Para 2.5.16 — MSO (Audit)

MSO (Audit)mso-audit

2.5.16 A supplementary or test audit, which is in the nature of an efficiency-cumpropriety audit, is conducted by the Comptroller and Auditor General. This has the following primary objectives:
(i) Verification of the technical accuracy of the accounting records, books of account and financial results with reference to the Accounting Standards.
(ii) Detection or prevention of misstatements in and window dressing of the financial statements.
(iii) Examination of the achievement, by the company, of the objectives for which it was established.
(iv) Detection or prevention of frauds, misappropriation, and other acts of omission and commission.

What This Means

The CAG conducts supplementary or test audit of government companies, which goes beyond routine financial checking to include efficiency and propriety aspects. The primary objectives are: verifying the technical accuracy of accounting records against Accounting Standards, detecting misstatements or window-dressing of financial statements, examining whether the company is achieving the objectives it was set up for, and detecting or preventing fraud and misappropriation.

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

Key Points

1Supplementary/test audit is an efficiency-cum-propriety audit conducted by the CAG
2It verifies technical accuracy of accounting records against Accounting Standards
3It aims to detect window-dressing and misstatements in financial statements
4Achievement of the company's establishment objectives is examined
5Detection and prevention of fraud and misappropriation is a key objective

Practical Example

During supplementary audit of a government fertilizer company, CAG auditors discover that the company has been capitalizing routine maintenance expenses to inflate its asset base (window-dressing). They also find that the company was set up to make fertilizer affordable for small farmers, but 70% of sales are going to large commercial farms at market rates, defeating its establishment objective. Both findings are included in the CAG's comments on the statutory auditor's report.

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

Frequently Asked Questions

How is supplementary audit different from the statutory audit?▼

Statutory audit focuses primarily on certifying whether financial statements present a true and fair view. Supplementary audit goes deeper -- it checks for efficiency, propriety, achievement of objectives, and potential fraud, essentially auditing whether public money invested in the company is being used effectively.

What is window-dressing in financial statements?▼

Window-dressing refers to deliberately presenting financial statements in a more favorable light than reality -- for example, by overstating assets, understating liabilities, capitalizing revenue expenses, or deferring legitimate expenses to show better profits.

Can CAG's supplementary audit lead to action against company management?▼

Yes. If the supplementary audit reveals fraud, misappropriation, or serious financial irregularities, the findings are reported to Parliament/Legislature through the CAG's report, which can trigger investigations by parliamentary committees and potentially lead to corrective or punitive action.

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

Para 2.5.16 — MSO (Audit)

Original Rule Text

What This Means

Key Points

Practical Example

Frequently Asked Questions

Related Rules