Para 17.12 — The IA Wing must maintain a register (APPENDIX 17

17.12 PURSUANCE OF AUDIT PARA 17.12.1 TEST AUDIT NOTES ISSUED BY STATUTORY AUDIT: In order to keep a watch over the settlement of audit objections included in the Test Audit Notes issued by Statutory Audit/CGA Inspection Team, the IA Wing will maintain a register in the form given in APPENDIX 17.3 with separate folios for each DDO. The progress made towards the settlement of outstanding objections should be reviewed on quarterly basis and appropriate action taken to ensure speedy settlement. The compliance of IA observations reported by the DDOs should be verified during the next audit of that office. Whenever asked for, the register will also be furnished to the Statutory Audit Parties to verify the settlement of objections.

17.12.2 IA para shall be reviewed regularly and reported to the Audit Committee of the Department. Status of pending para shall also be brought out in the review meetings of the Department. CGA shall also be informed through a structured report, as stipulated by CGA.

Role of Internal Audit (IA) Function: IA is an independent, objective assurance and advisory activity designed to add value and improve the Ministry’s/Department’s operations. It would facilitate achievement of Ministry’s/Department’s objectives by evaluating and improving the effectiveness of risk management, control and governance processes. IA is concerned with controls that ensure:

 Reliability and integrity of financial and operating information;  Effectiveness and efficiency of operations;  Safeguarding of assets; and  Compliance with laws, regulations and contracts.

The IA function in ____________________ Ministry would aim at improving the overall operating effectiveness of the programmes by conducting an independent evaluation of operations with respect to policy guidelines, scheme provisions and objectives and make suggestions to improve performance of the implementing units. While evaluating performance of spending units, audit would look into planning, execution and monitoring mechanisms, wherever possible from gender perspective, focus on control weaknesses and suggest ways to improve the control mechanisms. IA would also comment on risks which exist and may impede achievement of intended objectives.

IA function would also comment on compliance by various field formations with rules, guidelines and procedures established by the Government of India in general and of __________________ Ministry in particular. IA would also check the accuracy of accounting and financial records maintained by various executive offices of the _________Ministry and would focus on compliance with rules and regulations to be followed, in this regard.

The mandate of IA would include examination and evaluation of all aspects of functioning of the spending units and would not be limited to compliance audit only. It would help in identification and monitoring of risk factors and carry out a critical assessment of economy, efficiency and effectiveness of service delivery mechanism to ensure value for money and assist FAs in the appraisal, monitoring and evaluation of individual schemes.

The audit plan would concentrate on extensive coverage of the high-risk areas and would set up its audit priorities and coverage based on risk assessment and available resources. IA would thus provide an effective monitoring system to facilitate mid-course corrections.

Responsibilities: Programme divisions are responsible for maintaining an adequate system of internal controls to manage risks, which may adversely impact achievement of objectives. IA would provide assurance services to the spending units, the programme divisions and the audit committee in terms of reviewing the adequacy of these systems of internal control. IA may also play an advisory role in facilitating the development of effective systems of risk management and internal control, but ensure that it does not assume the role of management. In addition, and subject to the availability of resources, audit would seek to respond to programme divisions’ requests for special audits, which may have a specific and defined objective.

Annual Audit Plan: The IA function is a key component of Public Financial Management within each Ministry/Department. Historically, this function has confined itself to merely ensuring that accounting and related records were properly maintained and the expenditure by spending agencies was made in compliance to laws, rules and regulations. This concept has undergone a sea change and the move towards a Risk Based approach to IA is a paradigm shift. The planning is an important aspect of every project, and similarly, of performing the IA function to achieve the objective. In this regard, the guidelines from O/o CGA has been issued from time to time which include recommendations for utilizing 60% of working days for Risk Based IA of Schemes and 40% of working days for Compliance/Regularity Audit. The Planning for Compliance/Regularity Audit or Risk Based IA should be made on Risk Based approach. To facilitate smooth conduct of IA engagements, Annual Audit Plan should be finalized by 15th January every year and a copy of the same should be endorsed to the IA Division O/o CGA by 15th February.

By 15th of January every year, IA Wing would submit an Annual Audit Plan, for the next financial year, through the Financial Advisor to the Audit Committee and thereafter perform the audits approved by the Audit Committee, in the manner defined in the audit manual. Annual Audit Plan would be based on the risk assessments carried out by the Divisions and take into account issues derived from the current audit strategy that is approved by the audit committee. Wherever the Divisions have not completed the risk identification and categorisation exercise, the Chief Audit Executive may make his/ her own assessment in this regard and explain the same in the Annual Audit Plan. A copy of approved Annual Audit Plan should be sent to O/o CGA by 15th of February every year.

Reports: All audit reports should be prepared within one week and issued immediately after the approval of Chief Audit Executive of the Ministry/Department. Reports, which have significant issues, would be circulated with the approval of Vice Chairman of the Audit Committee. (A sample template of Audit Report is given in EXHIBIT II of Internal Audit Hand Book(2018) issued by Office of CGA). Also, summary of major observations on the basis of work done by the IA parties during a financial year would be brought out in the Annual Audit Review for the Ministry/Department and would be submitted to the Chairperson of the Audit Committee. This Annual Audit Review should also be submitted to the Office of CGA in the prescribed format by 31st May (Refer EXHIBIT I of Internal Audit Hand Book(2018) issued by Office of CGA). The programme divisions would be required to take follow-up action on the audit report and significant non-compliance would be brought to the notice of the Audit Committee for adequate action. Reports would be addressed to the HoD with endorsement to concerned entity of the Ministry/Department.

Access: IA would have unfettered access to all officers, buildings, information, explanations and documentation required, to discharge the audit responsibilities in a comprehensive and effective manner.

Independence: Independence of IA Wing of the Ministry/Department would be ensured by providing a clear mandate to it. The performance of IA would also be periodically reviewed by Pr. CCA/CCA/CA. Results of this assessment will be shared by Chief Audit Executive with the Audit Committee in the Ministry/Department.

Organization Structure of IA Wing: The IA Wing would be headed by Head of Accounting Organization i.e. Pr.CCAs/CCAs/CAs (i/c) as the case may be, who will function as a CAE in the Ministry/Department. CAE would report to the Secretary of the Ministry/Department through Financial Advisor of the Ministry/Department. Functionally, IA would report to an Audit Committee chaired by Secretary of the Ministry/Department, with Financial Advisor of the

Ministry/Department being its Vice Chairman and Chief Audit Executive (or an officer nominated by him) as its Member Secretary. Audit Committee would also have other division heads/members from Finance Wing to provide inputs for the function.

Independence of IA Functions: The Institute of IA (IIA) defines that the Independence is the freedom from conditions that threaten the ability of the IA activity to carry out IA responsibilities in an unbiased manner. To achieve the degree of independence to effectively carry out the responsibilities of the IA activity, the Chief Audit Executive [Pr.CCAs/CCAs/CAs(i/c)] has direct and unrestricted access to senior management and the Board. This can be achieved through a dual reporting relationship. Threats to independence must be managed at the individual auditor, engagement, functional and organizational levels.

In order to maintain the requisite technical standards of accounting in the Departmentalized Accounting Offices, the O/o CGA has the powers to inspect the offices with a view to ensuring that accounts are maintained accurately, comprehensively and in a correct manner. For this purpose, an Inspection Wing (IA Division) has been setup in the office of CGA. The IA Division is structured in three sections viz.

(i) Centre of Excellence

(ii) Planning and coordination and (iii)Inspection Wing.

Government entities must establish protection to ensure that IA activities are empowered to report significant issues to appropriate oversight authorities. Safeguarding auditor independence is particularly needed when the IAW reports to officials who may also be held accountable for any significant problems. Examples of such protection include statutory requirements that:

 Prevent the audited Ministry/Department from interfering with the conduct of audit work, staffing of the audit activity and publication of the audit report.

 Ensure the CAE reports to the highest executive level in the Government entity and that report distribution requirements ensure the transparency of audit results.

 Require that completed audit reports are made available to the public. (Source: Internal Audit Hand Book for Central Civil Ministries/Departments issued by Office of CGA on 1st March, 2018.)

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

• 1Register in APPENDIX 17.3 format tracks settlement of statutory audit and CGA inspection objections — separate folios per DDO
• 2Settlement progress is reviewed quarterly; compliance verified during next audit visit
• 3IA is independent and reports to Secretary through FA, with functional reporting to the Audit Committee
• 4Annual Audit Plan: 60% for Risk-Based IA of schemes, 40% for Compliance/Regularity Audit
• 5Annual Audit Plan due by January 15; copy to CGA by February 15; Annual Audit Review due by May 31

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

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