AUDIT

FUNCTIONS AND POWERS OF THE AUDITOR GENERAL OF PAKISTAN:

        3.1 In terms of Article 168 et seq of the Constitution of the Islamic Republic of Pakistan, there is an Auditor-General, who is appointed by the President. He performs such functions and exercises such powers and prepares such reports in relation to the expenditure and accounts of the Federation and of the Provinces as may be determined by an Act of the Parliament and, until so determined,, by Order of President. In pursuance of Articles 168 and 169 of the Constitution, the terms and conditions of service of the Auditor General and his functions and powers, in relation to the accounts of the Federal, the Provinces and accounts of the any authority or body established by the Federation or a Province are laid down in the Pakistan (Audit and Accounts) Order, 1973 promulgated as the President's Order No. 21 of 1973 and as further amended from time to time.

        3.2 The functions and powers of the Auditor General as laid down in Article 9, 10 and 11 of the President Order No. 21, 1973, as amended from time to time, are as under:-

A-ACCOUNTS

              (i) Auditor General shall be responsible for the keeping of the accounts of the Federation of each Province, other than the accounts of the Federation relating to Defence or Railways:

       Provided that the President may, by any general or special order, require the Auditor General to keep the accounts of the Federation relating to Defence or Railways or the accounts of any authority or body established by the Federation or a Province.

                 (ii) As respects accounts of the Federation, the President and as respects accounts of a Province, the Governor may, after consultation with the Auditor General, make provision by rules for relieving the Auditor General of responsibility for the keeping of the accounts of any particular service or department.

                (iii) The President may, after consultation with the Auditor General, make provision by rules relieving the Auditor General, of responsibility for keeping accounts of any particular class or character.

                (iv) The Auditor General shall, from the accounts kept by him and by other persons responsible for keeping public accounts prepare in each year accounts (including) in the case of accounts kept by him, appropriation account showing the annual receipt and disbursement for the purposes of Federation and of each Province, distinguished under the respective heads thereof, and shall submit those accounts to the Federal Government, or as the case may be, to the Government of the Province on such dates as he may, with the concurrence of the Government concerned, determine.

              (v) The Auditor General shall comply with any general or special orders of the President or, as the case may be, a Governor as to the head of account under which any specified transaction or transactions of any specified class is, or is to be included:

        Provided that, before issuing any such order as aforesaid, the President or, as the case may be, the Governor shall consult the Auditor-General.

B-GENERAL FINANCIAL STATEMENT

           It shall be the duty of the Auditor General to prepare annually in such form as he, with the concurrence of the President, may determine and to submit to the President a General Financial Statement incorporating a summary of the accounts of the Federation and of all the Provinces for the last preceding year and particulars of their balances and outstanding liabilities and containing such other information as to their financial position as the President may direct to be included in the statement.

C-AUDIT

           I. It shall be the duty of the Auditor-General: -

(i) to audit all expenditure from the revenues of the Federation and of the Provinces and to ascertain whether moneys shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied or charged and whether the expenditure conforms to the authority which governs it;

(ii) to audit all transactions of the Federation and of the Provinces relating to debt, deposits, sinking funds, advances, suspense accounts and remittance business;

(iii) to audit all trading, manufacturing and profit and loss accounts and balance sheets kept by order of the President or of the Governor of a Province in any department of the Federal Government or of a Province; and

(iv) to audit the accounts of any authority or body established by the Federation or a Province; and in each case to report to the President or, as the case may be, to the Governor on the expenditure transactions or accounts so audited by him.

II The Auditor-General may, with the approval of. and shall, if so required by, the President or the Governor of any Province, audit and report on

(a) The receipts of any department of the Federal Government or, as the case may be, of the Province; and

(b) The accounts of stores and stock kept in any office or department of the Federal Government or, as the case may be, of the Province.

III The President or the Governor of a Province may, after consultation with the Auditor General make regulations with respect to the conduct of audits under clause (2).

        3.3 The Pakistan Audit Department performs all such duties and functions as have been assigned to or are undertaken by the Auditor General, but subject to such special or general instructions that may be issued by him from time to time.

        3.4 In order to enable the Auditor General to discharge his functions properly he should be supplied free of charge annual budget estimates of the Federation and Provinces and all other publications issued by them. He should also be furnished with information or documents or books which may be required by him for preparation of reports or accounts. The Auditor General has also the authority to inspect any treasury or office responsible for the keening of initial and subsidiary accounts.

        3.5 The reports of the Auditor General, relating to the accounts of Federation and Provinces are submitted to the President and Governors respectively, who cause them to be laid before the Legislature concerned. The accounts and audit reports so submitted embrace, besides the Appropriation Accounts, the whole of the accounts of the Federal Government or of the Provinces including accounts of receipts and of all transactions relating to Debt and Remittance heads.

GENERAL PRINCIPLES OF AUDIT:

        3.6 The primary function of audit is to verify the accuracy and completeness of accounts so as to ensure that all revenue and receipts have been brought to account under proper head and that all expenditure and disbursements have been authorised, vouched and correctly classified. The Audit is also required to see that the final account represents a complete and true statement, of the financial transactions it purports to exhibit. This object can be achieved through an independent scrutiny. Accordingly the statutory provisions pertaining to functions of the Auditor General fully recognize his independence in the sphere of audit.

        3.7 The public audit has a dual role. Firstly on behalf of the Executive Government to check whether its officers and authorities subordinate to it comply with the orders issued by it in the discharge of its responsibility to the Legislature. Secondly, on behalf of the Legislature, to secure that the Executive Government acts in accordance with the law.

        3.8 It is essential that there should be a clear cut demarcation between the auditorial and administrative functions. It is the Executive Government which makes financial rules and orders and its subordinate officials apply them. The Audit has to see that the rules and orders satisfy the provisions of the law and are properly applied so as to be free from audit objections. It is not the function of audit to prescribe as to what the rules or orders should be. The criticism offered by the Audit should be limited to financial aspects and based on the accounts. It should not extend to administrative or other aspects. Nor the audit should offer any suggestions as to how Government may be better conducted. Although the Executive Government is itself responsible for enforcing economy in the expenditure of public money yet the Audit can bring to its notice any instance of wastefulness or infructuous expenditure. Government also welcomes suggestions to promote economy, based on information from the accounts. In short the audit of the Auditor General is a financial and not an administrative audit.

AUDIT OF CLASSIFICATION:

        3.9 One of the primary duties of Audit in examining an account is to verify that all financial transactions are properly recorded in the accounts and are allocated to the proper codes. It should be ensured that no "Charged" expenditure should be debited to the "Voted", "charged" and vice-versa. Although the ultimate authority for determining the function cum-object code under which a transaction is to be included rests with the President, but Audit, in its auditorial capacity, has every right to criticise the validity of a classification, which is inconsistent with the provision in the budget or which renders the accounts incorrect or misleading representation of the facts.

        3.10 It should also be remembered that the decision whether expenditure should be met from current revenues or from borrowed money rests with the Executive -cum Legislature. It is nevertheless, the duty of Audit to point out the occasions on which the classification of expenditure between revenue and development expenditure or its distribution between current revenue and loan funds appears to be contrary to the dictates of sound and prudent financial administration.

AUDIT OF EXPENDITURE

        3.11 The audit of expenditure on Government account is the responsibility of the Pakistan Audit Department but it will facilitate the work of the Executive to a great extent if the essential requirements of Audit are known to it. There can be a lot of saving in the time and labour and substantial correspondence avoided, if the sanctions issued by the Executive are in conformity with the basic requirements of Audit.

        3.12 There should be provision of funds authorised by competent authority fixing the limits within which expenditure can be incurred. This is the most important point which the Audit should see. It should be ascertained that the money expended applied to the purpose or purposes for which the Grants and Appropriation were intended to provide and that the expenditure so incurred does not exceed the amount of the Grant or Appropriation. It is no doubt true that the responsibility for watching the progress of expenditure and keeping it within the limit of a Grant or Appropriation devolves on the Executive but Audit is expected to render all legitimate assistance to the Executive in the matter. It should also see that the suitable and adequate arrangements exist in all Departments of Government for the control of expenditure.

        3.13 The Audit should also see that the expenditure incurred should conform to the relevant provision of the Constitution or of the Orders made there under and should be in accordance with the financial rules and regulations framed by competent authority. While examining the financial rules or orders the Audit has to ensure that those are intra vires and are not inconsistent with any provisions of the Constitution or orders issued thereunder. Further the orders should be consistent with the essential requirements of audit and accounts as determined by the Auditor General. Moreover, the orders should not conflict with the orders or rules issued by a higher authority. The responsibility of Audit in relation to regularity of expenditure is of a quasi judicial character. It involves the interpretation of statute, rules and orders with reference to the case law or previous decisions and precedents, interpretation by Audit should be based on the plain meaning of the section, rule or order. In such a case the inconsistency should be referred to the competent authority for resolution or removal. In no case the interpretation by Audit should ever verge on legislation.

        3.14 The next important consideration is that there should exist a sanction, either special or general accorded by competent authority, authorising expenditure. In this behalf Audit has not only to see that the expenditure is covered by a sanction but has also to satisfy itself that the authority sanctioning an expenditure is competent to do so by virtue of the powers vested in it by the provisions of the Constitution or by the Rules or Orders made thereunder or by the rules of delegation of financial authority made by a competent authority. Further it should be seen that the sanction is definite and needs no reference to the sanctioning authority or a higher authority.

        3.15 Finally comes the audit against propriety. It is an essential function of Audit to bring to light not only case of clear irregularity, but also every matter which in its judgement appears to involve improper expenditure or waste of public money or stores. It is equally important to see that the broad principles of orthodox finance are borne in mind not only by the disbursing officers but also by sanctioning authority. The crux of the matter is that no burden should be imposed on the revenues of the Federation or Provinces except for the purposes of Pakistan or some part of Pakistan.

AUDIT REPORT:

        3.16 In terms of Article 171 of the Constitution the report of the Auditor-General relating to the accounts of the Federal Government or Provinces are submitted by him to the President or the Governor as the case may be who causes them to be laid before the respective Legislatures. Two separate reports Audit Report on the Appropriation Accounts and Audit Report on the Finance Accounts are compiled in this behalf. In the case of the Federal Government the Audit Report on Appropriation Accounts is submitted in four separate volumes:

                (i) Audit Report on the Appropriation Accounts of the Defence Services;

                (ii) Audit Report on the Appropriation Accounts of the Posts and Telegraphs;

                (iii) Audit Report on the Appropriation Accounts of Railways; and

                (iv)Audit Report on the Appropriation Accounts Civil, i.e. for the remaining Departments of the Federal Government.

        3.17 The Audit Report on the Appropriation Accounts contains the audited accounts in the form of appropriation accounts of the entire expenditure "Voted" or "Charged" for each financial year. It also, includes such comments on the regularity and propriety of expenditure which are deemed necessary as a result of audit investigation. The report brings to the notice of National Assembly the result of audit of all trading, manufacturing profit   and loss accounts and balance sheets in respect of Government Commercial or quasi-commercial undertakings. The results of audit of receipts and accounts of stores and stock are also incorporated in the report and suitable comments made, where necessary.

        3.18 The Audit report on the Appropriation Accounts is self-contained in respect of all matters with which it deals. It gives a detached, dispassionate and technical presentation of the audited accounts and is free from bias or a political opinion. The report, as a matter of fact, has been designed to serve a dual purpose. To the Government concerned the report shows the extent to which its subordinate officials and authorities are complying with its rules and orders and can be amplified or modified-with advantage. To the Legislature the report reveals the extent to which the Executive Government have complied with the views expressed by the Legislature, through the Public Accounts Committee, in matters of importance and in particular how far moneys placed at the disposal of the Government were regularly and properly spent. In order to perform adequately the latter function, the report, in addition to the points arising out of the audit against provisions of funds brings to the notice of the Legislature the important financial irregularities such as deficiencies of sanction, failure to enforce prescribed rules or procedure, offence against universally accepted standard of official conduct or financial administration or any other class of irregularity. It also points out cases of losses, writes off or nugatory expenditure,

         3.19 Before an irregularity or overpayment, etc., is incorporated 'in the Audit Report it is desirable that the Government concerned should be given an opportunity of making observations and comments, it deems necessary. The draft paragraph should be shown to the Ministry/Division concerned before final inclusion in the report so that the department may get an opportunity to suggest a correction or modification. In predominantly administrative and technical matters the question of financial propriety can be raised by the Accountant General only if he is fully satisfied that the raising of such a point is a legitimate audit function and it is likely to serve some practical purpose.On such important matters it is better to hold a discussion between the Accountant General and the Department. The discussion should be for the purpose of clarifying issue and eliminating points of controversy The points which remain unsolved are then stated in a definite form as may be agreed to between the Accountant,, General and the Ministry/Division concerned. Even if the Ministry/Division does not agree to the inclusion of a paragraph in a particular form the Accountant General has every right to incorporate it in the Audit Report as he may deem fit. It is, however, not advisable to initiate a premature and widel ranging controversy in the Audit Report.

        3.20 The object of the Audit Report on "Finance Accounts" is to present to the Legislature a report on the financial result disclosed by the different accounts and other data coming under examination. It includes accounts of the receipts and expenditure of the Government for each financial year, the Revenue and Capital accounts, the accounts of the Public Debt, and the accounts of the assets and liabilities of the Government as deduced from the balance recorded in various books. The Audit Report on Finance Accounts, as a matter of fact, supplements the Audit Report on the Appropriation Accounts;

        3.21 The "Finance Accounts" is an auditor's presentation of the general state of accounts of the Government to the Legislature giving some elucidation and narrative presentation of new or salient features. There is nothing in the report by way of financial appreciation, praise or blame, nor there are any comments on the merits of the financial administration of the Government. In short, the sole purpose of the report is to convey a just and impartial picture of the financial position of the Government.

        3.22 Both these reports are laid before the Legislature which gets them scrutinized through the Public Accounts Committee. The observations and recommendations of the Public Accounts Committee are circulated by the Ministry of Finance and the Ministries concerned are expected to comply with them. A compliance report for the previous years is submitted to the Public Accounts Committee in its next meeting.