Para 2.5.17 — MSO

2.5.17 It should be specifically examined in the course of audit of government companies whether:

(i) the provisions of the Companies’ Act, 1956 or the relevant statutes governing the company concerned have been complied with;

(ii) there has been any material deviation from the objectives listed in the company’s Memorandum of Association and Articles of Association;

(iii) instructions of the Government of India, State Governments, Reserve Bank of India, etc. have been followed in conducting financial transactions;

(iv) pronouncements of the Institute of Chartered Accountants of India (ICAI) relating to Accounting Standards AS 1 to AS 15 (which are mandatory) and standard auditing practices have been complied with, and its guidance notes and opinions in regard to accrual accounting, reserves created during revaluation of fixed assets, expenditure incurred during construction, treatment of excise duty, debtors, loans and advances, investments, etc. have been adhered to;

C. Scrutiny of statutory auditor’s report

(v) accounting procedures for proper control over expenditure and realization of revenues are adequate;

(vi) there is any large accumulation of surplus stores/finished stock;

(vii) the method of charging depreciation on the assets is reasonable;

(viii) bad and doubtful debts have been outstanding for long periods and, if so, the reasons therefor;

(ix) major contract agreements have been concluded in the company’s best interests and their terms and conditions have been enforced; and

(x) internal control mechanisms that assist the management in safeguarding assets and resources and in complying with laws and regulations, and provide assurance about the accuracy and completeness of accounting records are available and operate as desirable.