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Role of Accountability and Audit in Government

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Role of Accountability and Audit in Government Dr.MCR Human Resource Development Institute Hyderabad 26 October 2012 Need for accountability What is Accountability? – PowerPoint PPT presentation

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Title: Role of Accountability and Audit in Government


1
  • Role of Accountability and Audit in Government
  • Dr.MCR Human Resource Development Institute
  • Hyderabad
  • 26 October 2012

2
Need for accountability
3
What is Accountability?
  • Philosophy
  • No organ of the State can use the coercive powers
    of the State without concurrence of others
  • Concept
  • Broader than accountability institutions,
    processes or laws
  • Giving and demanding of reasons for conduct
  • Two elements
  • Account (information) and
  • Holding to account (account evaluated, compared
    against standards, difference noted and praise or
    blame meted out.
  • Two parties
  • Accounter (subordinate)
  • Accountee (superior)
  • Two way flow
  • Formal top-down processes (such as elections,
    hearings, consultations) or
  • Bottom-up strategies (such as participatory
    budgeting, social mobilisation, and citizen
    monitoring)

4
Forms of accountability
  • Political
  • Public servant exercising authority on behalf of
    elected representative accountable to people
  • Public
  • Direct accountability to public, lobby and
    community
  • Rapidly growing form of accountability to
    pressure-groups and community based organisations
  • Managerial
  • Beyond traditional administrative accountability
    to new public management
  • Professional
  • Owed to professional associations of public
    servants
  • Personal
  • Fidelity to internalised moral and ethical values

5
Our Accountability heritage
  • Westminster Hierarchical model
  • Variety of accountability relationships leading
    to accountability tensions
  • Not only to immediate supervisor but also range
    of external institutions

People
Parliament
Ministers
Horizontal Accountability Institutions
Public servant
6
Accountability Pyramid
7
Legislative Accountability Lifecycle
Budget
Sanction
Expenditure
Accounts
Audit
Legislative review
8
Accounts and Accountability
  • Holds bureaucrat in check and clinch
    responsiveness
  • Lays down what is to be done, resources to be
    used
  • Monitoring operations individually and in
    aggregate
  • Freezes decisions of the past and provides audit
    trail
  • Buffer organisation from political compulsions
  • Record of organizational choices and activities

9
Evolution of Public Auditing
  • Magna Carta 1215 AD
  • Commercial origins
  • Separation of ownership and management
  • Owners confidence that the manager is acting to
    maximise interest of the owner
  • Technical competence
  • Personal consumption of owners wealth
  • Public Audit in India
  • Government of India Act 1935
  • Indian Audit Accounts Order 1936
  • Constitution of India Articles 148 to 151
  • CAGs Duties, Powers Conditions of Service Act
    1971

10
Objectives of Government auditing
  • Part of horizontal accountability system
  • Objectives of public audit
  • Provide objective assessment of financial
    activities and financial position of Government
  • Provide assessment of due observance of laws,
    rules and procedures and financial propriety in
    functioning of Government
  • Provide assessment of achievement of economy,
    efficiency and effectiveness in implementation of
    government activities
  • Method of achieving objectives
  • Financial attest audit
  • Audit against provision of funds
  • Audit against rules and orders
  • Audit against sanctions to expenditure
  • Audit against propriety

11
Evolution of Financial Attest Audit
  • Audit a dynamic process and scope
  • changes with time.

Report on view of A/C and Statement
Report true Fair view
Audit of PL A/C
1969
Detect fraud
1948
1929
Detect errors
1919
1896
12
Evolution of Public Audit
  • Focus changes with societal concerns

Assessment of impact
Achievement of three Es
1990
Compliance with rules
1950
Compliance with appropriation
1936
1860
13
Auditing powers of CAG of India
  • Audit of expenditure from and receipts into
    consolidated/contingency fund and Public Account
    of Union/States
  • Beyond formality to wisdom, faithfulness and
    economy in expenditure
  • Canons of financial propriety
  • Man of ordinary prudence
  • Not more than what occasion demands
  • No order to own advantage
  • Public expenditure not for benefit of a
    particular individual or community
  • Allowances are not a source of profit
  • Audit of autonomous bodies
  • Audit of corporate undertakings
  • Indian Companies Act 1956

14
Audit Principle
  • Audit is an assurance process
  • Audit Criteria What should be
  • Audit Evidence What is
  • Audit Finding Deviation
  • Audit to follow standards
  • Auditing standards of CAG of India
  • International Standards of Supreme Audit
    Institutions

15
Audit Process
  • Audit Planning
  • Audit Execution
  • Audit Reporting
  • Audit Monitoring

16
Audit Process
  • Audit enquiry
  • Inspection report
  • Draft Paragraph
  • Report of CAG of India
  • Report of PAC/COPU

17
Audit procedures
  • Compliance testing
  • Evaluation of internal controls to locate
    deviations from control procedures
  • Analytical review
  • Comparison involving single component
  • Comparison across components
  • System analysis
  • Predictive analysis
  • Regressive analysis
  • Business analysis
  • Direct substantive testing
  • Tests of transactions and balances to provide
    evidence as to completeness, accuracy and
    validity of information

18
Kinds of audits
  • Pre audit Post Audit
  • Internal audit External audit
  • Central audit Field audit
  • Finance attestation audit, Compliance audit
    Performance audit
  • IT audit, Environmental audit, Social audit

19
Modern trends in accountability process
  • Impact of democratization of governance
  • Transition from representative-raj to
    peoples-raj leading to direct democracy
  • Demands from Right to Information Act and its
    restraining effect
  • In audit arena increasing demands for social
    audit
  • Influence of decentralization of governance
  • Localising accountability
  • Inverse relationship of decentralisation and
    corruption
  • Disrupting accountability bonds between three
    tiers of government and societies

20
Modern trends in accountability process
  • Expectations for shifting focus of governance and
    audit from
  • Process to productivity
  • Transactional accountability to transformational
    accountability
  • Administrative to market accountability

21
Issues in accountability
  • Need to change language of accounts and audit
  • Need for changing language of accounts with
    changing focus of governance resulting from
    changing conceptions of the state with need for
    accounting aims, actions and achievements

Function of Audit Accounts Language of Audit Accounts
Financial probity Traditional accounting language
Performance accountability Language of Output
Program accountability Language of objectives
Policy accountability Eclectic language
22
Issues in accountability
  • Overdose of accountability institutions?
  • Too much analysis leading to paralysis?
  • Compliance cost consciousness?
  • Emerging expectations of accountability for
    Private sector entities providing public service
  • Transition from economic accountability to social
    accountability?
  • Complexity of governance and accountability norms
  • Need for new supports for existing bonds of
    accountability?
  • Accountability of Accountability Institution
  • Who audits the auditor?

23
Way forward to ensure accountability through audit
  • Change of mindset
  • From adversary to partner
  • From Hindsight to oversight and insight
  • From being reactive to being proactive
  • From emphasis on letter to spirit
  • Need to chase the Rupee across multiple entities
    to assess outcome
  • Modernising standard auditing operational
    procedures to rely on technology and to take care
    of sunrise areas of audit
  • Mandate on audit of policies

24
Thanks!
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