Skip to content

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

While auditing Rajdhani Metro Services Ltd, a Government company, CA Arjun finds that the company awarded a large contract without following its prescribed tendering procedure, although the financial statements are accurately stated. The audit under the C&AG's directions includes examining whether the company's actions are in line with propriety. Which audit approach best describes this examination?

This is propriety audit, which tests whether decisions and expenditure meet standards of financial prudence and public interest, even when the accounts are accurate. Bypassing the prescribed tendering procedure is a propriety concern, which a plain financial audit focused on true and fair view would not capture.

  1. AFinancial audit limited to true and fair view of the financial statements
  2. BPropriety audit, examining whether expenditure and decisions meet standards of financial prudence and public interestCorrect
  3. CCost audit under the Cost Records rules only
  4. DTax audit for compliance with the Income-tax Act

Explanation

Propriety audit looks at whether transactions follow sound financial principles and public interest, beyond mere legal compliance. A true-and-fair financial audit alone would miss the tender lapse as the numbers are correct. Cost audit and tax audit address different matters and do not examine tendering decisions.

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