SAI India Country Report 10th ASOSAI Research Project “Audit to Detect Fraud and Corruption：Evaluation of the Fight against Corruption and Money Laundering” SAI India Country Report

About the SAI India SAI India is headed by the Comptroller and Auditor General of India (CAG) CAG is a Constitutional Authority Independence secured through Parliamentary enactment; DPC Act Expenses of his office are charged on the Consolidated Fund Fixed six year term and removal is possible only through Parliamentary process.

About the SAI India Over 146 offices throughout India for Auditing Union and State Government Expenditure Receipt Public Sector Undertakings Rural and Urban local bodies We also compile and prepare State Government Accounts and perform entitlement functions relating to provident fund, pension and pay.

Types of Audit Performance Audit Compliance Audit Financial Audit Environmental Audit Social Audit Information Technology Audit

Audit Reports Union Audit Reports are laid before each house of Parliament Civil, Autonomous Bodies, Scientific Departments, Defence Services, Railways, Direct taxes, Indirect taxes and Commercial State Audit Reports are laid before respective legislatures Civil, Revenue, Commercial and Local bodies

Professional Standards Governing Auditing and Accounting Regulation on Audit and Accounts Auditing Standards Good practice guides

Role of SAI in Anti-Corruption Mainly a preventive role Enforcing accountability Promoting strong financial management Strengthening internal control Disclosure of deviations as deterrence

Role of Audit in Relation to Cases of Fraud and Corruption Responsibility for prevention & detection of fraud and error rests primarily with the management of audited entity Audit, however ,evaluate and report on the adequacy of systems in place with the auditee to prevent, detect, respond and take remedial measure in relation to fraud & corruption. This is integral part of all kinds of audits.

Role of Audit … Fraud examination is a part of normal auditing procedure. Audit findings include the cases of presumptive and suspected frauds when the evidence is clear. Audit team put red flags which needs further investigations by appropriate agencies. Audit teams do not make legal determinations of whether fraud has actually occurred.

Role of Audit … Audit teams maintain a attitude of professional scepticism (questioning mind and critical assessment of audit evidence) throughout the audit. Audit teams carry out independent risk assessment and prioritise audit planning. Based on risk assessment, they design the audit objectives & audit procedures so as to secure reasonable assurance of detecting material irregularities arising from fraud and corruption.

Role of Audit … SAI India has a dedicated training institute as Centre of Excellence in ‘Audit of Fraud, Fraud Detection Techniques and Forensic Audit’ It acts as a repository of information on the subject through developing quality reading material, case studies research papers .

Audit Planning Independent risk assessment of auditee organizations by field offices Includes information from various sources on suspected cases of corruption High risk areas given adequate attention Contracts of service/procurement Inventory/Asset management Revenue receipts Cash management Sanctions/clearences Areas involving public-private interface

Fraud indicators Control weaknesses Inadequate record keeping Unusual transactions Errors

Complaint & Whistle blower mechanism Robust anti corruption complaint mechanism Complaints possible at every level Complaints taken as red flags Covered by RTI Act Whistle blowing system encouraged Facts substantiated in audit

Forensic audit No dedicated forensic audit units These are formed on need basis in case of detection/suspicion of fraud/corruption Auditors trained in relevant areas One dedicated training institute for frauds and digital forensics IT frauds also covered

Fraud Auditing Standards AS of INTOSAI suitably adapted Provide minimum guidance to auditors on steps and procedures Reporting standards in Auditing Standards- 2nd edition 2002/Chapter-IV-Reporting Standards/No.-9

Follow up Cases of frauds/corruption are forwarded to vigilance or investigative authorities Information/documentation used by them for their own examination Also checked that after reporting system & procedures have been modified Findings utilized to detect similar acts in other entities Used as case studies for sensitizing auditors and for their training

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