Certification of Finance and Appropriation accounts of Railways

Organisational set up of the Railway Audit Branch

Comptroller and Auditor General of India|

|

Deputy Comptroller and Auditor General of India| |

| |

Principal Director Director General

of Audit, Zonal (Railways) & (Railway Board)

Railways |

| |

|-------------------------------------| |

Deputy Assistant Senior Administrative Officers/

Directors Directors Administrative Officers

|

|

Senior Audit

Officers/ Audit Officers

Hierarchy of Audit• The responsibility of the CAG of lndia for audit of Railway accounts isdischarged through the Additional Deputy Comptroller and Auditor-General of India (Railways)

• ADAI/ DAI (Railways) exercises the function of audit of finance andAppropriation Accounts of Indian Railways through the PrincipalDirectors of Railway Audit associated with the various Zonal Railways.

• Certification of the consolidated Finance and Appropriation Accountsof the railways by the Principal Director of Audit is based on the Auditcertificates submit by the Senior Divisional Audit Officers/ DivisionalAudit Officers/ Senior Audit Officers/Audit Officers of the accountingunits in the zonal railways.

• Audit Officers are assisted by Asstt. Audit Officers and Auditors.

• Audit involves examination and evaluation of financial records with aview to express an opinion on the set of financial Statements.

Objectives of Audit

• To produce assurance :

• The assurance about the figures in the financial statements is derived throughconducting an audit which involves auditing against the objectives of :

• Completeness/recognition/authority; (this means that all valid transactions orbalance which have a bearing on the overall magnitude of financial figuresdepicted in the Consolidated Financial Statements at Zonal and All India level areduly incorporated and that all transactions are backed by the authority of asanction/order of Competent Financial Authority.)

• measurements/ estimation; (This means that the transactions/balances includedin the Financial Statements have been correctly computed.)

• presentation/classification;

• Regularity- transactions are as per applicable laws and rules ;

• Disclosure of material circumstances which affect completeness of the accounts,the measurement of transactions and their classification and there is no attemptto misclassify transaction/balances or to misrepresent figures through errors ofomission or commission.

Audit Procedure• Auditors compare the criteria framed by the Central Govt. with theprocedure followed by Railways in collection of earning, disbursement ofpayment, its accounting and preparation of financial & appropriationstatements.

• Audit teams should have complete knowledge of list of major and minorheads of Railway accounts, Railways codes and manuals, budget circulars/documents, supplementary grants, re-appropriation orders etc.

• Financial/ Appropriations statements shall carry an explicit Statement ofManagement Responsibility and examine that these are free from materialmisstatements due to error or fraud.

• The audit procedures for recognition/authority include ascertaining theexistence of transactions through audit of vouchers, challans, generalvouchers, local audits etc.

• Audit procedures for deriving assurance against the objective ofCompleteness includes non accounting procedures like field inspectionduring local audit, reconciliation between ledgers balances and relatedsubsidiary registers.

Audit Procedure ….

• The audit requires identification and conduct of audit procedures andpolicies to derive assurance.

• The audit procedures for recognition/authority include ascertaining theexistence of transactions through audit of vouchers, challans, generalvouchers, local audits etc. Audit procedures for deriving assurance againstthe objective of Completeness includes non accounting procedures likefield inspection during local audit, reconciliation between ledgers balancesand related subsidiary registers.

• It has to been seen that all transactions comprising the financialstatements have been measured appropriately as per applicableaccounting principles like appropriations to DRF and pension fund.

• It is to be ensured that the financial statements are complete in form andcontent with suitable disclosures to ensure complete understanding by thestakeholders and users of the financial statements.

Audit Procedure ….

• Monitoring mechanism to ensure that the issues raised during transactionaudit, thematic audit, performance audit that have a bearing on thefinancial reporting by Railways in terms of completeness, measurementand reporting of financial information are taken into consideration whileconducting Financial Attest audit and vice versa.

• Each audit para/objection noticed in the transaction audit (Specific Reportand Part-I)/ performance/thematic audit may be judged for its inclusion inthe certification audit by the Branch Officer and recommended for itsimpact on certification.

• 'Register of Important points:- RIP may contain the columns viz., name ofthe file, Remarks of PDA and its date, relevant year of accounts in which itis to be seen, etc. This register can be as far as possible kept in electronicform with periodic backup as well as hard copies taken at the end of eachquarter. Similar exercise will be done by the Senior Divisional AuditOfficers/ Divisional Audit Officers/ Senior Audit Officers/Audit Officers forPart-II IR’s and Audit Notes and use the results in certification process.

Audit Procedure ….

• The verification of various financial statements are done to have anassurance that the moneys, representing receipt into andDisbursement from Consolidated Fund of India; the liabilities andassets of the Railways as worked out from the balances reflected inthese financial statements represent a true and fair view of theirfinancial position.

• Demands Recoverable, DHR, Dividend, Balance sheet, Receipt

• Audit observations framed should necessarily be based on thedeviations/ violation from/ of codal provision/ accounting principles.

• Observations are communicated to Indian Railways.

• Disposal of Audit Objections

Certificate• Certificate on Income tax• Certification on Debt head report/ balances• Certificate on Finance Accounts• Certificate on Appropriation Accounts• Specific qualification of the certificates of audit on the AppropriationAccounts and the Balance Sheet with reference to misclassification in theaccounts of the year would rarely be necessary and should not be madewithout the prior approval of the DAI.

• The certificates on the March Accounts and the review of balances may,however, be qualified wherever necessary.

• So long as a full list of misclassifications affecting the accounts of the yearconcerned is appended to the Appropriation Accounts, the certificate ofaudit on the Finance Accounts and the Capital and Revenue Accounts ofthe railway need not be qualified with reference to misclassifications.

Thanks

Audit of Receipts (Revenue and Capital)

• F- II provides that revenue earnings would be reflected underclassification X, Y and Z. The cash collected against Earnings getsreflected in the revenue receipt head 1002 and 1003. The remainingearning representing the credit sale (traffic account) and the billsraised, but not realized, is shown under the suspense head – TrafficAccount (Minor Head 101) Demands Recoverable (Minor Head 102).

Issue of Completeness

• Reconciliation may be done between the amounts shown in billsrecoverable registers and as shown in the 'Suspense head - Traffic,Demands recoverable' to see that all items of bills recoverable are apart of the suspense.

Issue of Measurement

• The items under the suspense account is to be scrutinized from the point ofview their estimated value and recoverability. Amounts in suspensewithout appropriate justification lead to overstatement of earnings. Theamounts under the suspense should also be checked for appropriatemeasurement through local audits etc. Measurement implies that auditassures itself of the correctness of the demand against the applicable rulesand orders.

• Unremunerative Branch lines are qualified for subsidy only when they havebeen classified as unremunerative on marginal cost principle. The annualfinancial results of each line is to be examined to see that the subsidy iscorrectly valued.

• RCC allows a moratorium on payment of dividend on investments in NewLines during the period of construction and for the first five years afteropening of the line for traffic. Dividend becomes payable on the New linesif it becomes remunerative by adopting the marginal cost principle. Thefinancial results of each such line is to be seen for comment.

back