Certification of Finance and Appropriation

accounts of Railways
 Organisational set up of the Railway Audit Branch

Comptroller and Auditor General of India

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Deputy Comptroller and Auditor General of India
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Principal Director Director General
of Audit, Zonal (Railways) & (Railway Board)
Railways |
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Deputy Assistant Senior Administrative Officers/
Directors Directors Administrative Officers
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Senior Audit
Officers/ Audit Officers
 Hierarchy of Audit
• The responsibility of the CAG of lndia for audit of Railway accounts is
discharged through the Additional Deputy Comptroller and Auditor-
General of India (Railways)
• ADAI/ DAI (Railways) exercises the function of audit of finance and
Appropriation Accounts of Indian Railways through the Principal
Directors of Railway Audit associated with the various Zonal Railways.
• Certification of the consolidated Finance and Appropriation Accounts
of the railways by the Principal Director of Audit is based on the Audit
certificates submit by the Senior Divisional Audit Officers/ Divisional
Audit Officers/ Senior Audit Officers/Audit Officers of the accounting
units in the zonal railways.
• Audit Officers are assisted by Asstt. Audit Officers and Auditors.
• Audit involves examination and evaluation of financial records with a
view 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 through
conducting an audit which involves auditing against the objectives of :
• Completeness/recognition/authority; (this means that all valid transactions or
balance which have a bearing on the overall magnitude of financial figures
depicted in the Consolidated Financial Statements at Zonal and All India level are
duly incorporated and that all transactions are backed by the authority of a
sanction/order of Competent Financial Authority.)
• measurements/ estimation; (This means that the transactions/balances included
in 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 attempt
to misclassify transaction/balances or to misrepresent figures through errors of
omission or commission.
 Audit Procedure
• Auditors compare the criteria framed by the Central Govt. with the
procedure followed by Railways in collection of earning, disbursement of
payment, its accounting and preparation of financial & appropriation
statements.
• Audit teams should have complete knowledge of list of major and minor
heads of Railway accounts, Railways codes and manuals, budget circulars/
documents, supplementary grants, re-appropriation orders etc.
• Financial/ Appropriations statements shall carry an explicit Statement of
Management Responsibility and examine that these are free from material
misstatements due to error or fraud.
• The audit procedures for recognition/authority include ascertaining the
existence of transactions through audit of vouchers, challans, general
vouchers, local audits etc.
• Audit procedures for deriving assurance against the objective of
Completeness includes non accounting procedures like field inspection
during local audit, reconciliation between ledgers balances and related
subsidiary registers.
 Audit Procedure ….
• The audit requires identification and conduct of audit procedures and
policies to derive assurance.
• The audit procedures for recognition/authority include ascertaining the
existence of transactions through audit of vouchers, challans, general
vouchers, local audits etc. Audit procedures for deriving assurance against
the objective of Completeness includes non accounting procedures like
field inspection during local audit, reconciliation between ledgers balances
and related subsidiary registers.
• It has to been seen that all transactions comprising the financial
statements have been measured appropriately as per applicable
accounting principles like appropriations to DRF and pension fund.
• It is to be ensured that the financial statements are complete in form and
content with suitable disclosures to ensure complete understanding by the
stakeholders and users of the financial statements.
 Audit Procedure ….
• Monitoring mechanism to ensure that the issues raised during transaction
audit, thematic audit, performance audit that have a bearing on the
financial reporting by Railways in terms of completeness, measurement
and reporting of financial information are taken into consideration while
conducting Financial Attest audit and vice versa.
• Each audit para/objection noticed in the transaction audit (Specific Report
and Part-I)/ performance/thematic audit may be judged for its inclusion in
the certification audit by the Branch Officer and recommended for its
impact on certification.
• 'Register of Important points:- RIP may contain the columns viz., name of
the file, Remarks of PDA and its date, relevant year of accounts in which it
is to be seen, etc. This register can be as far as possible kept in electronic
form with periodic backup as well as hard copies taken at the end of each
quarter. Similar exercise will be done by the Senior Divisional Audit
Officers/ Divisional Audit Officers/ Senior Audit Officers/Audit Officers for
Part-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 an
assurance that the moneys, representing receipt into and
Disbursement from Consolidated Fund of India; the liabilities and
assets of the Railways as worked out from the balances reflected in
these financial statements represent a true and fair view of their
financial position.
• Demands Recoverable, DHR, Dividend, Balance sheet, Receipt
• Audit observations framed should necessarily be based on the
deviations/ 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 Appropriation
Accounts and the Balance Sheet with reference to misclassification in the
accounts of the year would rarely be necessary and should not be made
without 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 year
concerned is appended to the Appropriation Accounts, the certificate of
audit on the Finance Accounts and the Capital and Revenue Accounts of
the 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 under
classification X, Y and Z. The cash collected against Earnings gets
reflected in the revenue receipt head 1002 and 1003. The remaining
earning representing the credit sale (traffic account) and the bills
raised, but not realized, is shown under the suspense head – Traffic
Account (Minor Head 101) Demands Recoverable (Minor Head 102).
Issue of Completeness
• Reconciliation may be done between the amounts shown in bills
recoverable registers and as shown in the 'Suspense head - Traffic,
Demands recoverable' to see that all items of bills recoverable are a
part of the suspense.
 Issue of Measurement
• The items under the suspense account is to be scrutinized from the point of
view their estimated value and recoverability. Amounts in suspense
without appropriate justification lead to overstatement of earnings. The
amounts under the suspense should also be checked for appropriate
measurement through local audits etc. Measurement implies that audit
assures itself of the correctness of the demand against the applicable rules
and orders.
• Unremunerative Branch lines are qualified for subsidy only when they have
been classified as unremunerative on marginal cost principle. The annual
financial results of each line is to be examined to see that the subsidy is
correctly valued.
• RCC allows a moratorium on payment of dividend on investments in New
Lines during the period of construction and for the first five years after
opening of the line for traffic. Dividend becomes payable on the New lines
if it becomes remunerative by adopting the marginal cost principle. The
financial results of each such line is to be seen for comment.
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