1.1. An Audit recital-be it a statistical analysis, an expose of a grave irregularity or an incisive evaluation of a complex project-must bear the twin stamps of incontrovertibility of facts and credibility of findings. This axiom must be an article of faith with the auditors. They would lose caste otherwise.
Audit reports should be beyond reproach-correct on facts and right on findings. Audit can aspire to influence the government process and even public policy for the better, by relentless pursuit of excellence in writing its reports. Audit working should be well-crafted for nearing that goal. Right tools with the cutting edge and well developed skills aid in crafting audit, as a discipline that seeks to judge diverse activities and in making the practitioners versatile. The craft of audit can be developed, imparted, practiced and upgraded by constant endeavors. The scope for innovation is unlimited.
1.2. Traditionally defined as a watchdog, the audit has more important duties to fulfill, in its role as a device of democracy. Its reports to the Legislature and through them to the public on government process should focus attention on the working of the diverse branches of the public administration, in perspective. And, well in time. Bias has to be eschewed and that must be manifestly so. These reports should contain the findings, emanating from a thorough check, fact finding, programmed scrutiny and audit analysis of the primary and generated data base of the auditee institutions. The aim is to bring out cogent, lucid and objective evaluations that carry conviction. Then and then only, they would get noticed in circles that matter. Media has an abiding interest in highlighting lapses in public organisations. Investigative journalism hunts for clues from Audit Reports. Over the years, the academic interest is also catching up. Public opinion had always been moulded by activists of one school of thought or the other. Audit can also be one such catalytic activist, playing a positive role in upgrading public administration. The ultimate role of audit is to influence opinion towards better performance. To play such a role, it is imperative for the audit professionals to seek new frontiers, by enlarging the depth and extent of coverage, by honing the tools, by upgrading the techniques and by relentlessly analysing the feedback. It is also increasingly realised that the sampling should be representative from statistical parameters, that the judgement should be so weighed that all factors are adequately considered, and that the presentation should be a balanced one. In short, the auditor must live upto the article of faith of incontrovertibility of facts and credibility of the findings. One sure way of nearing that target is that of widening the horizon of knowledge, developing the sense of perspective and seeking excellence in drafting.
2.1. Audit is said to be conservative in its approach. It bases its findings on test audit. Auditee units are chosen in a cyclical sequence. Generalisations, arising from such findings, may not always be fair. Compulsions of deadlines could lead to cutting corners regarding representative sampling and in weighing the evidence. Audjtees seldom respond in time and the presentation is thwarted, as a result. Such limitations are recognised and have not, by and large, stood in the way of unbiassed and verified findings being printed, year after year, in the Audit Reports of the Comptroller and Auditor General of India. The inbuilt checks and balances relating to the very framing and editing the contents of these Reports have stood as a bulwark against unjustified criticism, hasty conclusions and biassed findings.
2.2. A brief account of an year's audit out-put in India will show the scope, extent and depth of the audit activity and that it calls for talents and skills of a high order. During the fiscal year 1985-86, the Indian Audit & Accounts Department brought out 17 Audit Reports on federal expenditure. The two Audit Reports on federal tax income brought out short levies of Rs. 1.55 billions. 15 of the Government Companies, whom the Department audits under the Companies' Act, voluntarily recast their Balance Sheets, on the audit pointing out the mistakes. Profit went up by Rs. 16.8 millions in one case and down by Rs. 90.0 millions in another case. Loss went up by Rs. 25.5 millions in one case and down by Rs. 9.1 millions in another case. 56 more Audit Reports dealt with the revenue, expenditure and commercial activities of the constituent States. The short levy of taxes in the States detected by Audit was Rs. 3.24 billions. The audit reviews in the State and Federal Audit Reports were versatile and covered activites such as (a) non-formal education, (b) bonded labour, (c) Calcutta telephones, (d) Railway electrification, (e) irregular tax relief's, (f) integrated child development service, (g) drinking water to problem villages, etc.
3.1. One must, however, concede that while the chaff could be winnowed out, the grains could also get blown away along with the rejected chaff. Such a situation arises consciously when report drafting calls for a more rigorous analysis than that was done in the field or when the findings have to be qualified, for ensuring objective presentation. Audit findings, based on equivocal and hypothetical inferences, for want of evidence, seldom make the grade. The burden of proof is with the auditor and not with the auditee; appearances to the contrary are deceptive. Further, it is known that the more you qualify the audit findings, the less is its force. Drafting standards can be evolved as a technique, to guard against rejecting the grains, when such difficulties are faced. At least, one would know what had been rejected and why.
3.2. But, there is no built-in safeguard against inferior inspection audit, intrinsically speaking. Briefing, guidance, supervision and cross check help in minimising such losses. All such administrative steps suffer from limitations and do not guarantee that the best would be done. The possible remedy lies in intensive training, exposure to related technology and review of the audit performance itself, to draw lessons for the future.
4.1. Public Administration is more than mere governance. It is a mosaic of different activities in diverse fields in a Welfare State. The style, an important and intangible Input from the human resource angle, oscillates from the rigid rule-bound drift to innovative achievement averse to accountability. Extraneous influences always hover around and affect and possibly change the course of the conceptualisation, implementation and delivery of the programmes. Pressure Groups, lobbying self-interest, "Who'd know?" syndrome, graft etc. intervene as adverse influences, on the one hand. On the other hand, innovation, dynamism, commitment to public interest, integrity, vision etc. have a constructive and elevating role to play, though they could and often do clash with the pre-ordained system of procedure and precedents. 'Conflict of interests' 'encounter with vested interests', etc. are not adequate phraseology to describe the scenario. The problem is far too complex and cannot be brushed away in arithmetical terms, percentages and indices.
4.2. Such influences can, at best, be perceived by audit-not always. The auditors face a dilemma when they face such a situation, as the task of translating perceived verities into formal and written evidence, passing the tests of credibility and incontrovertibility, is not an easy one. The documentation from which the evidence is to be prised, is most likely to be absent or sketchy or contrary. It could even be built around such that it supports colorable decisions, particularly when adverse factors had intervened. Positive factors are qualitative and their imprint is superimposed on the deviation from the system. The contrast is a blur. And, the gestation period of beneficent influences is of uncertain duration and is influenced by many factors, which leave no evidence. The labyrinthine information system makes for incoherence and for myriad ways of leading one up the garden path. Haystacks loom large and the auditor is smugly informed, in writing, that all the needles are supposedly in. Halted in his tracks, the auditor can find his task frustrating indeed!
4.3. The central point that audit, as a discipline, should be crafted as an excellent instrument of larger public administration, can best be presented in the words of Mr. T.N. Chaturvedi the Comptroller and Auditor General of India. Speaking on "Controlling the Bureaucracy" in the Second International Financial Management Conference in London in September 1985, he dwelt at length about the role of the Government itself and related it to the 'optimisation of resources'. A few excerpts from that speech are reproduced below for the limited purpose of drawing support for my theme that audit, as an external agency of control, should be well crafted:
"....controlling the bureaucracy certainly means how it can be made more rational, responsive, responsible and accountable."
"Since Governmental machinery is so vast, the implementing agencies often get delinked, in their mental wavelength as well as organisational framework, from the fundamental objective which they are supposed to be pursuing."
"We should probably resist the temptation of asking for 'remedial' action, particularly as auditors, in the shape of further regulations and instructions pursuant to every audit finding."
" even by implication, we should not expect that the rules and regulations should be deterministic... Human situations cannot always be tailored to fit into rules."
"It is the professional excellence and ethics of audit which inspire confidence in the public. Trust in audit is a very precious resource."
5.1. Those, who practise some craft or the other diligently, will subscribe to the preposition that the right tools should be used for the right jobs, that the tools should be ever ready with the cutting edge and that it is the skill of the practitioner that imparts the shine and polish, which are the hallmarks of excellence. I shall now warm up to the theme that this craft of audit can be imparted, can be assiduously practised and that the skills can be so developed that audit serves the ultimate purpose of being a 'precious resource'.
5.2. Let us consider the tools, first. The brown pencil for ticking the entries in the cash book and the like, represents the routine check of money transactions. Admittedly, one should not stop at that. At the same time, such checks cannot be waived or diluted in the belief that evaluation of performance needs to be done differently.
5.3. Firstly, it is no less important to detect cash irregularities like defalcation, misuse, diversion, temporary misappropriation etc. Detection of leaks and malpractices is an important function of audit, as they can be plugged and the wrong-doers punished, only then. Comprehensive presentation of this aspect will take lot of space. An instance can be cited. Bill collectors file daily reports in manuscript, clumsily written. Entries may be correct. Totalling errors may conceal misappropriation. If not detected in time, simple malpractices like this could lead to considerable loss of revenue by passive encouragement.
5.4. Secondly, such a scrutiny throws up cues for cross verification. A small district office kept papers in order and defaulted only in reconciliation of its remittances into the treasury. When the auditor did a cross verification on his own, he found that the treasury acknowledgements kept in the cash book were forged ones. A major fraud was unearthed.
5.5. Thirdly, tracing money transactions in the books of accounts represents the first step in the Audit Trail. Unusual features, inexplicable delays, diversion of funds etc. surface in such scrutinies, aiding the auditor in his selection of the more vulnerable areas for intensive audit.
5.6. Auditors cannot verify all the primary transactions. It is neither necessary nor rewarding. For instance, all the bus tickets cannot be checked while auditing a public utility engaged in transporting passengers. But, resort to statistical random sampling, surprise element and a thorough check of the internal audit system and output will help, in no small measure.
6.1. Auditors go about their business, by following the codes and manuals of the auditee and that of their own. This can be considered as the next tool in the kit. Their familiarity with these sets of instructions, written down step by step and their capability for practical application, is tested by graded periodical examinations. The importance and relevance of these codes and manuals should not be underestimated, particularly in the context of different teams of auditors being engaged in the task, in different audit cycles. But, codes and manuals have no cutting edge. They might not have been updated for long. Comprehensive instructions can, seldom, be laid down to cover all situations, prevalent in the different organisations. The standardised instructions can hold him back from seeking new frontiers, by acting as a leash. There is yet another angle too. An auditor could rest on his oars after sincerely completing his manual-based audit, without even reaching the fringe of the areas and activities, which deserve to be audited critically, just because the codes and manuals limit his vision. That is a grave restraint, indeed. Therefore, it should be well recognised that the auditor should look beyond the codes and manuals, if he is to be effective.
6.2. Computers aid audit. The data on performance in different centres, if analysed from different angles, present interesting trends, deviations. Computer aided analysis will, thus, help in selective audit. Many auditees like the Railways, Power utilities etc, have developed information systems and decision trees with 'he help of computers. Their output, in a manner of speaking, is the input of auditors. Audit software will immensely help in covering vast areas of activities in a dependable manner, within a short span of time. Statistical random sampling can be effectively programmed in such software for enhancing the reliability. The auditees should not have access to such exclusive software, for ensuring the surprise element and for pre-empting tailored compliance being programmed, in advance.
6.3. The technique of using guide-lines, based on a theoretical study as a check list and building the audit evidence around the same has caught on, in recent years-particularly for evaluation studies and appraisals. We may call this, the third tool. This is a significant aid to the field auditor. He knows what to look for. The selection of the documents for detailed scrutiny is easier and less time is consumed in arriving at tentative findings. The task of getting evidence for supporting such findings leads to better interaction with the auditee and untenable findings get excised in the first round. His obligation to answer questionnaires, it has been found, helps in getting verified evidence and in identifying specified areas for close'- scrutiny. It is the repeated audit findings on irrigation projects that they seldom met the real targets that led to the shift in policy towards intensified development of infrastructure in their command areas. The dam merely impounds the water. The canals carry it. Pithily stated, the projects had served little purpose unless assured water is reached to the standing crops in time and to the extent needed. Such a delivery should have been assured in advance and past experience should encourage the agriculturists to sow the seeds. Soil conservation, land levelling, fertilisers, loans, marketing etc. are the ancillary inputs that would have a multiplier effect. Such and similar audit analysis, one can fervently hope, will influence decisions in favour of 'the accomplishment of the goals envisaged'. Guidelines help in structuring such audit programmes.
6.4. The inadequacy of guide-lines, as an audit tool, is keenly felt while auditing social welfare programmes. Guidelines aspire to deal with local situations, by simulating an exercise on a theoretical model and depend heavily on the reporting system to provide the clues. That reporting system is, often, bugged in favour of colouring the truth. The reasons are not far to seek. Malicious intent may not be there. But, the hierarchy is more concerned with compliance, with winning recognition and with side-stepping gets obsessed with reporting on physical achievements, spending the budget and target statistics. There is a pressure to report performance and implementation that would satisfy the higher authorities, by filling in innumerable forms. Inadequacies in fulfilling the ultimate objective can be well-hidden. Being obliged to draw from such a data base, audit finds it difficult to assess the qualitative results of antipoverty programmes, public health projects, social uplift measures etc. Still, one could cite audit reports which brought out the shortfalls in such programmes, in bold relief. That success, limited though, is attributable to the auditors' initiative in emerging out of the cocoon of set procedures and elevating the plane of his inquiry to one of expert scan and search. Such initiatives can pay rich dividends in all types of audit, by appropriate modifications in methodology. Be it a welfare programme, a major project, a cluster of different activities, a company or a public utility or a bank, the result will be wholesome and rewarding, once the auditors begin practising the craft instead of merely using the tools.
7.1. We can now consider the ingredients of the audit craft. Direction of the course of audit is central to success. Audit inspection teams, unless directed, might lose their track in the quagmire of routine work in tasks unrelated to the set direction and in data collection for swelling the report.
7.2. Basic knowledge, sound experience, reasonable familiarity with the subjects of inquiry, a questioning frame of mind and versatility go into the making of a complete auditor; professional skill can be acquired and sharpened in no other way. Training and interaction with his peers help in upgrading his capability to sieve the information generated from many sources-the auditee's own documentation, other audit reports, news and views in the media and even tender notices. It is only the trained eye that can zero on the target, while scanning the scenario.
7.3. The scope for replication of the audit work done elsewhere is worthy of notice. In fact, such an approach is the optimal one under certain circumstances. As in the case of any other field of human endeavour, audit tasks also can be evaluated for achievements, limitations and pitfalls. The lessons learnt help in framing the scope of the audit inquiry and the replicated audit programmes, it can be ensured, do not suffer from the infirmities of the fore-runner. Saving on time and the energy expended, the quality of audit can be upgraded.
7.4. There is yet another advantage in developing long- term replication strategies. Specialisation can be practised with verve. Different groups of auditors can take up specified fields for close scrutiny. The principal auditor in one zone can intensively audit the purchase and utilisation of transformers and conductors of Electricity Utility, in an audit cycle. Another may simultaneously audit the transmission tower erection in his zone. Yet another may look into electricity generation. A programmed exchange of views amongst them preceding and following the directed audit, switching the subjects for the next audit cycle, audit workshops to discuss the limitations and dilemmas threadbare, skeleton audit reports as the back-cloth, timely help from the audit research wing are some of the ingredients of the audit craft that will undoubtedly pave the way for upgrading the coverage and quality of the audit findings emanating from all of them on all the aspects. Many variations of this approach can be attempted and the scope of interaction can be enlarged for structuring a continuing programme of audit for covering all the government activities.
8.1. The quality of presentation of the audit recitals depend on the audit report-writing skills. And, style is a skill. Styles differ and should be encouraged, within the bounds of a frame-work. It can be laid down that statistical analysis should be interpreted, findings on irregularities should set forth what went wrong and why and that project evaluations should dwell upon the positive aspects, economics, cost reduction results etc. as well, with an even hand. The turn of the phrase, a certain literary flourish, a subtle sense of humour etc. will embellish the report and make the point effectively, if implanted with a finesse.
8.2. Audit reports have three components-A standard format, juxtaposition audit recitals and tabulated data. The principal auditor brings to fore his skill and fund of knowledge, in the recital. This is an area in which he must apply his mind, exercise his style and bring out the story lucidly. He shall travel back and forth in the rough report that he drafts first, lest he misses the evidence, while being carried away by his forensic skill and extraneous but relevant knowledge. It is at this stage that he fits in the tabulated data, which had been checked out for accuracy. A certain trend, an inexplicable variation and such auditable aspects will, then, bleep for attention. A double check done promptly will help in upgrading the audit recital, revision of the findings and balanced presentation. A bold auditor will now try to alter the format itself for aligning that with his recital. That unorthodox step will be countenanced only if it is manifest that it had upgraded the report and had helped in highlighting the salient features and in bringing out the audit conclusions unambiguously. It is, thus, the audit is crafted with the right tools and applied skills of the profession.
9. The scope for innovation in audit is unlimited.