement process. Procurement Transactions were adequately supported and timely and accurately
recorded.
Audit programme: The following programme is a guide to assist the auditor in identifying and
addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by 1. Whether the requirements from the the requiring
body /approved DPP/ Approved APP been received?2. Whether any single work as shown in DPP or in Annual
Procurement Plan split for avoiding approval of higher authority ?
3. Whether there is funds commitment to meet the procurement?
4. Whether the requirements have been incorporated in the Procurement Plan?
5. Whether the General Procurement Notice (GPN) been been issued?
6. Whether the specifications/BOQ/Drawings/ToR been defined?
7. Whether the procurement method have been defined?8. If it is an International or a National Competitive Tender
were requirements to apply margin of preference in favour of local firm observed?
9. Has consideration been given to whether any specific procurement policy apply such as Environment issues as stipulated in Regulations?
10. Whether the tender docoument prepared following schedule specified?
11. Whether pre-qualification documents and tender notice have been approved by the competent authority?
12. Whether competitive tendering procedures i.e. Open tender method or EGP have been followed?
13. If non-competitive procurement i.e. Limited tendering method, Direct purchase method, Quation method or frame work tendering method has been used have the
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Audit steps Checked by reasons been documented?
14. Whether a list of qualified supplier and contractor has been prepared for limited tendering method (LTM) rule -52 of PPR 2008 ?
15. Whether the joint venture documents have been verified following Rule 54 of PPR 2008 ?
16. Whether the tender number have been allocated prior to advertising?
17. Whether the ground and instruction of rule 63 of PPR 2008 are obseved and total yearly amount are found limited as stated in schedule II in case of Limited Tendering Method ?
18. Whether in case of quatation the ground and instruction of rule 69 of PPR 2008 are obseved and total yearly amount are limited as stated in schedule II ?
19. Whether in case of direct contracting method have the ground and instruction of rule 74,76 , 81 of PPR 2008 are obseved and total yearly amount are limited as stated in schedule II?
20. Does the tender document provide all the information necessary to enable potential tenderers to prepare appropriate submissions?
21. Whether the evaluation creteria have been developed and approved before issuing invitations?
22. Is there any clear distinction made between mandatory and desirable criteria?
23. Has an evaluation matrix been prepared using appropriately weighted evalution criteria determined in the tender documentation prior to advertising?
24. Has the advertisement been placed in the newspapers of national circulation and foreign or international publications or trade journals in the case of international tendering ?
25. Whether the cost of tender document are fixed following rule 5 of PPR 2008?
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Audit steps Checked by 26. Has a copy of the advertisement been sent to CPTU
webesite ?27. Whether the tender documents are distributed following
instruction of rule 6 of PPR 2008 ? 28. Was a policy on late or incorrect form of submission
stated in the invitation?29. Are enquires, questions and clarifications about the
tendering documents passed onto potential tenderers?30. Are tenders received in a locked tender box/secure place?31. Whether the tender opening committee formed following
rule – 7 schedule II of PPR 2008 ?32. Are the tenders opened only after the closing time?33. Are the tenders opened in accordance with the
procedures specified in the tender documents?34. Are the tender details recorded on a Tender Opening
Summary Sheet?35. Were the receipts issued for tenders?36. Are the original tenders and summary sheet kept
securely?37. Is the evoluation committee formed following rule -8 of
PPR 2008?38. Are the evaluations performed by a panel as stated in rule
for goods, works and non consultancy services?39. For consultancy services, are the evaluations performed
by a panel of experts?40. Are the tenders evaluated in accordance with the criteria
set in tender document?41. Are all tasks, calcuations, deliberations during evaluation
documented?42. In case of declaring a tender as non responsive are the
instruction of 96(6) followed ? 43. Are the tender front loaded? 44. Were the results clearly agreed upon by both parties to
the negotations?45. Were the negotiations adequately recorded and signed by
both parties? 46. Have the negotiations results been approved?
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Audit steps Checked by 47. Are unsuccessful tenders notified accordingly?48. Whether the contract has been signed by someone with
appropriate authority?49. Was the contract properly witnessed?50. Whether the contract details have been entered into
Contract Register?51. Whether the necessary security insurance policies
certificates, etc. have been obtained from the contractor?52. Whether the processes, data used and conclusions of
contract performance been fully documented?53. Has the end user been involved in the review of contract
performance?54. Whether retention moneys as specified in the specific
conditions of contracts, been deducted from payments to the contractor?
55. Were there any variations in the contract while signing the contract document
56. If there variations in the contract,whether those were approved by the Tender Committee?
57. Whether all obligations under the contract been fulfilled?58. Has the contract been properly closed?59. Has the contract records been properly archived and
made ready for audit examination and varification ?Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
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8.18 AUDIT OF REGISTER OF CONTINGENCIES
Key Risks:The main risks are:-
1. Sanction from competent authority not being received2. Power of sanctioning authority not being competently exercised3. Register not properly maintained4. Irregular maintenance of log book
Audit Objectives:1. Understand the internal controls over contingent fund management.
Document to be obtained:1. Contingency fund allotment letter2. Contingency fund register3. Vouchers
Audit programme:
The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by Whether Register of contingencies was maintained in the prescribed form with detailed head-wise particulars?
Whether allotments had been noted at the top and availability of funds verified?Whether office copies of all the contingent bills were produced?Whether cases of major items were scrutinized in detail with reference to stock registers, issue registers, etcWhen more than one copy of invoice was obtained
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Audit steps Checked by for purchases etc., whether precaution had been taken to mark the duplicate, triplicate copies, etc suitably to prevent fraudulent use?Whether stock certificates have been recorded on invoices?When VAT, IT had been paid for purchases, whether admissibility and correctness under VAT and IT laws have been verified?For purchase of petrol, spares, etc, whether cross check was made with entries in log books of vehicles?Whether purchases of books, furniture etc., have been verified with the stock register for books, furniture etc.? Whether the purchase of service stamp has been accounted for in the Stamp account? Whether payment of rent, etc., for buildings hired for various offices, verified with fixed charges register, etc.?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.19 AUDIT OF VEHICLES
Key Risks:The main risks are:-
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1. Irregular maintenance of log book.2. Misuse of fuel and lubricant.3. Excess over maintenance cost.4. Idleness of vehicle.
Audit Objectives:Ascertaining cost effectiveness in maintenance.
Document to be obtained:1. History of maintenance log book.2. Logbook.3. Register of vehicle and equipment.4. Hire charge collection register.
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by W/PWhether the Register of vehicles had been maintained with full details of vehicles -purchase, renewals, repairs, transfer to other offices, etc?
Whether the log book was maintained in the prescribed form and entries were made and attested by concerned officers? Whether purpose of journey, route of journey, kilometer readings etc., have been entered and whether the readings appear to be reasonably correct?Whether tested mileage has been noted? Whether details of purchase of petrol/diesel / gas have been entered, monthly closing done and consumption of petrol/diesel with tested mileage has been compared? Whether for non-official or for other uses, hire charges have been recovered?
Whether the vehicle has been retained for unreasonably long period for repairs, etc?Whether all the vehicles supplied to the office were actually necessary for the office and were put to optimum use?Whether there were cases of theft, accident, loss etc., of
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Audit steps Checked by W/Pvehicles? Whether appropriate action was taken thereon? Whether there were cases of idle wages of driver, helper, mechanics or idleness of vehicles for want of crew?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.20 AUDIT OF ESTABLISHMENT BILLS AND SERVICE BOOKS
Key Risks:The main risks are:
1. Unauthorised recording in service book2. Improper custody of service book3. Incorrect information recorded into service book4. Overwriting on date of birth and joining date5. Incorrect leave calculation6. Non record of earn leave, rest and recreation leave 7. Non recording of punishment8. Non recording of service verification 9. Non recording of fixation, promotion, transfer posting, yearly recruitment etc.
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Audit Objectives: Controls over service book maintenance and personnel management.
Document to be obtained:1. Service book register2. Service book
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Name of the Office ----------------------------------- Financial Year -------------------
Audit steps Checked by Whether salary has been drawn only for the sanctioned strength of the staff?Whether the names of the persons for whom salary had been drawn appear in the register of Service Books?Whether all the Service Books noted in the Register of Service Books were producedWhen any Service Book was not produced, whether proof of having sent it to any other office was producedWhether the pay noted in the bills was verified from the entries in the Service Books?Whether correctness of drawal of DA, HRA, etc., in the bills had been verified?Whether total of the bills had been verified?Whether recoveries noted in various registers were checked with the entries in pay bills and postings in the Registers were up-to-date?
When advances were drawn, whether noting had been made in the Register for recoveries to watch adjustments?Whether deduction of Income Tax had been correctly done?Whether various claims in the bills were correct with reference to the rules and orders?
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Audit steps Checked by Whether all Service Books of persons retiring within five years and the prescribed percentage of other Service Books in Divisions and all the other Service Books of the selected sub-divisions were scrutinised and list of Service Books checked has been prepared?
Whether entry regarding dates of birth was certified as verified with reference to authentic record and not altered without the orders of competent authority and adequate proof?
When date of birth was originally noted in local era, whether conversion to A.D. era was correctly done?Whether it was verified that no officer was retained in service beyond his attaining the age of superannuation?Whether the Service Books have been periodically shown to the incumbents and their signatures obtained in the prescribed columns?Whether attestations had been done?Whether numbers and the fact of having obtained nomination for GPF account has been noted in the Service Book?Whether entries relating to service had continuity? If there was any break, was it explained properly? Whether pay scales have been written in full and are correct?Whether event for a fresh entry was noted such as increment, promotions etc?Whether sanction of increment has been correctly done?Whether events like completion of probation, passing tests crossing EB, etc. noted?Whether leave accounts have been maintained?Whether postings in leave account against sanction of leave have been verified?Whether pay has been correctly computed?Whether period of leave as seen from Attendance
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Audit steps Checked by Register has been verified in the Service Book?Whether pay fixation has been correctly done and details entered in the Service Book?Whether option statements are attached?When recoveries of excess pay had been made, whether noting had been made in the Service Book?Whether the certificate that entries had been verified with pay bills, acquittance rolls, leave account etc., had been recorded periodically in the Service Book?Whether Register of pay slips was correctly maintained and entries therein had been checked with pay slips issued by CAO? Whether bills had been prepared accordingly?Whether LPCs issued had been correctly prepared and all recoveries due have been noted therein?Whether recoveries had been noted in the Register for recoveries with reference to LPCs received from other offices?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________Note: The examples of programme set above are guidelines to assist the auditor in identifying and
addressing the risks stated.
8.21 Audit Checklist for other departments dealing with works
Some works and construction related features are common to many departments engaged in engineering works like Roads and Highways, Local Government Engineering, Public Health Engineering Department where for the purpose of keeping books and accounts provisions of
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Civil Public Works Account Codes (A&D) are followed. In the context of ISSAI compliant audit the methods those are enunciated in this manual for audit of PWD are equally applicable for audit of those organisations. However entities like Bangladesh Power Development Board, Bangladesh Water Development Board, Dhaka Power Distribution Company, Dhaka Electric Supply Company etc. having some distinctive features are also audited by Works audit directorate. Considering the distinctive features of these organizations a few more audit check lists are added here for ready reference:
8.21.1 Roads and Highways Department
8.21.1.1 Budget and Expenditure
Name of Division (office) ----------------------------------------Financial Year-----------------------------
Key risk
1 Inappropriate budget allocation
2. Mis coding in budget distribution and accounts keeping
3. Malafide booking of expenditure from one head to another
4. Unspent fund not being duly surrendered5. Spending money in anticipation of budget allocation6. Revenue loss due to Performance Security not being forfeited7. Revenue received from different organization for cutting roads not deposited to
Govt. Accounts8. Interest earning from STD a/c not deposited to government Account.9. Over writing of Measurement Book (if any) is attested with proper initial
Key audit objectives:
To check budget authorization and sanction of expenditure from appropriate authority
To examine regularity of code wise fund allocation To examine year end status of budget refund To assertion that money is spent for desired and assigned purpose To ascertain Standard of Financial property is assured To asses work is done as specified deign and approved by appropriate authority
Documents to be obtained: Yearly reconciled financial statements Budget (original and Revised)
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Code of accounts Annual Procurement Plan Estimate, Tender Notification, Technical Evaluation Committee (TE C )report , Notification of Award (NOA), Work Order Works Completion Certificate Bills and Vouchers Measurement Book Schedule of Rates Test certificate (where applicable) Proper recording of raw materials Register of VAT and IT Sanction of Expenditure
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether yearly budget is allotted by competent authority?Whether Code wise allocation and name-wise sub-allocation of fund is made?
Whether excess or less expenditure is made during the current year?
Whether allocation of one coded fund is booked into another code?
Whether un-spent amount of money is surrendered to Govt. account within the same financial year?
Whether routine maintenance budget is spent for the actual work for which the fund is allocated?
Whether expenditure under establishment budget is made against defined appropriate codes?
Whether re-appropriation is made with the approval of the competent authority?
Whether unspent budget of one particular work is done for another
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Audit Steps Checked by W/Pwork following relevant steps to do so?
Whether money Spent is more than the stipulated work or less work done?
Whether prior to spending the re appropriated amounts, the estimate for the expected expenditure is made?
Whether the fund of one head is re appropriated against sub head of another head?
Whether payment for variation is approved by competent authority?
Whether Direct cash purchase, RFQ, LTM< OTM is practiced as per PPR 2008?
Whether the expenditure made during a financial year is reconciled with the relevant CAO (Roads & Highways), (PWD),(DPHE), (LGED) ?
Whether work is done as specified design and approved by appropriate authority ?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.1.2 Audit of Annual Development Progremme
Key risk:
Irregularity in the approval /revision of ADP
Non execution of work in accordance with the instructions of approved DPP Non persuasion of procurement matrix as in DPP
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Split up of a single package for untoward intention Deterrence in physical and financial progress Purchase of vehicles without approved of Ministry of Finance Year -wise provision not maintained
Key audit Objectives:
Ascertaining compliance of timely execution of ADP following procurement matrx.
Documents to be obtained: Development Project Proposal Public Procurement Regulations Estimates , Tender Notification, Technical Evaluation Committee (TE C )report , Notification of Award (NOA), Work Order Works Completion Certificate Bills and Vouchers Test certificate Measurement Book IT /VAT register Schedule of Rates Sanction of expenditure
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether DPP is approved?Whether DPP is revised?
Whether standard road design is followed in preparing estimate/contracts as per DPP?
Whether estimate is prepared following approved rate of schedule?
Whether tender method is followed as per instruction of PPR?
Whether a single package of work is split up into a number of pieces?
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Whether there is any price escalation that goes beyond DPP instruction
Whether there is any major variation from DPP ?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
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8.21.1.3 Audit of Audit of Routine Maintenance
Key Risks: Absence or lack of control in managing routine work Slack in proper record keeping Dual completion of chain work Sand filling while upgrading HBB road to Bituminous Carpeting (BC) road Work done after the expiry of repair work to be done
Audit Objectives: Ascertaining the status of field level control and financial regularity.
Document to be obtained: Routine Maintenance Register Measurement Book Monthly Site Account Hand Receipt Book Stock register of Raw material
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether routine maintenance work is approved pre or post facto by the appropriate authority?
Whether record is maintained for issued materials for departmental works done?Whether monthly site account is correctly maintained for receipt, issued and surplus materials in appropriate form?Whether record of work completed is maintained in the Measurement Book?Whether payment is made through Hand Receipt without the work done?Whether payment is made for sand filling while upgrading a HBB road to BC (Bituminous carpeting road)?Whether payment is made even though the date for starting maintenance work has expired?
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Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.1.4 Audit of Interim Payment Certificate (IPC)
Key Risks:
Perpetuation of malafide practice in record keeping Irregular record keeping leading to wrong reporting information Malafide payment for work not done
Audit Objective: Ascertaining propriety in dealing with financial records
Documents to be obtained: Interim Payment Certificate Measurement Book ( Details/Abstract) Contract Agreement Standard Tender Documents Notification of award (NOA)
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether excess of work beyond the Bill of Quantity (BOQ) is recorded in the IPC with the approval of appropriate authority?Whether new IPC is made keeping any old IPC pending?
Whether MB number is recorded in the IPC?
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Audit Steps Checked by W/PWhether IPC is prepared as per record in the MB?
Whether IPC contains signature of consultant/ departmental officer/ contractor?
Whether there is a signature of the authorized executive engineer/ superintendent engineer/ chief engineer (as the case may be) on the certificate?
Whether IPC is done following chronological order?
Whether IPC is approved by the authority that floated the tender (Executive Engineer, Superintendent Engineer, Addl. Chief Engineer, Chief Engineer) before the payment is made?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.2 Audit of Local Government Engineering Department
8.21.2.1 Road Development
Key Risks :
Increased unauthorized expenditure Construction of fake road
Audit Objectives: To examine that road is built as per approved DPP and expenditure incurred complies with financial rules and regulations.
Documents required: Development Project proposal Planning Commission gazette notification for approved road design
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List of roads with ID number Estimates , Tender Notification Technical Evaluation Committee (TEC )report Notification of Award (NOA) Work Order Measurement Book Works Completion Certificate Bills and Vouchers IT/VAT register Related files and work register
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/P Whether the name and identification number of the road recorded in the approved Development Project Plan?Whether the road approved follows the length chainage and value specified in the DPP?
Whether the road is classified and grouped by Planning Commission?
Whether the road has it’s distinct ID number?
Whether the road is recorded in the inventory and upgraded?
Whether the development of the road is done in line with the length and type as recorded in the inventory list?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
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8.21.2.2 Audit of Annual Procurement Plan
Key Risks :
Work not being done according to APP Inappropriate utilization of Government fund.
Audit Objectives: Examining violation of govt. orders and financial rules and regulations
Documents required: Annual Procurement Plan (APP) (original/ revised) Budget allocation (original/revised) Measurement Book Contracts Estimates , Tender Notification Technical Evaluation Committee (TE C )report , Notification of Award (NOA), Work Order Works Completion Certificate Registers and files
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether APP is prepared following budget allocation and approval by appropriate authority?Whether development and maintenance of road is done as per approved APP
Whether appropriate section is taken for revised allocation?
Whether APP is revised by competent authority
Whether work is done in accordance with approved revised APP?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various
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control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.2.3 Audit of Off pavement
Key Risks :
Existence of ghost labourer Jobs not done Perpetuation of financial irregularities
Audit Objectives: To examine maintenance of financial and other discipline in the
construction/maintenance of village road and culvert
Documents required: Resolution of Labor Contracting Society (LCS) Contracts Bills and vouchers
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether village roads and culvert maintenance programmes are done by the LCS? (Labor Contracting Society)Whether the community organization is formed before the work is done?
Whether the Upazilla engineer approves the work?
Whether completion of work certificate is given by the community organization?
Whether contracted laborers are paid as per approved rate?
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Audit Steps Checked by W/PWhether expenditures so made are recorded accordingly?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.2.4 Audit of Mobile maintenance
Key Risks :
Procurement and issue of material for work not being done Expenditure made for undone work
Audit Objectives: To examine the work done and propriety of expenditure made
Documents required: Work assessment report Work completion certificate Stores register Bills and vouchers
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether the requirement for mobile maintenance assessed and reported prior to the work done?Whether inspection is carried out in the site where mobile maintenance work is done?
Whether the executive engineer approves the work?
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Audit Steps Checked by W/PWhether goods procured for the work are stored and recorded?
Whether goods are issued and recorded?
Whether list of departmental workers is entered in the register?
Whether works completion certificate is issued by the engineer in charge?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.3 Audit of Public Health Engineering
8.21.3.1 Audit of Tube well
Key Risks :
Number of tube wells not being sunk as per DPP Fictitious payment made for work not done
Audit Objective:To examine financial propriety of expenditure made
Documents required: Register of store materials Watsan committee report Certificate of completion Estimates , Tender Notification Technical Evaluation Committee (TE C )report , Notification of Award (NOA),
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Work Order Works Completion Certificate Bills and vouchers
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether test tube wells have been sunk at the approved site?Whether test tube wells have been sunk at a place where it is required?
Whether tender is floated and contractors selected as per PPR 2008?
Whether estimate is approved by the competent authority?
Whether certificate of completion is taken from the sub assistant engineer?
Whether payment is made on the basis of drinking water and material test report from authorized laboratory?
Whether bill prepared is based on boring report?
Whether upa-zila engineer office maintains a tube well register describing site, name and address of supplier of material used?
Whether newly sunk tube well is recorded in register along with completion report including date of hand over to the user?
Whether particulars of erected parts are noted in the register or not?
Whether material supplied to the contractor, if remains unutilized, is returned to the store and valued at issue rate?
Whether completion report contains the date in which the platform is built as required under Special Rural Water Supply Programme (SRWSP) directives?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various
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control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.3.2 Audit of Pond Sand Filter (PSF)
Key Risks:
Selected site may not be an arsenic free area Water treatment plant may not be built as specified in the PP Impropriety in expenditure management
Audit Objectives: To examine the propriety of expenditure and authenticity of work done.
Documents required: Development Project Proposal Details of Watsan ( Water & Sanitation) Committee report Money receipt book Estimates , Tender Notification Technical Evaluation Committee (TE C )report , Notification of Award (NOA), Work Order Works Completion Certificate Treasury Chalan, CTR Monthly accounts, bills and vouchers
Audit programme:The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether Watsan committee has approved the site for PSF?Whether prior to approving the degree of arsenic, iron and chlorine of the pond has been checked ?
Whether the recipient of benefits of PSF has deposited the supporting fee at the prescribed rate?
Whether the supporting fee is recorded and deposited in the
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Audit Steps Checked by W/PGovernment account through money receipt, treasury challan and verified CTR?
Whether reservoir has been built and drinking water is supplied from the source?
Whether PSF is installed at a place where deep tube well cannot work ?
Whether PPR is followed in selecting and awarding contract?
Whether issue rate is applied in valuation of materials supplied to or returned by contractor?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.3.3 Audit of Stores
Key Risks :
Inappropriate maintenance of stores Irregular issues of items from stores Specification and quality of goods not maintained
Audit Objective: To examine non compliance of financial and other regulations
Documents required: Stock register Contracts Invoices Back HR
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Hand Receipt Book
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether tender has been called for item to be procured by following PPR-2008? Whether the quality of materials stored is procured as per need and specification?
Whether any goods received is recorded without having material test report?
Whether the prices of goods supplied to the contractor is recovered as per departmental issue rate?
Whether contractor’s bill contains test report, work completion report, invoice for water test examination fee?
Whether material statement contains the details of the goods supplied, utilized and balance remaining unspent?
Whether the amount is deducted from the contractors’ bill for the goods supplied at departmental issue rate?
Whether all rules and regulations are maintained during the period of store purchased?Whether store purchased for sinking tube well is entered in the stock register immediately after those are received?
Whether the qualities of the collected materials are certified by a technical committee or not?
Whether test report from authorized laboratory regarding quality of the materials has been ensured by the division?
Whether monthly return of store is submitted to competent authority?
Whether all the hand receipt of materials issued to the contractor are recorded and preserved?Whether yearly physical inventory of stores is done by a committee formed by divisional officer?
Whether stock verification committee is comprised of members
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Audit Steps Checked by W/Pinvolved in the management of stores, such as store keeper and stock supervisor?
Whether obsolete store is sold by an auction committee followed by a survey report and approved by the competent authority?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.4 Audit of Bangladesh Power Development Board
Key Risk: Inaccurate claim and collection of revenue Untoward tendency to evade revenue claims Imposition of relevant rules ignored
Audit objective:
To examine compliance of financial rules and regulations
Documents required:
Individual meter reading book Consumer file Monthly operation data Meter reading report Material Statement Contractor’s bill
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Issue voucher Return Voucher Stock ledger
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether electricity bills are prepared, issued and recovered as per provisions of tariff rule? Whether penal charges are imposed on bills when unauthorized utilization of electricity is discovered?
Whether Power Factor Correction (PFC) charge is imposed and recovered as per tariff rule?
Whether tariff rule has been applied in setting PFI plant?
Whether tariff rule is observed in disconnection or reconnection cases?
Whether the directives of Energy regulatory provisions are followed in case of new connection?
Whether material statement is prepared in cases when departmental materials are used or remain unutilized in new line construction, maintenance and repair?
Whether system losses remain within the targeted limit?Whether electricity is produced as per rental and quick rental agreements in those installations?
Whether penalty is imposed and recovered from the rental and quick rental plants for failure to comply with the contracted agreements?
Whether provisions of PPR-2008 and Delegation of Financial Rules are followed in preparation of Estimate, Tender, Tender Opening Committee, Technical Evaluation Committee, Note of Award, Contract, Work Order, Work Completion Report and Bills?
Conclusion:
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In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
Note: First 8 points in the above check lists are equally applicable for DPDC & DESCO
8.21.5 Audit of Bangladesh Water Development Board
Key risks:
Misuse of government fund through malafide practice Mis appropriation of government stores and material Violation of government rules and regulations
Audit objective:
To examine the appropriateness of the application of financial rules and regulations
Documents required:
CC block manufacturing and dumping register Counting committee report Variation order Revised estimate Estimate, tender, Tender Opening Committee, Tender evaluation committee,
Notification of order, work order, Bills, MB IT/VAT regulars
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether the work is done as per Project proposal? Whether PP and delegation of financial power is observed in offering tender?
Whether permission is given for work based on selected
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sample tests have been conducted on selected CC block or samples?
Whether geo test of soil and geo textiles tests are carried out is done before the work is done?
Whether approved design is followed in CC block and placing or laying or dumping geo bags?
Whether work in the same chain is duplicated?
Whether pp is approved by the competent authority?
Whether provisions of PPR-2008 and Delegation of Financial Rules are followed in preparation of Estimate, Tender, Tender Opening Committee, Technical Evaluation Committee, Note of Award, Contract, Work Order, Work Completion Report and Bills?
Conclusion:
In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
8.21.6 Audit of Rural Electrification Board
Key risks:
Misuse of fund Misappropriation of fund in case of procurement Violation of financial rules and regulations
Audit objective:
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To examine that rules and regulations are followed to ensure financial and technical discipline.
Documents required:
Consumer file Monthly operation data Meter reading report Material Statement Contractor’s bill Issue voucher Return Voucher Stock ledger
Audit programme: The following programme is a guide to assist the auditor in identifying and addressing the above risks,
Audit Steps Checked by W/PWhether the work is done as per Project proposal? Whether PP and delegation of financial power is observed in offering tender?
Whether permission is given for work based on selected sample tests have been conducted on selected CC block or samples?
Whether estimate prepared based on local and international market rate is analyzed and approved accordingly?
Whether received materials are tested by an authorized testing laboratory and recorded accordingly?
Whether materials are received by store officer on the basis of an inspection report from a qualified and approved inspecting team?
Whether material statement is prepared on receipt of materials returned by the contractor and recorded at issue rate in the inventory register?
Conclusion:
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In my opinion, subject to the observations in the working papers referred the instructions with regards to work expenditure are presented fairly/unfairly in the accounts, various control systems are in place/ not in place and overall management of the office is satisfactory/unsatisfactory.
Prepared by______________________ Date_____________Reviewed by_____________________ Date ____________
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CHAPTER 9
AUIDIT OF PUBLIC PROCUREMENT
9.1 Procurement Process
Procurement of Works/Goods (Determination of need for Procurement, Preparation of Specifications and Estimates and Preparation of Pre-Qualification/Tender Documents) is the main consideration here.
Risks, Audit Procedures and Assertions The auditor will use all or some of the questions mentioned below, depending on the time available for the audit and the nature of works/goods procured, taking into account the risks described at the top of each part of the questions, with a view to understanding whether and where the procurement activities and process in respect of procurement of works/goods during the period under audit were not compliant and consistent with PPA-2006 & PPR-2008 and were irregular.
(Note: Risks and irregularities as well as audit procedures cited below are only examples. The auditor may come across other types of risks depending on the specific type of procurement activities passed through by an individual entity or authority. Auditors may have to adopt and undertake additional audit procedures suitable and appropriate under a specific situation to establish risk and irregularities.)
Guidance on Sample Selection The majority of the questions in this Module are sample tests. Complete the steps in Part C if any of the sample items selected included pre-qualification stage in the procurement process, but if no pre-qualification cases were selected in the sample, draw a separate sample of pre-qualifications (the auditor will need to ask for a separate list of pre-qualification procurements in the period being audited).
Part A: Procurement Plan and Needs assessment
Some Possible Risks/ Irregularities
Audit Procedures
1. Works/Goods were not necessary at all or not required to the extent contracted, leading to inefficient stockpiling of inventory/ stock,
Ascertain whether works/goods procured or to be procured were necessary at all or in full or in part. Review stock to ascertain whether previous stock would remain unused for long time to turn these obsolete and whether new
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Some Possible Risks/ Irregularities
Audit Procedures
obsolescence and expiry of useful life (Regularity, Accuracy, Occurrence).
goods procured would become obsolete because of excess receipts (Regularity, Accuracy, and Occurrence).
2. Indent of Procurement completed much ahead of actual need, resulting in block of capital, wastage through long time stock, pilferage, stock management cost that could be avoided (Regularity, Accuracy).
Ascertain whether Works/Goods procured or to be procured were necessary for the period for which procurement was or would be made (Regularity, Accuracy)
3. Supply received but was installed only some months before expiry of warranty or even was not installed and commissioned before expiry of warranty (Regularity, Accuracy, Occurrence).
Ascertain whether equipment, goods were installed in time to match warranty period (Regularity, Accuracy, Occurrence).
4. Incorrect categorization of object of procurement as works or goods or services to enable a particular party to win the procurement award.
Review whether categorization of procurement as Works or Goods or Services was correct and proper.
Some relevant questions and guidelines are listed below:
1. Was the categorization of procurement as Works or Goods or Services was correct and proper as per provisions of PPR-2008?
Categorization is the primary and preliminary requirement in procurement process. Determination of method of procurement, selection of STDs (Standard Tender Documents)/ SRFPs (Standard Request for Proposal) etc. will quite depend on decision regarding whether the object of procurement will be Works or Goods or Services.
2.Was one kind of object (say Goods) categorized willingly or unintentionally as another category (say Works or services)?
3. Were the Total Procurement Procurement plan shall be prepared separately
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plan and Annual Procurement Plan, as applicable, prepared in an appropriate manner as per Public Procurement Rule-2008, 16?
for Goods, Works and Services in formats prescribed in Schedule 5 Parts –A to D and approved by Head of Procurement Entity (HOPE) or an officer authorized by HOPE.
A well prepared annual procurement plan will help an entity to initiate process of procurement and finish the deal on time, which in turn ensures timely completion of a project or an activity. An examination of implementation of the Annual Procurement Plan shall expose success or failure in procurement functions of an entity.
4. Was the requirement for procurement properly assessed?
The auditor will verify:
What procedures have been set to determine the need, in respect of both quality and quantity?What frequency or intervals have been set for replenishment of stocks?What is the due process for preparing, submitting a requisition and who would approve the requisition?Were the set procedures followed or skipped or twisted?Suggested documentation to request: List of major procurements; Copy of approved procedures; Relevant approval orders for ceilings;
Approval for requisition.
5. Was the requisition for procurement duly initiated and approved?
6. Were the changes in technology and operations based on an appropriate assessment?
7. Was the quantity for goods/works accurately scheduled and phased?
8. What are the ceilings for imprests and stores and are the procurement requirement assessed in consideration of that?
Were the set procedures followed or skipped or twisted?
Suggested documentation to request: List of major procurements; Copy of approved procedures; Relevant approval orders for ceilings;Approval for requisition.
Part B-Method of Procurement, Preparation of Specifications and Estimate
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Some Possible Risks / Irregularities
Audit Procedures
1 Inappropriate method used for procurement (Regularity, Accuracy).
Review the circumstances in consideration of which a specific method—particularly non-competitive methods—was selected for procurement to assess the justification for selection of the method (Regularity, Accuracy).
2 An inappropriate Method is used for procurements of value above or below the threshold prescribed in PPR 2008 (Regularity, Accuracy).
Ascertain whether selected method is correct as per threshold set in the schedule of PPR 2008 (Regularity, Accuracy).
3 Situations and circumstance not fit and proper to justify selection of a particular method of procurement; (Regularity, Accuracy).
Review the situation to understand the genuineness of justification for selection of a particular method. (Regularity, Accuracy).
4 Method of procurement used is different from that mentioned in the approved Annual Procurement Plan (Regularity, Accuracy).
Compare the method included in Annual Procurement Plan with that selected actually. (Regularity, Accuracy).
5 Biased and restrictive specification prepared to restrict competitiveness and facilitate some few selected parties to be able to participate only and become responsive (Regularity, accuracy and completeness).
Understand whether the specification was prepared following appropriate steps and process according to stipulations prescribed in PPR-2008 so as to facilitate wide completion where applicable (Regularity, accuracy and completeness).
6 Faulty or incorrect specification that may involve comparatively higher cost of procurement (Regularity, accuracy and completeness).
Ascertain the accuracy, compatibility, adequacy and completeness of specifications (Regularity, accuracy and completeness).
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Some Possible Risks / Irregularities
Audit Procedures
7 Faulty specification for which the object could never come into use.
8 Too high quality and powerful specifications prepared for equipment which will generate too many or much output to be consumed by the overall system of production or operations (Regularity, accuracy).
9 Purchase at higher price because only a few could participate in tender due to restrictive specifications (Regularity, accuracy and completeness).
Ascertain reasons and situations for which competition was limited. (Regularity, accuracy and completeness).
10 Higher estimate may be made that may result in selection of a tenderer at higher price (Regularity, accuracy and completeness).
Review the estimation process to understand compliance with PPR 2008 (Regularity, accuracy and completeness).
Some relevant questions and guidelines are listed below:
Questions Guiding Notes1. Did the procuring entity
select appropriate procurement method for procurement of goods and works according to procedures mentioned in Chapter Four of PPR?
Inconsistency, if any, between annual procurement plan and invitation of tender/proposal in respect of type of procurement must be verified by auditor.
2. Did the selected method ensure competition and transparency and were the reasons for selecting a
Auditors shall verify the reasons for selecting a method other than OTM and should arrive at their conclusion offering analysis and clarification regarding whether the reasons or justifications
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method other than OTM recorded in writing as per Rule 62(1) of PPR?
were appropriate, sufficient and consistent with that mentioned in PPR to justify selection of a method other than OTM.
Situations arising because of delay by an entity cannot be used to justify selection of Limited Tendering Method according to Rule 63(1-c). Auditors will review the reasons and circumstances in consideration of which (to be recorded by entity as per Rule 62(1)) the procuring entity selected some method of procurement other than OTM.
When Works/Goods of expected quality, standard and quantity cannot be procured following national procurement process, procuring entity shall follow international competition process per provisions in Rules 90, 83 and others.
3. Had national or international tender been done under appropriate method of procurement according to Sec 33 of the Act-2006?
4. Were the circumstances appropriate and sufficient enough to justify selection of Limited Tendering Method according to Rule 63(1) and 63(2) or Two-stage Method under Rule 65 or Request for Quotation Method under Rule 69 or Direct Procurement Method under Rule 76?
5. Were the process, procedures and stages mentioned in Schedule III of Part C followed for Limited Tendering Method, Part D for Two-Stage Tendering Method, Part E for Request for Quotation Method and Part F for Direct Procurement Method under Rule 62(2)?
6. Did the procuring entity consider all the issues under Rule 15(2) while determining the method of procurement for procurement of Goods?
7. Was the Request for Quotation Method used in an appropriate way?
According to Rule 69(3) approval from HOPE or authorized officer would be required if the method was not included in the Annual Procurement Plan for that said object of procurement. Procuring
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entity cannot use this method to either bypass more competitive methods or split large potential contracts into smaller ones solely to allow the use of this method.
8. Was the procurement method selected after approval from HOPE or authorized officer, where applicable?
Limited Tendering Method be used with the approval of HOPE or an officer authorized by HOPE per Rule 63(4).
9. Were the specifications particularly technical and particular conditions of contract restrictive and discriminatory to disallow or disturb wide participation and competition?
As per the PPR competition should be allowed.
10. Were the specifications prepared according to Rule 29?
i) According to sequence of activities shown in Schedule III of PPR specifications must be approved before preparation of cost estimates.
ii) This is a very pivotal issue. A biased or restrictive specification may be set to provide undue advantage to certain tenderer/ consultant, on the one hand and drive out others, on the other hand, turning their offers to become non-responsive. The net result will be procurement at non-competitive price and higher price.
11. Were the specification determined in violation of Rule 29(3) and (4)?
12. i) What are approved internal processes and committees set for determination of specifications and terms of reference for works/ goods?
ii) Has the approved process been followed to finalize specifications?
13. Did the procuring entity calculate the price-estimate accurately?
Procedures for preparation of estimate of value of a tender and level of authority fixed for approval of estimates do exist in an entity. Proper estimation is very crucial since this is used as a basis by Evaluation Committee to compare whether quoted price is reasonable and acceptable and this influences the decision of
14. Were the appropriate processes of estimation followed?
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Evaluation Committee in this respect under Rule 33(2-kA) subject to provision of Rule 33(3).15. Was the estimate approved
by competent authority per Rule-15(2-KHA)?
Auditor will check the discrepancy in estimate shown in Annual Procurement Plan in comparison to that approved under Rule -25(2-KHA).
16. Were all the items included for preparing estimate?
Collusion may occur at the time of billing to fix rate for items not included in the estimate/tender schedule.
17. Was there any frontloading while making the estimate?
Estimate will become faulty if excess weight is given for example in construction for completing initial or first stages of work
This is a crucial stage in procurement process. Manipulation may occur at this stage particularly in preparation of specifications to detar potential tenderers from participation or to become responsive.
Part C-Pre-qualification Procedure/Enlistment Process
Some Possible Risks / Irregularities Audit Procedures 1 Biased criteria and qualification
requirements etc set to drive away some potential Persons so as to limit and allow few favoured Persons/parties to participate in the next stage of procurement process (Regularity, accuracy and completeness).
Review the Process and Document to ascertain whether the process was discriminatory and restrictive (Regularity, accuracy and completeness).
2 Select an incompetent Applicant through faulty or biased evaluation and assessment of Applications (Regularity, accuracy).
Review the evaluation process (Regularity, accuracy).
3 Not maintaining List by types of procurements and not updating List of Enlistment every year (Regularity and occurrence).
Ascertain whether Enlistment List was updated according to PPR 2008 (Regularity and occurrence).
Some relevant questions and guidelines are listed below:
Questions Guiding Notes18. Was the pre-qualification
process admissible under Rule 91?
Procuring entity may undertake Pre-Qualification for large and complex procurement valued, for example, above Tk. 35 crore for construction Works, above Tk. 35 crore for Management contract, above Tk. 15 crores for Supply and
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Questions Guiding Notesinstallation of plant and equipment subject to the approval of HOPE per Rule 91(1).
19. Were pre-qualification documents prepared following Rule 48, 49 and 51?
Mandatory requirements for qualification must be clearly spelled out in Tender Documents. Procuring entity must include in Tender Documents the information and particulars of evidence that an Applicant must submit along with Application to demonstrate professional and technical capacity, legal capacity and financial capacity to complete the work or supply or services.
20. Were the steps taken appropriate and timely under Rule 91?
Applicants be allowed minimum 21 days to prepare Applications per Rule 91(4). Pre-Qualification Documents must remain ready by the date advertisement is published. Documents be prepared using STDs like PQG issued by CPTU per Rule 91(13).
21. Were the experiences and financial capability of sub-contractor added to those of the Applicant?
The general experience and financial capability of sub-contractor shall not be added to those of Applicant per Rule 93(7).
22. Was the evaluation of Applications for Pre-Qualification conducted in appropriate manner per Rule 93?
Applications for prequalification be evaluated on pass or fail basis and all Applicants who passed the Qualification requirements shall be included in the list. Changes in structure or formation of an Applicant may be admissible subject to conditions under Rule 93.
23. Was appropriate Standard Pre-Qualification Document (SPD) used for inviting Applications for Pre-qualification under Rule 91(13)?
Standard Documents for Pre-qualifications(SPD) are PQG for Goods and related Services, PQW-4 and PQW-6 for Works and physical services respectively mentioned in Schedule- I.
24. Were the Lists of Qualified Potential Suppliers or Contractors prepared and maintained following Rule
i) Lists be prepared by an Enlistment Committee consisting of three members one of whom must be from outside the procuring Entity (Rule 52(3));
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Questions Guiding Notes52? ii) Lists be approved by HOPE or an officer
authorized by HOPE.iii) Lists be maintained by types of supply or works
and updated every year to add new persons or upgrade or downgrade persons.
Part D- Preparation of Tender Documents
Some Possible Risks / Irregularities Audit Procedures 1 Tender documents particularly
specifications and special conditions may be biased and restrictive, incomplete, ambiguous, and self-contradictory (Regularity, accuracy and completeness).
Review the Process and Document to ascertain whether the process was discriminatory and restrictive. (Regularity, accuracy and completeness).
2 Tender documents may not be approved at appropriate level; (Regularity).
Ascertain whether Documents were approved at appropriate level (Regularity).
3 Not following sequence of steps mentioned in Parts KHA, GHA, GGHA, GGHAGGHA, UMA, CHA, CCHS, GHA GGHA and NIHA of Schedule 3; (Regularity, accuracy and completeness).
Review the steps followed (Regularity, accuracy and completeness).
4 Appropriate STDs may not be used for preparation of Documents (Regularity, accuracy and completeness).
Review the sequence, contents, criteria etc per STDs (Regularity, accuracy and completeness).
Some relevant questions and guidelines are listed below:
25. Was the value of services included in a tender for Goods or Works covered by threshold prescribed in PPR?
Rules 2 (27), (59) set value-ceiling for inclusion of services in tender for works and goods.
26. Was provision for retention money appropriate per Rule 28?
Retention money will be deducted from contractor’s bill until completion of the Works or delivery @ 10% in case of procurement valued up to two crores under OTM. No retention money is
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necessary if no advance has been paid and Performance Guarantee @ 10 % has been obtained.
27. Was domestic preference allowed according to Section 33 and Rule 83?
Domestic preference may be allowed up to maximum 15% of delivered price for Goods and maximum 7.5% of contract price for Works subject to conditions that tenderers and suppliers must fulfill the requirements prescribed in Rule 83 to get domestic preference and Guidance Notes and Instructions on Domestic Preference shall be included in STDs for international competitive Tendering.
28. Were the documents comprehensive, non-restrictive, non-discriminatory and transparent?
Procuring entities must prepare tender documents in a way that would include instructions and particulars in respect of matters mentioned in Rule 4 to deliver clear message and information so as to enable correct preparation of a tender or proposal. Applications/Tender Documents must be non-restrictive and non-discriminatory except under circumstances mentioned in Rule 47. This is essential to receive sufficient number of responsive tenders as well as to ensure transparency enough to deter necessity of too many clarifications after issue of tender documents. An incomplete and ambiguous tender document may create scope for corrupt, fraudulent, collusive practices which are punishable under Section 64 of the Act.
29. Were the documents prepared using appropriate STDs?
30. Was the tender document revised after publication of tender notice to give undue favour to any party?
Sometimes tender documents may be revised to allow and suit the purpose of a particular Applicant/Tenderer/ Supplier or even to limit the scope of completion.
31. Were the procedures and process set in Rule 61 and Schedule III Part B followed in Open Tender Method?
The documents must be based on STDs and SRFPs mentioned in Rule 4(1) with necessary adjustments to change or include provisions to enable procurement of an object.
32. Were the bidding documents for re-tender reconstructed
Before inviting new Tenders, Quotations or Proposals after rejection of all Tenders, Quotations
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and finalized with due care according to Rule 34?
or Proposals Procuring entity shall reassess the official estimate or budget or both and consider revising the Conditions of Contract, design and specifications or scope of Contract or a combination of some or all these factors .
33. Were the Application/ Pre-Qualification/Enlistment/ Tender/ Request for Quotation Documents prepared and approved by competent authority?
Appropriate expertise is needed to ensure that such documents are drafted properly.
34. Were the appropriate Standard Tender Documents (STDs) /Standard Document for Request for Quotation (SRFQ) etc used while preparing bidding documents?
Pre-Qualifications, Tender Documents shall be prepared by Procuring Entities per Rule 4 following STDs like PG1 (SRFQ), PQG, PG (STD), PW5 (STD), etc. issued by CPTU, IMED.
35. Were the necessary documents and supporting papers asked to be submitted to establish eligibility of persons in respect of professional, technical and financial capacity per Rule 49(1)?
36. Were the criteria to be taken into account for assessment of qualification and eligibility of Applicant, Tenderer clearly mentioned in relevant Documents?
Procuring entity cannot use any criteria other than that mentioned in Documents while assessing the eligibility of the Person.
This part is critical since restrictive or biased tender document may be prepared to enable some Person to become qualified, responsive and to turn others disqualified and non-responsive.
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9.2 Procurement Process –Works/Goods
Interpretive notes related to Determination of need for Procurement, Preparation of Specifications and Estimates and preparation of Pre-Qualification / Tender Documents are given below:
Questions Notes
Part A: Procurement Plan and Need assessment (Questions 1 – 8 )
Q.1–Q.8 are aimed to establish the process of determination of procurement need and find out the errors and irregularities in this process.
Excess requirements placed by users in excess of actual need or over procurements in excess of requisition by procuring staff would result in piling of stocks becoming obsolete or unusable or even unable to be used within warranty period. It may happen that procurements, particularly goods procurement have not been properly phased in relation to completion of construction. If Goods like equipment for hospitals or education institutions are procured much ahead of completion of building, goods may remain uncared due to lack of space and become damaged or may not be commissioned and operationalised within warranty period even. This usually happens when a procuring officer desires to finish purchases for malafide intentions within the posting tenure and before transfer to other places.
Auditors may verify inventory to ascertain whether abnormal stocks remain unused for a long time. Sometimes one procuring entity may procure objects in so large number and quantities with malafide intention that cannot be utilized and consumed in 20 years - by that time the objects may become obsolete and unusable because of either change of technology or change of curricula or need of the users or the need was over-assessed, as the case may be. Such huge procurement happens when procuring officials establish liaison with contractor or supplier and derives benefits from over-supply or over-work from suppliers and contractors. It
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Questions Notes
happened in one organization that priced-books were printed in so large numbers out of own fund that it would take 20 years to consume books by students by which time the curricula will change and lots of money and space would remain blocked for many years.
Equipment etc procured for hospitals, schools and offices well ahead before completion of construction of buildings sometimes to avoid lapse of budget or spend money before transfer of incumbent procuring officer. Equipment may sometimes be not procured in time for which completed facilities remain unutilized for long time. This may happen sometimes because of lack or coordination between Engineering Department and user/ Goods procuring entity or lack of efficiency of procuring entity.
Part B- Method of procurement, Preparation of specifications and estimate and formation of TOC/TEC(Questions 9-25)
Q.9 - Q.25 This part is very important. Because vested interests will try to influence the process at this stage to manipulate specification so as to derive comparative advantage in both technical and financial offer over other potential competitors. This part is designed to lead auditors to review the process and mechanism followed to establish specifications to be included in a Document issued to Applicants, Tenders, and Suppliers. Examination of process, justification and papers referred in questions at this stage would help find out whether incorrect, over-sufficient, biased or restrictive at length resulting in inefficient, costly and supply-driven procurement.
Sometimes supply-driven specifications of some equipment may be prepared to fulfill the interest of suppliers in which case either the equipment will not serve the purpose or the equipment is so large or powerful that the outputs will be too many to be consumed by the overall system of procurement. In that case the equipment remains underutilized. Auditor shall review whether any large–value equipment remain
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Questions Notes
underutilized for determining an over-specification.
Q.7- Q. 10 are aimed to understand the situations considered, steps, sequence, process and procedures followed by procuring entities for selection of methods of procurement and for preparation of Documents. These questions will guide auditors to locate loopholes, non-compliance, irregularities taking place and committed during the process and to assess genuineness of situations considered by entities for selection of a particular method of procurement.The procuring entity shall take into account various matters e.g. urgency of procurement, capacity of local supplier, market conditions etc and shall choose particular method of procurement on the basis of proper analysis of the relevant matters. Usually a procuring entity shall use OTM for procurement. If however analysis of points referred in Rule 15(2) suggests a method other than OTM as a suitable option, procuring entity may select the particular method. Result of analysis must be recorded per Rule 62(1) to substantiate justification for not opting for OTM. For example analysis of local market condition will demonstrate the capacity of local market and industry to meet the requirement of procuring entity and will serve as a basis for choosing national or international competition. If, for example, analysis suggests that particular goods are required without delay, the best option for a procuring entity will not be OTM, rather LTM or DPM, as the case may be.
Q.8, Q.9 and Q.10 will enable auditors to understand and analyze circumstances and conclude whether selected method of procurement was covered by relevant Rules, whether the particular method was opted to avoid competition or to favor some vested quarter/tenderer /supplier to win the tender.
While reviewing the process and reasons under which a
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Questions Notes
specific method of procurement was selected, it may appear to the auditor that an inappropriate method was selected by a procuring entity because of incorrect or incomplete assessment of situations. Or it might be that reasoning were framed having malafide intention in mind to avoid competition and provide benefit to certain quarter through LTM or DMP.
Q.13 Stages mentioned in Schedule III have been designed so that procuring entity makes correct assessment of market situations, survey of agencies eligible and competent to execute works/supply/ services needed. The stages if followed properly may help avoid selection of a method other than OTM. Examination of steps taken by procuring entity may reveal that an inappropriate method was selected as a result of not following required stages in sequence and that resulted limited competition and non-competitive price.
Q. 15 Procurements may be made through RFQM for Works valued up to Tk. 10 lacs under Development Budget per Rule 69(1) and 69(6) subject to a maximum of Tk. 40 lacs in a year. Procurements may be made through RFQM for Works valued upto Tk. 5 lacs under Revenue Budget per Rule 69(1) and 69(6) subject to a maximum of Tk. 20 lacs in a year. Value of procurement of Goods needs to be limited up to threshold prescribed similarly for procurement of Goods
Q. 21 and Q. 22 Price estimate may be fixed high in collusion with tenderers and procurements may be made at high rates in comparison to existing market rates. Different entities like Public Works Department (PWD), Roads & Highways Department (R&H), Local Government Engineering Department (LGED), RAJUK, City Corporations etc prepare individually and separately estimate for similar items e.g. items for construction of building, earth filling etc. Auditor may cross check both
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Questions Notes
estimates and order-price of same or similar items of different procuring entities to draw a comparison and form a conclusion.
Part C- Pre-qualification Procedure/Enlistment Process(Questions 26-32)
Q.26 - Q.32 will guide auditor to understand the procedures of Pre-Qualification and Enlistment and establish the compliance firstly with provisions of PPR with that included in Documents issued to Applicants and secondly with the process of evaluation set in Documents with that followed actually during evaluation.
Q. 28 Applicants should be allowed a minimum of 21 days to prepare Applications per Rule 91(4). Pre-Qualification Documents must remain ready by the date advertisement is published. Total Procurement Plan/Annual Procurement Plan involving procurement valued Tk. one crore or above for works and goods, Tk. fifty lacs or above for physical services and intellectual and professional services be published in CPTU website under Rule 16(11).
Q 30 TEC shall use only the conditions, criteria and requirements included and set in Pre-Qualification Document to evaluate the qualification of Applicants per Rule 93. TEC cannot use a criteria or condition etc not defined or kept in document for evaluation. Usually some members of TEC try to introduce a new criteria etc during evaluation process with malicious intentions to either qualify or disqualify an application—in the former case to favor an Applicant and in the latter case to drive away a potential applicant from the competition process having aim to help another particular applicant gain a contract at length.
A minimum 3 applicants need to become qualified per Rule 93(9) and if the minimum number is not available, the procuring entity may, per Rule 93(11) , after thorough review of Pre-Qualification Document and introducing necessary amendments, re-advertise per Rule 90 with the approval of the Head of Procuring Entity (HOPE).Applications for Pre-Qualification be invited following format
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Questions Notes
and descriptions shown in Part –(2) and (4) of Schedule 10.
Part D - Preparation of tender documents (Questions 33-44)
Q. 42 Documents must be prepared following relevant standard documents as shown in Schedule I under Rule 4(1) and should include information and particulars mentioned in Rule 4 (2). Unless documents are clear, comprehensive and non-restrictive, so many clarifications will be needed after the issue of documents and some or all tenders/proposals etc may be submitted incomplete and inconsistent for which they would turn out to be non-responsive. As a result either retendering will be necessary or only few tenders/ proposals may become responsive leading to acceptance of a higher price of procurement out of the few responsive competitors. Auditors should carefully check this part of the tender process to conclude whether :
i) documents were prepared appropriately to get best price offer from wide competition ;
ii) procuring entity has prepared documents in a faulty or restrictive way :
a) to discourage or debar potential persons to participate;
b) to create scope for manipulation during evaluation ;
c) to avoid appropriate test, standard etc to be used to ensure quality performance from contractors/suppliers as per Rule 4(4); and / or
d) to allow contractor/supplier/consultant to take undue advantage in quality , quantity and billing during execution of contact .
Q. 44 The procuring entity must clearly mention the criteria per Rule 18(2) so that potential bidders/suppliers etc are well aware and able to assess their stand, status and eligibility and submit necessary papers and information along with the application, tender to become responsive. Introduction of any new or additional criteria at evaluation
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stage or approval stage or at any stage after opening of application or tender, not mentioned in documents, will be a clear violation of Rule 18(2), unfair and unacceptable. This kind of new introduction, if done, is malicious and aimed at either turning some Person non-responsive or turning someone responsive with ultimate intention to favour some particular party.
Note: Procurement threshold may be changed by the Government from time to time. Auditors are required to use relevant threshold while auditing.
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CHAPTER 10
REPORTING
10.1 INTRODUCTION
Audit depends for its effective value in its right and duty to report results to the proper authority so that appropriate action may be taken to rectify the irregularity or impropriety, where possible, or to prevent a recurrence of it. This authority may be a departmental authority, Government itself, or in the last resort, Parliament through the Public Accounts Committee.
It is in the treatment of results of audit that the auditorial function demands the highest qualities of understanding, balanced judgment and sense of proportion; and it is to enable auditors to deal with results adequately that the auditor has been accorded a high degree of independence and responsibility. An auditor must develop an instinct for assessing the importance of an individual irregularity.
The auditor must keep before him his primary functions of securing the substantial correctness of accounts, and the regularity and propriety of individual financial transactions. He must decide, therefore, when the detailed audit of accounts and transactions has been completed and all deviations of rules and orders noticed whether to demand regularization or correction in an individual case, or whether to be satisfied with prevention of the error or irregularity for the future. As a general rule, undue insistence on trifling errors and technical irregularities should be avoided, and more time and attention devoted to the investigation of really important and substantial irregularities with the object not only of securing rectification of the particular irregularity but also of ensuring regularity and propriety in similar cases for the future. At the same time failure to appreciate the significance of what appears to be a trifling irregularity may lead to failure to discover an important fraud or defalcation. Again, notice may be taken of the cumulative effect of numerous petty errors or irregularities as indicating carelessness and inefficiency in the maintenance of accounts or in financial administration generally.
Further guidance on forming conclusions may be found in:
ISSAI 1700 Forming an Opinion and Reporting on Financial Statements INTOSAI’s Implementation Guidelines for Performance Auditing Section 4.5 IFAC’s ISAE 3000
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10.2 REPORTING
Reporting is an essential part of a public sector audit and involves reporting deviations and violations so that corrective actions may be taken, and so that those accountable may be held responsible for their actions. To this end, the Fundamental Auditing Principles state that a written report, setting out findings in an appropriate form, should be prepared at the end of each audit (ISSAI 400, 4.0.7a).
The principles of completeness, objectivity and timeliness are important in reporting on compliance audits. Public sector auditors should take care to ensure that reports presented are factually correct, and that findings are presented in the proper perspective and in a balanced manner. This involves applying the principle of contradiction which involves checking facts with the audited entity and incorporating responses from responsible officials as appropriate.
Form and Content of Compliance Audit Reports
The form of the written report may vary depending on the circumstances. However, some consistency in the auditor's report may help users of the report to understand the audit work done and conclusions reached, and to identify unusual circumstances when they arise.
The factors that may influence the form of the compliance audit report are numerous. These factors include, but are not limited to, the mandate of the SAI, applicable legislation or regulation, the objective of the particular compliance audit, customary reporting practice and the complexity of the reported issues. Furthermore, the form of the report may depend on the needs of the intended users, including whether the report is to be submitted to the legislature or to other third parties such as donor organizations, international or regional bodies, or financial institutions.
Depending on the abovementioned factors, a SAI may find it appropriate to prepare either a short form report or a long form report. Long form reports (sometimes referred to as 'compliance audit special reports') generally describe in detail the audit findings and conclusions, including potential consequences and constructive recommendations, while short form reports are more condensed and generally in a more standardized format.
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Compliance Audit Reports
In general, the compliance audit report itself includes the following elements (although not necessarily in the following order):
Statement of the Comptroller and Auditor general Statement of the Director General Title Addressee Objectives and scope of the audit, including the time period
covered Identification or description of the subject matter information (and
where appropriate, the subject matter) Individual and observation Identified criteria Responsibilities of the various parties (legal basis) Identification of the auditing standards applied in performing the
work A summary of the work performed A conclusion Responses from the audited entity (as appropriate) Recommendations (as appropriate) Report date Signature
Compliance Audit Special Reports (long form reports)
Depending on the needs of users, and the particular objective of the compliance audit, a SAI may decide to report the results of a compliance audit in a compliance audit special report. Such special reports are more akin to those reports common in performance audits and set out in greater detail the observations, conclusions and recommendations arising from the audit than the short form reports envisaged in the preceding section. In some cases, this type of report may be in addition to a compliance audit short form report.
As with compliance audit reports, some consistency in the form of compliance audit special reports may help users of the report to
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understand the audit work done and conclusions reached, and to identify unusual circumstances when they arise.
In general, compliance audit special reports include all of the elements set out in the guidance on compliance audit reports, but are normally structured into the following sections (the order of which may vary):
a) Title pageb) Table of contentsc) Statement of the Comptroller and Auditor general d) Statement of the Director Generale) Glossary (if necessary)f) Executive summaryg) Introduction, objectives and scopeh) Observations and findingsi) Conclusions and recommendationsj) Responses from the audited entityk) Appendices (if necessary)
Title page, table of contents and glossary
The title page clearly sets out the title of the report, the report date, to whom the report is addressed and the preparer of the report.
Including a table of contents, especially if the report is voluminous, helps give the report structure and guide the reader to areas of particular interest.
A glossary may also be helpful to readers if technical or unfamiliar terminology, acronyms, abbreviations or words with a particular contextual meaning are used repeatedly throughout the report.
Executive Summary
The executive summary is critical as it is often the part of the report most read by users. The executive summary should reflect fully and accurately, while at the same time in a concise and balanced fashion, the content of the report. To be effective, an executive summary is normally one to two pages in length.
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The main focus of the executive summary is on the identified criteria (significant questions to be answered) and a summary of the main audit conclusions and recommendations in relation to such criteria (answers/ findings to the questions).
In some cases, a chart or diagram may display significant audit conclusions in a form that makes it easier for users to grasp complicated or voluminous information. In such cases it may be helpful to users to include graphical information in the executive summary.
Introduction, objectives and scope
The introduction sets out the context of the audit including the objectives and scope of the audit, identification or description of the subject matter or subject matter information, the identified criteria, the responsibilities of the various parties involved and the auditing standards applied in performing the work.
The introduction is generally short without a lot of detail. If necessary, relevant detailed information may be included in appendices.
Observations and findings
The observations and findings section comprises the main body of the compliance audit report. This section describes the audit work performed and related findings. It is structured in a logical manner, normally around the identified criteria, and in a way that assists the reader in following the logical flow of a particular argument.
When presenting audit observations and findings, making the following four elements apparent to users assists them in gaining a better understanding of the audit work performed and the significance and consequences of the audit findings:
Criteria – the benchmark or measure against which any activity, deviation or performance is compared or evaluated
Conditions – the situation observed
Cause – the source and reasons giving rise to the conditions observed
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Effect – the impact and consequences of the conditions observed (the materiality of the findings, their impact on the budget, citizens or users, implications for principles of sound public sector management, etc).
When significant amounts of data are included to support audit findings, such data may be more appropriately included in appendices.
Conclusions and recommendations
The primary purpose of the conclusions and recommendations section of the report is two-fold: a) to provide clear answers (conclusions) to the audit questions (identified criteria), and b) to provide constructive and practical recommendations for improvement where appropriate.
Recommendations are most effective when they are positive in tone and results oriented, setting out clearly what needs to be done, when and by whom. Cost considerations are borne in mind when determining the practicality of recommendations.
Where significant compliance deviations are reported, recommendations are provided in cases where there is potential for significant improvement. It may be helpful to users for public sector auditors to highlight ongoing corrective actions.
While constructive and practical recommendations assist in promoting sound public sector management, public sector auditors are careful not to provide such detailed recommendations so as to be taking on the role of management and thereby impairing their own objectivity.
Responses from the audited entity
As set out in the guidance above on compliance audit reports, the principle of contradiction – agreeing facts and incorporating responses -is also applied in preparing compliance audit reports. Responses from the audited entity to matters raised may be incorporated in the report, either verbatim or in summary.
Responses from the audited entity may be included in a separate section of the special report or as an appendix, depending on the volume of the responses.
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Incorporating the views of responsible officials assists in ensuring the practicality of the recommendations and in making the responsible officials accountable for their actions.
Appendices
Where appropriate, appendices may be used to provide users with detailed or supplementary information related to the audit. The information may be in text or table format, or it may be more graphical in nature such as diagrams, charts or pictures. Such information may assist users in understanding the audit findings, as well as the causes and effects thereof.
Further guidance on reporting may be found in:
ISSAI 1700: Forming an Opinion and Reporting on Financial Statements, ISSAI 1705: Modifications to the Opinion in the Independent Auditor’s Report ISSAI 1706: Emphasis of Matter Paragraphs and Other Matter Paragraphs in the
Independent Auditor’s Report INTOSAI's Implementation Guidelines for Performance Auditing Part 5 IFAC's ISAE 3000 and International Standard on Review Engagements 2400
10.3 AUDIT OPINIONS
Conclusions/opinions for compliance audits (ISSAI 4100/4200):In forming conclusions and opinions, the auditor considers the level of assurance provided:
Reasonable assurance: Here the audit conclusion/opinion is expressed positively, conveying that, in the auditor's opinion, the subject matter is or is not compliant in all material respects, or, where relevant, that the subject matter information provides a true and fair view, in accordance with the applicable criteria.
When expressed in terms of the underlying subject matter and the applicable criteria, "in our opinion, the entity has complied, in all material respects, with criteria";
When expressed in terms of the subject matter information and the applicable criteria, “In our Opinion, the forecast of the entity’s activity is properly prepared, in all material respects, based on criteria";
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Limited assurance:
The audit opinion/conclusion states that based on the procedures performed, nothing has come to the auditor’s attention to cause the auditor to believe that the subject matter is not in compliance with the applicable criteria. A limited assurance report conveys the limited nature of the assurance provided.
• When expressed in terms of the underlying subject matter and the applicable criteria, “Based on the procedures performed and evidence obtained, nothing has come to our attention that causes us to believe that [the entity] has not complied, in all material respects, with criteria.”
• When expressed in terms of the subject matter information and the applicable criteria “Based on the procedures performed and evidence obtained, auditors are not aware of any material amendments that need to be made to the assessment of key performance indicators for them in accordance with criteria.”(ISSAI 1705).
Nature of matter giving rise tothe qualification
Auditor’s judgement about the pervasiveness of the effects or possible effects on compliance
Material butnot pervasive
Material and pervasive
Material failure to complyQualified opinion –
except for disagreement
Adverse opinion
Inability to obtain sufficientappropriate audit evidence
Qualified opinion – except for
limitation of scopeDisclaimer of opinion
EXAMPLE OF A ‘SHORT FORM' COMPLIANCE AUDIT REPORT
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The following short form report example is for illustrative purposes only. Some SAIs may use a long form report where findings are described in more detail in the body of the report.
Compliance Audit Report by the SAI of XPQQ
[Appropriate Addressee, e. g Donor Organization XYZ] Report on [Government Agency ABC’s Compliance with the Terms of the Funding Agreement with Donor Organization XYZ dated xx.xx.20XX]
We have audited [government agency ABC‘s compliance with the terms of the funding agreement with donor organization XYZ dated xx.xx.20XX as set out the project accounts for the year ended 3l l2.2OXX showing total expenditures of xxxxxx.xx].
Management’s Responsibility
According to [the terms of the funding agreement with donor organization XYZ dated xx.xx.2OXX], management of government agency ABC is responsible for [preparing complete project accounts in compliance with the terms of the funding agreement].
Auditor’s Responsibility
Auditor’s responsibility is to independently express a conclusion on [the project accounts] based on audit. The work was conducted in accordance with the [INTOSAI Fundamental Auditing Principles and Guidelines for Compliance Audit].
Those principles require that Auditors comply with ethical requirements and plan and perform the audit so as to obtain reasonable assurance as to whether [the use of the project funds are in compliance, in all material respects, with the terms of the funding agreement dated xx.xx.20XX].An audit involves performing procedures to obtain sufficient appropriate evidence to support our conclusion. The procedures performed depend on the auditor's professional judgement, including assessing the risk of material non-compliance, whether due to fraud or error. Auditor believes that the audit procedures performed are appropriate in the circumstances and that the audit evidence gathered is sufficient and appropriate to provide the basis for conclusion.
ConclusionBased on the audit work performed, Audit found that [government agency ABC's use of project funds received from donor organization XYZ] is in compliance, in all material respects, with [the terms of the funding agreement dated xx.xx.20XX].
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[Responses from the audited entity as appropriate, for example in summary under a heading 'Responses from the Audited Entity,‘ or as an appendix] [Recommendations as appropriate, for example under a heading 'Recommendations' or as an appendix]
[Date of auditor's report][Auditor's signature]
10.4 OBSERVATIONS: CAUSE, EFFECT AND RECOMMENDATIONS
All observations and objections must be conveyed in courteous and impersonal terms, and must be legible and intelligible. It is of the utmost importance that any statement of criticism or of irregularity in an audit report should be accurate, fair, moderately worded and dispassionate. Suggestion is forbidden: if a charge cannot be substantiated, there should not be even any hint of it.
Objections and observations in relation to any accounts or transactions subjected to audit should be communicated to the disbursing and where necessary to the controlling authorities at the earliest opportunity. It is important that before they are communicated objectives should, unless, otherwise provided in any case, be registered in detail in the prescribed records
The responsibility for the removal of objections, and the settlement of other points raised in audit devolves primarily upon disbursing officers, heads of offices and controlling authorities. An intelligent, prompt and vigorous pursuance of objections and early report of any important irregularity to Government are essential so that the Audit Report required to be submitted by the Director General, Audit may have their full value.
If Government so desires, abstracts of outstanding objections should be prepared in such form and submitted to it, or to any other authority specified by it, on such dates as may be settled by Director-General, Audit in consultation with OCAG. These abstracts may be accompanied when so required by Government
While it is the duty of Audit to call attention to any disbursement which it considers to be improper, it is the function of the Executive authorities to order recovery of the amount, to confirm the disbursement or to forego the recovery of the sums improperly disbursed.
Director-General of Audit directorate should, as soon as the facts come to his notice, direct the recovery of sums in respect of which there is no doubt that they have been
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improperly disbursed; this power of directing recovery though not inherent in the auditorial function is accorded by convention to authorities of the Bangladesh Audit Department in virtue of their dual accounting and audit capacity. If, in any case, the Director-General, Audit is doubtful of the propriety of any expenditure, he should at once take steps to resolve the doubt by reference to the Executive authorities or to the Auditor-General, as the circumstances of the case may require. If, in any case, an executive authority desires to forego recovery of an amount the recovery of which has been directed by Audit, it may be required to furnish the requisite sanction.
When an amount is outstanding for recovery against a Government servant and money is also due to him by Government, but has remained undrawn for a considerable period owing to the death or resignation of the Government servant or any similar cause, the Audit Officer may adjust the amount due by the Government servant against the amount due to him by Government, and thus clear the objection. A bill from the head of the office should be called for in the case of Government servants who do not prepare their own bills and note of payment and adjustment should be made in the relevant records.
10.5 FOLLOW UP
The Fundamental Auditing Principles place emphasis on the reporting of constructive recommendations and additional follow-up as necessary in regard to correction of identified weaknesses (ISSAI 400, 4.0.26). The need for any follow-up of previously reported instances of non-compliance will vary with the nature of the non-compliance and the particular circumstances. This may include formal reporting by the auditor to the legislature, as well as to the audited entity or other appropriate bodies. Other follow-up processes may include reports, internal reviews and evaluations prepared by the audited entity or others, a follow-up audit, conferences and seminars held for, or by, the audited entity, etc. In general, a follow-up process facilitates the effective implementation of corrective actions and provides useful feedback to the audited entity and to the users of the report and to public sector auditors in planning future audits.
For further guidance following guideline may be consulted:
INTOSAI's Implementation Guidelines for Performance Auditing Part 5.5
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ANNEXTURES
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ANNEXTURE -A
EXAMPLE OF ENGAGEMENT LETTER
Government of the People’s Republic of BangladeshWorks Audit Directorate
Segunbagicha, Dhaka-1000
No:-R-7/Compliance/Audit/2013-2014/399 / Date: /xx/20xx
ToThe SecretaryMinistry of ……………..Bangladesh Secretariat, Dhaka-1000.
Subject: Letter of Understanding regarding the Compliance Audit of the X X …….
Reference: OCAG’s Office Order No- CAG/ Audit/ SPEMP-B Project/ Date: /xx/20xx
1.1 The purpose of this letter is to set out the basis on which the Comptroller and Auditor General (C&AG) of Bangladesh will conduct audit on the XX Authority’s compliance with laws and regulations in the areas of construction and maintenance, revenue collection and purchasing by the Central Engineering, Maintenance and Store Unit for the financial year 20xx-xx. This engagement will be conducted with the sole objective of expressing an opinion on the x’s compliance with the Ordinance and other relevant legislation, rules and regulations and government Orders as issued from time to time.
1.2 The terms of the audit engagement are set out below. This letter will remain effective until a new letter of understanding is issued for this audit.
The Secretary of the X Ministry, as the Principal Accounting Officer (PAO) of the Ministry will act as a facilitator to provide all sorts of support for timely conduct of the audit.
2. SCOPE OF THE AUDIT.
2.1 This compliance audit will be conducted in accordance with the International Standards for Supreme Audit Institutions (ISSAIs) along with relevant Govt. Audit standards, Audit Code, Audit manual etc and will cover construction & maintenance, revenue collection
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and purchasing by the Central Engineering, Maintenance & Store Unit of the X Authority for the financial year 20xx-20xx.
3. RESPONSIBILITIES OF AUDITORS.
3.1 The Director General of Works audit directorate audits on construction & maintenance, revenue collection and purchasing by the Central Engineering, Maintenance & Store Unit of the Authority on behalf of CAG under Article 128(1) of the constitution of the Peoples Republic of Bangladesh which states that the Public accounts of the Republic and all Courts of Law and all authorities and officers of the Government shall be audited and reported on by the Auditor General and for that purpose he or any person authorised by him in that behalf shall have access to all records, books, vouchers, documents, cash, stamps, securities, stores or other government property in the possession of any person in the Service of the Republic.
3.2 Also, the Comptroller and Auditor General (Additional Functions) Act-1974 empowers the C&AG to audit the expenditure of Statutory public authorities, public enterprises and local authorities.
4. AUDIT CRITERIA
4.1 The representatives of the C&AG while conducting an audit on construction & maintenance, revenue collection and purchase by central engineering, maintenance & store unit of the XX will be guided by the provisions of XX (with amendment) and all other relating rules, regulations, orders, circulars, guidelines, PPA & PPR and policies. In the absence of any suitable criteria for any particular audit the representatives will discuss with XX Authority to reach agreement on criteria. In addition the representatives may also use available best practices, standards while conducting the audit.
5. And jurisdiction will cover the following areas namely
a. Construction and Maintenance b. Revenue collection c. Purchase by Central Engineering, Maintenance and Store Unit
6. AUDIT OBJECTIVES
6.1 In carrying out of this audit, we are required to consider the following matters, which the representatives of C&AG will report on if he is not satisfied:
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• whether the X Authority is materially complaint with the legislation and regulations, orders, circulars, guidelines, PPA & PPR, polices relating to construction & maintenance, revenue collection and purchase by central engineering, maintenance & store unit of X Authority (as detailed in section 4.1);
• Whether proper evidence for construction & maintenance, revenue collection and purchase by central engineering, maintenance & store unit activities have been kept by the X Authority and proper Expenditure adequately maintained.
7. THE AUDIT PROCESS
7.1 The audit will be conducted in accordance with the International Standards of Supreme Audit Institution (ISSAIs) along with relevant Govt. Audit standards, Audit Code, Audit manual etc. These Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance over whether XX Authority complies with relevant laws and regulations.
7.2 We shall obtain an understanding of the XX Authority internal control system to ensure compliance with regulations and to assess their adequacy and to establish whether proper records of construction & maintenance, revenue collection and purchase by central engineering, maintenance & store unit of the Authority and other activities have been maintained by the authority. In general, we will evaluate the design and implementation of controls we consider appropriate. Where we are placing reliance on any of the controls, we will test the effective operation of these controls.
8. LIMITATION OF COMPLIANCE AUDIT
8.1 We will plan our audit so that we have a reasonable expectation of detecting material regulatory non-compliance with laws or regulations in the system for collecting Revenue, civil works and other activities (including non-compliance resulting from fraud or error). However, due to the test nature of our audit and other inherent limitations of a compliance audit there is an unavoidable risk that some non-compliance with regulations may remain undiscovered.
8.2 Our work on internal control will not be sufficient to enable us to express any assurance on whether or not the Authority internal control systems are effective.
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9. RELIANCE OF THIRD PARTIES AND USE OF EXPERTS
9.1 Where we place reliance on internal or any other auditor we shall consider the professional compliance of the auditor in the content of this engagement and perform procedures to obtain sufficient evidence that the work of the other auditor is adequate for our purposes.
9.2 Where we judge that it is appropriate to use the work of an expert we will:
Obtain sufficient / appropriate audit evidence that such work is adequate for the purpose of audit.
Evaluate the objectivity of the expert. Ensure that the Scope of work of the expert adequate for our
purposes, and Evaluate the appropriateness of the experts work as audit evidence
regarding the assertions being considered.
10. COMMUNICATIONS10.1 At the end of audit we will report formally to you on:
Any significant weakness in, or observation on, the internal control system; Errors identified in the course of the audit; and Any other matter of interest.
11. MINISTRY OF XX AUTHORITY’S RESPONSIBLITIES
11.1 Ministry’s responsibilities extend to ensuring that construction maintenance, revenue collection and purchase by central engineering, maintenance & store unit and other activities of XX Authority have been carried out in the way intended by Parliament and that the related financial transactions confirm to the authorities who govern them.
11.2 The responsibilities for the prevention and detection of fraud, error and non-compliance with laws or regulations rest with the Ministry and the XX Authority.
11.3 The Ministry and the XX Authority are responsible for making available to us, as and when required, all the XX Authority’s accounting records and all other relevant records and information relating to construction & maintenance, revenue collection and purchase by central engineering, maintenance & store unit. We are entitled to require from XX Authority such other information and explanations as we consider necessary for the performance of our duties as auditors.
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12. AUDIT ARRANGEMENT
12.1 Members of audit team will be in touch with relevant XX Authority officials to discuss practical arrangements and the timing of audit visits.
13. OTHER MATTERS
13.1 Use of Report & Confidentiality: Any formal report or other unpublished reports from us may not be provided to third parties without our prior written consent.
13.2 Electronic Communication: During the audit we may from time to time communicate electronically with each other.
14. EFFECTIVENESS OF THIS LETTER.
14.1 This arrangement will remain effective for future years unless it is terminated, amended or superseded. Should you wish to discuss any aspect of this before signing the foot of this letter and returning a copy, please do not hesitate to contact me.
Yours sincerely, Name & Signature
Director GeneralWorks Audit DirectoratePhone:
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ANNEXTURE-B
EXAMPLE: UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT (PUBLIC HEALTH ENGINEERING DEPARTMENT)
The purpose of the forms described below is to document Auditor’s understanding of the entity and its environment. Where appropriate, we should reference to supporting documents included in standing information in the file.
The questions within the form cover the areas where we typically need an understanding to be able to identify and assess risks of material misstatement or irregularity, and so plan and perform an effective audit.
This understanding is part of the standing information on the file. Each year we should perform appropriate Risk Assessment Procedures, as set out in the Overall Audit Strategy, to confirm or update our understanding. Where the Director General expects the standing information will remain current, we will perform procedures to determine that this information remains relevant. These procedures should consist of inquiry and, where appropriate, observation and inspection.
Where changes are needed to the standing information, we should obtain appropriate evidence for the changes and document what that evidence is. Depending upon what the update is, this may be through inquiry, examination of documentation, observation, or other means.
If, having confirmed/updated our understanding of the entity and its environment, we have identified a potential risk of material misstatement/irregularity or information which will affect whether there is a risk, this should be discussed with the Engagement Manager and Engagement Director and clearly concluded upon.
(1) Relevant industry, regulatory, and other external factors (Ref: ISA 315 A17-A22, ISA 250 A7, ISA 540 A13-A15)
(2) The nature of the entity and its activities (Ref: ISA 315 A23-A27)
(3) The entity's financial reporting and accounting policies (Ref: ISA 315 A28)
(4) The entity's objectives and strategies, and related business risks (Ref: ISA 315 A29-A35)(5) The measurement and review of the entity's financial performance (Ref: ISA 315 A36-A41)(6) The nature and extent of the entity’s related party relationships (Ref: ISA 550 A11-A14)
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CONCLUSION ON UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT
(1) Relevant industry, regulatory, and other external factors (Ref: ISA 315 A17-A22)
Relevant industry, regulatory and other external factors
Including:
Standing information(Update as required based on Risk Assessment Procedures performed)
Remarks
a) What is the Authorizing Legislation for the entity? What activities does it authorize?
Bangladesh Gazette no. MHFW/Construction/HED-27/03 (part) /102 date: 22 march 2010
b) What are the Regulations issued under Authorizing Legislation? How do they affect the entity’s operations?
Under the above gazette the organization was renamed as Health Engineering Department. Apart from that they use the following activities:1. CPWA code 2. CPWD 3. GFR 4.
PRA -2006 & PPRR 2008 5. DOFP (Revenue & Development 6. PWD schedule of rate
c) What activities of the entity is there Parliamentary Authority for?
Bangladesh Gazette no. MHFW/Construction/HED-27/ 03 (part)/102 date: 22 march 2010
d) What does the client need Treasury approval for? What does the client have delegated authority from Treasury for?
Delegation of Financial Power, Revenue and Development, Design approved by chief Engineer of HED according to the needs.
Whether they have violated or not.
e) Are there other elements of the legal and regulatory framework applicable to the entity which affects its operations? How does it comply with that framework?
PWD rate schedule, Design approved by chief Engineer of HED according to the needs.
f) What is the nature of the entity’s relationship with its
HED only provides development & construction related activities
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Including:
Standing information(Update as required based on Risk Assessment Procedures performed)
Remarks
sponsoring Department? and maintenance to the medical colleges and medical college hospitals along with internal roads and boundaries.
g) What aspects of the Political Environment affect the entity’s operations?
h) What aspects of the Business Environment affect the entity’s operations?
Pressure from tenderers, collusion by the tenderers, pressure to draw payment for false and faulty activities, submission of false bank guarantee and tender security.
i) How might future events affect the entity?
Fault solvency certificate issued by banks, Lack of supervision by the supervisory authority along with Bangladesh Bank.
j) Are there any other factors to consider?Consider any other external factors that may influence the business, operations or financial reporting of the client.
Lack of supervision by Executive engineers, Superintending engineers and Chief Engineers and Faulty Monetary Policy, lack of independence of Central Bank.
(2) The nature of the entity and its operations (Ref: ISA 315 para A23-A27)
The purpose of understanding the nature of the entity and its operations is to enable an understanding of the classes of transactions, account balances and disclosures to be expected in the financial statements.
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The nature of the entity
Including:
Standing information(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment Procedures performed in current year to determine whether Standing Information remains relevant(As set out in Overall Audit Strategy)
a) What is the nature of the entity’s operations?Where not obvious, consider indicating how significant audit areas relate to the entity’s operations?
Development of health infrastructures including maintaining existing ones.
b) What are the entity’s ownership and governance structures?
Ministry of Health & Family Welfare
c) What types of investments is the entity making or planning to make (including investments in special-purpose entities)?
d) How is the entity structured and how is it financed?
Ministry of Health & Family Welfare underscored high priority for massive development of health infrastructures including maintaining existing ones. This huge work was carried out by the CMC and BPDU. Later necessity was felt for better implementation and timely execution of the assigned task the CMC and
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Including:
Standing information(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment Procedures performed in current year to determine whether Standing Information remains relevant(As set out in Overall Audit Strategy)
BPDU were unified in 1991 to form CMMU. With the passage of time, the competing demand and expectation led the MOHFW to create its own engineering department by increasing the capacity both qualitatively and quantitatively. Thus, the HED was established with its present structure on 22 March 2010.
e) What factors might affect whether the entity is a going concern?
By nature it is a going concern.
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(3) The entity's financial reporting and accounting policies (Ref: ISA 315 A28)
The entity’s financial reporting and accounting policies
Including:
Standing information
(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
a) What financial reporting framework does the entity use for financial reporting? Are there any specific considerations that should be noted?
Cash based accounting
b) Are there any historic judgements on accounting treatments to keep in view?
No
c) How does the entity select and apply accounting policies?This should include estimation techniques used in applying accounting policies.
According to government
accounting policy
d) What changes have there been to the entity’s accounting policies in the period? What are the reasons for any changes?
e) Are there any financial reporting standards and laws and regulations that are new to the entity? When and how will the entity adopt such requirements)?
f) What are the principal accounting estimates in the entity’s financial statements required by the financial
There is a reporting system called call circular form 1 & 2 of MTBF system which is
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Including:
Standing information
(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
reporting framework (including disclosures)?
to be sent to the ministry of finance showing projection of five years and budget of one year.20xx-20xx –Development 527.12 crore Taka; 20xx-20xx: 212.00 crore taka.Maintenance: 20xx-20xx: 150 crore Taka , 20xx-20xx : 150 .00 crore Taka .
Example of Understanding the Entity:
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The following Diagram-1 shows the key players that help understand the entity:Diagram-1
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Power to Make Rules: CAAB Rules-1984
The Civil Aviation Authority Ordinance, 1985
Civil Aviation Authority Fund: Grants made by the GOB Loans obtained from GOB Sale proceeds of Bonds Loan obtained with the
approval of GOB. Foreign aid and loans obtained
with approval of GOB.
Establishment of Authority: Government by notification
established CAAB which is a corporate body.
CAAB as a corporate body shall be guided by a Board that is empowered to perform all functions and formulate rules.
Functions of the Board Registration of aircraft Certificate of Air-
worthiness Pilot Licensing Air Operation Certificate Air Traffic Service Development Planning Facilitation of Passengers
Power: The authority shall, from time
to time, prepare for the approval of the Government, five year plans for the development of infrastructure for the promotion of safe, efficient, adequate, economical properly coordinated civil air transport service and control and regulate civil aviation activities in Bangladesh.
ANNEXURE -C
UNDERSTANDING INTERNAL CONTROL
UNDERSTANDING THE ENTITY’S INTERNAL CONTROL
ISSAI 1315 [ISA 315]
Auditors should confirm/update our understanding each year as part of risk assessment procedures. The purpose of this form is to summarize our understanding of the entity’s internal control. This form should:
document our understanding of the overall control environment;
link to our systems notes of control cycles; and
link to where auditors have evaluated the design and implementation of controls (or, if this will be done later in the audit, where this will be documented).
Where appropriate, Auditors should make reference to supporting documents included in the file.
This understanding is part of the standing information on the file. Each year we should perform appropriate Risk Assessment Procedures, as set out in the Overall Audit Strategy, to confirm or update understanding.
Where it is expected the standing information will remain current, auditors will perform procedures to determine that this information remains relevant. These procedures should consist of inquiry and, where appropriate, observation and inspection.
Where auditors need to plan to evaluate the design and implementation of a control, he/she should do so each year, which will involve evaluating:
the design of a control requires a team to assess whether, if it operates as designed, it would reliably prevent or detect and correct material misstatement or irregularity.
the implementation of a control requires a team to obtain evidence that it is implemented as designed (by walking through the relevant process, sighting
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evidence of the operation of a control, observation of the operation of the control, or other audit evidences).
Where changes are needed to the standing information, we should obtain appropriate evidence for the changes and document what that evidence is. Depending upon what the update is, this may be through inquiry, examination of documentation, observation, or other means.
If, having confirmed/updated understanding of the entity’s internal control and its environment, auditors have identified a potential risk of material misstatement/irregularity or information which will affect whether there is a risk, this should be discussed with the Engagement Manager and Engagement Director and clearly concluded upon.
Click on the underlined links to jump directly to the relevant factors.
1) Control Environment (Ref: ISA 315 A69-A78)
2) The entity’s risk assessment process (Ref: ISA 315 A79-A80)
3) Monitoring of controls (Ref: ISA 315 A98-104)
4) Business controls (Ref: ISA 315 A81-A87)
5) The information system (Ref: ISA 315 A81-A85) and, if considered necessary:
Annex A – Access Security
Annex B – Change Management
6) Communication (Ref: ISA 315 A86-A87)
7) Controls relevant to the audit (Ref: Para A66-A68, A88-97)
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CONCLUSION ON UNDERSTANDING THE ENTITY’S INTERNAL CONTROL: Bangladesh Meteorological Department (BMD)
Note: If auditors obtain additional information about the entity’s internal control after completing this form, teams should update the form accordingly. For example, auditors may only evaluate the design and implementation of some controls at year-end.
1) Control Environment (Ref: ISA 315)The purpose of understanding the control environment is to understand whether:(a) Management, with the oversight of those charged with governance, has created and
maintained a culture of honesty and ethical behaviour; and(b) The strengths in the control environment elements collectively provide an appropriate
foundation for the other components of internal control, and whether those other components are not undermined by deficiencies in the control environment.
Control environment
Including:Standing information
(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment
Procedures performed in
current year to determine
whether Standing Information
remains relevant(As set out in Overall Audit
Strategy)a) How do the
Accounting Officer and Board maintain an appropriate control environment?
The Secretary acts as the Principal Accounting Officer of the Ministry of Defence. The Director General is the Head of BMD. He is responsible for both administrative and financial activities of BMD. The Budget Office of BMD collects the budget proposals from different DDOs on behalf of the Director and complies it. The proposed budget is sent to Ministry of Finance through the Ministry of Defence for approval. After getting approval of budget in a single operational unit, the
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Including:Standing information
(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment
Procedures performed in
current year to determine
whether Standing Information
remains relevant(As set out in Overall Audit
Strategy)Budget Officer reallocates budget to different DDOs. All DDOs follow the government financial rules & regulations for expenditures. DDOs maintain different types of registers, records and cash book for accounts and send expenditure reports to the head office.
For financial control, all DDOs follow the Delegation of Financial Powers (issues from Ministry of Finance from time to time) for expenditure limits as stated for the Head of the department, Category 1,2 and 3 level officers.
b) How do the Board of Trustees and Oversight Board contribute to maintaining an appropriate control environment?
c) How effective is the Audit Committee in maintaining an appropriate control
Not Applicable
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Including:Standing information
(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment
Procedures performed in
current year to determine
whether Standing Information
remains relevant(As set out in Overall Audit
Strategy)environment?
d) How does the entity’s organizational structure contribute to maintaining an appropriate control environment?
BMD is headed by a Director, Director is responsible for all activities related to technical as well as administrative matters of the Department, 7 Deputy Directors- Assisting the Director for all administrative and technical matters of Department, 8 Assistants Director /Dy. Director for all administrative and technical matters of Department, 2 Administrative Officers, 2 Accounts officer, 1 Store officer and 1095 staff. For maintaining appropriate control over the organization, every section takes approval of director, sends various administrative and financial report returns to director, working progress report to director.
e) How do the entity’s Human Resources policies and procedures contribute to maintaining an appropriate control environment?
Under the recruitment rules BMD maintain their appropriate control environment on human resources policies and procedure.
f) What impact do N/A
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Including:Standing information
(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment
Procedures performed in
current year to determine
whether Standing Information
remains relevant(As set out in Overall Audit
Strategy)any other relevant factors have upon the effectiveness of the control environment?
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2) The entity’s risk assessment process (Ref: ISA 315 para A79-A80)
Public sector organisations should have a risk assessment process, which should be appropriate for the size and complexity of the entity. The risk assessment process is involved in:
(a) Identifying business risks relevant to financial reporting objectives;(b) Estimating the significance of the risks;(c) Assessing the likelihood of their occurrence; and(d) Deciding about actions to address those risks.
Including:Standing information
(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
a) Does management have an effective Risk Assessment Process?
The management of BMD has effective risk Assessment planning by the inspection, physical verification, approval from higher authority, reconciliation with Bank, CAO’s Accounts and other registers.
b) Does management use the Risk Assessment Process to effectively identify and respond to risks of fraud or irregularity?
Yes, BMD does Risk Assessment Process to effectively identify and respond to risks of fraud or irregularity. BMD identify the risk of fraud or irregularity by comparing accounts, bank statement, director approval, existing government rules, PPA 2006 & PPR 2008, CAO’s accounts and various expenditure reports.
c) What are the results of management’s Risk Assessment Process?
Cross-reference to a copy of the results of
Management’s risk assessment process detects fraud, irregularities, undue payment, excess payment, unauthorized payment and weakness of internal control.
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The entity’s risk assessment process
Including:Standing information
(Update as required based on Risk Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
management’s process. Read and summarise any results of the client’s risk assessment process that indicate potential risks of material misstatement or irregularity.
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3) Monitoring of controls (Ref: ISA 315 para A98-104)
Public sector organisations should have a risk assessment process, which should be appropriate for the size and complexity of the entity. The risk assessment process is involved in:
(a) identifying business risks relevant to financial reporting objectives;
(b) estimating the significance of the risks;
(c) assessing the likelihood of their occurrence; and
(d) deciding about actions to address those risks.
Monitoring of controls
Including:
Standing information(Update as required based on Risk
Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
a) How does management monitor the effectiveness of the entity’s internal control?
What sources of information about the operation of controls are used in monitoring and how reliable are they?
The Secretary of the Ministry of Defence gives the administrative and financial direction to BMD. BMD use the budget on the basis of financial rules and regulation and as per power delegated in the Delegation of financial power- 2005. Beyond this limit BMD have to take approval from the Ministry. The internal control system for payroll is stated below.
Accounts Assistant prepares the non-gazetted staff salary bill on prescribed form on the basis of authorized TO&E, attendance sheet, cut list and their entitlement pay scale. After completion of pay bill the total amount is deducted
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Including:
Standing information(Update as required based on Risk
Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
from budget. Then the account assistant submits the bill to accountant to verify. The Accountant compares the salary bill with the previous month’s salary bill of total amount and number of staff. He also re-calculates the amount such as basic pay and allowances and all kinds of deduction like General Provident fund (GPF), benevolent fund (BF), house rent, Gas Bill, Electricity bill, Water & Sewerage bill and all advance loan. In case of additional payment he also verifies the approval of proper authority.
After all kinds of verification the accountant submits the bill to Drawing and Disbursing Officer (DDO) for approval and sign. In case of self-drawing officers salary bill all self drawing officers prepare their salary bill on prescribed form and sign the bill with attached revenue stamp and submit bill to accountant for verification. The Accountant verifies the bill properly and makes entry in the officer’s salary bill registers. Then the DDO sends the staff and self drawing officers’ salary bill to CAO office for passing the bill.
After receiving the bill, auditor issues a
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Including:
Standing information(Update as required based on Risk
Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
token number against every bills. Then checks and verifies the bills according to entitlement and pay scale. Afterwards CAO office deducts GPF contribution, group insurance and benevolent fund contribution, loan repayment, house rent, gas and water bill, municipal tax, Sewerage bill etc for govt. quarter residents.
CAO office puts in all records into the iBAS system by following the 13 digit accounts code classification. If CAO office find any anomalies in the bill they send the bill to BMD with observations/ comments. BMD receives that bill and rectifies the bill according to the observations and sends back to CAO office to pass the bill.
The CAO office passes the non-gazetted bill and issues the cheque to concern DDO. The DDO deposits the cheque to DDO’s Bank account for cash. Then the cash is drawn by the DDO and distributes among staff. After passing the gazetted salary bill the amount is transferred by Electronic Fund Transfer (EFT) to concerning bank account of officers. It is also mentioned that the salary bill of field
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Including:
Standing information(Update as required based on Risk
Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
unit offices are prepared by concerned offices and passed l by the concerned Divisional controller of Accounts (DCA) and District Accounts Office (DAO, Upozilla Accounts Office (UAO)).
For the accuracy of transaction, the bank sends the bank statement to DDO. Every month DDO compares their cash register with bank statement. If any anomaly is found the DDO takes necessary action for correction of the transaction.
The internal control system for the procurement is stated below-
Besides this for spending money in specific economic code like procurement of Vehicles, BMD have to take approval from the Ministry of Finance through the Ministry of Defence. BMD sends the monthly and quarterly expenditure report to ministry to inform the ministry the progress of expenditure and for monitoring upon them.
b) How reliable is the entity’s overall Financial Reporting and Budgetary Control?
BMD gets budget allocation from the Ministry of Finance through the Ministry of Defence. BMD gets budgets in a single operational unit that is Headquarters. After getting the budget, budget officer
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Including:
Standing information(Update as required based on Risk
Assessment Procedures performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
reallocates the budget in to six controlling officers of the BMD all over the country for their expenditures with the approval of Director. All DDOs spend money by taking approval from the controlling officer following financial rules and regulation and prepare expenditure reports monthly, quarterly and yearly and sends those reports to head quarters.
c) How effective is Internal Audit as part of the entity’s monitoring of controls?
N/A
d) What impact do any other relevant factors have upon the entity’s monitoring of controls?
N/A
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4) Business controls
The audit file should include systems notes for each class of transactions in the entity's operations that are significant to the financial statements, and for monitoring controls. The system notes should include:
the procedures, within both information technology (IT) and manual systems, by which those transactions are initiated, recorded, processed, corrected as necessary, transferred to the general ledger and reported in the financial statements. This should include how regularity is ensured;
the related accounting records, supporting information and specific accounts in the financial statements that are used to initiate, record, process and report transactions. This includes the correction of incorrect information and how information is transferred to the general ledger. The records may be in either manual or electronic form; and
how the information system captures events and conditions, other than transactions, that are significant to the financial statements.
System notes should clearly set out the flow of information within a business cycle, the IT systems involved, and where control activities and data interface take place (including controls over regularity). This can often be effectively documented using a system-flow diagram. The client or their internal audit team may have prepared systems diagrams.
In addition to system notes on business cycles, documentation should set out the financial reporting process used to prepare the entity's financial statements, including significant accounting estimates and disclosures, and the controls surrounding journal entries, including non-standard journal entries used to record non-recurring, unusual transactions or adjustments.
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Format used to examine key controls to incorporate in the AMMS:
Account Area
Has the Audit Team Documented the Controls? if Yes – Place Controls Document in AMMS
Reason Why Not Documented
Income (Energy Sales, Other income and Interest Income)
Expenditure
Payroll
Property, Plant and Equipment
Capital works
Accounts receivable
Accounts payable
Cash and bank
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5) The information system (Ref: ISSAI 315 A81-A85)
Auditors should have sufficient understanding of the entity’s information systems and their interaction with business controls (including controls over regularity) to be able to:
identify any related risks of material misstatement or irregularity;
identify where business controls are dependent upon general IT controls; and
plan an effective and efficient audit.
Completing this section of the form
This section of the form documents our general understanding of the entity’s information systems. Where appropriate, teams should link to detailed documentation of general IT controls held as standing information in the file. If the client has a document which sets out how they comply with security requirements, this may be an appropriate form of documentation (but this does not provide assurance that IT controls have been implemented or are operating effectively).
Based upon general understanding, auditors should identify whether there are any IT related risks or they will need to test general IT controls. This assessment can be performed in the IT Scope Assessment form.
Auditors should complete Annex A of this form if they plan to rely on controls dependent upon general IT controls, or if the Engagement Director considers appropriate due to the complexity and significance of the entity’s IT environment (as set out in the Overall Audit Strategy).
Auditors should complete Annex B of this form if there have been significant changes in the IT system in the year, or if the Engagement Director considers appropriate due to the complexity and significance of the entity’s IT environment (as set out in the Overall Audit Strategy).
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Issue
Standing information(Update as required based on Risk Assessment Procedures
performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
What is/are the entity’s IT system(s) involved in financial reporting?
BMD does not prepare any financial report. But BMD prepares some reports of receipts and payments manually. BMD prepare expenditure summary monthly and yearly. As under the pre audit system, BMD collects expenditure summary from the iBAS system from CAOs office. Using iBAS, BMD gets monthly, quarterly and yearly details transactions records, monthly accounts, final accounts, appropriation accounts.
To what extent does the entity use the automated controls and checks within the IT system?
BMD does not have any automated controls and checks within the IT system. The automated IT system known as iBAS system is operated and controlled by Controller General of Accounts which is another government organization.
How is the entity’s IT system managed?What is the in-house IT team’s structure/what is the structure of the relationship
N/A
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Issue
Standing information(Update as required based on Risk Assessment Procedures
performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
with outsourced suppliers?
Is there any internal or external assurance over the operation of the IT system (e.g. internal audit, or attack and penetration testing)?
N/A
Is there an IT strategy, how is it set, and how does it align to the business strategy?
N/A
Is an IT Risk Assessment performed? What are the findings of the risk assessment?
N/A
Data centre and network operations:If the entity uses data centers or networks in financial reporting, how is appropriate security maintained over the data?
N/A
Access Security:What is the high level approach to systems security, including physical security of servers?Where we consider we need to perform work on general IT controls per the IT scope
N/A
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Issue
Standing information(Update as required based on Risk Assessment Procedures
performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
assessment form, please complete Annex A.How does the entity manage changes to IT systems involved in financial reporting or in controls over regularity of transactions?
N/A
Have there been significant changes to the information systems environment during the year?If there have been significant changes, please complete Annex B.
N/A
Other general aspects of the IT environment relevant to the audit
Complete the IT Scope Assessment form based upon this understanding and, if necessary, complete Annex A and/or Annex B.
6) Communication
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Including:
Standing information(Update as required
based on Risk Assessment Procedures
performed)
Description of Risk Assessment Procedures
performed in current year to determine whether Standing
Information remains relevant
(As set out in Overall Audit Strategy)
a) How does the entity communicate financial reporting matters internally?
BMD does not produce any financial reports for internal purpose.
b) How does the entity communicate to employees policies on business practices and ethical behaviour?
Do
c) How does the entity communicate financial reporting matters externally?
Do
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(7) Controls relevant to the audit (Ref: ISA 315 para A66-A68, para A88-97)
It is required to evaluate the design and implementation of controls relevant to the audit in order to develop a sufficient understanding to plan and perform audit, including, where relevant, IT controls. Depending on the timing of planning and of when these controls operate, we may perform this evaluation at the planning stage or later in audit.Where auditors plan to evaluate the design and implementation of a control, they will do so each year, which will involve evaluating:
the design of a control requires a team to assess whether, if it operates as designed, it would reliably prevent or detect and correct material misstatement or irregularity.
the implementation of a control requires a team to obtain evidence that it is implemented as designed (by walking through the relevant process, sighting evidence of the operation of a control, observation of the operation of the control, or other audit evidence).
Link in the table below to show where auditors work on the evaluation of the design and implementation of controls has been performed.
Nature of control Link to summary of D&I work
Issues relevant to D&I of controls not already
noted above(Update by exception)
Controls that address Significant Risks (including where we plan to test their operating effectiveness)
The major risk areas in the operation level are given below-
For pay roll system- Wrong Pay fixation, Selection grade and time scale, Excess payment on clerical mistake, Overpayment/undue out of pattern, payment on first appointment, Payment of income tax on salary, Payment on wrong economic code, Payment without budget.For procurement- Procurement without budget, Procurement
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Nature of control Link to summary of D&I work
Issues relevant to D&I of controls not already
noted above(Update by exception)
without proper approval, Procurement without demand/ requisition, violation of PPA-2006 & PPR-2008, Procurement without tender, Absence of Comparative Statement of the tenders, Work order against non-responsive and non lowest tenderer, Payment without receiving goods, over payments, improper deposit of tender schedule selling money to treasury, improper deduction of VAT-IT from bill, payment from improper economic code and proper approval of variation order.
Other business cycle controls where we plan to test the operating effectiveness of controls (including application controls)(including where we need to test controls because we consider we cannot get sufficient assurance from only performing substantive testing)General IT controls where we plan to test their operating effectiveness(The IT scope assessor indicates whether we need to
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Nature of control Link to summary of D&I work
Issues relevant to D&I of controls not already
noted above(Update by exception)
do so)Month and year-end close processAccounting policies and financial statement productionMonitoringJournals
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ANNEXURE - D
EXAMPLE: AUDIT PLANNING MEMORANDUM
The planning memorandum will outline the key planning decisions and the proposed audit strategy. It should be prepared after reviewing in detail the system notes, the flow charts, the ICQs, the prior year’s working papers and the current year’s financial statements. The level of detail in the memorandum will be a matter for the judgement of the auditor and will depend on the nature and complexity of the engagement.
The planning memorandum should include where appropriate the following items: Brief overview of the entity’s business, including its purposes and objectives,
operation, policies and legislative requirements, its organization and major programmes;
Terms of the engagement; Key entity contacts; Materiality level(s); Level of audit assurance required (level of audit risk); Previous years audit issue and concerns; Significant (critical) audit areas (components); Any complaint or media reports Inherent risk and control risk by financial statement assertion and related
compliance with authority objective for each significant audit area; Tentative audit strategy for significant/critical audit areas; Quantitative performance information such as production (if any) and auditor’s
reports; Compliance with regulations and directives issued and “other matters”; Electronic Data Processing (EDP) opportunities and requirements; Role of, and reliance on, internal audit; Relations with and requests from management to carry out specific procedures; Practices regarding extent of audit testing, and use of sampling; Audit time budget, staffing and other resource requirements; Listing of number of staff assigned to the engagement and their general
responsibilities; Administrative matters, such as the entity’s written policies and procedures; and Review of sensitive matters such as payroll and other information.
The completed planning memorandum should be reviewed and approved by the senior audit management staff.
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Office of the Comptroller & Auditor General
AUDIT PLANNING MEMORANDUM
Name of Auditee Organization Budget Year Type of Audit be undertaken (new, cyclical, rotational or special) Budget Year (date) and nature of last audit (if applicable) Head of Concerned Audit Directorate Name of Concerned Supervising Auditor Name of Team Leader
Results of Preliminary Review
Staff assigned for the preliminary review of the organization’s systems and procedures:
Ref. to Working Papers
(1)(2)(3)(4)(5)(6)
Matters arising from familiarization visit to the auditee organization (Give date (s) and details):Points arising from a review of the previous audit planning memorandum Major weaknesses in the control environment and their audit implications:Major weaknesses in control systems and their audit implications:Major weaknesses noted during previous audits, dates of management letters issued, actions taken by management, and implications for the current audit:Extent of reliance that might be placed on the work of the internal audit:Matters arising from a review of the current year's draft financial statements:
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Visit(s) (with dates) to organization to discuss identified weaknesses, and points of clarification obtained from the auditee's management:Major matters to be pointed out in any management letter to be issued at this stage:Supervising Auditor Head of Division
Date Date
Preliminary Audit Strategy1. Names and designations of additional staff to be
assigned/withdrawn as a result of the preliminary review:(1)(2)(3)(4)(5)
2. Materiality for the audit.3. Expected aggregate error for the audit and resulting planned
precision (materiality less expected aggregate error).4. Audit risk for audit.5. Inherent risk for each component and each financial
statement assertion and related compliance with authority objective.
6. Control risk for each component and each financial statement assertion and related compliance with authority objective .
7. Assurance from analytical procedures for each component and each financial statement assertion and related compliance with authority objective.
8. Sources of assurance for each component and each financial statement assertion and related compliance with authority objective.
9. For those components, financial statement assertions and related compliance with authority objectives for which
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sampling for tests of control to be performed. 10. For those components, financial statement assertions and
related compliance with authority objectives for which substantive tests of details to be performed.
11. Any additional or special work to be performed over and above that required for the audit (e.g., extra work performed at request of entity officials or as part of a performance audit).
12. Date of Staff Planning Meeting, and any special instructions given.
13. Types of Audit Programmes required (e.g., cash, purchases, payrolls, etc.).
14. Changes (if any) required to be the specimen Audit Programmes in the Manual.(List here or have references to audit progammes)
Audit Programme Changes Required
15. Estimated time for the audit.16. Date for commencement of audit.17. Target date for completion of the audit.18. By whom Audit Planning Checklist completed.19. By whom Audit Planning Checklist reviewed and approved:
Supervising Auditor Head of Division Date Date
Results of Interim ReviewRef. to
Working Papers
20. Date of interim review:21. By whom carried out?
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Results of Interim ReviewRef. to
Working Papers
22. Audit work completed to date (check with Working Papers)23. Is all audit documentation being properly maintained?24. Does the work done to date and the time taken so far
appear to be satisfactory as regards:(a) nature and extent of audit tests done?(b) disposal of audit queries?
(c) conclusions drawn to date?
(Check with working papers and place a tick (or write comments) against each).
25. Any significant matters arising from the interim review which need to be reported in a management letter:Supervising Auditor Head of Division
Date Date
Revised Audit Strategy Ref. to Working Papers
26. Changes ( if any) required to the Preliminary Audit Strategy: (Each of the items numbered 11-29 above must be reviewed and any changes required noted below):
Changes Required Reasons
29. Changes (if any) required to the approved audit Programmes:Audit Programme Changes Required
30 Audit completion procedures to be taken in hand now (e.g., obtaining bank certificates, circularizing debtors and creditors, reviewing stock-taking instructions, observing
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stock counts, etc.):
31. Any other matter to ensure satisfactory completion of audit by target date:Supervising Auditor Head of Division
Date Date
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ANNEXURE- E
EXAMPLES: COMPLIANCE AUDIT PROCEDURES FOR SELECTED SUBJECT MATTERS
Examples are shown below of possible compliance audit procedures in the areas of environmental legislation and project funds from donor organizations. It is not intended to be an exhaustive list of procedures. Audit procedures must be designed for the particular audit circumstances and objectives.
Sample audit procedures
Subject matter: Environmental legislation
(1) Obtain an overview of relevant environmental legislation to which the entity is required to adhere.
(2) Inquire with management, and internal audit as applicable, as to the processes and routines in place to ensure compliance with relevant environmental legislation.
(3) Review manuals and systems descriptions to understand the processes and relevant controls. Document the process and identify key controls. Test key controls as necessary.
(4) Perform a media search, and other databases as applicable, to identify previous instances of non-compliance by the entity.
(5) Review any inspection reports, including those of internal audit as applicable. Follow up any areas that may indicate significant risks of non-compliance with environmental legislation.
(6) Confirm that the audited entity has necessary permits and registration certificates as appropriate. Evaluate procedures to ensure that these remain valid and up to date.
(7) Review minutes of meetings of environmental, or health and safety committees. Follow up as necessary.
(8) Interview selected staff as to their understanding of relevant policies and procedures in place, including training, and how these procedures operate in practice.
(9)Inquire with management, and legal counsel as appropriate, as to any previous, existing or potential environmental liability claims. Consider the causes and effects/impacts of any such claims.
(10) Observe processes and routines in practice (eg. waste disposal – properly stored and disposed of, etc) and document appropriately (eg. photo or video evidence may be relevant).
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ANNEXURE- F
EXAMPLES: COMPLIANCE DEVIATIONS
The following table provides some examples of compliance deviations and includes considerations related to materiality and forming conclusions. The comments related to materiality and forming conclusions are not intended to be definitive assessments of whether the particular example constitutes a material compliance deviation or not, but rather to highlight relevant considerations. The determination of materiality will depend on the particular circumstances and the professional judgement of the public sector auditor.
Example of Compliance Deviation
Considerations Related to Materiality and Forming Conclusions
During the year, a government agency received budget appropriations through the Ministry of Education for national educational purposes. The agency's grant expenditure for the year included TK.10 million to overseas high tech manufacturers.
Based on the legislation governing the government agency, the agency did not have the power to make grants to overseas bodies. The non-compliance may be material because the grant expenditure was paid out to overseas bodies and was therefore not in compliance with relevant authorities, nor was it applied to the purposes intended by the legislature.
During the year, a government agency incurred expenditures of TK.100 in excess of the total expenditure of TK.5000 authorized by the budget approved by the legislature.
In this case, actual expenditures were in excess of amounts authorized through the approved budget. This non-compliance may be material because it was a clear violation of clearly established authorities. Depending on the circumstances, including the type of expenditures, it may also be very sensitive in nature.
A citizen is entitled to a monthly pension of TK.1000. The government agency has only been paying out TK. 900 per month. The payments were also made after the dates stipulated in the legislation.
Although the monetary amounts involved may not be material to the financial statements of the government agency, the consequences of the noncompliance are likely to be very significant to the individual pensioner living on a fixed income. If the non-compliance is due to a
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Example of Compliance Deviation
Considerations Related to Materiality and Forming Conclusionssystem weakness, the non-compliance may also affect many other citizens. The non-compliance may therefore be material in terms of the impact on citizens and society in general
A single mother is entitled to monthly child benefits for each child under age 18. The government agency has paid out
While this compliance deviation may have been positive for the recipient, it is not in accordance with the legislation and its intentions, and may therefore be unfair to other beneficiaries. If the
Child benefits for a 19 year old child. Non-compliance is due to a system weakness, the non-compliance may also affect many other citizens. The non-compliance may therefore be material in terms of the impact on citizens and society in general.
The terms of a building code require annual inspections to be performed. The government agency has not performed inspections for the past five years.
The non-compliance may be significant due to qualitative aspects such as safety implications. Although no particular monetary amounts are involved, the non-compliance may be material due to the potential consequences it may have on the safety of the building occupants. In the event of a disaster, there is also a risk that the noncompliance may result in significant liability claims which could have material financial implications for the government agency as well.
The terms of a funding agreement state that the recipient of the funds must prepare financial statements and send them to the donor organisation by a certain date. The financial statements have not been prepared and sent by this date.
The non-compliance may or may not be material depending on whether or not the financial statements were subsequently prepared and sent, the extent of the delay, the reasons for the delay, any consequences that may arise as a result of the non-compliance, etc.
Significant system weaknesses were This type of compliance deviation relates
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Example of Compliance Deviation
Considerations Related to Materiality and Forming Conclusions
identified in relation to revenues collected in accordance with a tax code. The weaknesses were due to incorrect interpretation of the tax code by the audited entity. Numerous instances of taxpayers being assessed more than they were obligated to pay were identified.
to the due process rights of individual citizens. Certain citizens were being assessed too much tax, while others were not being assessed at all. Depending on the circumstances, and because it involves a system weakness, the deviation may be material.
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ANNEXURE -G
EXAMPLE OF ISSAI COMPIANT COMPIANCE AUDIT PLAN ON CIVIL AVIATION AUTHORITY
Audit Examination Plan
Compliance Audit of
Civil Aviation Authority of Bangladesh
Under
The Ministry Of Civil Aviation And Tourism
For the Financial Year: 2013-2014
Works Audit DirectorateFebruary, 2015
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Table of Content:
Sl. No. Contents Page
1.0 Introduction 032.0 Understanding the entity 043.0 Background of the Audit Entity(CAAB) 054.0 Organogram of CAAB 065.0 Functions of Civil aviation authority 07-086.0 Formation of Civil Aviation Authority Fund 097.0 Source of Revenue Earnings 098.0 Accounting System 109.0 Budget Analysis 10-13
10.0 On-going Projects 13-1411.0 Outstanding Income Receivable from Different
Airlines(Aeronautical)14
12.0 Outstanding Income Receivable from Different Airlines(non-aeronautical)
15
13.0 The Planning Phase 1514.0 Overall Audit objectives 15-1615.0 Audit Approach 1616.0 Audit Criteria 17-1817.0 Scope of Audit 1818.0 Assessing Risk 19-2119.0 Setting the Materiality 21-2320.0 Potential Audit Significance 2321.0 Summary of Audit Locations 2322.0 Audit Resources Available 2423.0 Audit Road Map 2424.0 ISSAI References 24-2525.0 Developing Audit Program 2526.0 Details Audit Programmes(Annex 01 to Annex-07) 26-50
Compliance Audit on Civil Aviation Authority, Bangladesh, Audit Examination Plan
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1.0 Introduction:
SPEMP-B project is an important capacity development project currently underway in the Office of the Comptroller & Auditor General of Bangladesh (OCAG). One of the project’s key development thrusts is to develop OCAG’s technical and managerial capacity to carry out high quality audits. The key project development objectives (PDO) are to: (1) strengthen the institutional arrangements for the Office of the Comptroller and Auditor General, (2) improve the quality of audit practices using International Standard of Supreme Audit Institution (ISSAI) and (3) expand the new concept such as entity wide audit practice. SPEMP-B is trying to build up this capacity by updating audit, implementing International Standards for Supreme Audit Institutions (ISSAI), and using Idea Software. Moreover, intensive classroom training has been arranged on the issues relevant to the areas under audit. Several pilot audit teams have been formed by the OCAG to conduct audit in different organisations. More specifically compliance audit in Civil Aviation Authority of Bangladesh will cover a consideration of whether the construction & maintenance, revenue collection and purchasing by the Central Engineering, Maintenance & Store Unit of the Civil Aviation Authority are, in all material respects, in compliance with the authorities which govern them. This responsibility includes performing procedures to obtain audit evidence about whether the agency's expenditure and income have been applied to the purposes intended by the legislature. Such procedures include the assessment of the risks of material non-compliance. These were selected by the Comptroller & Auditor General (CAG) as the topic for the third round pilot compliance audit under Director General of Works Audit Directorate with the technical support from SPEMP B project.
2.0 Understanding the Entity:The following Diagram-1 shows the key players that help understand the entity:
Diagram-1
Page | 238The Civil Aviation Authority
Ordinance, 1985Power to Make Rules: CAAB
Rules-1984
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Establishment of Authority: Government by notification
established CAAB which is a corporate body.
Civil Aviation Authority Fund :
Grants made by the GOB Loans obtained from GOB Sale proceeds of Bonds Loan obtained with the
approval of GOB. Foreign aid and loans obtained
CAAB as a corporate body shall be guided by a Board that is empowered to perform all functions and formulate rules.
Functions of the Board Registration of aircraft Certificate of Air-
worthiness Pilot Licensing Air Operation Certificate Air Traffic Service Development Planning
Power: The authority shall, from time
to time , prepare for the approval of the Government, five year plans for the development of infrastructure for the promotion of safe , efficient, adequate ,economical properly coordinated civil air transport service and control and regulate civil aviation activities in Bangladesh.
3.0 Background of Civil aviation authority, Bangladesh:
Civil Aviation Authority, Bangladesh is a public service enterprise and a body corporate. It functions under the Ministry of Civil Aviation and Tourism. The Authority is run by a Board with a Chairman and six other Members. Management of administration, finance and operations of the Authority all vest in the Board. The organization was formed in 1985 vide Ordinance No. XXXVIII of 1985, titled The Civil Aviation Authority Ordinance, 1985. As the provisions laid down in Civil Aviation Ordinance 1960 and Civil Aviation Rules 1984, this organization acts as the Aeronautical Authority of Bangladesh and discharges the duties and responsibilities as laid down by ICAO. As a Regulatory Body it implements the rules, regulations and directives of the Government of the People's Republic of Bangladesh and the standards and recommendations thereon of International Civil Aviation Organization (ICAO). The main objectives of CAAB are:
To act as a regulatory body to ensure safe, orderly and smooth operation of all types of aircrafts in Bangladesh airspace.
To develop necessary infrastructure and provide better services for all respectable passengers who travel through the civil airports of Bangladesh.
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Director(Administration)
Director(Finance)
Chairman
Member(Administration)
Member(Finance)
Member(Operation & Planning
Chief Engineer
All Airports
Director(Flight Safety & Regulation
Director(ATS & Aerodromes)
Director(Planning & Training)
Director(Communication)
Director(Hazrat Shahjalal Airport)
Director(CATC)
Director(CEMSU)
SE(P&D/QS)
SE(E/M)
SE(Civil)
4.0 Organogram of CAAB:
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5.0 Functions of Civil aviation authority:The Authority shall be responsible for the regulation and control of civil aviation activities in the country. The authority shall, from time to time, prepare for the approval of the government five year plans for the development of infrastructure for the promotion of safe, efficient, adequate, economical and properly coordinated civil air transport service and control and regulate civil aviation activities in Bangladesh. However, details functions of the CAAB are as follows:
Flight Safety and Regulation
1. Registration of aircraft: CAAB maintains register for all Bangladesh aircraft. Such registration is a prerequisite for a Bangladesh aircraft to start operations.
2. Certification of Air-worthiness: In order to ensure flight safety, airworthiness of aircraft must be ensured first. An aircraft can be regarded as airworthy if it and its components conform to design standards, are of approved type and are in sound operational condition. CAAB regularly inspects the aircrafts registered in Bangladesh and issues/renews certificate of airworthiness for the worthy aircrafts, and suspends/cancels such certificate of unworthy ones. Without such certificate no aircraft should attempt to fly. In relation to such certification, CAAB also continuously monitors all maintenance activities with Bangladesh aircrafts, approves certificate for aircraft type and certificate for maintenance establishments, issues directions regarding maintenance, and approves design modification, repair and replacement of any component.
3. Personnel Licensing: Each personnel responsible for flight operations on board – pilot, navigator, flight engineer, flight instructor, air traffic controller etc. – and aircraft maintenance engineer on ground should have appropriate license proving his ability and skill before he engages himself in respective job. CAAB tests and issues/renews licenses to the successful applicants. No member of the aircrew and no maintenance engineer should engage in flying operations and participate in maintenance works respectively without such license.
4. Bi-lateral Agreements: CAAB examines documents submitted by other countries in regard to bilateral Air Services Agreements, negotiations and prepares brief for the Government. Any foreign airline intending to operate scheduled flights in the country must be designated pursuant to such Government level agreements.
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5. Air Transport Service Authorization: CAAB issues/cancels license for Bangladeshi enterprises of air transport services, and approves, revises if required, tariff including fares, rates, charges, commissions, and terms and conditions associated with their business.
Air Traffic Service6. CAAB provides air traffic control service to each aircraft flying in the national airspace
and moving on maneuvering areas of Bangladesh aerodromes in order to prevent collisions, and to maintain expedite and orderly flow of air traffic.
7. CAAB establishes air routes, and flying, approaching and landing procedures for each route and aerodrome belonging to the country.
8. CAAB makes all necessary arrangements for search and rescue operations in case of accident or missing of any aircraft, and conducts investigations against accidents and unwanted incidents related to aircrafts.
Communication and Navigation9. CAAB makes provisions for facilities and services for aeronautical
telecommunications and air navigation in order to ensure safety, regularity and efficiency of aircraft operation.
Airport and Anti-hijack Security10. CAAB makes all necessary arrangements in order to ensure security to passengers
and aerodromes, and to detect, prevent penetration of terrorist activists on board from within national territory.
Facilitation of Passengers11. CAAB makes all necessary arrangements to establish and maintain all passenger
services and facilities at the terminal of Bangladesh airports. Arrangements for facilities, such as flight information, public address, entertainments, comfortable room and environment for passengers and their attendants are all accomplished by CAAB.
Construction and Maintenance of Airports12. CAAB constructs, maintains and develops airports; aerodromes whenever and
wherever are required in order to expand the aviation infrastructure and air transportation network in the country.
13. CAAB also provides operational accommodation to other organizations and agencies like airlines, Customs, Immigration, Meteorology, Health, and Police etc. at the airports.
Development Planning14. CAAB studies, evaluates and plans for development of the aviation infrastructure
within the country considering necessity and budget. It also maintains liaison with
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regional partners and ICAO in relation to future development programs masterminded by ICAO.
15. CAAB takes all necessary steps for training of its operational officers and employees both in country and abroad. It has already established the Civil Aviation Training Centre at Dhaka.
6.0 Formation of Civil Aviation Authority Fund: Section-16 of the ordinance describes that there shall be a fund to be known as the “Civil Aviation Authority Fund” which shall vest in the Authority and shall be utilized by the Authority to meet charges and expenses in connection with its functions under this Ordinance.
Grants made by the GOB; Loans obtained from GOB; Sale proceeds of Bonds; Loan obtained with the approval of GOB; Foreign aid and loans obtained with approval of GOB and All other sums received by the Authority.
Notably, though CAAB Fund can be comprised from different sources, still CAAB’s capital structure is formed from two financiers: (1) Equity and loan from government and (2) Foreign Loan. CAAB has full authority with the approval of GOB to utilise its fund but there is a legal obligation to pay annual return on GOB’s investment (26A of Ordinance).
7.0 Source of Revenue Earnings 7.1 Aeronautical: Aeronautical revenue stream includes:
Landing charge Aircraft parking Housing Overflying Route Navigation charge Boarding Bridge Charge
7.2 Non-aeronautical: non-aeronautical revenue stream includes: Embarkation fee-International Embarkation fee-Domestic AOC (Air Operation Certificate) Pilot license fee Car parking Visitors fee Rent & Lease Rent
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Interest on FDR Cargo Charges Others
8.0 Accounting System:The Authority shall maintain its accounts in such manner and form as may be prescribed. In fact, CAAB follows accrual basis accounting system. It’s operational units individually keep separate accounts and CAAB, HQ prepares consolidated accounts including its own accounts.
9.0 Budget Analysis:9.1 Budgeted & Actual Expenditure for 2013-2014
(Amount in Taka)
Civil Aviation Authority, Bangladesh
Revised Budget Actual
Revenue-Expenditure 575,48,55,000Development-Expenditure 693,05,23,000
Total 1268,53,78,000
Table 1: Budgeted Revenue & Expenditure
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9.2 Budgeted Revenue for 2013-2014(Amount in Taka)
Civil Aviation Authority, Bangladesh
Revised Budget Actual
Revenue-Income 709,93,14,000 915,85,03,271Total 709,93,14,000 915,85,03,271
Table 2: Budgeted Revenue & Expenditure
9.2 Execution Unit-wise Budgeted Capital Expenditure 2013-2014(Amount in Taka)
Execution Units Revised Budget Actual Expenditure
Unspent
Director(FSR) 100,000,000.00Director-CEMSU 784,525,000.00
XEN-CD-1 2,763,280,000.00XEN-CD-2 753,000,000.00
XEN-E/M-1 295,000,000.00XEN-E/M-2 466,441,000.00
XEN-E/M-3/CD-3 1,768,277,000.00Total 6,930,523,000.00
Table 3: Budgeted Capital Expenditure
9.3 Operational Unit-wise Budgeted Revenue Expenditure 2013-2014
Operational Units Revised Budget Actual Expenditure Unspent
HQ 3,539,560,000.00
Barisal Airport 20,840,000.00
CATC 13,950,000.00CEMSU 158,050,000.00
Civil Circle 16,050,000.00Comilla Airport 5,330,000.00
Cox's bazar Airport 50,475,000.00E/M Circle 28,300,000.00
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Operational Units Revised Budget Actual Expenditure UnspentHazrat Shahjalal Airport
1,185,800,000.00
Ishurdi Airport 51,830,000.00Jessore Airport 37,470,000.00
Osmani Airport 167,120,000.00P&D/QS 5,880,000.00
Shahamanat Airport 397,450,000.00Shahmakdum Airport 27,350,000.00
Syedpur Airport 49,400,000.00575,48,55,000
Table 4: Budgeted Revenue Expenditure (Operational Unit-wise)
9.4 Summary of Budgeted Revenue-Income (Category-wise): 2013-2014
Sl. No.
Description Income Actual
Aeronautical Income1 Landing and Parking charge 193,00,00,000 368,34,59,3462 Housing
3 Overflying4 Route Navigation Charge 221,50,00,000 300,49,53,6115 Boarding Bridge Charge 19,67,50,000 32,70,46,501
Total 701,54,59,458Non-aeronautical Income
1 Embarkation fee-International 78,00,00,000 127,14,60,6102 Embarkation fee-Domestic 1,17,27,000 38,11,6853 AOC(Air Operation Certificate)
4 Pilot license5 Car parking 5,00,00,000 5,84,57,4656 Visitors fee 11,50,65,000 12,23,10,1797 Rent & Lease Rent 22,95,00,000 4,61,81,0508 Interest on FDR 115,53,01,000
9 Cargo Charges 57,72,66,38510 Others(Utility Charges) 6,35,56,439
Total 214,30,43,813
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Grand Total 915,85,03,271Table 5: Budgeted Revenue-Income (Category-wise)
9.5 Summary of Budgeted & Actual Expenditure (Repair & Maintenance): 2013-2014
Sl. No. Description Expenditure Actual
1 Airport Cleaning 27,000,000.002 CDST 1,000,000.00
3 CNG & Fuel 45,000,000.004 Others (Gardening, Sanitary, Maneuver) 40,000,000.00
5 R&M- Building(Civil) 278,650,000.006 R&M- Building(Electrical/Maintenance) 124,900,000.00
7 R&M- Communication Equipment(Civil) 6,360,000.008 R&M- Fuel 20,400,000.00
9 R&M- Vehicle 13,000,000.0010 R&M-Airport(Civil) 279,000,000.00
11 R&M-Airport(Electrical/Maintenance) 108,400,000.0012 R&M-Communication
Equipment(Electrical/Maintenance)102,800,000.00
13 R&M-Others 14,500,000.00
Total 106,10,10,000 68,16,70,135
Table 6: Budgeted Revenue-Income (Category-wise)
9.6 Summary of Budgeted & Actual Administrative Expenditure (Selective): 2013-2014
Sl. No.
Description Amount Actual
1 Depreciation 1,100,000,000.00
82,74,97,243
2 Dividend Paid to Government 500,000,000.003 Donation 800,000.00
4 Electricity Expense 530,000,000.00 40,93,85,2185 Entertainment 1,000,000.00
6 Flight Safety/Operation/Inspection/Training
12,500,000.00
7 Flying & Gliding Expenses 2,000,000.008 Foreign Delegation Expense 2,000,000.00
9 Foreign Tour & Seminar 20,000,000.00
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10 General Provident Fund-Subsidy 1,000,000.0011 Grant for Flight Training 2,000,000.00
12 Holding Tax 19,000,000.0013 Installment of Foreign Loan 366,233,000.00
14 Installment of Government Loan 70,734,000.0015 Interest on Foreign loan 7,325,000.00
16 Interest on Government loan 53,047,000.0017 International Seminar on Aviation 35,000,000.00
18 Land Development Tax 227,720,000.0019 Leave Salary-CAAB Employee 18,000,000.00
20 Leave Salary-GOB 18,000,000.0021 Liveries 34,000,000.00
22 Maintenance for Flying Club 1,000,000.0023 Subsidized Canteen 135,000,000.00 9,26,97,75224 Training-Foreign 14,000,000.00
25 Training-Local 6,000,000.00Total 317,63,59,000
Table 7: Budgeted Revenue-Income (Category-wise)
9.7 Summary of Budgeted & Actual Expenditure (Payroll-Skilled & Unskilled including Ansar): 2013-2014
Sl. No.
Description Expenditure Actual
1 Wages-Skilled 8,88,06,000 5,53,77,0252 Wages-Un-Skilled 6,50,00,000 5,37,17,2403 Security force(Ansar) 12,07,00,000 10,97,48,395
Total 27,45,06,000 21,88,42,660
Table 8: Budgeted Revenue-Income (Category-wise)
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10.0 Ongoing Projects
Sl. No
.
Name of Project Project Cost(Million Taka)
Comments
1. Consultancy Services for Up-gradation of Hazrat Shahjalal International Airport
1866.68 Targeted for completion by June 2014
2. Up-gradation of Hazrat Shahjalal International Airport
41404.75 (Approved)
53120.38 (Revised Proposed)
Targeted for completion by June 2013.
3. Asphalt concrete overlay over the runway at Hazrat Shahjalal International Airport
8780.00 Targeted for completion by June 2011
4. Development of Cox's Bazar Airport (Phase-I)
30265.00 (Original) 54964.21 (Revised)
Targeted for completion by December 2013
5. Extension of Passenger Apron from foxtrot taxiway towards west and export Cargo Apron from northern side of the existing export Cargo Apron at Hazrat Shahjalal International Airport.
4440.00 Targeted for completion by June 2013
6. Construction of CAAB Headquarters Complex at Hazrat Shahjalal International Airport
6141.90 (approved) 10985.28 (Revised
Proposed)
Targeted for completion by June 2014.
Table 9: Budgeted Revenue-Income (Category-wise)
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11.0 Outstanding Income Receivable from different Airlines-Aeronautical:
Name of Unit
Name of Airlines
Grand total
US Dollar Taka
Shah Amanat Airport Biman Bangladesh Airlines 12,257,867 172,576,211 Shah Amanat Airport United Airways 705,008 17,130,877 Shah Amanat Airport Regent Airways 78,340 11,322,179
Shah Amanat Airport Aviana Airways 0 2,051,902
Shah Amanat Airport GMG Airlines 460,886 30,438,101 Shah Amanat Airport Aero Bengal 0 817,059 Shah Amanat Airport Fuchet Air 276,025 30,983,792 Hazrat Shahjalal Airport Biman Bangladesh Airlines 107,484,556 653,010,792
Hazrat Shahjalal Airport Regent Airways 1,678,931 24,518,272
Hazrat Shahjalal Airport United Airways 0 0 Osmani Airport Regent Airways 0 2,844,769 Osmani Airport Biman Bangladesh Airlines 5,486,332 51,334,354 Osmani Airport United Airways 0 5,093,853 128,427,943 1,002,122,161
Table 10: Budgeted Revenue-Income (Category-wise)
12.0 Outstanding Income Receivable from different Airlines-Non-aeronautical:Name of Unit Name of Airlines Total
Shah Amanat Airport Biman Bangladesh Airlines 84,110,052Shah Amanat Airport United Airways 20,628,028Shah Amanat Airport Regent Airways 3,558,472Shah Amanat Airport Aviana Airways 530,029Shah Amanat Airport GMG Airlines 21,319,107Shah Amanat Airport Aero Bengal 48,387Shah Amanat Airport Fuchet Air 17,128,119HazratShahjalal Airport Biman Bangladesh Airlines 430,703,240HazratShahjalal Airport Regent Airways 37,305,905Osmani Airport Regent Airways 276,873
Total 615,608,212Table 11: Budgeted Revenue-Income (Category-wise)13.0 The Planning Phase:
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The audit team started the planning phase (knowledge building stage) of the audit in November, 2014.Since this is a pilot audit, a number of training sessions for audit team have been arranged by the SPEMP-B project for skill development during this time. A series of meetings were held with senior “CAAB officials in Dhaka, including an introductory meeting with the Secretary, MoCA&T (Ministry of Civil Aviation and Tourism) in November, 2015 accompanied by national and international consultants. In this meeting the audit team informed the Secretary about the pilot audit activities and handed over a letter of engagement signed by Director General.
13.01 Entry Meeting with Secretary:At the outset of data collection Audit team met with the Secretary to give brief description what they are going to do in conducting an audit in Civil Aviation Authority of Bangladesh. In this process his office issued a letter to the Chairman of CAAB and instructed to render all sorts of cooperation to conduct the audit.Documentary information was obtained from the CAAB documents, reports and website. Information was also collected through interviews. CAAB officials at headquarters and in the field i.e. Hazrat Shahjalal Airport, Shah Amanat Airport and Sylhet Airport. The focus of the audit is to observe the efficient management and compliance aspect of the revenue generation and expenditure both development and revenue. However, it was essential for the team to see first-hand the prevailing environment at these levels. It includes understanding the entity and its environment, compliance review, assessing the materiality, risk and internal control for the audit planning. Accordingly, the audit team carried out preliminary field visits since December 2014 to CAAB and other three units to gather necessary information for audit.
13.02 Understanding of Audit Team based on the information gathered: CAAB is self financing organization that earns and expenses with the budget
approval by the government. Major part of its income comes from both aero-nautical and non-aeronautical
sources. It has huge amount of liquid assets in form of FDR and a big amount of non-
operating income comes from FDR.
14.0 Overall Audit objectives:
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Audit objectives in performing compliance audits are to gather sufficient appropriate audit evidence, conclude whether the information on a particular subject matter is in compliance, in all material respects, with a particular set of criteria. The objective must be defined in a way that will allow the audit team to conclude against criteria. In line with setting criteria however, the objectives of the compliance audit are as follows:
To verify whether the proper accounting of the collections and deposits of revenue income are maintained.
To examine the utilisation of the CAAB fund. Do the expenditures conform to the rules and regulation both CAAB and GOB? Is the financial record complete and includes only eligible expenditures?
15.0 Audit Approach:
This audit is basically based on system based audit approach. Under this approach the audit was carried out through document review and analysis, interviews with Civil Aviation Authority at Dhaka headquarters and other field offices as mentioned earlier. Moreover The audit was conducted in compliance with International Standards for Supreme Audit Institutions (ISSAIs) along with national standard of Audit.Auditors found the weakness in internal control system in CAAB that is why the focus of our audit is a comprehensive one and audit team carried out substantive test by drawing representative sample. The audit concentrated on the audit areas selected and consider the materiality in monetary value and high risk areas together. In addition, audit considered the audit methodologies:
To analyse and ensure that all the expenditures and fund disbursements are authorised, vouchers are correctly classified.
To study and analyse various reports (if any) prepared by CAAB.
16.0 Audit Criteria: Approval of the transactions:
1) All receipts are collected following the approved method and rates approved by the CAAB and GOB.
2) All payments are made after receiving the approval from the proper authority.
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ISSAI- 1200ISA 200: Section - "Overall Objectives of the Auditor"; Para 11
ISSAI- 4100.3.24Chapter-3: Objective to be achieved
System based Audit Approach
3) All payments are made in the correct figures approved by the authority. Compliance of financial rules and regulations:
1) Different receipts are collected and deposited to the funds following the financial rules and regulations.
2) Payments are made following the financial rules and regulations.3) Payments are made only when the activities actually occur.
Income collected by third parties are cross-checked:1) Embarkation fee collected by air lines should be cross-checked with
immigration authority. Recording the transactions and preserving evidence:
1) All transactions of receipts and payments are recorded in books of account such as cash book, stock registers, etc.
2) All transactions of receipts and payments are sequentially recorded day to day and balancing the accounts monthly and yearly.
3) No transaction of previous/ next year are included in current year’s account.4) All vouchers and evidence are preserved against each transaction.5) The minutes of all meeting are preserved sequentially.
17.0 Scope of Audit:The Fundamental Auditing Principles explain that compliance audit is important because government agencies, programmes and activities are often the result of particular laws and regulations. Decision makers need to know whether laws and regulations are being followed, whether they have the desired results and if not, what revisions are necessary (ISSAI 300, 3.4.2). The scope of audit will help us to examine whether the audited entity are in compliance with the laws and regulations. Fundamentally the audit needs to cover operational aspects of Civil Aviation Authority of Bangladesh for the year 2013-2014 but our audit scope is narrowed down and it will only cover the areas identified based on data analysis. However, in line with the audit objectives the audit team will examine:
Capital expenditure for construction and maintenance; Revenue income from aeronautical and non-aeronautical activities; Major repair and maintenance works from revenue budget; Payroll particularly for wages (skilled, unskilled and Security Forces-Ansar); Selective Administrative Expenses and Interest on FDR.
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ISSAI 4100.2.2.1.8When the SAI carries out compliance audit, it is
the discretion of SAI to determine the scope and
nature of work.
18.0 Assessing Risk:The purpose of the risk assessment is to identify the risks associated with performing operations of Civil Aviation Authority. The audit will try to identify what risk comes from law, rules, risky transactions, activities etc. Moreover, understanding inherent limitations i.e. human errors, improperly designed systems and significant changes in the system are also consideration of audit for assessing risk. In this line, however, ISSAI suggests that audit resources will be allocated to the operations with the highest risk. The risk assessment will directly affect the nature, timing and extent of audit resources allocated. Areas assessed high risk will be focused in audit in terms of resource and application of substantive procedures. It is summed up that reviewing of audit entity and its internal control system is the basis of risk assessment. The following Table-12shows the issues of audit and their risk level by considering judgemental approach and analysing information collected by the audit team from the entity.
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ISSAI 1315Identifying and Assessing the Risks of Material
Misstatement through
Understanding the Entity and Its Environment
Audit Areas Risk Reason Detail Audit Programe
(Annexure)High Medium Low
Aeronautical Revenue
High • Internal control is weak.• Main source of income
with very high value item.• Related rules
®ulations may not be followed.
• All the revenues earned may not be recorded as income.
• All the revenues may not be deposited into bank account in a timely manner.
Annex-02
Non-aeronautical Revenue
High • Internal control is weak.• Main source of income
with very high value item.• Related rules
®ulations may not be followed.
• All the revenues earned may not be recorded as income.
• All the revenues may not be deposited into bank account timely manner.
Annex-02
Construction and Maintenance-Capital
High • A number of high value projects are on- going.
• Selection of contractor payment for the works may not in compliance with rules and legislation such as PPA 2006 and PPR-2008
• Lack of proper accounting
Annex-01 & 06
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Audit Areas Risk Reason Detail Audit Programe
(Annexure)High Medium Low
system. • Transaction may be
fabricated and not accounted for.
Repair & Maintenance-Revenue
High • A large number of repair and maintenance with high value.
• Selection of contractor payment for the works may not be in compliance with rules and legislation such as PPA 2006 and PPR-2008
• Lack of proper accounting system.
• Transaction may be fabricated and not accounted for.
Annex- 03 & 06
Wages- Skilled and & Unskilled
Medium • Payment made above may exceed the limit set by the Ministry of Finance.
• The disbursement criteria may be faulty & ghost worker may have prevailed.
Annex-04
Payment for Security Forces (Ansar)
Medium • Actual payments may be more than contract.
• There may be fabricated transaction.
Annex- 04
Interest on FDR High • Amounts against different funds such as depreciation, deposited into various banks in forms of FDR.
• Interest received on FDR
Annex- 02
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ISSAI 1320Materiality in Planning and Performing an Audit
ISA 320, Para 10
Audit Areas Risk Reason Detail Audit Programe
(Annexure)High Medium Low
is Very high value• Inherently risky area
Administrative Expenses(Selective items)
High • Expenditure may not be properly approved.
• Expenditure may exceed budget without proper approval.
Annex- 04
Engagement of Consultants
High • Hiring services is an inherently risky area because of payments to outsiders.
• In hiring consultants PPA and PPR may not be complied with.
• TOR may not be properly designed.
• Irregular payments may be made against agreement or TOR.
Annex-06
Table-12: Areas of Audit and their Risk Level
19.0 Setting the Materiality:When determining materiality for planning purposes in the public sector both quantitative and qualitative matters as well as the nature of items are of importance. The context in which the matter appears may be of importance. Furthermore, the inherent nature or characteristics of items, or groups of items, may render them material. When determining whether a particular class of transactions, account balance, disclosure, or other assertion which is part of the financial reporting framework, is material by virtue of its nature, public sector auditors also take into account qualitative aspects such as:
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The context in which the matter appears, for example if the matter is also subject to compliance with authorities, legislation or regulations, or if law or regulation prohibits overspending of public funds, regardless of the amounts involved;
The needs of the various stakeholders and how they use the financial statements; The nature of the transactions that are considered sensitive to users of the financial
statements; Public expectations and public interest, including emphasis placed on the particular
matter by relevant committees in the legislature, such as a Public Accounts Committee, including the necessity of certain disclosures;
The need for legislative oversight and regulation in a particular area; and The need for openness and transparency, for example if there are particular
disclosure requirements for frauds or other losses.The analysis should include against each heading:
The Percentage it represents of the total expenditure and Revenue Income A Prima facie allocation of audit priority based on this percentage.
Public expenditure audited by the OCAG is generally expenditure driven meaning gross expenditure is often the most appropriate benchmark for setting materiality. In addition, in case of parastatal entities like CAAB, our consideration also includes revenue income. Because CAAB is a self earning and expenditure based entity. As CAAB does not prepare financial statement in timely manner and reliability upon financial statement does not meet our purpose because of inaccuracy found in accounts. So, setting materiality level we have considered budgeted income and expenditure for the year 2013-2014 under audit review. However, a misstatement in the revenue collection, budget and expenditure statement would be considered material. Based on auditors' judgement and best audit practices, the materiality has been established at 1% of total revenue.
Quantitative ConsiderationsAt the planning stage use expected full year position.
Materiality base Current year (Taka in lakh)
1%
Revenue 70,993.14 710Construction & Maintenance 69,305.23 693Maintenance-Revenue 17,386.41 174Payroll-Casual Worker including Ansar 27,450.00 275Administrative Expenses 31,763.59 318Accounts Payable
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Interest on FDR
Total
We do not consider CAAB to be extremely sensitive, but it is not completely lacking sensitivity either as there is some public interest, so, we have set planning materiality at 1.0% of Revenue as revenue is higher than gross expenditure in the account.
Civil Aviation Authority of Bangladesh is asset intensive; therefore, to use Gross Asset to set materiality would result in exceptionally high materiality level and may not be appropriate for our audit.
20.0 Potential Audit SignificanceFrom the information and knowledge gained in the planning phase and risk analysis, the audit team identified several issues of potential audit significance. Each of these issues was assessed by the team against a number of factors, including:
Relevance/significance of issue Materiality (how much money is involved?) Interest to parliamentarians, public, media Contextual significance
Audit Entity’s management riskWhat is the risk that objectives will not be met as a result of
Weaknesses in planning, implementation, internal controls, monitoring and supervision, measurement, reporting
Staff shortages Influence peddling, corruption
Impact of auditWill the audit help to improve the prevailing condition by
Presenting new, complete and up to date information Raising awareness about the issues Offering solutions for improvement
AuditabilityWill the team be able to conduct the audit successfully in terms of
Obtaining sufficient information
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Having adequate audit resources (number, skills, time)
21.0 Summary of Audit Locations:The audit team carried out audit in different cost centres and places under Civil Aviation Authority, Bangladesh in connection with audit areas selected and activities irrespective of geographical location. List of the sites visited by the audit team is given below:
Civil Aviation Head Quarter(Including All Cost Centres other than Hazrat Shahjalal Airport);
Hazrat Shahjalal Aipport Shah Amanat Airport Sylhet Airport Cox’s bazar Airport.
22.0 Audit Resources Available:The manpower composition of the pilot audit team is as follows:
Sl. No. Name Designation01. Mr. xxxxxxxxxxxx Director, Works Audit Directorate & Team
Leader02. Mr.xxxxxxxxxxxxxxxx Deputy Direcor, Works Audit Directorate03. Mr. xxxxxxxxxxxxxxxx Deputy CAO, CAO, Ministry of Education
04. Mr. xxxxxxxxxxxxxxxx A&AO, Works Audit Directorate05. Mr. xxxxxxxxxxxxxxxxx A&AO, Works Audit Directorate06. Mr. xxxxxxxxxxxxxxxxx Superintendent, Works Audit Directorate
The audit was conducted under the direct supervision of Director General of Works Audit Directorate.
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23.0 Audit Road Map:Activities Expected completion Date
Completion of audit planning February15, 2015Audit Fieldwork: CAAB HQ and other 3 field offices February12 to June 11,
2015(Annex-07)Preparation of AIR 3rdJune 30, 2015Issuance of AIR 4th week of June, 2015
24.0 ISSAI References:The following ISSAIs are consulted during the preparation of the audit planning:
1) ISSAI-1200: Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing
2) ISSAI-1210: Agreeing the Terms of Audit Engagements3) ISSAI-1230: Audit Documentation4) ISSAI-1240: The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial
Statements5) ISSAI-1265: Communicating Deficiencies in Internal Control to those charged with
Governance and Management6) ISSAI- 1300: Planning and Audit of Financial Statements7) ISSAI- 1315: Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and its Environment8) ISSAI- 1320: Materiality in Planning and Performing an Audit9) ISSAI- 1330: The Auditor’s Responses to Assessed Risks10) ISSAI- 1500: Audit Evidence11) ISSAI- 1520: Analytical Procedures12) ISSAI- 1530: Audit Sampling13) ISSAI-4000: General Introduction to Guidelines on Compliance Audit.14) ISSAI-4100: Compliance Audit Guidelines for Audits Performed Separately.15) ISSAI-4200: Compliance Audit Guidelines related to Audit of Finance Statement.
25.0 Developing Audit Programme:Once the audit areas are to be used and their relative risk has been identified, it is necessary to write a series of procedures to document the work that is going to be carried out according to the plan arrived during the planning stage. In this process audit programmes are the tools to be used to ensure the audit objectives are achieved in an efficient and timely manner. Audit programmes specify the tests to be followed by the audit team in order to implement the chosen audit approach. On the basis of the team’s assessment of potential audit areas, several audit areas have been selected for detailed audit examination.
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However, the detailed audit programmes for selected audit areas are shown in Annex: 01 to 07.
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Annex-01
26.0 Details Audit Programmes:
(I) Prescribed Audit Programme : Civil, Electrical and Mechanical Works and & Maintenance Infrastructure Development is done by the Chief Engineer, CAAB.
System objective:Civil, Electrical and Mechanical Works & Maintenance are done according to an appropriate standard of quality on the basis of a genuine need at the right places as per approved drawing and design in conformity with the PPA-2006 & Public Procurement Rules-2008.
Sl. Details of Risks Potential Consequences
1 Infrastructure development works were not actually done
Expenditure is overstated & loss of money
2 Tender procedure was not proper Competitive bid was not ensured as a result quality of works was not ensured
3 Failure to fully apply the Public Procurement Rules
Violation of PPR
4 Material test reports were not proper Quality of works not ensured5 Security deposit and bank guarantee
were not ensuredFraud
6 Awarding contract to parties incapable of performing the job
Works would not be completed with proper quality or delayed or contractor may leave work undone
7 Lack of proper supervision and monitoring
Quality of works not ensured
8 Stoppage of work due to budget overrun
Possibility to make the work incomplete, and expected benefits may be impaired
9 Use of low quality materials and equipment
Longevity of works would be impaired
10 Inadequate documentation and absence of good accounting practice
Lack of control and payment may not be properly recorded and may be miscoding
11 Mismatching the transaction figure of accounts office and executive office
Wrong accounting and lack of reconciliation
12 Reconciliation may not be done Wrong accounts
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Sl. Details of Risks Potential Consequencesamong the accounts, executive office and bank
13 Poor work quality from non-compliance with specification
Expected output may not be available
14 Non-competitive rates More expenditure15 Variation was not in order Misuse of money16 Works not completed in scheduled
timeCost and time overrun
17 Payment for work not done Works would not be completed timely18 Payment for unauthorized work Fraud
19 Changing scope of work during execution
Cost escalation
20 Financial support to contractors not covered by rules or through manipulation
Inappropriate payment may pose fraud
21 Non-completion of work according to design
Less quality works
22 Non-tender item/additional work involving substantial amount
Budget overrun or manipulation
23 Bills & MB were not consistent Payment made against wrong calculation, resulting over payment
24 Government revenue was not deducted duly and not deposited
Government did not receive revenue as demanded
Audit Objectives for Civil, Electrical and Mechanical Works & Maintenance:The main controls over civil, electrical and mechanical works and & maintenance are to ensure that:
There was a genuine need for the work; The work was in consistency with the Public Procurement Rules; The amount is accounted for to the correct head of account; The individual who authorizes does so at an amount within their delegated authority
limit; The amount is charged to the correct ledger code/account figure; The work was a satisfactory completion in a timely manner; Taxes are paid as appropriate; Expected benefits are received from the expenditure i.e. value for money.
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Audit Objective Definition
Completeness All infrastructure works expenditure relevant to the period has been recorded.
Occurrence All of the infrastructure works actually occurred.Accuracy All infrastructure works expenditure has been recorded at the
correct value during the period.Classification Infrastructure works expenditure has been properly classified in
the government accounts with correct figureCut-off Infrastructure works expenditure has been recorded in the
schedule timeRegularity Infrastructure works expenditure is treated and accounted for in
line with GOB regulations and donor regulations.
1) Documents obtained:
The following documents were obtained for audit review:a) Budget provision.b) Administrative sanction.c) Technical sanction.d) Standard Tender Document.e) Design and Drawings of the works.f) Copy of the advertisement.g) Report of Tender Evaluation Committee.h) Decision of Tender Evaluation Committee.i) Notification of Award (NOA).j) Bill of Quantities (BOQ).k) Time schedule.l) Contract agreements.m) Security deposits register.n) Schedule of rates.o) Measurement Book (MB).p) Expenditure sanction.q) Contractor’s ledger.r) Stock issue register.s) Equipment issue registers.t) VAT and Income Tax Register.
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u) Work progress register.v) Work completion report.w) Sale proceeds of tender forms.
2) For Checking Contractors Bill:x) CPW CODEy) Laboratory Test Report of Goods.z) Contractors Site Book.aa) Measurement Book.bb) Contractors Ledger.cc) Stock Issue Register.dd) Appraisal Report (Feasibility Study).ee) Machinery Issue Register.ff) VAT and Income Tax Register.gg) Advancement of Works Registerhh) Works completion Report.
Audit Entity: Civil Aviation Authority of Bangladesh
WP Ref:
Period Under Review:
2013-2014 Prepared by Date:
Reviewed by Date:
Sl. Audit Test Audit assertions
Signed/date WP Ref
1 SUBSTANTIVE TEST: Obtain a listing of works done for CAAB.Select a sample of works from this listings using IDEA.For each sample items selected:a) Check to supporting documentation
for evidence that an estimate was prepared and sanctioned.
b) Were the estimate(s) approved by a competent authority?
c) Is the amount of the approved
OccurrenceRegularity
Regularity
A1
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Sl. Audit Test Audit assertions
Signed/date WP Ref
estimate expressed in words as well as in figures and is it signed & dated by the officer approving the estimate?
d) Test the rates by comparison with the schedule of rates.
e) Was the tender duly called for?
f) Review the number of tender documents sold and tenders received. In case of big variation, determine the cause of the variation.
g) Have all tenders furnished earnest/security money along with their offer; and security deposits by the parties in whose favour contracts have been awarded ?
h) Whether there is any non-tendered items in the bills and it was duly approved?
i) Was the contractor penalized for unwarranted delays in completion of the work within the stipulated time frame?
j) Confirm that there is audit trail i.e. follow the work beginning from the issue of notice to final payment.
k) If possible, observe that the structure
AccuracyOccurrence
AccuracyRegularity
Regularity
RegularityCompleteness
Regularity
AccuracyOccurrence
Regularity
OccurrenceCompleteness
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Sl. Audit Test Audit assertions
Signed/date WP Ref
exists or obtain assurance from alternative sources that the work in question has been executed according to plan.
l) Were the materials issued have been valued as per rules and recovered?
m) Have the works exceeded original estimates and if so was this properly approved?
n) Was the lowest tender accepted? If not, ensure that the reasons have been recorded. Examine each case of non-acceptance and obtain sufficient and adequate explanation for such action?
o) Was a certificate of satisfactory completion of work furnished by the competent authority and ensure that there were no unusual delays in obtaining such a certificate?
p) Verify that VAT and income tax have been recovered, recorded and accounted for.
q) Confirm that all key decisions are adequately documented and reasons for a decision are given.
r) Examine justification for changes in design, scope and specification during execution stage. Are financial consequences commensurate with
OccurrenceRegularity
AccuracyRegularity
Regularity
RegularityAccuracy
Completeness Regularity Accuracy
Accuracyclassification
Classification
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Sl. Audit Test Audit assertions
Signed/date WP Ref
economic benefits and do they support project objectives?
s) Were the relevant rules of PPR 2006 & PPR-2008 followed?
t) Ensure that the transaction figure is accurately recorded.
u) Has the expenditure incurred exceeded the budgeted head?
Cut offAccuracy
Regularity
AccuracyClassification
Classification2 CONTROL TEST: Ensure that the
estimates were not prepared in a piecemeal manner.
Accuracy
3 CONTROL TEST: Was the reconciliation made between the bank, accounts and executive office?
RegularityCompletenessAccuracy
4 CONTROL TEST: Ensure that the transaction figure accurately matches with accounts office and concern executive office.
CompletenessAccuracy
Findings:
Prepared by: Date:
Reviewed by: Date:
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Annex-02
(II) Prescribed Audit Programme: Total Revenue Earnings
Aeronautical: Aeronautical revenue stream includes:(1) Landing charge(2) Aircraft parking & Housing (apron and hangar)(3) Overflying(4) Route Navigation charge(5) Boarding Bridge Charge
Non-aeronautical: non-aeronautical revenue stream includes:(1) Embarkation fee-International(2) Embarkation fee-Domestic(3) AOC(Air Operation Certificate)(4) Pilot license(5) Car parking(6) Visitors fee(7) Rent & Lease Rent(8) Interest on FDR(9) Cargo Charge (10) Others (Forfeited Income)
Total revenue is generated by:a. CAAB headquarterb. Hazarat Shajalal international Airportc. Shah Amanat International Airportd. Osmani international Airporte. Jessore Airportf. Shah Mukhdum Airportg. Comilla Airporth. Cox’s Bazar Airporti. Sayedpur Airportj. Barisal Airportk. Iswardi Airport
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System objective:Revenue is generally generated into two forms, firstly aeronautical and secondly non-aeronautical. However, 65% of total revenue comes from aeronautical sources. System objective is to check whether the revenue has been collected properly and recorded in accounts in proper manner.
Sl Details of Risks Potential Consequences1 Revenue may not be collected
promptly as accrued.Large volume of arrear to different airlines
2 Lack of proper control system may impair the genuineness of income stream.
Actual income may not be received and account for.
3 Failure to collect accrued revenue from concerned airlines and other parties (risk of bad debts – particularly for long standing debts).
Cash flow shortage may be occurred and in long run the dues may not be collected.
4 Measurement of Space for Rent/Lease may not be measured properly.
Income may be impaired.
5 Air billing, navigation fee, boarding bridge charge, and parking charge are prepared manually.
Manually prepared bill may be manipulated and wrongly recorded in the books of accounts.
6 Aero-nautical income such as embarkation fee collected by airlines is not in a position to counter check with immigration authority.
There is strong possibility to undermine the actual income stream without counter check.
7 Cargo handling done by Biman Airline is not under the control of CAAB.
CAAB may get less charge from cargo import and export.
8 Renewal problem in case of termination of lease contract.
In some cases client sues that disrupts normal flow of income.
9 In case renewal, lack of competitiveness may impair proper flow of income.
Less income generation
10 Income is improperly exempted by the authority
Loss of income.
11 Is training aircraft operating for apprentice pilot charged properly?
Loss of income.
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Audit Objectives for revenue income:The main controls over revenues are to ensure that:
Income was genuine and accounted for to the correct head of account; Lease agreement and rent of space are competitive; Embarkation fee is cross-checked with immigration and collected in timely manner; Income is not exempted without proper authority. Charge for cargo scanning is accurately measured and properly recorded.
Audit Objective Definition
Completeness All incomes relevant to the period have been recorded.Occurrence All incomes actually occurred. Accuracy All incomes have been recorded at the correct value during the
period. Classification Revenue accrued has been properly classified according to CAAB
rules.Cut-off Income should be recorded in the current period. Regularity Revenue is treated and accounted for in line with GOB regulations
and CAAB Rules.
1. Documents obtained:
The following documents should be obtained for audit review:1) Civil Aviation Rules-1984 (269) should be reviewed for the charges for landing,
parking and housing, embarkation, hand-carried bags route navigation facilities etc.2) Air Billing System (Forms).3) Overfly Charge Document (Air Traffic Control Record Properly).4) Air Operator Certificate (Rule-112).5) Pilot License Fee. 6) Lease agreement.7) Rent Deed.8) Rules for Signboard display.
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Audit Procedures:
Audit Entity: Civil Aviation Authority of Bangladesh
WP Ref:
Period Under Review:
Year ending 30 June 2014 Prepared by
……. Date:
2013-2014 Reviewed by
……. Date:
Sl. Audit Test Audit assertions Signed/date
WP Ref
Aeronautical Income1 SUBSTANTIVE TEST: Obtain a listing of
works done for CAAB.Select a sample of works from this listings using IDEA Software.For each sample items selected:
a) Landing charge is imposed based on aircraft weight;
b) Landing charge shall be properly accounted for and collected from airlines in timely manner.
c) Foreign exchange conversion rate is properly applied.
d) Aircraft engaged in training purpose is charged as per tariff.
e) Air operator certificate issuance in accordance with CAR (R-112).
f) Pilot Licensing Certificate is issued and charged at specified rate.
g) Route navigation is recognized, charged as per tariff, collected and
Accuracy OccurrenceRegularity
Classification AccuracyCutoff
Regularity Accuracy
Regularity Accuracy
Regularity Accuracy
Regularity Accuracy Completeness
Regularity Accuracy Completeness
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accounted forh) Boarding Bridge charge is imposed
according to time taken.
i) Parking charge is imposed according to tariff rules.
j) Embarkation fee is charged as per tariff rules and properly accounted for.
k) Lease rent is charged and received duly manner.
l) In case of default in payment any installment interest is charged according to agreement.
m) In case of default Security Deposit is forfeited duly and accounted for
n) In case of default penalty was charged and received properly.
o) Due lease rent is received fully.
Regularity Accuracy
Regularity Accuracy Completeness
Regularity Accuracy Completeness
Regularity Accuracy Completeness
Regularity Accuracy Completeness
Accuracy ClassificationCutoff
Regularity, completeness, Accuracy Accuracy Completeness
2 CONTROL TEST: (a) Air Billing is properly documented and communicated to the accounts departments.
Regularity CompletenessAccuracy
CONTROL Test: (b) Pilot Flight Plan should be checked with landing time.
Regularity AccuracyCompleteness
CONTROL Test: (c) Overflying charge is properly communicated to the accounts department.
Regularity AccuracyCompleteness
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Non-aeronautical Income:3 SUBSTANTIVE TEST: Obtain a listing of
works done for CAAB.Select a sample of works from this listings using IDEA.For each sample items selected:
a) Embarkation fee is charged, collected and accounted for properly.
b) Leasing process is competitive and renewal is done as per terms and conditions.
c) Rent of space is approved by proper authority.
d) Rent of space is collected in a timely manner and accounted for and renewed as per terms and conditions.
e) Signboard display is allowed in designated area , charged as per approved rate and collected properly
Accuracy Cut offRegularity
Regularity Accuracy
Regularity Accuracy
Regularity AccuracyCutoff
Regularity Accuracy
2 CONTROL TEST: Embarkation fee-International is crossed checked with other appropriate agency.
Accuracy Completeness
3 CONTROL TEST: Cargo scanning is properly documented.
Accuracy Completeness
Findings:………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..Prepared by: Date:
Reviewed by: Date:
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Annex-03
(III) Audit Programme : Repair and maintenance System objective:
Repair and maintenance is correctly paid following applicable rates. The repair and maintenance process is documented in accordance with the financial
policy and procedures instructions.
Sl.
Details of Risks Potential Consequences
1 Payment of Repair and maintenance may be fake
Irregular payment made, possibility of fraud
2 Payments of Repair and maintenance may be made more than actual
Irregular payments
3 Payments of Repair and maintenance may not be made for actual need
Unjust payments
4 Payments of Repair and maintenance may be charged to the wrong period of account
Misstatement in the annual accounts, breach of annual budgetary accountability
Audit Objectives:
To evaluate the main controls over repair and maintenance to ensure that: Up to date procedures exist for the proper authorisation of payments of repair and
maintenance including necessary supporting documentation requirements. All payments are made within the applicable rates approved by the authority or the
ministry. Repair and maintenance is made in accordance to the need assessment. Repair and maintenance is properly recorded and accounted for.
Audit Objective
Definition
Completeness
All payments of repair and maintenance relevant to fiscal year 2013-2014 have been recorded.
Occurrence All recorded payments actually occurred during the period of review.Accuracy The payments of repair and maintenance were recorded at the
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correct value during the fiscal year 2013-2014.Classification Payments have been properly classified in the fund accounts.Cut-off Payments have been recorded in the correct accounting period.Regularity Payments are in line with relevant rules & regulations.
Repair and maintenance:
Audit Entity:
Civil Aviation Authority of Bangladesh
WP Ref
Period Under Review:
2013-2014 Prepared by Date
Reviewed by Date 21.04.2013
Sl. No
Audit Steps Audit assertions
Signed/date WP Ref
1 SUBSTANTIVE TEST: Obtain a listing of repair and maintenance payments done for CAAB.Select a sample of repair and maintenance expenses from this listings using IDEA.
For each sample items selected:
a) Ensure payment of repair and maintenance was correctly calculated with the line of approval rates;
b) Ensure that the payment of repair & maintenance has been entered into the correct code in the accounting system/general ledger
Accuracy
Accuracy, Classification Completeness
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Sl. No
Audit Steps Audit assertions
Signed/date WP Ref
in the correct year and so is included in the correct financial statements.
c) Confirm payment of repair and maintenance is madeactually
d) Ensure repair and maintenance was only paid at an authorised rate approved by the authority.
e) Recalculate the payment of repair and maintenance to ensure that they have been recorded at the correct amount in accordance with the authorized rates;
f) Ensure that repair and maintenance has approval of the requisite authority.
and cut-off
Occurrence
Accuracy
Regularity
Accuracy
Regularity
2 Control Test: Ensure that the yearly rise in payment of repair and maintenance has been appropriately authorised, and that the relevant budget limit has not been breached.
Regularity
Findings:…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..Prepared by: Date:
Reviewed by: Date:
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Annex-04
(IV) Audit Programme : Wages for casual Labour and Security Force(Ansar)
System objective: Payments are made to the correct employees at the correct rates for work done for
the authority. The wages are documented in accordance with the financial policy and procedures
and instructions.
Sl. Details of Risks Potential Consequences1 Payment made to workers who are
not bonafide.Irregular payment made, possibility of fraud.
2 Payment made above may exceed the limit set by the Ministry of Finance.
Irregular payments.
3 Payment made to workers more than once.
Duplicate payments.
4 Payment charged to the wrong period of account.
Misstatement in the annual accounts, breach of annual budgetary accountability.
5 Payment made at the wrong amount /in excess or below entitlement.
Payments at incorrect amount.
6 Starters and leavers are properly authorised and not paid before or after employment started/finished.
Irregular payments.
Audit Objectives:
The main controls over wages are to ensure that: Up to date procedures exist for the proper authorization of payments including
necessary supporting documentation requirements. All payments are within the Ministry of Finance pay limit. Starters and leavers are properly authorised and not paid before or after
employment started/finished. Changes to pay details are properly authorised and made correctly.
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Audit Objective
Definition
Completeness
All wages relevant to the period have been recorded.
Occurrence All recorded wages actually occurred during the period of review.Accuracy The wages were recorded at the correct value during the period.Classification Payments have been properly classified in the CAAB accounts.
Cut-off Payments have been recorded in the correct accounting period.Regularity Wages are in line with government regulations.
Wages for casual Labour and Security Force(Ansar)
Audit Entity : Civil Aviation Authority of Bangladesh
WP Ref
Period Under Review:
2013-2014 Prepared by
Date
Reviewed by
Date
Audit Procedure:Sl. Audit Steps Audit
assertionsSigned/date WP Ref
1 SUBSTANTIVE TEST: Obtain a listing of payments of irregular workers made for CAAB.Select a sample of payments from this listings using IDEA.For each sample items selected:a) Ensure first payment was correctly
calculated with reference to start date (contract);
b) Ensure that the first payment has been entered into the accounting system/general ledger in the correct year and so is included in the correct financial statements. Agree start date to contract of employment/personnel
Accuracy
Accuracy, Completeness and cut-off
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Sl. Audit Steps Audit assertions
Signed/date WP Ref
records/letter of appointment.
c) Confirm payment is to a bona fide employee (by reference to signed contract).
d) Ensure employee was only paid at an authorised rate within the Ministry’s pay limit.
e) Ensure last payment was correctly calculated with reference to leaving date (personnel records) taking into account any relevant allowances or outstanding leave;
f) Ensure that the last payment has been entered into the accounting system/general ledger in the correct year and so is included in the correct financial statements.
Occurrence
RegularityAccuracy
Regularity
AccuracyClassification
ClassificationAccuracy
Findings:………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Prepared by: Date:
Reviewed by: Date:
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Annex-05(V) Audit Programme : Administrative expenses(Selective items)
System objective: The Administrative expenses (selective items) are incurred in accordance with the
financial rules and regulations. Expenditure is made for meeting the purpose at applicable rates.
Sl Details of Risks Potential Consequences1 Payment of administrative expenses may be
fake.Irregular payment made possibility of fraud.
2 Payments of expenses may be made more than actual
Irregular payments.
3 Payments may be made for personal gain rather than official.
Unjustpayments.
4 Payments may be charged to the wrong period of account.
Misstatement in the annual accounts, breach of annual budgetary accountability.
Audit Objectives:Evaluate the main controls over administrative expenses to ensure that:
Up to date procedures exist for the proper authorization of payments of administrative expenditure including necessary supporting documentation requirements.
All payments are within the approved rates and entitlement. Expenditure is made on need basis. Expenditures are properly recorded and accounted for.
Audit Objective DefinitionCompleteness All expenses relevant to 2013-2014 have been recorded.Occurrence All recorded payments actually occurred during the period of
review. Accuracy The payments were recorded at the correct value during the
fiscal year.Classification Payments have been properly classified in the fund accounts.Cut-off Payments have been recorded in the correct accounting period.Regularity Payments are in line with rules.
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Administrative Expenses
Audit Entity
CAAB WP Ref
Period Under Review:
2013-2014 Prepared by ........ DateReviewed by
.............. Date
Sl. Audit Steps Audit assertions Signed/date
WP Ref
1 SUBSTANTIVE TEST: Obtain a listing of administrative expenses incurred for CAAB.Select a sample of expenses from this listings using IDEA.For each sample items selected:a) Ensure payment of expenses was
correctly calculated in line with approved rates;
b) Ensure that expenditure payment has been entered into the accounting system/general ledger in the correct year and so is included in the correct financial statements.
c) Confirm that expenditure payment is
for actual need
d) Ensure that expenses were only paid at an authorised rate approved by the authority;
e) Recalculate the expenditure payment to ensure they have been recorded at the correct amount.
RegularityAccuracy
Accuracy,Completeness cut-off
Occurrence
Regularityaccuracy
AccuracyClassificationRegularityCutoff Regularity
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Sl. Audit Steps Audit assertions Signed/date
WP Ref
f) Ensure that the transactions have been appropriately coded within the general ledger.
g) Ensure that the yearly rise in payment has been appropriately authorised and relevant budget has not been breached.
h) Is the expense paid complying with prevailing rules
CutoffRegularityOccurrence
2 Control Test: Ensure that the yearly rise in payment of administrative expenses have been appropriately authorised, and the relevant budget limit has been breached.
Regularity
Findings:…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….
Prepared by: Date:
Reviewed by: Date:
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Annex-06(VI) Audit Programme: procurement
System objective: Based on the planning decision for the audit areas we will select sample transactions
on procurement of goods, works and services.
Sl. Details of Risks Potential Consequences
1 Payment of procurement may be fake.
Irregular payment made possibility of fraud.
2 Payment of procurement may be more than actual.
Irregular payments
3 Need assessment is not done before procurement made.
Procurement does not match actual requirement.
4 Payments of procurement may be charged to the wrong period of account.
Misstatement in the annual accounts and breach of annual budgetary accountability.
Audit Objectives: To ensure that payments were made for goods, works and services delivered in
accordance with PPA-2006 and PPR-2008. To ensure that the transactions are free of material misstatement.
Audit Objective
Definition
Completeness
All payments of procurement for the fiscal year 2013-2014 are properly recorded.
Occurrence All recorded payments actually occurred during the period of review.Accuracy All payments of procurement were recorded at the correct value
during the fiscal year 2013-2014.Classification Payments have been properly classified according to the nature of
expenditure.Cut-off Payments have been recorded in the correct accounting period.Regularity Payments are in line with PPA and PPR.
Audit CAAB WP Ref
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Entity:Period Under Review:
2013-2014 Prepared by ............... Date
Reviewed by .............. Date
Sl. No
Audit Steps Audit assertions
Signed/date WP Ref
1 SUBSTANTIVE TEST: Obtain a listing of procurements goods, works or services done for CAAB.Select a sample of procurements either goods, works or services from this listing using IDEA.For each sample items selected:
a) Check the transaction to its prime document (i.e. Contract, Notification of Award) to ensure that what has been invoiced is what was ordered.
b) Ensure that the price on the invoice is in agreement with the notification of award and contract document.
c) Check with receiving documents to ensure that the quantities specified bill of quantities were received.
d) Ensure that the calculations of the payment considered all applicable discounts, deductions such as VAT Income Tax Retention Money etc. and that there are no over or underpayments.
e) Check the calculation of the amount paid with the amount entered in the
Regularity
Accuracy
Occurrence
Accuracy
Regularity
Accuracy
Regularity
AccuracyClassification
Page | 287
Sl. No
Audit Steps Audit assertions
Signed/date WP Ref
accounts.
f) Check that the payment was approved by an authorized official and confirm that the transaction is within the budget criteria (Year end cut-off.)
g) Review large and exceptional items around year-end to ensure that the item is a proper charge for the year under audit.
h) Review purchases around year end to ensure that the purchases are relevant to the account to which they are charged.
Cutoff
AccuracyClassificationCutoff
AccuracyClassification
ClassificationCutoff
2 CONTROL TEST: Annual Procurement Plan is prepared before procurement and approved by proper authority.
RegularityOccurrence Accuracy
3 CONTROL TEST: Annual Procurement Plan is based on need assessment.
RegularityOccurrence Accuracy
Findings:……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Prepared by: Date:
Reviewed by: Date:
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Annex-07
(VII) Audit Execution Time Schedule
Sl Operational Units Time Required Working days
01 CAAB-HQ, Kurmitola, Dhaka 8 days03 HazratShahjalal Airport, Kurmitola, Dhaka 14 days03 CEMSU, Kurmitola, Dhaka 7 days04 SE, Civil Circle, Kurmitola, Dhaka 5 days05 XEN-CD-1, Kurmitola, Dhaka 7 days06 XEN-CD-2, Kurmitola, Dhaka 6 days07 SE, E/M Circle, Kurmitola, Dhaka 4 days08 XEN-E/M-1, Kurmitola, Dhaka 6 days09 XEN-E/M-2, Kurmitola, Dhaka 5 days10 Osmani Airport, Sylhet 2 days11 SE, P&D/QS, Kurmitola, Dhaka 6 days13 Shahamanat Airport, Chittagong 4 days13 Directorate of Immigration, Kurmitola, Dhaka 2 days14 Biman Airlines – Cargo, Kurmitola, Dhaka 2 days15 Cox’s Bazar, Airport 2 days
Total Working days 80 days
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