Examination on Accounts and Audit Functions

 Examination on Accounts and Audit Functions

-Dr. Lalit Kumar Setia

The examinations of Accounts Officers, on Financial and Compliance Audit, Methods and Procedure of Auditing including auditing in Information Technology (IT) environment are very easy to attempt after going through the material available on my webpages. The Auditing standards are issued by Comptroller Auditor General in India, at the international level, these are issued by IFAC and INTOSAI.

The CPD test and syllabus focuses on the understanding of the Audit function. In Government, the Accounts Officer is Head of an office of Accounts responsible to ensure effective utilization of financial resources and compliance of rules in the department. The Audit officer is the head of an office of Audit. The Audit Officer and Accounts Officer, both are inter-related. An accounts officer performs functions as per financial rules while an audit officer checks and points out the irregularities while performing financial functions with recommendations to do the same work better.

To know the responsibilities of a Head of Accounts Office, the following article is a must-read.

https://drlalitsetia.blogspot.com/2021/08/responsibilities-of-head-of-accounting.html

From where do the funds/grants come in a Government office?

Article 267(1) of the constitution establishes Contingency Fund and an officer is designated as ‘Drawing Officer’ by the Central Government or Head of the Department; for drawing bills from this fund so that the financial functions may be discharged as per Government Accounting Rules 1990, Government Account (Receipt and Payment) Rules, 1983 and the orders or instructions issued latest in this regard.

How Haryana Treasuries are performing financial functions with the help of allotting Unique Code of Payee. Have a detailed reading of the following –

https://drlalitsetia.blogspot.com/2021/09/how-does-unique-code-of-payee-work.html

It is well known that an audit is an examination of accounting records which includes entries of financial transactions undertaken for performing the official duties by the officers of an office.

The PC-8 paper of Financial Rules and Principles of Government Accounts:

The Group II examinations for Subordinate Audit/Accounts Services (SAS) are particularly related to Financial Rules, Principles of Accounting in Government, Audit function, etc. The examination books are available on the web portal of CAG and the syllabus is also prescribed by the CAG, the sole authority entrusted with the responsibility of audit of accounts.

It is required to have a detailed understanding of Financial Procedures in Government, also explained in the following article –

https://managerialadministration.blogspot.com/2018/04/financial-procedures-in-government.html

Can an Executive Force Audit Officer modify audit findings?

This question is generally asked by the participants, Auditors in my class whether the Audit should be independent or not? It is interesting to clear that an Auditor General of State and Comptroller Auditor General in Central Government, is fully independent and there is no power in the hands of executive to direct the Audit Officers to modify or refrain from carrying out a fair audit, derive conclusions, and recommend to ensure proper utilization of the financial resources.

How the rules enforce the financial control and how the administration is held responsible if any irregularity stays for the long term –

https://managerialadministration.blogspot.com/2018/10/accounts-administration-and-prevention.html

Financial Audit

To verify whether the Government Accounts are properly prepared or not, whether the applicable laws and rules are compliance or not, whether there is a need to point out excess or shortfall in expenditure or not, and if there are any irregularities, what should be an action plan for sorting out the issues and timely completion and monitoring of the financial statements?

How to ensure effective financial administration –

https://managerialadministration.blogspot.com/2018/10/effective-financial-administration.html 

*Copyright © 2021 Dr. Lalit Kumar. All rights reserved. 

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was published on 8th October 2021 and last updated on 8th October 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

Uniformity in Accounts of Haryana Government

 Uniformity in Accounts of Haryana Government

-By Dr. Lalit Kumar

Statement of Purpose:

The uniformity in accounts is generally ensured by enforcing the Accounting Standards and the purpose is improving financial reporting. In India, the Comptroller and Auditor General of India (C&AG) constituted Government Accounting Standards Advisory Board (GASAB) on dated 12th August 2002 and the GASAB is working as a nodal advisory body to formulate and improve standards of government accounting, financial reporting, and enhance accountability mechanisms. As per a document compiled by GASAB entitled, “Primer on Accrual Accounting”, there should be a transition to an accrual-based system for improving financial reporting. Government Accounting is primarily concerned with the recognition, measurement, and reporting of transactions undertaken by governmental entities and it is quite different in many aspects from business and commercial accounting. Government financial information is used by a wide range of stakeholders, all of whom have an interest in the financial health and management of public resources.  For improving the quality of the information on which basis the decisions are usually taken by the Authorities of Public Sector Organizations, it is desirable to adopt uniform and comparable accounting practices. The Robust and Uniform Set of Accounting Standards can bring greater stability in the economic system; enhance the accountability and efficiency to govern. It can become a basis for evaluating the financial positions of the organizations easily and support the effective decision making.

Accounting is an effective tool for improving the finance function in Government and there is need for both uniformity and transparency by following standards, rules, regulations etc. It is well-known fact that the functions of Government Organizations by nature are diverse and there are numerous legal and fiscal constraints under which the financial operations must be conducted. Due to this limitation, the financial reporting also becomes different and the particulars of receipts, payments, accounting principles, and financial statements also differ from one organization to another as per the nature of the functions.

With the help of uniform accounting, the Administrative Officers, Finance Officers including Accounts officers not only summarize the financial accounts in terms of income statement and balance sheet but also make decisions with a comparison of the figures with greater transparency. Arthur Stone Dewing rightly said, “All decisions are financial decisions.” Critical analysis and evaluation is used as a base to take effective decisions in organizations and financial management is a yardstick used to judge most of the operations and projects of an enterprise.

Aims and Objectives:

The main objective of this research is to examine and evaluate the benefits and drawbacks of uniformity in Government Accounts and how it affects the financial management, decisions of the Officers relating to the financial health of the organizations.

Review of Literature:

Amyas Morse (2013) in his report examined how far finance is at the heart of decision-making in government. He emphasized the importance of effective financial management in supporting sound decision making, facilitating accountability, improving and refining planning, and enabling an organization to devise its strategy and manage risks. He explained how the government has made some significant financial management processes more coherent and simplified reporting at three stages i.e. plans, estimates, and expenditures outturns. In the research, various strategic challenges for financial management have been identified including cost reduction, strategic planning, prioritizing in the allocation of resources, difficulties in rendering local public services, and lack of skills associated with effective financial management. It is concluded that the government has succeeded in a number of areas in controlling spending however it still faces a significant challenge in redesigning and transforming public services.

Government of Haryana (2016) describes the accounts of government companies audited by the Comptroller and Auditor General of India under the provisions of Section 619 of the Companies Act. The report detailed the performance audits on the functioning of DCR Thermal Power Plant, Yamunanagar, and RG Thermal Power Plant at Hisar and pointed out an amount of nearly five thousand crores related to avoidable expenditure, non-compliance of rules, directives, and procedures. There are 30 Public Sector Undertakings (PSUs) in Haryana including 25 working PSUs and 5 non-working PSUs. The government exercises control over the affairs of the PSUs through its administrative departments. The State Legislature monitors the accounting and utilization of invested amounts in the PSUs. The total investment in the form of Capital and Long-term Loans was Rs. 40,984.19 crores as of 31^st March 2015. In the report, it is found that the DCR Thermal Power Plant and RG Thermal Power Plant incurred avoidable expenditure towards penalty imposed by ECL and kept excess inventories than the normative limit set by HERC. There was an unfruitful expenditure of Rs 6.4 crores in December 2009 on the Computerized Maintenance and Inventory Management System (CMIMS) which had not been made operational till June 2015.

Vishal Gupta, Swanand Kulkarni, Naresh Khatri (2018) explored the key managerial challenges faced by the leaders and managers of public sector organizations. They used an open-ended questionnaire to gathered data from 42 senior managers of PSUs from various industries representing 12 Indian states in different regions of India. On the basis of in-depth qualitative analyses, they tried to find the ground realities of Indian Public Sector Undertakings and what they found that there are three key managerial challenges i.e. political interference and lack of autonomy, rigid rules, and HR practices, and lack of employee motivation. Finally, it is concluded that there is a dominant role of Indian cultural and political contexts in influencing the experiences of leaders working in public sector organizations.

The review of literature reveals that the decisions of the Government are affected by the level of uniformity in the accounting of organizations. There are few research studies in the areas of uniformity of accounting and it needs to relook this area of research with consistent changes in the accounting systems and new approaches in Accounting and Finance. The present research will bring useful results for improving the financial decisions of the Government because the quality of financial reporting is a factor for fixing the responsibilities of the concerned Officers/Officials. It will determine the effect of uniformity in enhancing public finance accountability management.  

Research Methodology:

The research is descriptive and data will be collected firstly from secondary sources, thereafter if required, from the primary sources using a survey with a pre-determined structured questionnaire. The primary data will be gathered through the questionnaire method and also with the help of discussions and interviews covering both personal and telephonic interactions. The targeted population will be Finance Officers including Chief Accounts Officers, Senior Accounts Officers, Accounts Officers, Section Offices and Accounting Staff working the Haryana Government Organizations. Adequate Sample units keeping in view the constraints of time and cost will be selected using the Simple Random Sampling method. The data collected from Secondary and Primary sources will be analyzed using descriptive and inferential statistical methods. The research is descriptive and data will be collected firstly from secondary sources, thereafter if required, from the primary sources using a survey with a pre-determined structured questionnaire. The primary data will be gathered through the questionnaire method and also with the help of discussions and interviews covering both personal and telephonic interactions. The targeted population will be Finance Officers including Chief Accounts Officers, Senior Accounts Officers, Accounts Officers, Section Offices and Accounting Staff working the Haryana Government Organizations. Adequate Sample units keeping in view the constraints of time and cost will be selected using the Simple Random Sampling method. The data collected from Secondary and Primary sources will be analyzed using descriptive and inferential statistical methods.

References/End Notes:

---

[i] The information of GASAB is retrieved on http://gasab.gov.in/gasab/about.aspx.

[ii] A document is retrieved from the portal of GASAB i.e. http://gasab.gov.in/gasab/pdf/Primer.pdf

[iii] ICAI (2017), Government Accounting System in Developed and Developing Countries – A Comparative Analysis retrieved from https://cpfga.icai.org/wp-content/uploads/2017/11/Government-Accounting-System-in-Developed-and-Developing-Countries.pdf

[iv] This information is retrieved from the lesson, “Government Financial Operations: Accounting and Reporting”, retrieved from https://study.com/academy/lesson/government-financial-operations-accounting-reporting.html

*Copyright © 2021 Dr. Lalit Kumar. All rights reserved.

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. The article was published on 1^st September, 2021 and last updated on 4^th September, 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

Organizational Performance depends upon Financial Management

Organizational Performance depends upon Financial Management

-Dr. Lalit Kumar

Financial Administration:

In public sector organizations, most of the drawing and disbursing officers (DDOs) functions in coordination with the Accounts Officers (AOs) and perform their duties very sincerely. They require to have clarity on various areas of finance and accounting to make their decisions more effective. The accounting system is also required to be supervised constantly to prevent the mal-practices. It is required to adopt Double Entry System-cum-Accrual Accounting followed by use of technological tools like in private sector organizations, using Systematic Application Product (SAP) in financial operations.

Accounting Standards:

The Chief Financial Officers (CFOs) of private sector organizations are equivalent to Drawing and Disbursing Officers (DDOs) of public sector organizations. The Accounting Standards of Institute of Chartered Accountants of India (ICAI) are adopted in private sector organizations while in public sector organizations, the Accounting Standards of Government Accounting Standards Advisory Board (GASAB) are implemented.

Procurement Functions:

The use of Government e-Marketplace (GeM) in procurement made the public sector organizations stand at par with the private sector organizations in procuring goods and services. With the constant regular training for upgrading the skills of DDOs, the public sector organizations are performing well and delivering public services in more efficient manner. The Administrative Training Institutions (ATIs) are coming ahead to bear the responsibility of improving the performance of public sector organizations with providing training to the officers and conducting research studies to enhance the transparency and accountability in the system.

Capacity Building for Governance:

The Department of Administrative Reforms and Pension Grievances (DARPG) constantly sponsoring the capacity building programmes and providing financial assistance the raise the standard of living in public through infusing money in various projects. From last one decade, the role of DDOs and CFOs has become hard due to rising level of corruption and mal-practices in organizational operations. It is must to adopt practical solutions along with improving the transparency and accountability.

Challenging Role of DDOs:

The role of DDOs is more challenging because the employees in their organizations cannot be easily removed from their job-role and show less motivation to deliver better results.  The rules and regulations are also not modified strictly as per the requirement to deliver better organizational performances. Even if the rules and regulations are modified, it is difficult to implement the change in their organizations.

Challenging Role of Administrators:

The officers with Indian Administrative Service (IAS) cadre play a very critical role by coordinate themselves between the Ministers and employees of public sector organizations. The rely upon the Head of Offices (officer-in-charges of field organizations) to have better performance and the Head of Offices remain in close touch with advisors, chartered accountants, consultants, and trainers to complete their functions in more effective way.

The challenges in front of IAS officers and concerned ministries required to be modelled in the form of Standard Operating Procedures (SoPs) keeping in view the role of each and every officer of their concerned departments. After having SoPs, it is required to enforce the control with fixing the accountabilities of each employee with strict action in case of irregularities and non-compliance of rules.

Functions of Finance and Accounts Branch

Most of the organizations are headed by the Administrative Officers including IAS Officers in Government / Public Sector Undertakings and Chief Executive Officers (CEOs) in Private Sector Organizations. Whatever functions an organization is doing, its financial records, financial decisions, and financial analysis are done by its Finance and Accounts Branch. Let’s have a snapshot on the functions of Finance and Accounts Branch i.e. the functions of Chief Accounts Officer (CAO) in Government / Public Sector Undertakings and Chief Finance Officer (CFO) in Private Sector Organizations:

Finance Functions in Government Organizations:

In order to ensure proper functioning of the department, the Finance and Accounts Branch facilitates in proper management of funds keeping in view the compliance of financial rules, prescribed procedures in Standard Operating Procedures (SoPs) of internal checks, maintenance of accounts which are audited by Accountant General at regular intervals, and compliance of taxation rules including income tax and goods and services tax (GST). The functions may be categorized:

a.     Maintenance of Books of Accounts

b.     Statutory Compliances

c.     Disbursement and pre audit of expenditure

d.     Funds Management

e.     Preparation and disbursement of Salaries /other remunerations

f.      Application of funds

The employees of Finance and Accounts Branch are entrusted to implement and ensure proper internal checks & control, statutory compliances, flag financial irregularities (if any), ensure quality and speed of disposal of bills and sanctions, proper utilization of funds with furnishing of utilization certificates. But with continuous change in the finance and accounting framework; due to changes in accounting system i.e. manual to computerized, changes in income tax and goods & services tax (GST), changes with adoption of Standard Operating Procedures (SoPs); there is acute requirement to assess the training needs Finance and Accounts Branch for improvement in effectiveness of the performance of accounts personnel.

Use of Information Technology:

The employees working in finance and accounts branch performs their functions on e-Office and Tally Software and also use MS-Excel software for reporting purposes. The work-load becomes huge most of the time due to continuous involvement of the employees in maintenance of cash book, entry of vouchers, processing of bills and sanctions, enforcing deductions and recoveries, and submission of returns of e-TDS and GST. The Information Technology is used to perform the functions fast and efficiently.

*Copyright © 2020 Dr. Lalit Kumar. All rights reserved. 

You might also be interested in reading the following: 

You might also be interested in the following:

Introduction to Income Tax Matters

Advance Tax and How to Avoid Interest on Advance Tax

Implications on Income Tax on Formation and Dissolution of Hindu Undivided Family

Payment and Status of Income Tax

Income Tax Return

Tax Deduction at Source

Tax Planning to Have More Take-Home Salary

Tax Deduction at Source for Deductors

How to save money from being covered under taxes (Tax Saving Options)?

Tier I and II Accounts of NPS

Tax Saving Under Section 80C

Tax Deduction Under Section 80C

11 Must Claim Exemptions and Deductions