CIRCULAR No.- 01 * * * Subject: Application for Loans & Advances under Demand No.29 - Major Head for the year

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5 OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT), ANDHRA PRADESH, HYDERABAD No. PAG (Audit)/Admn/L&A/ / Date: CIRCULAR No.- 01 * * * Subject: Application for Loans & Advances under Demand No.29 - Major Head for the year The officers/officials of this office, who intend to obtain advance for purchase of Personal Computer, may submit their applications (along with proforma) on or before for the financial year Sl. No Nature of Advance Eligibility Amount admissible* 1 Personal Computer Advance All government employees Rs.50,000/-or *subject to eligibility actual price of PC, whichever is lower Outstation officers and officials on Inspection duty may send their applications to Sr.Audit Officer (Admn.), O/o PAG (Audit),AP at Hyderabad. by Registered post. All applications received up to the prescribed date will be considered for empanellment and panel will be valid up to Applications received after due date will not be considered. Sd/- To Notice Boards All Headquarters Sections Senior Audit Officer (Admn.)

6 OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT) ANDHRA PRADESH :: HYDERABAD Form VI (See GOI (1) Below Rule 2 of Compendium of rules on Advances to Government servants1) Application for an advance for purchase of Motor Car/Motor Cycle/Scooter/Moped/Personal Computer 1. Name of the Applicant : 2. Applicant s Designation & Section : 3. Personnel No.(Old & New) & Gradation No : 4. Basic Pay + GP : 5. Anticipated price of Motor Cycle/Motor Car/Personal Computer : 6. Amount of Advance required : 7. Date of Superannuation : 8. Number of instalments in which the advance is desired to be repaid 9. Whether advance for similar purpose was obtained previously and if so-- : : i) date of drawal of the advance : ii) the amount of advance and/or interest thereon still outstanding, if any : 10 Whether the intention is to purchase- a) a new or an old Motor Cycle/Motor Car/ Personal Computer : b) if the intention is to purchase Motor Car/Motor Cycle/Personal Computer from a person having official dealings with the Government servant, whether previous sanction of the competent authority has been obtained as required under Rule 18(3) of the Central Civil Services (Conduct) rules, 1964 : 11 Whether the officer is on leave or is about to proceed on leave-- : (a) The date of commencement of leave : (b) The date of expiry of leave : 12 Are any negotiations or preliminary enquiries being made so that the delivery may be taken of the Motor Car/Motor Cycle/Personal Computer within one month from the date of drawal of the advance? 13 (a) Certified that the information given above is complete and true (b) Certified that I have not taken delivery of the Motor Car/Motor Cycle/Personal computer on account of which I apply for the advance, that I shall complete negotiations for the purchase of pay finally and take possession of the same before the expiry of one month from the date of drawal of the advance : Date: Signature of the Applicant

7 OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT), ANDHRA PRADESH, HYDERABAD No. PAG (Audit)/Admn/L&A/ / Date: CIRCULAR No.- 02 * * * Subject: Application for Loans & Advances under Demand No.29 - Major Head for the year The officers/officials of this office, who intend to apply for House Building Advance, may submit their applications (along with proforma) on or before for the financial year Sl. No. HOUSE BUILDING ADVANCE Length of remaining service 1. Officials retiring after 20 years. 2. Officials retiring after 10 years but not later than 20 years. 3. Officials retiring within 10 years. Slab of repaying capacity Amount admissible* 40% of basic pay 34 months basic pay 40% of basic pay. 65% of DCR Gratuity may also be adjusted. Up to 50% of basic pay DCR Gratuity up to 75% can be adjusted subject to a maximum of Rs.25 lakhs (Rs.10 lakhs for expansion of existing house); whichever is the least. Outstation officers and officials on Inspection duty may send their applications to Sr.Audit Officer (Admn.), O/o PAG (Audit),AP at Hyderabad by Registered post. All applications received up to the prescribed date will be considered for empanellment and panel will be valid up to Applications received after due date will not be considered. Sd/- To Notice Boards All Headquarters Sections Senior Audit Officer (Admn.)

8 COVERING LETTER TO ACCOMPANY H.B.A APPLICATION To The Principal Accountant General(Audit), Andhra Pradesh, Hyderabad Sir, I submit herewith an application in duplicate together with other documents in original and with two attested copies of each detailed below for the grant of House Building Advance of Rs.. 1. Sale Deed. 2. Encumbrance Certificate. 3. Sworn Declarations (2) 4. Government Pleader s Certificate. 5. Approved plan for proposed building. 6. Construction permit. 7. Estimates. II. III. IV. The consent letter from the seller of the plot is enclosed. Administration permission for purchase of plot of land construction of building is accorded in No. AG Audit.I/Admin.III/No. Dt I propose to construct a single/double storeyed building. V. The construction of the proposed building is going to be done through a regular contractor. VI. VII. The difference of cost of building (including cost of the site) and amount of advance to be sanctioned will be met from (Indicate the source of Income). The particulars of recoveries from my pay are: 1. G.P.F. ½ Rs. 2. L.I.C. Rs. 3. Conveyance Rs. VIII. I propose to repay the advance at Rs. per month which will not cause me any financial hardship. IX. I propose to commence repayment of advance from my pay for the month 20 i.e. X. Any Other particulars. Yours faithfully, Date: Station: Signature of the applicant (Designation & Section)

9 GRANT OF ADVANCE FOR PURCHASE OF LAND/ OR PART/FULL CONSTRUCTION/ENLARGEMENT ETC. OF A HOUSE. APPLICATION FORM (To be filled by Applicant) 1. Name (in Block Letters) : In Ministry/Office : 2. Post held In the Ministry/ Office I. Permanent In the Ministry/Office II. III. Temporary/Offg. Length of service on the date of application : 3. Present pay as defined in Rule 4(b) and scale of pay : 4. Whether governed by Pension Rules : 5. I. Date of Birth : II. Date of retirement on Superannuation : 6. Amount of Provident Fund/any other advance/final withdrawal taken for purchase of land/construction (an attested copy of the sanction to be enclosed) : Particulars relating to Advance : 7. If Advance is needed for purchase/of plot and /or for construction of a new house, please give the following information :

10 8. If advance is required for enlarging the existing house, please state : Location Plinth area Plinth area Cost of construction/ Cost of Total plinth Total Amount Number with address (in sq mts) proposed for acquisition of proposed area cost of Advance of installments enlargement existing house enlargement (1+2) (3+4) required for repayment (in sq. mtrs) Note if the enlargement is proposed on any floor other than ground floor a certificate from an approved Engineer to the effect that foundations of the existing structure can safely take the load of the proposed enlargement should be enclosed. 9. If advance required for purchasing a ready built house/flat, please state: Location Plinth area When Price The agency Amount Amount of Number of installments with addresss constructed settled from which a. Already paid advance required for repayment to be purchased b. To be paid

11 A. Plot: Location Rural/Urban Is it clearly Approximate a.cost if not purchased Unexpired with addresss demarcated area (in sq.mtrs) b.amount when proposed porting & developed annually paid to acquire of lease If not freehold a. b. B. Construction: Floor wise area Estimated cost Amount of Advance required Number of instalments for repayment To be constructed (for land/construction/both)

12 MISELLANEOUS: 10. If you or any dependent member of your family already own(s) a house, Please state:- Location with Plinth area (floorwise) Present fair market Reasons for acquiring house address value or enlarging existing house Have you enclosed : (a) The relevant construction plan and approval by the municipal authority concerned : (b)detailed construction estimates based on Central/State P.W.D Schedule prevailing the area corrected is per relevant cost of index duly signed by the qualified Enginneer: DECLARATIONS 1. I solemnly declare that the information furnished by me in replying to the various items indicated above is true to the best of my knowledge and belief. 2. I have read the rules regulating the grant of advances to central government servants for purchase of land and purchase/construction of building etc., and agree to abide by the terms and conditions stipulated therein. 3. I certify that * I. My wife/husband is not a central government servant/ my wife/husband who is a central government servant has not applied for and /or obtained an advance under this rules. II. Neither I nor my wife/ husband /minor child has applied for and /or obtained any loan or advance for acquisition of a house in the past from any government sources (e.g. Sate Housing Scheme). III. The construction of the house for which the advance has been applied for, has not been yet commenced. Signature of Applicant. Station : Date : Designation: Deptt /office in which employed

13 SWORN STATEMENT OF SHRI I S/o aged years, occupation resident of And I also know the plot of land bearing No. measuring square yards/square metres situated at and bounded : On the North by: On the South by: On the East by : On the West by : The said Shri is the absolute owner and is in possession of the said land without any encumbrance whatsoever. Dated the DEPONENT Deponent identified by: Sworn and signed before me Signature of owner of plot Signature of Government Pleader with his seal.

14 SWORN STATEMENT OF SHRI I S/o aged years, occupation resident of And I also know the plot of land bearing No. measuring square yards/square metres situated at and bounded : On the North by: On the South by: On the East by : On the West by : The said Shri is the absolute owner and is in possession of the said land without any encumbrance whatsoever. Dated the DEPONENT Deponent identified by: Sworn and signed before me Signature of owner of plot Signature of Government Pleader with his seal.

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16 Office of the Principal Accountant General (Audit) Andhra Pradesh Circular Date: 15 February 2018 Sub: Improving the Quality of Compliance Auditing Professional Practices (PPP) Group of the CA&G Office vide its letter No dated 23 August 2017 issued Guidance Note on improving the quality of Inspection Reports. Stated objective of this guidance note is furtherance of the Compliance Auditing Guidelines and establishing the specific procedures for the purpose. This Guidance covers the aspects of planning, conducting of compliance audits and reporting the compliance audit findings in Inspection Reports. Keeping in mind the fact that Compliance Auditing Guidelines and this Guidance Note do not comprehensively address the challenges of the Compliance Auditing, this Circular is prepared incorporating the best practices available in different sources including the said guidelines. Introduction Audit work of the Office of the Accountant General (Audit) Andhra Pradesh (created with effect from 1 st April 2017), is organised in three Audit Wings, headed by the respective Group Officer. The following is the sanctioned strength (SS) of the each functional wing. Economic Services Sector and PSUs Social Services Sector, ABs and Local Bodies Revenue and General Services Sector ES Departments SS and ABs RS SS-AOs 12 SS-AOs 20 SS-AOs 15 SS-AAOs 27 SS-AAOs 46 SS-AAOs 31 SS-Auditors 30 SS-Auditors 50 SS-Auditors 33 ES-PSUs LB GS-FINAT-FAW-RAO SS-AOs 13 SS-AOs 8 SS-AOs 9 SS-AAOs 28 SS-AAOs 20 SS-AAOs 24 SS-Auditors 36 SS-Auditors 26 SS-Auditors 55 Audit Reports Audit Reports Audit Reports 1.Economic Services Depts. 3.Social Services Sector 5.Revenue Services Depts. 2.Economic Services 4.Local Bodies 6.Report on State Finances Certification of Accounts of PSUs Certification of Accounts of ABs (Certification Finance & App Accts. Each wing is organised into Coordination/Head Quarters Section, Editing Section, Report Section and Field Audit Parties. This circular contains instructions for each section and for the field audit parties. The Group Officer is responsible for implementing these instructions by enforcing the compliance by the Coordination Section, Editing Section, Report Section and the Field Audit Parties. 1

17 1. Creation/updating of data-base of auditable entities Compliance Auditing Manual distinguishes auditable entities of Department into apex unit, its sub-ordinate units (administrative/regional) and implementing units. Coordination Section should have the complete list of all the entities of each Department/Demand for Grant under the audit jurisdiction of the Group Officer. The entities in a Department include apex units such as Offices of the Principal Secretary/Secretary; subordinate administrative entities such as Offices of Commissioners/CCOs/Directors/Joint Directors etc (regional/ zonal/ district/circle level offices) and the implementing offices (with a Drawing and Disbursing Officer-DDO). Implementing units also include agencies (societies, bodies etc.), if any engaged by the Departments. Similar list (could be in a different form) should be available for all PSUs, Corporations, Autonomous Bodies and Local Bodies. Coordination/Head Quarters Section should have a database of past five years financial information (budget and actuals expenditure and revenue) of the each department/commissionerate. Similar data base should be available for all PSUs, Corporations, ABs and LBs. In respect of every unit, there should be information of when was the unit last audited. The information in the database should be regularly updated. 2. Maintenance of Guard Files Coordination/Head Quarters Section should maintain a Guard File for each Department/ Demand for Grant. The Guard File should contain information relating to the Acts, Rules applicable to the Department. A copy of Act, Rules etc., should be available in the Coordination/Editing Section. The Guard File should contain Government Orders, Departmental orders and instructions issued from time to time. Guard File should contain information about the departmental manuals and codes. A few copies of these manuals and codes should be available in the Section. The Guard File should contain financial information (budget/expenditure/revenue/financial statements) for the last five years and the budget of the current year. A copy of the documents (budget, outcome budget, financial statements, Socio-Economic Survey Reports etc.,) should be available in the Coordination/HQ Section. The Guard File should contain the details of activities, schemes and projects of the Department. The Guard file should contain details of the department s sanctioned strength and men-in-position, the organisation structure and business-process flow chart. Guard File should contain detailed information related to IT systems and IT applications in use in the Department, its databases and its third party databases. Where business processes are automated, Coordination /HQ Section should pursue with the Department to 2

18 have access to the data, for the purpose of audit. Newspaper clippings/ media coverage reports and any inputs received from the APR Section should be taken to the Guard File. Guard Files with similar information should be maintained for PSUs, Corporations and Autonomous Bodies. Guard Files may be maintained for ULBs and PRIs for revenue and expenditure. In Revenue Audit, Guard Files should be maintained for each type of tax revenue/tax revenue department. Guard Files should contain information related to the audit findings printed in the CAG Audit Reports during last ten years and also PAC related information. Guard File may be maintained in a box-folder which separate section allotted for each item. The information in the Guard Files should be regularly updated. 3. Desk Review of the Departments and preparation of Strategic Audit Plan Coordination/Head Quarters Section, during June-July of each year should carryout deskreview of all the Departments/PSUs. Desk-review of each department involves general review of the information in the guard file. The objective of the desk review is to decide on which department/psus should be audited annually/ biennially/triennially. This general review of all the Departments/PSUs should result in preparation of 3-year Strategic Audit Plan explaining how the wing proposes to cover its audit universe. Strategic Audit Plan should explain how the wing (with the available manpower) proposes to audit all the departments (a sample of units) at least once in three years. Group Officer, on the basis of valid criteria, may decide on whether a Department/PSU has to be audited every year or once in two years or once in three years. Each wing should have a 3-year Strategic Audit Plan (3-year audit cycle). ES Wing would have a strategic audit plan for Economic Services Sector Departments and similarly one for PSUs. SS Wing would have one for Social Services Sector Departments and one for Local Bodies. RGS Wing would have one for Revenue Services Departments/ Commissionerates and one for General Services Sector Departments. Strategic Audit Plan should indicate, which departments/psus are proposed to be covered in Year-1, Year-2 and Year-3. It may be necessary that larger departments/psus may have to be covered annually, in which case one part of the department is audited in each year. Strategic Audit Plan for Revenue Service Departments will provide for annual coverage of all Departments/Commissionerates. Annual plan would cover different units which would be selected on specific criteria. Same would be the case with Local Bodies. This information should be sent to APR Section by 31 st July. APR Section is responsible for compilation of the information from all the wings and prepare Strategic Audit Plan of the Office. The present Strategic Audit Plan covers three year period from April/July 2017 to March/June A copy is enclosed to this circular. Next Strategic Plan (July 2020 to June 2023) is due in July

19 Though the Strategic Audit Plan is prepared once in three years, general review of Guard Files of all the Departments should be carried out even during the intervening years to examine whether any changes are required to the Strategic Audit Plan. 4. Detailed Desk Review of selected Departments and preparation of Annual Audit Plan Desk review of selected departments Coordination/Head Quarters Section, every year, in the month of July-August should carry out detailed desk review of departments that are due for audit in the next year (which would be Year-1, Y-2 or Y-3 of the Strategic Audit Plan). Detailed desk-review includes analysis of information of department s revenue, expenditure, activities, schemes, projects etc., available in the Guard Files. Coordination(/Head Quarters Section), for this purpose, should collect and analyse the information from the VLC in the A&E Offices. Information should also be collected from Central Audit Section. Expertise in the Data Analytics Section (Admin Wing) may be utilised. Similar processes should be followed for PSUs, Corporations and Local Bodies. In Revenue audit, desk review of the department could be with reference to type of tax, assessee, nature of goods/services, Similarly review may be made for non-tax revenue. Coordination/ HQ Section should prepare a Desk Review Report for each department due for audit in the next year annual audit plan (Year-1, Y-2 or Y-3 of the Strategic Audit Plan). Results of detailed desk-review should lead to selection of area/activity/scheme/project/ (or the Department as whole) for PA, TA, IT, follow-up and Compliance Audits for the annual audit plan. All the departments that are listed in the audit plan should get covered by one or other audit (either PA or TA or IT/Follow-up or Compliance Audit). Annual Audit Plan Coordination/HQs Section, by the end of August every year, in consultation with Editing and Report Sections should prepare detail Annual Audit Plan for the next year (Y-1 or Y-2 or Y-3 of the Strategic Audit Plan). It involves working out the availability of party days and allocation of party days for audits identified through detailed desk-review. Available party days should be worked out assuming that each party would have one AO and at least two AAOs and one Auditor. Firstly, party days required for mandatory financial audits (FA) should be set apart. Secondly, party days for all India PAs should be set apart. Thirdly, party days for PA/ IT/Follow-up Audit should be set apart. Fourthly, party days for TAs should be set part. Finally, the remaining party days should be apportioned for Compliance Audits. Coordination/HQs Section should, then work out the number of units/offices that can/would be covered under PA, TA, Follow-Up, IT and Compliance Audits. Reasonable number of days should be allotted for audit of a unit. 4

20 Time required for drafting the material for audit report, discussions and verification of key documents by the C&AG Office, finalisation of audit report, translation etc may be built into the audit plan. Coordination/HQ Section should ensure that preparation of Audit Plan for the next year, is completed by the end of August, and is transmitted to the APR Section in the prescribed format. Group Officer while preparing the annual audit plan, if finds it necessary, may suggest changes to the existing Strategic Audit Plan. APR Section APR Section is responsible for preparing the Annual Audit Plan for the office as a whole. APR Section, at the end of August every year should obtain and consolidate the Annual Audit Plan of all the Wings. In the first week of September, it should convene Audit Advisory Board and seek inputs on the draft annual audit plan. APR Section should then, convene the meeting of Audit Planning Group and seek its approval for the draft annual audit plan. Audit Planning Group consists of all the Group Officers and Sr.AO APR is the convenor. The Group will meet at least twice in a year, in September to finalise the audit plan and in March/April to review the progress of the plan. APR Section will also be responsible for sending Monthly Progress Report on PAs, TAs, IT/Follow up Audits to the C&AG Office. APR Section, during the course of the year will carry out research studies on the economy of the State, contribution of the public sector and private sector to the economy (sector-wise, region-wise), issues related to governance in the State etc., and provide its inputs to the Coordination/HQs Section of the concerned Wing. APR Section will also provide newspaper clippings and summary of media reports to the concerned Wing. 5. Performance Measurement of Coordination/HQ Section In order to measure the performance of the Coordinating/HQ Section, the following indicators are introduced. There are ten indicators with a total weightage of 100. At the end of every Quarter, Coordinating/HQ Section should assess and grade its performance with reference to the activities during the quarter. This self-assessment and grading should be submitted to the Group Officer, who in-turn will assess and grade the performance for every quarter. A B C Coordination/ Head Quarters Section - Performance for the Quarter Ending.. Having a working manual describing the functions in the Section and updated duty list with detailed description of duties Having a complete list (date base) of auditable entities and periodical updating of the information in the data base. Having five years financial information of all the departments/psus and periodical updating 5 Coordination/ HQ Section Selfassessment /5 /15 /15 Group Officer Assessment

21 D Having information on when was the unit last audited and name of the persons who audited /5 E Maintaining and updating the Guard Files /15 F Desk review of departments and preparation of strategic audit plan (every third year) /10 G Detailed desk review of departments selected for audit in the year and preparation of annual audit /15 plan by the due date H Identification of audit parties for PA/TA/IT/CA by due date /5 I Preparation of detailed audit program for all the four quarters /10 J Compliance of all the prescribed returns by due dates, submission of material in time for returns to by compiled by ITA/ARP/Sec to AG (to CAG) /5 / Desk review of the selected units by the Field Audit Parties PA/TA/IT/Follow-Up Audit Group Officer with the assistance of Coordination/Report Section, in the month of September should identify the audit parties that would be conducting Performance Audits, IT Audit, Follow-up Audit and Thematic Audits. Audit Parties entrusted with these Audits should have discussions with the Coordination/HQ Section and define the scope of audit. Audit Parties should discuss the scope of audit with Report Section and select the units through statistical sampling. Audit Party (parties), should then, carry out the detailed desk-review of the units selected for audit. It involves study of the desk review report of the department and review of the old IRs, collection and analysis of information from Central Audit Section. It also involves collection of information from VLC in the A&E Office and its analysis. If it involves analysis of electronic data, Audit Party may coordinate with Data Analytics Section. The audit party, with the approval of the Group Officer should finalise the scope of the audit and frame the audit objectives/sub-objectives, identify the suitable criteria for each audit objective/sub-objective and then prepare a detailed list of audit procedures (check list). Audit Parties entrusted with PA/TA/Follow Up Audit /IT Audit, should complete this activity (including pilot study) by the middle of October. Coordination/HQs Section, in the last week of October, in consultation with Audit Party should prepare the Audit Program in such a way that that the field audit would commence at least in the first week of January. Detailed audit program for PA/TA/Follow Up/IT Audit Parties, including the dates on which each unit will be audited and the names of the AO/Sr.AO and party members (for the entire duration of audit) should be available by the end of October. 6

22 Audit Parties should commence the field audit of PA/TA/IT/Follow Up Audit, and complete the audit including the preparation of first draft, by the end of June. Group Officer should plan for mid-term reviews and inspections for each PA/TA/IT/Follow up Audit. Compliance audits Group Officer, in the month of September with the assistance of Coordination/HQs Section, should identify the audit parties that would be conducting the compliance audits in the next year audit plan. At least one Audit Party should be entrusted with the compliance audit of one department. If more than one audit party is entrusted with a department, one of the audit parties should be designated as lead audit party. It should be kept in view that Audit Parties entrusted with PA/TA/IT/Follow-up etc., would be available for compliance audit after October. Compliance audit of the department, could be the department as a whole or particular area/activities/region etc of department. As explained in the Section-4, Coordination/HQ Section should have already identified the topics in respect of each department that would be subjected to compliance audit. Audit Parties, in the month of October should have discussions with Coordination/HQ section and define the scope of the audit. Audit Parties should have discussions with Editing Section and select the units through statistical sampling. Audit Party (parties), should, then carry out the desk-review of the units selected for audit. It involves study of the desk review of the old IRs, collection of detailed information in respect of those units from central audit and VLC in A&E Office. If it involves analysis of electronic data, Audit Party may coordinate with Data Analytics Section. Compliance Audit Parties, with the approval of the Group Officer should finalise the scope of the audit and frame the audit objectives/sub-objectives. They should identify the suitable criteria for each audit objective. Audit Parties, should then prepare a detailed list of audit procedures (check list). This would mean that compliance audit of a department is planned with pre-determined scope of audit (topic), audit objectives and criteria. The above activity should be completed by the end of October. Coordination Section, during the last week of October, in consultation with Audit Party (parties) should prepare the audit program for each compliance audit party, in such a way that, the field audit would commence in April/July and be completed by the end of next year March/June. Audit program should have the list of units proposed to be audited during each quarter, period of audit and the names of the AO/Sr.AO and party members. Such program, for all the four quarters should be available by the end of October. Group Officer may provide for periodical meeting with the audit parties and plan for his/her field inspection. 7

23 7. Selection of sample for substantive testing Audit party entrusted with the compliance audit, before proceeding for quarterly audit programme, in consultation with the Group Officer, should decide on the sample of transactions that would be subjected to audit in each of the selected units. This sample should be with reference to the Audit Objectives and Criteria. For example, if the objective is to examine the extent of compliance with procurement rules, the sample could a percentage of procurement files in the units, or procurements done in the selected month. In revenue audit, it could be a per cent of total consignments/returns/ assessments. Where it is not possible to select the sample before proceeding for audit, the audit party within first two days of reaching the unit, should decide on the sample in consultation with the Group Officer. This sample may be treated as Sample-A. This sample is meant for conducting compliance audits with pre-determined audit objectives and criteria. In addition to this, the audit party in consultation with the Group Officer, should also select one month transactions for detailed test check. This may be treated as Sample-B. Group Officer may decide on the size of the sample. It could be 15 days or 30 of 45 days transactions, depending on the volume of transactions and number days given for the audit of the unit. This sample will have different types of transactions. This sample is meant for conducting compliance audit of each transaction where each transaction would be verified in detail with reference to the rule/procedure applicable to that type of transaction. 8. Conducting the Compliance Audit Field audit involves substantive testing of the selected sample with reference to the audit criteria. Substantive testing is application of audit procedures on each of the transaction/activity in the sample. This process, provides an answer to the audit question (audit objective). Substantive testing in compliance audit revolves around the Criteria, Condition, Consequence (effect), Cause, and Correction. Condition means the exact situation, for example how the transaction was carried out. Criteria explains the desired way of doing, for example how the transaction should have been carried out. Auditor examines the exact situation (Condition) to see whether it deviated from the Criteria. If there is deviation or non-compliance, the Auditor would examine the effect of non-compliance; that is the Consequence of non-compliance. Auditor would also explore the reason (Cause) for the non-compliance or deviation. The cause could be an act of omission or commission. An act of omission can be the case of neglect, oversight or lack of knowledge of rule or procedure. An act of commission could be with an intention of wrong doing or could in the best interest of the work. Ultimate purpose of any rule or procedure is to safeguard the concerned resource from the risk of being misused, mismanaged, neglected wasted, damaged or lost. Through the evidence gathered, the Audit would explain the consequence of non-compliance and substantiate through argument, the reason (cause) of non-compliance. Audit, then would 8

24 explain how this cause for non-compliance can be addressed (can be corrected or prevented and minimised). For example, in certain situation, Audit might find that a rule or procedure may have become redundant, in the existing form it is not able to safeguard the resource, people might have found ways to circumvent, or the nature of risk has changed or risk no longer exists etc. Compliance Audit of Sample-A Audit Party should carry out the substantial testing for Sample-A, by applying the audit procedures (check list). Substantive testing is with reference to the audit criteria in order to arrive at an answer to the audit objectives. The audit party should comment on the extent of compliance. For example, in a sample of 10 procurements, the audited unit might have complied with rules in 7 cases and did not comply in 3 cases. Instances of noncompliance, where materiality is significant should be examined and explained in detail. Audit Party should examine all relevant issues related to the transaction by calling for and examining the related files. For example, test check of a procurement transaction would involve examining assessment of requirement of goods, budget provision, administrative approval, financial sanction, calling for tenders, opening the tenders, selection of bidder, award, receipt of goods, enforcement of agreement conditions, taking to stock, consumption, adherence to payment related rules/procedures etc. Audit Party, through valid and appropriate audit evidence should explain the Condition, Consequence (Effect) of not complying with the Criteria and through well-reasoned argument would explain the Cause and suggest the Correction. Compliance Audit of Sample-B Audit Party should also carry out the test-check (substantial testing) for Sample-B. This sample consists of all types of transactions that the entity had entered into during that period. Field Audit Party, for each of the transaction in the sample, should identify the applicable rule (criteria), and examine to what extent the transaction complied with that rule. The audit party should comment on the extent of compliance for each type of transaction. Audit Party should trace non-compliance transactions to its origin (administrative approval, financial sanction, budget provision etc.,) and verify all the related records. Cheques issued by Treasury/PAO for transactions during this test check period should be traced in the cash book and other relevant registers of the office. All the audit checks relating to cash book should be applied for the test-check period. All the remittances during the test-check period should be verified from the books of the Treasury/PAO. Audit Party should document this audit process in its working papers. Audit Party should prepare audit documentation that is sufficiently detailed to enable an experienced auditor, 9

25 with no prior knowledge of the audit, to understand the scope of the audit, audit procedures that are applied, results of the procedures performed, the evidence obtained in support of the audit conclusions and recommendations. This documentation serves as evidence that audit of the unit was carried out by thoroughly examining the sample of transactions and related activities with reference to the audit criteria and objectives. Audit party, in the entry meeting, should explain the management the scope of audit, objectives, criteria, sample and the auditing standards (including ethical requirements). Audit Party should adhere to prescribed field auditing standards. They include compliance with the relevant ethical requirements; maintaining appropriate professional behaviour; applying professional scepticism and professional judgment and due care throughout the audit; managing the risks of providing a report that is inappropriate in the circumstances of the audit. Audit Party should establish effective communication (written and verbal) throughout the audit process. Each audit observation should be well drafted and should clearly explain the Criteria, Condition, Consequence (Effect). Audit Party should strive to understand the reasons for non-compliance and suggest corrective steps. All the replies and responses of the management should be recorded and documented. Audit Observations and management s response should be discussed in the exit meeting. The Sr.AO/AO should maintain a diary recording the daily progress of work and furnish a weekly report on the following Monday to the Coordination Section Sr.AO/AO informing the extent of audit done, and constraints if any. If Head of the Audit Party is not able to resolve constraints if any, for conducting the audit, he/she should bring it, in writing, to the notice of Group Officer. 9. Draft Inspection Report Audit findings in the Inspection report should flow from the working papers, where the audit process is documented. Working papers should accompany the Inspection Report. Working papers include, duty list of each member of the audit team, daily diary of each member of the audit team, the list of transactions selected in the sample, list of audit procedures applied, audit requisitions, audit queries, audit observations, and entities replies, action taken on the observations made by the Group Officer during his/her field visit. Audit observation should clearly bring out the extent of compliance for each similar type of transactions. For example, in 10 TA bills audited, 3 were non-compliant with TA Rules. Details of all 10 should come out in the audit observation or as annexure and should be available in the working papers. Audit observation on high value non-compliance transactions/ activities should explain all the related events and facts and tracing the activity to its origin involving budget provision, administrative approval, financial sanction etc and also facts from the related files/records. 10

26 While drafting the audit observations, Audit Party should adhere to the principles of sufficient and appropriate audit evidence, completeness and objectivity. Criteria, Condition, Cause, Consequence (effect) should be marked against each para and proposed corrective action should be suggested. Each para should be drafted in such a way that focus on the issue is not lost, argument is cogent and it is not too lengthy. In respect of persistent irregularities, reference may clearly be made to similar paras in the previous inspection reports. Inspection Report should contain at least one page explaining the organisation structure of the unit, its staff strength, break-up of expenditure/revenue of the year, brief description of the activities/schemes implemented by the unit. Inspection Report should contain one page explaining the scope of audit, audit objectives, audit criteria and information about the size of the sample Sample-A subjected to test check and audit procedures applied. Information about the size of the sample (Sample-B) should also be mentioned. Audit observations in the IR should be supported by key documents (audit evidence). Audit party should have an exit meeting and discuss the contents of the draft inspection report. Audit party should attach the record of discussions held in the exit meeting to the IR. Audit party should transmit the draft inspection report to the Editing Section, in the prescribed form, within five working days from the date of completion of the audit. 10. Performance Measurement of the Audit Party Every compliance audit assignment should be measured on the following performance indicators. Audit Party, while preparing the Inspection should assess and grade its performance against each of following eight items. Total weightage is 100. Title sheet of each IR should have the following table filled in by the Head of the Audit Party. Audit Parties- Performance for the Audit Selfassessment A Desk review of units analysis of activities/ expenditure/ revenue etc /15 B Determination of the scope of the audit, framing audit objectives, identifying audit criteria, preparing list of audit /15 procedures C Selection of sample, assignment of duties, completeness in coverage of selected sample /10 D Application of audit checks on selected transactions/activities and detailed examination of issues arising out of test check /20 E Whether audit evidence is appropriate and sufficient? /10 F Documentation of audit process with working papers /5 G Drafting quality /20 H Transmission/submission of inspection report on time /5 /100 11

27 Apart from working papers, copies of key documents, record of discussion at the conclusion of audit (Annex-A), and certificate of compliance with CAG s Auditing Standards including Code of Ethics(Annex-B). 11. Editing the draft Inspection Report and issue of Inspection Report Editing Section should ensure that within three weeks of receipt of the draft inspection, the approved Inspection Report is issued to the audited entity. There should not be any delay in issue of Inspection Reports. Editing Section on receipt of the draft inspection report should verify whether it is received in the prescribed form, with the top sheet and all the prescribed annexures duly filled in. Audit Officer of the Editing Section should carefully go through the contents, edit where required and submit to the Group Officer. Audit Officer, along with each IR should submit an assurance memo stating whether (in his/her view) the audit was carried as planned, in accordance with the applicable auditing standards and audit process is evident from the working file. This assurance memo should contain two additional columns to the table of self-assessment done by Audit Party. Editing Section, should give its assessment (grading) in the column Audit Party Assessment By Audit Parties- Performance for the Selfassessment Section Officer by Editing Group Audit.. A Desk review of units analysis of activities/ expenditure/ revenue etc /15 B Determination of the scope of the audit, framing audit objectives, identifying audit /15 criteria, preparing list of audit procedures C Selection of sample, assignment of duties, completeness in coverage of selected /10 sample D Application of audit checks on selected transactions/activities and detailed examination of issues arising out test /20 check E Whether audit evidence is appropriate and sufficient? /10 F Documentation of audit process with working papers /5 G Drafting quality /20 H Transmission/submission of inspection report on time /5 /100 12

28 Editing Section should justify why it agrees with self-assessment grading given by audit party or why it does not agree. Deficiencies if any in conducting the audit and areas for improvement should be brought out by the Editing Section, in the assurance memo. Group Officer, after approving the inspection, should communicate to the audit party whether the audit was conducted as planned, whether deficiencies if any were noticed and improvements for future audits. Group Officer should record this information in the assurance memo. Editing Section is responsible for sending periodical reminders to the audited units/hods for the replies, watching the replies for the IR paras, taking further action in the light of the reply. Editing Section is responsible for maintaining and regularly updating the information on outstanding IRs and IR Paras in the prescribed form/format. HoDs/audited units may be insisted upon for arrange for audit committee meetings periodically. Audit Officer, Editing Section is responsible for processing Part-II Paras as PDPs. It is expected that 50% of the Part-II A paras will be processed as PDP. If not, the reasons for treating such paras as Part-II A paras should be explained by the Editing Section. Editing Section is responsible for processing the PDP as DP, obtain the approval of Group Officer and transmit to Report Section with all the supporting documents. It is expected that 30% of the PDPs will be floated as DP. If not, the reasons for treating such paras as DPs should be explained by the Editing Section. 12. Performance Measurement of the Editing Section At end of every quarter, Editing Section should assess and grade its performance against the following performance indicators. There are eight indicators with a total weightage of 100. Editing Section should submit this quarterly self-assessment and grading report to the Group Officer for his/her assessment by 5 th of the following month. A B C D E Editing Section - Performance for the Quarter Ending. Having a working manual describing the functions in the Section and updated duty list with detailed description of duties of each official in the Section Analyse the desk-review of units done by the Audit Parties and submit to Group Officer Finalise the Inspection Reports within the stipulated period and provide assurance memo for each IR Issue periodical reminders for the outstanding IR paras and action is taken on the replies received Maintaining and regularly updating the information on outstanding IRs and IR Paras and audit committee meetings 13 Editing Section Self- Assessment /5 /20 /25 /5 /5 Group Officer Assessment

29 F Process 50% of Part-II A paras as PDPs /10 G H 13. Report Section Process 30% of PDPs as DPs and forward to Report Section Compliance of all the prescribed returns by due dates, submission of all the material in time for returns to be compiled by ITA/ARP/Sec to AG (to CAG Office) /25 /5 /100 Report Section should maintain a Guard File containing all Audit Report related circulars, instructions issued by CA&G Office. The Guard File should be regularly updated with latest information. Responsibilities of the Report Section include processing the draft PA, TA, IT Audit, Follow-up Audit reports prepared by the concerned Audit Parties, processing the Draft Paras floated by Editing Section, sending the audit report material in batches / chapter material to the C&AG Office and coordinating with officials of C&AG Office for key document verification, attending to the queries raised by C&AG Office at different stages/journeys, preparation of draft audit report (including overview, table of contents, preface) and submission of bond copy for approval of C&AG. The entire programme should be planned in such a way, that the Audit Report related work for year should commence in April and complete (assuming that there is no delay in C&AG Office) in December. Report Section should coordinate with OE Section to ensure that the printer is selected by the end of December. After receipt of printing clearance by C&AG Office, all efforts should be made to complete the work within one month and Printed Audit Reports are ready for signature of C&AG. Report Section should initiate action for constitution of a Cell for Telugu translation of Audit Reports at the annotation stage of the Audit Report. It should be ensured that translation and other related work gets completed within 15 days after receipt of approval of Headquarters for bond copy. Printing of Telugu version is also to be done along with English version. After the Report is countersigned by the C&AG, prescribed number of copies (both English and Telugu) bearing the signature of the C&AG should be forwarded to Governor (Secretary to Governor) for causing the Reports to be tabled in the State Legislature and Government (Principal Finance Secretary) for submission to Governor. Efforts should be made to impress upon the State Government to table the Audit Reports in the Budget Session of the State Legislature. On receipt of information that Report was presented to the State Legislature, copies can be distributed to other stake holders and uploaded in the website. 14

30 The Report section dealing with State Finances shall undertake compilation of Epitome of C&AG s Reports (both English and Telugu versions) by obtaining material from all the Report sections and get the Epitome printed and also take up distribution of Epitome to all the stake holders. The work should be completed in the month of April after tabling of Audit Reports in the state Legislature. Report Section should maintain and update database of Explanatory Notes (on Audit Paragraphs) and Action Taken Notes (on PAC recommendations) received by Legislative Secretariat, obtain the copies, review of the contents of the ENs/ ATNs, prepare MIP for paragraphs taken up for discussion, keep a record of the status of paras discussed, maintain and update database of Explanatory Notes received by Legislative Secretariat, obtain the copies, review the contents of ATNs and provide necessary feed back to the PAC. Report Section would collect the Reports of PAC, review the contents and follow up action taken by the concerned Department. Report section also pursues with Government for timely submission of ENs and ATNs. This Circular on Improving the Quality of Compliance Auditing will come into effect from 1st March Clarification needed, if any, on any of the issue in this circular, may be sought from the APR Section. (Sudhir Kumar.L.V) Principal Accountant General Andhra Pradesh 15 th February

31 Annex-A Format of Minutes/Record of Discussions at the conclusion of Audit Minutes of the Minutes held on to discuss audit observations to be included in the draft inspection Report for the period relating to the Ministry of /Audited Entity. Persons present in the Meeting From Department/Offices side From Audit side Minutes of the Meeting (Note:- The minor and procedural irregularities which were noticed during the course of audit have either been settled on spot after taking assurance from the auditee or have been issued to the Ministry in the shape of Test Audit Note). The audit observations were discussed in detail and necessary clarifications, wherever sought, were given from the Audit side. It was pointed out by audit that initial replies from the Ministry in respect of audit observations were still awaited and the same may be furnished on priority. In response, the Ministry assured to send the replies at the earliest possible. The meeting ended with vote of thanks. (Signature) (Signature) (Name & Designation) (Name & Designation) From Department/Unit side From Audit side 16