Auditing Exposes Irregularities
Auditing
The
major goal of an Audit is to add value and improve the organization’s
operations and provide reasonable assurance that the risks are identified and
managed and the information in administrative and financial records is accurate
and reliable as per proper compliance of policies, procedures, applicable laws
and regulations. Every year, the organizations are either audited at their
internal level or a team of auditors comes from outside or both internally as
well as externally. An organization is always works to establish its priorities
and the audit is particularly to evaluate for further deciding the action plans
to achieve the organizational goals. The auditors perform independent
evaluations and audited records are more trusted for the stakeholders with assurance
of auditors that the records including financial statements present a true and
fair view of the organization’s financial performance and position.
Internal Audit
The
internal audit is decided by the Head of Departments / Chief Executive Officers
to ensure financial controls in the organizational processes with the help of
proper accounting and reframing of Standard Operating Procedures (SoPs). An
internal audit is a self-assessment to determine the financial and
administrative control in order to avoid irregularities.
Process of Auditing
At
the time of audit, the following points are kept in mind:
a. Findings of the prior audits
First of all, the files of prior
audits are reviewed with the findings of each prior audit in an organization.
It is possible only through meeting and building a rapport with the managerial
people of the organization. The auditors observe the prime concerns and
expectations of the managerial people from an audit, in case, request comes to
audit a few organizational processes more sincerely, the same may be considered
by the team of auditors.
b. Organizational processes to achieve
its aim, objectives
Secondly,
the auditors if required, may discuss and interact with the employees of the
organization regarding their assigned duties and how they perform their duties
as per the organizational functions. Thereafter, the financial records and
departmental documents are tested whether adequate records are being maintained
or not.
c. Budget documents of the organization
2. Grants from Central Government
d. Utilization of Budget, Approvals,
Sanctions etc.
e. Revenue generated by the organization
f. Process of incurring expenses in
organization:
1. Cost of operations –
Material, Labour, and Expenses
2. Ledger Accounts
including Cash Book
3. Accounting Procedures
either Manual or Computerized
4. Inventory Management
System
5. Various functions of organization including Procurement of Goods / Services
/ Works, Salaries and Remuneration to Human Resources, Financial Statements,
Taxation including Income Tax and GST, Organizational Codes and Policies etc.
g. Evaluation of internal control
systems
1. Compliance of Laws,
Acts, Rules, Policies, Instructions
In
between and at the end of the audit, it is must to meet the managerial people
informally and discuss on the findings of the audit. In case, the findings are
misinterpreted then the same may be reframed after getting the clarity from the
managerial people. However, the auditors are independent to write the audit
objections if they disagree from the perspective of the managerial people.
2. Identifying
Irregularities and corrective course of actions
3. Improving Efficiencies
and Effectiveness of organizational processes
4. Safeguarding Assets
from Wastes and Frauds
5. Promoting Accuracy and
Reliability of Financial Records
The Audit report not only identifies
the financial and administrative irregularities but also recommend the
corrective course of actions to promote accuracy and reliability of the
records.
h. Comments and Concerns of
Administrators and Managerial people
Concern of Audit at Prime Minister Level in India:
The
administrators looking after the efficient and effective use of public
resources should be stricter than other employees working under them. The
ministers elected to make decisions for their concerned ministries, should
further restrict the administrators and themselves in using the public money
with utmost prudence. In 2016, the Prime Minister of India, Sh. Narendra Modi
worried and commented against the system in which Member of Parliament have
right to decide or increase their own salary. He commented that the lawmakers
(i.e. MPs) themselves should not decide their pay package*.
The
member of parliament elected by the public in India, receives various benefits
apart from the salaries i.e. housing and telephone facilities, travelling and
daily allowances, medical facilities, allowances for foreign trips,
constituency allowances, purchase of conveyance and office expenses. They are
also eligible to get free accommodation, air tickets, free power and even
pension after the term of five years.
The
auditors only check the irregularities and the benefits passed in the
parliament or assembly by the public representatives; cannot be questioned in
audit.
Concern of Audit of Chit Fund Companies:
The
chit fund companies are playing with the interests of investors and exposed
when most of the investors have been affected adversely. The window-dressing of
financial statements by the Multi-National Companies (MNCs) also affect the
investors. In order to show higher net worth of company, the accounting is
misused by the Chief Financial Officers (CFOs) of the company. In October 2018,
Supreme Court of India, appointed Forensic Auditors to audit the accounts of
Amrapli group of companies. The audit of account comprises the checking the
errors in accounts as per the Accounting Standards framed by Institute of
Chartered Accountants of India (ICAI).
Amrapali Group Diverted Money of Investors:
The Amrapali Group consist of 46 companies and the forensic auditors found that the directors of the Amrapali Group have been provided money in form of professional charges. It is also found that a few investors are refunded more amount due to non-allotment of flats. The forensic audit also detects the diversion of money within the bank accounts. As per provisions of Real Estate Regulation Act (RERA), it is must to utilize at least 70% of the amount received from investors in the concern real estate project and for this purpose, it is must to operate and maintain a separate escrow account for each real estate project. The developers if require to divert the money to other functions, then they require to take money out of the escrow account which can easily be audited.
Copyright © 2018 Dr. Lalit Kumar. All rights
reserved.
References:
*This information has been retrieved from Economic Times of 3rd May 2016
reported by Rakesh Mohan Chaturvedi & Ravish Tiwari; 'PM Narendra Modi
against MPs deciding their own salary'.
