Para 17.10 — Internal Audit (IA) of important government office

17.10 FREQUENCY OF IA 17.10.1 IA of important offices shall be carried out every year. All offices shall be audited at least once in a period of three years. However, the frequency of IA will largely depend upon the staff strength of Internal Audit Wing as well as the number of units falling under its purview. Judicious planning and prioritization is required to optimize the outputs, and the duration and frequency of audit may be decided based upon the nature of transactions, amount of allocation, arrears in relation to last audit, and the general health of accounts of each unit.

17.10.2 Audit Committee and CAA shall be informed by CAE about the targets and constraints if any, in meeting the targets. Efforts shall be made to have an IA set up to meet the targets.

DRAFTING AND PROCEDURE FOR SUBMISSION OF INSPECTION REPORTS 17.11.1 The inspection reports should be written in polite and dispassionate language pointing out the risks and/ or irregularities, rather than sounding accusatory. Offensive and strong words, sarcastic language etc. should not figure in the report on any account. At the same time suppositions, assumptions or allegations should be avoided in the reports. Further, the facts recorded in the reports should be based upon the available documents and records and only inevitable conclusions should be drawn. For every observation there must be some evidence. There should be no reference to judgemental inferences, for example fixing of responsibility for any irregularity, as it is for the administrative authorities to take action in the matter. The inspection report should be in two parts, Part-I comprising of Introductory Report and Part-II comprising the irregularities noticed during current audit. IA Party should take up all the outstanding paras pertaining to an office during subsequent audit and settle them to the extent possible, through on the spot verification of compliance. Where settlement is not possible,

outstanding paras with their updated position should be taken as part of the new report and the old report

(s) should be considered as settled.

17.11.2 Routine errors or omissions or commissions noticed during the course of inspection may be got rectified on the spot. Inspection reports should also be invariably discussed with the Heads of Offices inspected, and their comments if any, should be suitably incorporated in the report. Inspection reports should be issued only after they have been vetted at the headquarters, with one copy each issued to the Head of Office inspected and the CAE. Important points arising out of the IA should also be brought to the notice of FA and the Secretary through the Head of Accounting Organization by the IA Wing. The assessment of procedural risks that may be noticed or any suggestions that may arise on account of IA should be incorporated in the report as an aid to the auditee for improving the process under review. Also, any major systemic deficiency, which requires urgent action should be clearly brought out and reported to the higher authorities. The CAE should watch the progress on settlement of points raised by IA as well as CGA’s Inspection Unit. IA Party should also review all the outstanding points at the time of next inspection.

17.11.3 The CAE’s reporting and communication to the CAA and the Audit Committee must include information about:

i. The Audit Charter. ii. Independence of the IA activity. iii. The audit plan and progress against the plan. iv. Resource requirements vs. Results of audit activities. v. Conformance with the Code of Ethics and the Standards and action plans to address any significant conformance issues. vi. Management’s response to risk that in the Chief Audit Executive’s judgement, may be unacceptable to the Ministry/Department.

17.11.4 Reporting upon the audit engagement (5-C Framework): The auditor must check if he has reviewed all working papers and all the supporting evidence for audit observations before final preparation and entry of paras raised. The report must be created adhering to the 5C framework which has the following objectives:

(a) Criteria: What should exist? The benchmarks or expectations identified as the basis against which audit evidence is compared. (E.g. Policy, SOP, Norm, etc.)

(b) Condition: What exists? The factual evidence found in the course of the audit. The condition identifies the nature and the extent of the observation. A clear and accurate statement of condition evolves from the auditor’s comparison of actual evidence with appropriate criteria.

(c) Consequence/Effect/ Impact: What effect did it have? The risk or exposure to the institution and/or others as a result of the difference between the criteria and the condition should be recorded. The effect establishes the actual or potential impact of the condition. The significance of a condition is usually judged by its effect. It can be expressed in quantitative terms. To warrant reporting, an effect should be sufficiently serious to justify the action (and related cost) to correct the difference (the deficiency).

(d) Cause: Why did it happen? The possible or likely reason for the difference between the expected and actual condition should be explored. The cause may be

obvious or may be identified by deductive reasoning. The identification of similar causes for a number of observations may highlight an underlying risk and the audit recommendation should address it. Identification of the cause of an unsatisfactory condition is a prerequisite to making a meaningful recommendation for corrective action.

(e) Corrective Action/ Recommendation: What should be done? The actions suggested or required to correct the situation and prevent future occurrences. The relationship between the audit recommendation and the underlying cause of the condition should be clear and logical. In developing sound recommendations, the IA ensures that the recommended action is within the scope of the auditee, addresses the cause and not just the symptoms, and is viable.

What This Means

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

• 1Important offices: annual IA; all offices: at least once in 3 years
• 2Frequency depends on staff strength, number of units, transaction nature, allocation amount, and arrears
• 3Inspection reports must use the 5C framework: Criteria, Condition, Consequence, Cause, Corrective Action
• 4Reports must be in polite, evidence-based language — no accusations, sarcasm, or assumptions
• 5Outstanding paras from previous audits must be followed up and either settled or carried forward with updated status

Practical Example

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

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