STATUTORY AUDIT

Lesson No. 1(a) & (b)

Comptroller and Auditor General of India (C & AG) is the

final audit authority in India. As per article no. 149 to 151 of
the Indian constitution, he is responsible for the audit of the
Accounts of the Indian Railways. The main duties of the C &
AG are as under: -

a) To audit all expenditures from Consolidated fund of India

with a view to ascertain whether the money shown in the
Accounts as having been disbursed were legally available
for and applicable to the service or purpose for which
those have been applied and whether the expenditure
confirms to the authority governing the same.
b) To audit all the transactions relating to Contingency fund
and Public accounts.

Lesson No. 1(c)

c) To audit all trading, P & L A/Cs and manufacturing A/Cs

and balance sheet together with the subsidiary accounts
maintained by the department concerned and in each
case, to report on the expenditures, transactions of all
accounts so audited by him. The C & AG in connection
with the performance of his duties has authority –

i) To inspect any office of the Accounts including

Treasuries and such offices responsible for keeping
the records.
ii) To call for any accounts, books, papers and other
documents which deal with the basis of accounts and
are relevant to the transactions to which his duties in
respect of audit is extended. He shall appoint his
 authorized representatives for inspection of the
documents.
iii) To put such questions or to make such observations
as he may consider necessary to the person in-
charge of the office or to call for such information,
which he may require for preparation of accounts of
the report.

Lesson No. 2

Railway Audit

Lesson No. 2(a) & (b)

The responsibility of the C & AG in respect of audit of the

Railway Accounts is discharged through Additional C & AG
(Railway wing) and Director of Audit, who conducts the audit
on behalf of and the direction of C & AG. For this purpose at
each Zonal Railways HQr, have been attached with the
Director of Audit for discharging the duties for Auditing of a
particular Railway Accounts.

Lesson No. 2(c)

Divisional Audit Officers/[Link] Officers further assist

the Directors of Audit at Divisional level. The main
responsibilities of the Audit department are as under:-

1. To audit sanctions having financial effects and those

pertaining to an individual Railway or Railway Accounts
offices.
2. To audit sanctions regarding financial rules and general
orders issued by the President which are exclusively
applicable to the Railway Department.
3. To audit tenders invited and accepted by the Railway for
purchase of materials.
4. Audit the accounts maintained in the Railway Board’s
office.
5. To ensure that the system of Accounts used by the
internal check authority is correct.
6. To see that the method of check applied at every stage of
the Accounts is sufficient.
7. To see that the Accounts are maintained properly and
arrangements exists in the accounts office to ensure
attention to the financial interest of the Railway on the part
of all accounts.

The Director of Audit of a Railway is also responsible for

detailed auditing of the accounts of the Railway and for
conducting inspection of records of various offices of that
Railway. Thus his responsibility further extends to audit all
expenditure and receipt of Railway whether under
construction or open line including traffic accounts,
accounts of stores and manufacturing stock etc.

The cost of Railway audit is borne by the Railway Revenue

and is debited to minor head “Statutory Audit” including
pensionary charges which is operated under the major
head’345’-Indian Railways- Policy formulation, Director
Research and Miscellaneous Organization.

Lesson No. 3

Communication from Audit: -

Ordinarily the results of Statutory Audit are communicated to

Accounts department through: -

Lesson No. 3(a), (b) & (c)

1. Specific reports of more important and serious
irregularities discovered during the course of Audit of
Accounts department, Departmental Offices and station
records.
2. Audit Notes detailing minor irregularities noticed during
the course of Audit of Accounts Office records.

3. Inspection reports showing the results of Audit of initial

records of the Executive offices and stations.

Disposal of Audit objections: -

The Accounts Officer should promptly attend to all audit

objections and notes. Audit objections may either relate to
matters, which can be disposed off by the Accounts Officer
himself without referring to the Executive concerned, or the
matters, which can be well explained by the executives
concerned only. The matters where the executives are not to
be consulted, the objections should be made out directly by
the Accounts officer and reply will be given to the Audit
department. In the other cases, the executives should be
referred to for obtaining necessary information in order to
give a suitable reply to the Audit department. An Accounts
officer is expected to take generally the same action on the
defects and irregularities brought out to his notice by the
Audit department as he could have taken if he would have
detected the same.

Audit Notes and Inspection reports: -

An Inspection report consists of 2 parts, Part I dealing with

more important matters and Part II dealing with the rest of
the items containing minor routine matters of objections.
Audit Notes detailing the results of monthly test Audit
similarly consist of 2 parts and should be promptly attended
to by the Department Concerned or the Accounts Office
without any delay.

The final disposal of Part II of the Audit notes and Inspection

reports, whether on accounts or executive officers rests with
the Accounts Officer and no final reply to the Audit
department is necessary. Disposal of such Audit notes and
Inspection reports should, however being made available to
the Audit department.

Replies to Part I Inspection reports and Audit notes including

specific reports on the more important irregularities should
be sent to the Audit officer as soon as possible showing
clearly the action taken thereon.

A record of specific reports, Audit Notes Part I & II,

Inspection reports Part I & II etc. received from the Audit
department should be kept and reviewed periodically to
ensure prompt disposal of all outstanding paras. The
collected records on which objections have been raised
should not be destroyed till such time the objections have
been settled.

Replies to Inspection Reports: -

Replies to inspection reports of Executive officers should be

sent by those officers through the Accounts Officer
concerned. In scrutinizing them the Accounts Officer should
call for additional information if required and consult the
Head of the Department concerned wherever desirable
before giving a reply to the Audit officer. The Accounts
officer while giving replies to the Audit Department should
act in close collaboration with the Administrative authorities
concerned, so that the information given to Audit may be an
authority to statements of facts on behalf of Railway
Administration and there may be no possibility of any dispute
at a later stage.

Lesson No. 4(b) & (c)

Audit report on Railways: -

Additional Dy.C&AG of India (Rlys.) and the Director of Audit

are responsible for preparation of a report of the C & AG
(Rlys.) which also includes the comments on the
appropriation accounts of the Railways compiled by the
Ministry of Railways.

All important cases coming to the notice of the Audit

department during the course of Inspection or regular audit
which in the opinion of the Director of Audit must be included
in the reports of the C & AG are ordinarily brought to the
notice of the Railway Administration /Executive concerned
through special letters. The Railway Administration and
Executives are expected to promptly scrutinize the facts
brought out therein and sent the replies to the Audit
department within the time prescribed for the purpose.
Since, the special letters and relevant documents etc. forms
the basis of the material for the Audit report, the Executives
should deal with them at sufficiently high level and bring out
their point of view in a convincing manner so that the
Director of Audit may have full presentation of the Railways
case before he proceeds to prepare a draft para for
incorporation in the Audit report.
The Director of Audit prepares a draft para and sent to the
G.M endorsing copies to the FA & CAO and the head of the
department concerned. On receipt of the Draft para in the
Accounts office, it is the responsibility of the Accounts
department to fully examine the objections brought out
therein with relevant records/documents etc. already
available with him. If required additional information should
be obtained from the Executives concerned so that a
convincing reply can be prepared and submitted to the Audit
department. The time limit for submission of replies to the
Audit department in respect of draft para is of 8 weeks from
the date of receipts in the Accounts office.

To enable the Railway Board to approve the draft reply

prepared by the Railway Administration, the following
additional information should also be sent.

1. The history of case with copies of the relevant

correspondence.
2. Sentence-wise comments on the Draft para.
3. A chronological summary of the case where there has
been unusual delay in the case.
4. Remedial action proposed to be taken to avoid recurrence
in future.
5. Disciplinary aspects where individual lapses have been
brought out.

The report of C & AG (Rlys.) including the Draft para is

presented to the Parliament generally in the Budget session
where it is taken up for consideration by the PAC which is a
Parliamentary committee itself. The committee examines this
report very critically and the views / recommendations are
communicated to the Railway Ministry. Based on the
recommendations, the Railway has to initiate action on
certain points wherever acceptable.