Para 3.7.13 — MSO (Audit)
Original Rule Text
What This Means
This paragraph provides a comprehensive 15-point checklist for auditing tender acceptances, contracts, and agreements. Key checks include verifying complete quantity and rate details, ensuring all material clauses are specified (delivery schedule, inspection, consignee details), confirming the signing authority's competence, checking sales tax/excise provisions, scrutinizing year-end rush purchases, verifying security deposits, ensuring penalty clauses are enforced, and confirming proper legal execution by all parties including firm partners.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Complete particulars of quantities and firm rates/prices must be furnished
- 2Contracts with price variation or provisional rates need local audit examination
- 3Signing authority must be competent to enter into contracts
- 4Sales tax and excise duty provisions must be definite, not vague
- 5Year-end rush purchases must be specially scrutinized
- 6Security deposits must be in correct form and amount
- 7All partners of a contracting firm must sign (or have power of attorney)
- 8Contracts must not be entered into by or on behalf of a minor
- 9Penalty clauses must be enforced in case of default
Practical Example
During audit of a supply contract, the auditor found several issues: the acceptance of tender was signed by a Purchase Officer who lacked delegated authority for contracts above Rs 10 lakh (the contract was Rs 15 lakh), the sales tax clause vaguely stated 'if legally leviable' without specifying the rate, and the security deposit was Rs 1 lakh instead of the prescribed 5% (Rs 75,000 on a Rs 15 lakh contract). All three points were raised as audit observations requiring rectification.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why are year-end purchases specially scrutinized?▼
What does it mean for a contract to have 'firm' prices?▼
Why must all partners of a firm sign the contract?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.