Dear friends! I am pleased to present this issue of RTI’s newsletter. These six months witnessed 4 extra trainings on IT side and 5 extra trainings training on non-IT side. This institute had 19 trainings on non-IT side and 15 trainings on IT side since Oct. 2014. On non-IT side, Courses such as New Companies Act 2013, Introduction to Accrual Accounting, GASAB and IPSAS, Audit of

Municipal Corporations, Audit Evidence, Seminar on IPSAS, Development of Management Skills, etc. were well received. On IT side, the Training Course on IDEA, Qlik View, Oracle, Hardware & Software, IT Audit, and e-Library were appreciated by the trainees. On 22-1-2015, RAC members met to finalise the training calendar for 2015-16. Members were also briefed about last year’s performance of this institute. The RAC members expressed their satisfaction about functioning of this institute. I would like to put on record my sincere thanks to the Chairman and RAC members for the guidance provided from time to time.

From P. D’s Desk

Issue Date - March 2015 Issue 5 Year 2015

Indian Audit & Accounts DepartmentIndian Audit & Accounts DepartmentIndian Audit & Accounts Department

Regional Training Institute, MumbaiRegional Training Institute, MumbaiRegional Training Institute, Mumbai

NewsletterNewsletterNewsletter

Our Mission :-

To organize and conduct training courses in strategic skills in general subjects relating to audit including Corporate Finance/G o v e r n a n c e , Audit of Municipal Corporations and General Purpose Financial Reporting (IPSAS). To impart requisite knowledge and skills in information technology to enable audit of information systems and to provide essential EDP skills. To act as a development centre for courses / courseware for delivery of these courses in in-house training units and training centres.

Inside this issue:-

Page No.

Courses Conducted-List 2

Photo Gallery 2

An Article-Role & Context of IPSAS 3-7

Crossword Puzzle - IT Audit 8

Contact Us :-

GN Block, Plot No. C-2, Bandra Kurla Complex, Behind Asian Heart Institute, Mumbai - 400051 Ph-022-26521902, Fax-022-26522627

“ There is no God higher than the truth”

Mahatma Gandhi

2

Courses we conducted from 1-10-2014 to 31-3-2015

General Courses :- 1. New Companies Act 2013 2. Audit of Fraud & Fraud Detection Techniques 3. All India Training Programme on Corporate Finance 4. Awareness of ISSAIs 5. All India Trng. Programme on Audit of Municipal Corporations 6. Performance Audit and Risk based Auditing 7. Audit Evidence 8. Audit of Works Expenditure 9. All India Trng. Programme on Development of Management Skills 10. Audit Reporting 11. Financial Rules & Financial Management 12. Preparation and Certification of Finance & Appropriation Accounts 13. Right to Information Act 14. All India Seminar on General Purpose Financial Reporting

(IPSAS) 15. Dieting and Nutrition - to commemorate Intl Women’s Day Additional / Special Trainings / Seminars 1. Introduction to Accrual Accounting, GASAB and IPSAS 2. Audit of Consolidated Financial Statements (Two Trainings) 3. Time Value of Money and Capital Budgeting for project appraisal 4. Training Programme under TGS for staff of DLFA, Maharashtra IT Trainings :- 1. Presentation & Graphics 2. IT Audit Level 2a 3. MS Access (Two Trainings) 4. Akshar Naveen/Saransh 5. Oracle Backend-SQL 6. MS Office 7. Hardware & Software 8. IT Audit Level 2b 9. Creation of e-Library 10. IT Audit Level 3-SAP and IDEA IT-Additional Trainings 1. QlikView (Two Trainings) 2. IDEA Training for MAB-I, Mumbai office 3. All India Training on IDEA 9.2 Case Studies 1. Corporate Revenue Management (Corporate Finance) 2. Collection of Property Tax by Kochi Corporation 3. Transactions involving interested parties in PSUs

(Corporate Governance) Developments in RTI Mumbai 1. Ms. Jayshree Chettiar, Sr.AO has joined RTI Mumbai as Core

Faculty – General Courses 2. Shri Prashant Solanki, MTS has been transferred to

PAG(A&E)-I, Mumbai 3. Shri B Shejal, MTS has passed the Accountant Examination held

in Feb 2015 RAC Meeting

Seminar-General Purpose Financing

Development of Management Skills

Corporate Finance Training

Training on IPSAS

3

Role and Context of IPSAS in IA & AD

Article by Shri Mahadevan P, Core Faculty, RTI, Mumbai

IPSAS - What and Why?

International Public Sector Ac-

counting Standards (IPSAS) are account-

ing standards intended for adoption by

public sector entities across the world.

They are to be used for preparation of

'general purpose financial statements'.

'General Purpose financial statements' is

a term denoting the full set of accounts in

applicable uniform formats. The accounts

need to comply with the laws and

accounting standards that govern their

maintenance and preparation. They

comprise the final accounts, such as

annual accounts- balance sheet, profit and

loss/ income and expenditure accounts,

finance and appropriation accounts, etc.

Organisations such as autonomous

bodies, statutory corporations and

companies, etc. in the public sector are

classified as Government Business

Enterprises – GBEs, by the IPSAS. The

accounting framework adopted by GBEs

is outside the purview of IPSAS. Thus,

in India, IPSAS, if adopted/ adapted,

would be suitable only for other Public

Sector Entities, including ministries,

departments and attached and subordinate

offices, local self governments,

international government organisations

and other programmes, organisations, etc.

which have a public sector character,

excluding GBEs.

IPSAS are a collection of

standards issued by the International Pub-

lic Sector Accounting Standards Board

(IPSASB) functioning under the

International Federation of Accountants

(IFAC). These are derived from the

International Financial Reporting

Standards (IFRS) developed by the

International Accounting Standards

Board (IASB) of the IFRS foundation

and have been given a public sector

focus. IFRS themselves have wide

acceptability in private sector and GBEs

across the world. IPSAS have been

framed primarily based on the accrual

basis of accounting in the context of

public sector, though they also contain

instructions on cash basis of accounting,

especially in 'Cash Basis IPSAS,

Financial Reporting under the Cash Basis

of Accounting'. IPSAS would by and

large harmonise accounting in public

sector entities with the accrual system of

accounting used in commercial

enterprises and businesses. Thus, both in

the private and public sectors across the

world, standards with some link with

IFRS framework would play a major

role.

The Indian Context

In India, government accounting

has been following the pattern and

procedures contained in rules such as the

General Financial Rules (GFR), the

(Continued on page 4)

4

Government Accounting Rules (GAR)

and the Receipts and Payments Rules

(RPR), as also numerous rules,

regulations, manuals and instructions for

operations in state and central treasuries,

offices of Accountants General and other

accounting authorities like the Controller

General of Accounts. The said

mechanism envisages cash basis of

accounting. Cash basis of accounting

records the actual cash inflow or outflow.

The outflow is authorised by and

compared to budgetary allotment by

competent legislature, being the

Parliament for the Union Government or

federal Legislature for States and Union

Territories with legislative assembly.

India has now embarked on the

transition to the accrual basis of account-

ing in government accounts. Accrual

accounting would present a more

meaningful comparison of the actual

position of the finances of the

government. Cash basis of accounting

may lead to distortions involving

expenditure of the current year being

carried forward to subsequent years,

merely because of lack of budgetary

support. Accrual accounting would

necessarily require booking of expendi-

ture to the year to which it relates,

irrespective of whether it is paid for

(settled in cash) or credit is availed for its

settlement in future year(s). An example

of a transaction booked in government

accounts in the present cash basis of

accounting and in the accrual basis of

accounting is given below.

Take the instance of a labourer

who is being paid Rs.10,000/- per month

out of the budget head 'Wages'. During

the year 2012-13, the budget allotment

under this head was Rs.1,10,000/- only.

Hence, wages for only 11 months (April

to February) could be paid. But, the ac-

counts of the government are duly closed,

matching budget of Rs.1,10,000/- with

cash payment of Rs.1,10,000/-. During

the year 2013-14, the office demands and

gets an allotment of Rs.1,30,000/-. In

April, the arrears for the month of March

(Rs.10,000/-) are first disbursed and

then, he is paid Rs.10,000/- per month

from April to March. The accounts of the

government are again duly closed,

matching budget of Rs.1,30,000/- with

cash payment of Rs.1,30,000/-. You

would appreciate that when the transac-

tion is the same, the wages are the same,

the value of services availed are the same

in both years, it would be logical to book

the same expenditure of Rs.1,20,000/- in

both years. A liability of Rs.10,000/-

could be recognised in the year 2012-13,

comprising the unpaid wage and it would

be settled in the year 2013-14. Thus, it

would be a balanced presentation of ex-

penditure in both years. This is the crux

of accrual basis of accounting.

(Continued on page 5)

5

In India, new standards for gov-

ernment accounting are being framed by

an organisation called Government Ac-

counting Standards Advisory Board

(GASAB) under the aegis of office of the

Comptroller and Auditor General of In-

dia. GASAB has been set up with repre-

sentation of CAG, Ministries and profes-

sional standard setting bodies for formu-

lating standards for government accounts.

These standards comprise Indian Govern-

ment Accounting Standards (IGAS) on

cash basis of accounting and Indian Gov-

ernment Financial Reporting Standards

(IGFRS) on accrual basis of accounting.

IGFRS draw from best practise standards

of government accounting across the

world, including IPSAS. These are in re-

sponse to the IPSAS mechanism being

adopted or adapted by governments

across the world. This would lead to vast

changes in the operations in the Accounts

offices of the department as well as the

audit approach during financial audit by

Civil Audit offices. The accounting

adopted by autonomous bodies, statutory

corporations and companies in the public

sector in India is outside the purview of

such changes, as they are GBEs already

covered by the mechanism of accrual ac-

counting as per Accounting Standards

issued by the CA institute. But this sector

too is set to change in a different direc-

tion, as India has decided to converge

with IFRS. For this, a fresh set of stand-

ards called IndAS is being issued to adapt

(converge) IFRS to the Indian context.

Subsequent to this, a National Financial

Reporting Authority has been envisaged

by the Companies Act, 2013 to peer

review draft accounting standards

formulated by CA institute under the

IndAS regime.

Challenges in navigating the network

of standards

The relationship between various stand-

ards, agencies involved and their applica-

bility in various contexts are tabulated

below.

Evolution of Accounting Standards and their adaptation in Indian and Public Sector, mercantile and cash

Accounting Contexts

* Designated in IPSAS as Government Business Enterprises (GBE)

Notes:

2. IGFRS is probably the future of accounting standards in the Indian public sector

1. The dotted line from IPSAS denotes that it is only one of the many set of standards referred to for

drafting IGFRS. These are not adaptations but original standards. In case of IGAS, it is only that the

scope of IPSAS (Cash basis Accounting) and IGAS that is similar.

(Continued on page 6)

6

While it may appear to be a daunt-

ing task to juggle with so many standards,

many of the agencies drafting the stand-

ards are, in fact, working in close co-

ordination with each other. The standards

are not competitive, but are co-

operatively developed to apply, as rele-

vant, to various contexts. There is a com-

mon thread in all these standards issued

by various agencies, that being the under-

lying principle behind the standard.

In fact, we only need to realise that

accounting has existed in all countries in

private and public sectors across the

world since time immemorial. The 'art' of

accounting had been around even in early

Mesopotamia (4th millennium BC) and

practiced by shepherds for keeping ac-

counts of their sheep ! The 'science', ter-

minology and standardisation of account-

ing and all other professional practices

and principles came later. This scientific

'knowledge' was nothing but a compila-

tion of the age-old wisdom of the art of

accounting and auditing. It first evolved

as a systematic science under Luca

Pacioli (15th century AD, Italy). Each

country and each class of business organ-

isation (public and private sector, small

scale and large scale, corporate and non-

corporate, business and welfare, etc.)

adopted and adapted this knowledge ac-

cording to their requirements. Some trade

guilds, associations and 'professional

institutes' were formed with varying

degrees of regulatory support from gov-

ernments in each country (such as enact-

ment of laws giving statutory recognition

to such institutes and/ or to standards is-

sued by them) to regulate the transmis-

sion of this knowledge and its uniform

(Continued on page 7)

7

practice by its members in their respec-

tive jurisdictions. This led to the concept

of Generally Accepted Accounting

Principles (GAAPs). With globalisation,

a need was felt to adopt uniform

standards of accounting to enhance the

quality, consistency, and transparency of

accounting and public sector financial re-

porting world-wide. This led to develop-

ments like IFRS and IPSAS. Yet, due to

the typical situations in various nations,

each country could choose to opt for or

not to opt for or to modify the application

of such standards. Each set of standards

contain jargon and technical terms unique

to them. But, the principles and logic

guiding accounting are evergreen.

Role of IA & AD

One of the immediate areas of change of

the IA &AD's audit approach consequent

to the advent of IPSAS would be in the

area of foreign audits such as UN

organisations and programmes thereof,

whose audits have been assigned to CAG.

Personnel to be deputed for such postings

would now require an awareness of

IPSAS, as this would be the basis of

accounting that they would encounter in

such audits.

Knowledge dissemination to our

Civil Accounts and Audit offices on

features and concepts given in IPSAS and

related developments would give the first

mover advantage to personnel who can

easily grasp and implement the new

accounting standards and practices in

government, if and as and when they are

notified.

The process adopted by GASAB

and NFRA for evolving accounting

standards would definitely benefit from

knowledge of IFRS and IPSAS as it

would give an insight into international

best practices for public sector account-

ing. Hence, GASAB, in which IA & AD

also plays a major role, may have to

frame standards which may draw from

the principles and best practices

enshrined in various standards, of which

IPSAS is one. At the same time, the role

of the IA & AD is to maintain transparen-

cy and simplicity. Drafting of standards

with minimal jargon, including a glossary

of technical terms used, if any, etc. will

help in seeing through the jargon in

accounts and audit and to frame reports

directed at ease of understanding by

common citizens and for lawmakers, for

whom it is intended. Thus, the principles

and best practices, enshrined in

international standards, including IPSAS

and drafting by GASAB could mark the

future of government accounting

mechanism in India. This would culmi-

nate in the final adoption of IGFRS for

public sector accounting in India.

8

5. RISKAPPETITE, 7. SDLC 14. RISKMANAGEMENT 15. COBIT 17. RESIDUALRISK 18. INSURANCECOVER

1. COLDSITE 2. FEASIBILITYSTUDY 3. PIGGYBACKING 4. SENIORMANAGEMENT 6. BUILTRISKPROFILE 8. CIANONREPUDIATION 9. VULNERABILITY 10. ITPROJECTDIRECTION 11. STAKEHOLDERS12. MOTIVATION 13. UAT 16. NOISE

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