Skip to content

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

During the audit of Konkan Ports Ltd, a Government company, the auditor appointed by the C&AG finds that the company has granted loans to a private party at an interest rate far below the government's borrowing cost, with no board justification. The auditor wants to evaluate this under the propriety dimension of public sector audit. Which is the best conclusion?

This is a propriety audit matter. Propriety audit checks that decisions follow sound financial principles and public interest even when no law is violated. An unjustified concessional loan should therefore be examined and reported, not ignored on the basis of board discretion.

  1. AIt is a matter of propriety audit and, as it may indicate a decision against public interest, should be examined and reported even though no law is breachedCorrect
  2. BPropriety is outside the audit scope since only arithmetical accuracy is audited in public sector entities
  3. CIt must be ignored because the board's commercial judgement cannot be questioned
  4. DIt is relevant only for the internal auditor and cannot feature in the statutory auditor's report

Explanation

Propriety audit examines whether expenditure and decisions conform to standards of financial prudence and public interest, going beyond legal compliance. A concessional loan with no justification is a typical propriety concern. Treating board judgement as beyond review ignores this.

Did you get it right without looking?

One question tells you little. A timed set on Overview of Audit of Public Sector Undertakings shows your real accuracy, how long you take and where you lose marks.

Practise Overview of Audit of Public Sector UndertakingsFree diagnostic mock

More Overview of Audit of Public Sector Undertakings questions