Slide 6.3

1. Slide 6.3 • Whether BSNL is a Govt. Company ? If yes, under what provisions? • Sec.617 of Indian Companies Act defines that any company in which not less than 51% of the paid up share capital is held by Central Govt. or partly by State Govt. or Governments and partly by Central Govt. and includes a company which is a subsidiary of a Govt . Company. • In case of BSNL, the whole paid up share capital is held by the Central Govt., therefore, BSNL is a fully owned Govt. Company.

2. Slide 6.3 • Provisions of audit of a Govt. Company • Sec.619(2) : The auditor of a Govt. company shall be appointed or reappointed by C&AG. • Sec.619(3) : The Comptroller and Auditor-General of India shall have power – • (a) to direct the manner in which the company’s accounts shall be audited by the auditor appointed in pursuance of sub-section (2) and to give such auditor instructions in regard to any matter relating to the performance of his functions as such ;

3. Slide 6.3 • (b) to conduct a supplementary or test audit of the company’s accounts by such person or persons as he may authorize in this behalf; and for the purposes of such audit, to require information or additional information to be furnished to any person or persons so authorized, on such matters, by such person or persons, and in such form, as the Comptroller and Auditor General may, by general or special order, direct.

4. Slide 6.3 • Sec.619(4) : The auditor aforesaid shall submit a copy of his audit report to the Comptroller and Auditor General of India who shall have the right to comment upon, or supplement, the audit report in such manner as he may think fit. • Thus C&AG has got the authority and responsibility to conduct the supplementary audit of a Govt. Company under the provisions of Companies Act only .

5. Slide 6.3 • Difference between Supplementary audit and Propriety Audit: • While doing supplementary audit, we do not sit in the judgment of executive about the justification of expenditure or income. We restrict ourselves only to that extent that expenditure or incomes are properly evidenced and properly classified. Whereas in the Propriety/Transaction audit, we analyze the expenditure made by executive on the principles of propriety i.e. he has applied all the common prudence which a person of normal intelligence would apply to spend his own money.

6. Slide 6.3 • Preparation for Supplementary Audit: • · Read the Previous years comments issued by the concerned circle. • · Study the final audited accounts of the circle submitted to the office. • · Study critically the auditors’ report about the qualifications mentioned and other disclosures made in their report or in the notes to accounts. • · Study the Trial Balance of the unit being audited.

7. Slide 6.3 • · Study the relevant Accounting Standards applicable to BSNL. • AS – 1 : Disclosure of Accounting Policies • AS – 2 : Valuation of inventories • AS – 9 : Revenue Recognition • AS – 10 : Accounting for Fixed Assets • AS – 11 : Accounting for the effects of changes in Foreign Exchange Rates • AS – 15 : Accounting for retirement Benefits in the Financial Statements • AS – 28 : Impairment of Assets

8. Slide 6.3 • · Collect, study and examine all the schedules forming part of the Balance-sheet as prepared by the unit e.g. Work-in progress schedules, capitalization schedules, Liabilities schedule, Provision for accrued income etc. • · Collect the General Ledger, Sub-ledger and critically examine them i.e. conduct Ledger Scrutiny.

9. Slide 6.3 • · Study the Accounting Policy adopted by the BSNL while finalizing the accounts, BSNL units receive several circulars issued by the Corporate office or Circle office regarding accounting treatment of different items. All these should be collected and the application of the same be examined. • · While doing transaction audit, if any point noted which has effect on the true and fair presentation of accounts should also be considered.