Para 2.5.16 — MSO (Audit)
Original Rule Text
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?▼
What is window-dressing in financial statements?▼
Can CAG's supplementary audit lead to action against company management?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.