Comprehensive Audit of Public Enterprises
: Areas to be examined:
1.The scope and
extent of audit of public sector enterprises is determined by the Comptroller and Auditor
General of India.
2.Audit of public enterprises in India is not restricted to financial and
compliance audit; it extends also to efficiency, economy and effectiveness with which these
operate and fulfil their objectives and goals.
3.Another aspect of such audit relates to questions
of propriety; this audit is directed towards an examination of management decisions in sales,
purchases, contracts, etc. to see whether these have been taken in the best interests of the
undertaking and conform to accepted principles of financial propriety.
4.Comprehensive audit
involves assessing efficiency and effectiveness of public enterprises in its entirety to be
conducted on the basis of certain standards and criterion. Public enterprises have been setup
with socio-objectives. An objective assessment with reference to such objectives’
fulfillment would require comprehensive audit.
5.The starting point of a comprehensive audit of a public enterprise, which covers aspects of
economy, efficiency and effectiveness, is the preparation of an audit programme based on the
study of decisions relating to the setting up of the enterprise, its objectives, the areas of
operation, organisation, financial and operational details available in the annual reports and
accounts, capital and operational budgets, deliberations of the board of directors, material in
the earlier audit inspection reports on the enterprise and other relevant available papers.
6.These audit programmes (or guidelines) identify the areas/aspects which require further
detailed audit analysis and criteria, the data required for such analysis and the sources of
such data, the extent of the audit analysis including the test checks to be applied and the
instructions to the audit parties assigned to the work.
7.The areas covered by comprehensive audit are those of investment decisions, project
formulation and management, organisation, delegation of powers and management
information systems, organisational effectiveness, capacity utilisation, management of
equipment, plant and machinery, production performance, use of materials, productivity of
labour, idle capacity, costs and prices, development of complementary ancillary small scale
industries, materials management, sales and credit control, budgetary and internal control
systems, etc.
8.The areas covered in comprehensive audit will naturally vary from enterprise to
enterprise depending on the nature of the enterprise, its objectives and operations. Some of
the broad areas are listed below:
♦ Comparison of overall capital cost of the project with the approved planned costs.
Audit of public sector undertakings
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♦ Production or operational outputs vis-a-vis under-utilisation of the installed capacity.
♦ Systems of project formulation and implementation.
♦ Cost control measures.
♦ Research and development programmes.
♦ System of repairs and maintenance.
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