Rule 318 of The General Financial Rules 2017 Supplementary Audit Cost Recovery Government Companies
Original Rule Text
Visual Summary
Cost of supplementary audit is waived.
Cost of supplementary audit is enforced.
Rule references Section 143(6) for context.
Executive Summary
Rule 318 of The General Financial Rules, 2017, outlines the policy for recovering the cost of supplementary audits for Government Companies. It specifies that if the Comptroller and Auditor General (CAG) conducts the audit using its own departmental staff, the cost recovery should be waived. However, if the CAG engages external professional auditors for the supplementary audit, the cost recovery must be enforced. This rule is framed in the context of Section 143(6) of the Companies Act, 2013.
In-Depth Analysis of the Rule
Introduction: Rule 318 addresses a specific financial aspect concerning Government Companies: the recovery of costs associated with supplementary audits. This rule distinguishes between audits performed by internal departmental staff of the Comptroller and Auditor General (CAG) and those conducted by external professional auditors.
Breakdown of the Rule:
- Waiver of Cost: The rule explicitly states that the cost of supplementary audit should be waived when the audit is carried out by the CAG’s own departmental staff. This implies an internal capacity within the CAG for such audits.
- Enforcement of Cost: Conversely, if the CAG employs professional auditors (i.e., external experts) for the supplementary audit, the cost recovery must be enforced. This suggests that the engagement of external resources incurs a recoverable expense.
- Legal Context: The rule references Section 143(6) of the Companies Act, 2013, indicating the statutory framework under which these supplementary audits are conducted.
Practical Example: A public sector undertaking (Government Company) undergoes a supplementary audit. If the audit team comprises officials directly from the Comptroller and Auditor General’s office, the company is not charged for this audit. However, if the CAG contracts a private auditing firm to perform the supplementary audit, the public sector undertaking will be required to bear the cost of that audit.
Related Provisions
To understand Rule 318 comprehensively, consider these related provisions:
Learning Aids
Mnemonics
- CAG’s Staff = Waived; Pros = Paid: A simple way to remember when supplementary audit costs are waived or enforced.
Process Flowchart
Multiple Choice Questions
1. According to Rule 318 of the General Financial Rules, 2017, when is the cost of supplementary audit for Government Companies waived?
- A) When the audit is conducted by external professional auditors.
- B) When the audit is done by the Comptroller and Auditor General through his own departmental staff.
- C) When the Government Company requests a waiver.
- D) When the audit cost is below a certain threshold.
Show Answer
Correct Answer: B) When the audit is done by the Comptroller and Auditor General through his own departmental staff.
2. Under Rule 318 of the General Financial Rules, 2017, in which scenario is the cost of supplementary audit enforced for Government Companies?
- A) When the audit is performed by the company’s internal audit team.
- B) When the audit is conducted by the Comptroller and Auditor General’s departmental staff.
- C) When the Comptroller and Auditor General employs professional auditors for the audit.
- D) When the audit is mandated by the Ministry of Finance.
Show Answer
Correct Answer: C) When the Comptroller and Auditor General employs professional auditors for the audit.
3. Rule 318 of the General Financial Rules, 2017, refers to which section of the Companies Act, 2013, regarding supplementary audits?
- A) Section 139(1)
- B) Section 143(6)
- C) Section 148(1)
- D) Section 150(2)
Show Answer
Correct Answer: B) Section 143(6)
4. What type of entity does Rule 318 of the General Financial Rules, 2017, specifically address concerning supplementary audit cost recovery?
- A) Local Bodies
- B) State Governments
- C) Government Companies
- D) Autonomous Organizations
Show Answer
Correct Answer: C) Government Companies
5. If the Comptroller and Auditor General uses its own departmental staff for a supplementary audit of a Government Company, what is the prescribed action regarding cost recovery under Rule 318 of the General Financial Rules, 2017?
- A) Cost recovery is enforced.
- B) Cost recovery is waived.
- C) Cost recovery is subject to negotiation.
- D) Cost recovery is partially enforced.
Show Answer
Correct Answer: B) Cost recovery is waived.
Frequently Asked Questions
Q: What is the primary distinction for cost recovery under Rule 318 of the General Financial Rules, 2017?
A: The primary distinction lies in who conducts the supplementary audit. If the Comptroller and Auditor General (CAG) uses its own departmental staff, the cost is waived. If the CAG employs external professional auditors, the cost is enforced.
Q: Does Rule 318 of the General Financial Rules, 2017, apply to all types of government-funded entities?
A: No, Rule 318 specifically applies to “Government Companies” as defined in the context of the Companies Act, 2013, particularly concerning supplementary audits under Section 143(6).
Q: Why is the cost waived when the CAG’s own staff conducts the audit, according to Rule 318 of the General Financial Rules, 2017?
A: The rule implies that when the audit is performed by the internal departmental staff of the CAG, it is considered part of the regular governmental function and overhead, thus not incurring an additional recoverable cost to the Government Company.
Key Takeaways
- Rule 318 governs supplementary audit cost recovery for Government Companies.
- Cost is waived if the audit is conducted by the CAG’s departmental staff.
- Cost is enforced if the CAG employs external professional auditors.
- The rule operates under Section 143(6) of the Companies Act, 2013.
Conclusion
Rule 318 of The General Financial Rules, 2017, provides clear guidelines on the financial implications of supplementary audits for Government Companies. By differentiating between internal and external audit resources, it ensures a transparent and consistent approach to cost recovery, reinforcing accountability within the framework of the Companies Act, 2013.