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CA Final · Advanced Auditing, Assurance and Professional Ethics · Overview of Audit of Public Sector Undertakings

CA Anil, an auditor of a Government company, finds that the company awarded a large civil contract without inviting tenders, although the company's own procurement manual requires open tendering above a set value. Prices paid appear reasonable. Which auditor action is most appropriate?

The auditor should report the breach of the company's tendering rules as a regularity and propriety matter and communicate it to management and those charged with governance. Reasonable prices do not excuse non-compliance, and a disclaimer or resignation would be disproportionate.

  1. ATake no action because prices were reasonable and no loss arose
  2. BReport the deviation from the procurement rules as a propriety and regularity matter and bring it to the attention of management and those charged with governanceCorrect
  3. CDisclaim an opinion on the entire financial statements
  4. DResign from the audit because internal control is ineffective

Explanation

In public sector audit, regularity and propriety are part of the audit concern, so non-compliance with the company's own procurement rules should be reported even where no loss is evident. Reasonable prices do not cure the breach. A disclaimer or resignation is disproportionate for this single deviation.

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