Page 286 - CA Inter Audit PARAM

CA Ravi Taori
The Propriety audit is to vet the expenditure in the annals of financial wisdom and
uprightness. It is to check to bring out the improper, avoidable, or in fructuous expenditure
even though such expenditure has been incurred in conformity with the existing rules and
regulations.
A transaction may satisfy all the requirements of regularity audit in so far as the various
formalities regarding rules and regulations are concerned but may still be highly wasteful. It
is not audit of sanction or against norms. It is a qualitative, opinion-based expression of
auditor’s findings as regards the efficiency, effectiveness and economy dimensions of
expenditure.

Audit against propriety seeks to ensure that expenditure conforms to these principles which
have been stated as follows:
• The expenditure should not be prima facie more than the occasion demands. (E.g.
Car of 1 crore for MPs) Every public officer is expected to exercise the same vigilance
in respect of expenditure incurred from public moneys as a person of ordinary
prudence would exercise in respect of expenditure of his own money.
(E.g. 50 cars were ordered without quotations)

• No authority should exercise its powers of sanctioning expenditure to pass an order
which will be directly or indirectly to its own advantage.
(E.g. Cars were used by government employees for personal use or given for
rent)

• Public moneys should not be utilized for the benefit of a particular person or
section of the community.
(E.g. Benefit was given only to ruling parties) unless:
o the amount of expenditure involved is insignificant; or
o a claim for the amount could be enforced in a Court of law; or
o the expenditure is in pursuance of a recognized policy or custom; and
• the amount of allowances, such as travelling allowances, granted to meet
expenditure of a particular type should be so regulated that the allowances are not,
on the whole, sources of profit to the recipients.

QNO Performance Audit Old Course -- (P16M/M18E/M23E)
GA.20 Bhaskar CNO - GA.160
Write short notes on Performance audit under government accounting system.
OR
Write a short note on Performance Audit.
OR

SK & Co, a Chartered Accountant firm has been appointed an auditor of Metro Rail project in City A. Since
the project is on large scale, it involves a high volume of resources (financial, human and physical resources).
The appointing authority C&AG requires an objective examination of the financial and operational
performance of the Metro Rail project. Explain the nature and scope of audit that SK & Co will undertake.
➢ Different Names
The scope of audit has been extended to cover efficiency, economy and effectiveness audit or
performance audit, or full scope audit.

➢ Economy audit
Economy audit looks into whether government have acquired the financial, human and physical
resources in an economical manner, and whether the sanctioning and spending authorities have
observed economy.

➢ Efficiency audit
Efficiency audit looks into whether the various schemes/projects are executed, and their operations
conducted economically and whether they are yielding the results expected of them, i.e., the
relationship between goods and services produced and resources used to produce them (input

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