Para 3.7.13 — MSO (Audit)

MSO (Audit)mso-audit

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?▼

There is a common tendency for departments to rush purchases in March (the last month of the financial year) to utilize unspent budget allocations. This rush can lead to unnecessary purchases, inflated quantities, or acceptance of unfavorable terms. Audit flags such practices to prevent wasteful expenditure.

What does it mean for a contract to have 'firm' prices?▼

Firm prices means the rates/prices agreed in the contract are fixed and will not change during the contract period. Contracts with price variation clauses or provisional rates are riskier for the government and therefore require additional scrutiny during local audit.

Why must all partners of a firm sign the contract?▼

In a partnership firm, all partners are jointly and severally liable. If only some partners sign, the absent partners could potentially claim they are not bound by the contract. Requiring all signatures (or valid power of attorney for absent partners) protects the government's legal interests.

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

Para 3.7.13 — MSO (Audit)

Original Rule Text

What This Means

Key Points

Practical Example

Frequently Asked Questions

Related Rules