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THE ODISHA LOCAL FUND AUDIT MANUAL 2014 · PDF file THE ODISHA LOCAL FUND AUDIT MANUAL 2014 DIRECTORATE OF LOCAL FUND AUDIT, ODISHA, TREASURY & ACCOUNTS BHAWAN, ... 2 Origin and Evolution

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  • THE ODISHA LOCAL FUND AUDIT MANUAL

    2014

    DIRECTORATE OF LOCAL FUND AUDIT, ODISHA, TREASURY & ACCOUNTS BHAWAN, 2nd FLOOR, UNIT-III, KHARAVELANAGAR, BHUBANESWAR

  • FOREWORD

    I am glad that the Directorate of Local Fund Audit has come out

    with a manual of its own, which will act asa guide to the audit personnel. It

    was a long felt need, finally got accomplished thanks to the sincere efforts

    of the team of officials of the LFADirectorate. It embodies different aspects

    of audit including new concepts and methodologies, ethics of audit and a

    host of other things, which the audit personnel will definitely find useful in

    discharging their responsibilities.

    I am sure, this will go a long way in streamlining and strengthening

    the local fund audit system in the long run.

    Bhubaneswar, is"June, 2014

    Upendra Nath Behera Additional Chief Secretary to Government,

    FinanceDepartment

  • PREFACE

    The Directorate of Local Fund Audit became functional as a

    separate Heads of Department with effect from 1st October, 2012. The

    immediate task for the new Directorate was to identify the key areas,

    where improvement was needed to strengthen the system of local fund

    audit. Then, drafting of an audit manual for the audit personnel was felt

    barely necessary. Therefore, the task was included in the Work Plan for

    2013-14 and some senior auditors and audit superintendents were pressed

    into service for this purpose under the guidance of one of the Deputy

    Directors of the Directorate. The draft was scrutinised and fine-tuned in

    several rounds of sittings and it was finally submitted for approval of

    Government.

    It's my pleasure that the Audit Manual is now going to be published

    with the approval of Government. I am confident that this will be

    immensely helpful for the audit personnel of LFA Organisation and

    strengthen the audit system. I express my sincere thanks to the senior

    officers and the audit personnel in the Directorate, who have contributed

    significantly for bringing out this manual.

    Bhubaneswar, Date-16.06.2014

    ~i' Pradeep Kumar Biswal

    Director, Local Fund Audit & Ex-officio Additional Secretary to Government,

    FinanceDepartment

  • CONTENTS

    Chapter

    No.

    Chapters Page

    1 2 3

    1 Introductory 1-2

    2 Origin and Evolution 3-8

    3 Odisha Local Fund Audit Act, Rules & Notifications 9-20

    4 General Principles, Objectives, Mandate,

    Methodology, Standards and Ethics

    21-38

    5 Plan and Programme 39-44

    6 Concepts of Financial and Thematic Audit 45-57

    7 Powers and Functions of Auditors 58-70

    8 Automation of Local Fund Audit (ALFA) 71-80

    9 Audit Procedures 81-112

    10 Annual Report 113

    11 Surcharge Action& Appeal 114-116

    12 Inspection and Monitoring 117-120

    13 Miscellaneous 121-126

  • THE ODISHA LOCAL FUND AUDIT MANUAL

    CHAPTER-1 INTRODUCTORY

    1.1 AUTHORITY AND SHORT TITLE This Manual is framed as guidance for the purpose of audit under the provisions of the Odisha Local Fund Audit Act, 1948 (Act V of 1948) and shall be called the “Odisha Local Fund Audit Manual”. 1.2 COMMENCEMENT AND EXTENT OF APPLICATION It shall come into force (on such date as the State Government may, by notification, appoint) with immediate effect and shall apply to:-

    (i) the Odisha Local Fund Audit Organisation; (ii) the institutions (both Government and Non- Government) whose

    accounts are subject to audit under the provisions of the Odisha Local Fund Audit Act,1948; and

    (iii) such other institutions or Organisations as will be determined and entrusted by the State Government from time to time for conducting audit or special audit by the Examiner of Local Accounts.

    1.3 SUBJECT MATTER The contents of this Manual are as follows:-

    (i) LFA Act & Rules (ii) The principles, procedures and instructions under which audit is to

    be conducted by the Examiner of Local Accounts of the State; (iii) Origin & Evolution of Local Fund Audit Organisation, Organisation

    structure, Roles & responsibilities of different functionaries etc. 1.4 DEFINITIONS

    Unless anything repugnant to the subject or the context, the terms defined in this chapter are used in the Manual in the sense explained here under:

    (i) Act “Act” means the Odisha Local Fund Audit Act, 1948.

    (ii) Auditor “Auditor” means an Auditor appointed under the provisions of the Act and includes the Examiner of Local Accounts, Deputy Examiner of Local Accounts, Assistant Examiner of Local Accounts, District Audit Officers and Audit Superintendents for the purpose of audit.

    (iii) Audit Superintendent

    “Audit Superintendent” is the promotional post of Auditor and shall be filled up as per Rule 12 of Odisha Subordinate Finance Service (Local Fund Audit) Rules, 1970.

  • 2

    (iv) Audit Camp “Audit Camp” means the temporary office of the Auditor where he conducts audit.

    (v) Audit Party “Audit Party” means the party consisting of one Audit Superintendent and/or two or more Auditors engaged to conduct audit of an account.

    (vi) Audit Report “Audit Report” means the Report on the findings of audit of an account conducted by the Auditor and duly signed by the Auditor and submitted by him as per sub-section (1) of Section ‘8’ of OLFA Act, 1948.

    (vii) District Audit Officer

    “District Audit Officer” means an Officer appointed under the Act as the Head of the District Level Office of this Organisation.

    (viii) Assistant Examiner of Local Accounts

    “Assistant Examiner of Local Accounts” means an officer of the State Government appointed as such under the Act.

    (ix) Deputy Examiner of Local Accounts

    “Deputy Examiner of Local Accounts” means an Officer of the State Government appointed as such under the Act.

    (x) Examiner of Local Accounts

    “Examiner of Local Accounts” means an officer of the State Government appointed as such under the Act as the Head of this Audit Organisation.

    (xi) Government “Government” means the Government of Odisha.

    (xii) Local Accounts “Local Accounts” means the accounts of the Local Authority other than a Cantonment Authority.

    (xiii) Local Authority “Local Authority” means the Authority of the Local Body.

    (xiv) Local Body “Local Body” means a body constituted under the provisions of any Act.

    (xv) Local Fund “Local Fund” means any fund not being a cantonment fund to the control or management of which a Local Authority is legally entitled and any cess, rate, duty or tax which such Authority is legally entitled to impose and any property vested in such authority.

    (xvi) Rules “Rules” means the Odisha Local Fund Audit Rules, 1951.

    (xvii) State Head Quarters

    “State Head Quarters” means the office of the Examiner of Local Accounts.

    (xviii) Year “Year” means a financial year beginning with 1st day of April of a calendar year and ending with 31st March of the next calendar year.

  • 3

    CHAPTER -2 ORIGIN AND EVOLUTION

    2.1 INTRODUCTION

    (i) ORIGIN AND EVOLUTION OF THE LOCAL FUND AUDIT ORGANISATION

    The Origin of the Local Fund Audit Organisation dates back to the pre-independence era. It came into existence under the provisions of the Bihar and Odisha Local Fund Audit Act, 1925 and was attached to the then Accountant General’s Office. The Audit Organisation continued to function under the provisions of the aforesaid Act until the Odisha Local Fund Audit Act,1948 (Act V of 1948) was enacted and came into force with effect from the 1st day of June 1952 in the State. At the outset of its functioning under the provisions of the Odisha Local Fund Audit Act, 1948, there were two separate Local Fund Audit Organisations functioning simultaneously viz. one for audit of the accounts of the Urban Local Bodies, Religious Endowments etc. under the Administrative control of Finance Department and the other for audit of the accounts of Panchayat Samities and Zilla Parishads under the Administrative Control of the Community Development and Rural Reconstruction Department. In order to unify both the Audit Organisations the unit functioning under the Community Development and Rural Reconstruction Department was transferred to the administrative control of Finance Department with effect from the 1st day of January 1966 vide Finance Department Notification No.-107/Aud. dated the 14th January, 1966 and subsequently the Local Fund Audit Organisation under Finance Department was reorganized for audit of accounts of Panchayat Samities, Zilla Parishads and Urban Local Bodies vide Finance Department Resolution No.-2489-Estt-37/66-Aud. dated the 17th September, 1966. Further, the Gram Panchayat Audit Organisation which was functioning under the administrative control of the Panchayati Raj Department was transferred to the administrative control of Finance Department with effect from the 1st day of April 2003 consequent upon the decision of the State Government to implement the recommendations of the Eleventh Finance Commission vide Finance Department Notification No.- 2261/F-XIV-AUD-18/2002 dat

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