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8/13/2019 Term Paper Main

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1 Introduction

1 Background

1.1 Introduction of VLC in A&E Offices

Voucher Level Computerization (VLC) was initiated in IAAD, pursuant to the recommendations

of the XIX Conference of Accountants General in November 1996. As of 2005, all the Accounts

and Entitlements Offices across the country have computerized the process of compiling the

initial vouchers sent by the treasuries and are rendering computerized monthly Civil Accounts to

the State Government. While in some states, the annual Finance and Appropriation Accounts afe

also generated directly from the VLC system, in other states, summary data is exported from the

VLC system and reformatted to produce the Finance and Appropriation Accounts.

1.2 Stabilization of the Processes

Over the last few years, the VLC system has stabilized and has facilitated a reduction in the time

taken for the preparation of monthly and annual accounts by the A&E offices while at the same

time, improving the quality of accounts. The system has also generated sufficient data in detail,

to enable a meaningful analysis of the financial position of the States and fulfill IAADs role not

just in terms of rendering accounts to the State Government, but also as an effective aid to the

latter on financial and budgetary management and control.

On the other hand, the enormity of data at our disposal has given us an excellent opportunity to

identify critical areas more scientifically and investigate cases of irregularities, deficiencies and

improprieties more thoroughly in audit.

2 VLC for Audit Purposes

With the stabilization of VLC, we are in a position to harness the data for a more effective audit.The utility of VLC data for audit is two-pronged as detailed below.

2.1 More effective Central Audit

At present, the staff posted in Central Audit are not fully conversant with the IT-based VLC

system and its processes. There is a general inhibitions in understanding the system and a sense


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of awe at what the system can do and their limitation with regard to its use. The staff in

CAP/CAS Sections continue to audit the vouchers and sanctions in the same manner as they used

to do earlier, when the accounts were being prepared manually. They normally audit vouchers

for selected months, with sample sizes being determined based on monetary values for different

categories of vouchers, as per the instructions contained in CAGs Memorandum of Secret

Instructions.

With VLC, the Central Audit Parties have an opportunity to analyse the entire gamut of vouchers

and challans in electronic format on multiple dimensions, and ensure a risk based selection of

vouchers/challans for manual review. Such a change in audit methodology would have the

following advantages:

2.1.1 Audit of Vouchers

With the availability of abundant information in the system, the CAP/CAS Sections can nowuse

analytical audit procedures to drill down to the level of details that they need to, to filter out what

is routine and identify significant details. They can run through the entire data and pick out

vouchers in an intelligent manner either randomly, or after stratifying them in to various

categories and taking samples from each category, based on their requirement.

Further, voucher selection for test audit would be better documented and it would be easier at the

supervisory level to verify compliance with the instructions on voucher selection.

2.1.2 Audit Certificates

The AG (Audit) is required to issue audit certificates for expenditure incurred on different Plan

schemes funded by the Central Government, as well as externally aided projects. The current

procedure involves test check of selected Statements of Expenditure through local inspection,

supplemented by deduction of amounts held under OB, AC Bills etc.

With the availability of VLC data, the CAS section can conduct a detailed analysis of

expenditure on plan schemes and externally aided projects on different dimensions, and identify

unusual vouchers or items requiring detailed examination (in central and/or local audit) ona more

rigorous and informed basis. Isolation of amounts drawn through high-value AC bills (especially


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AC bills drawn towards the end of March) for which DC bills have not been submitted would be

easier and more comprehensive.

2.1.3 Audit of Finance and Appropriation Accounts

Finance and Appropriation Accounts can be analysed in depth and everyone of the items figuring

in these accounts can be traced back to their source to see their validity and integrity.

Expenditure can be compared to budget allotment easily and savings/excesses can be verified

and vouched for precisely with reference to appropriations, re-appropriations and surrenders.

Account figures can be easily compared with previous years figures and expenditure trends can

be spotted and analysed in detail.

2.1.4 Audit Report

Chapters 1 and 2 of Audit Report can also be prepared with more incisiveness with regard to the

analysis of the financial position of the State Government, sources and utilization of funds,

liabilities and the extent of completion of schemes and projects.

2.2 Better Planning for Local Audit

Audit of VLC data will enable AG (Audit) to plan the local audits better in the sense that

instead of just going by periodically of inspection or total volume of expenditure/ contingent

expenditure, he/she can schedule audits based on the extent and the nature of transactions as

culled out from the VLC system.

With the availability of VLC data, it would be possible to identify the specific vouchers/challans

to be reviewed in local audit, at the headquarters itself well before the team leaves for the field.

VLC data can thus be used as an audit support tool for clear identification of thrust areas ar

Headquarters before the commencement of field work.

Documents selected for detailed test audit can be chosen on a more systematic basis (than the

current selected months basis):

High value transactions Key/exceptional/unusual/transactions based on chosen criteria A statistical/representative sample of other transactions


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Further, it would be possible to ensure better integration and co-ordination between central

audit and local audit, where the findings of central audit provide pointers, which can be

examined further in local audit and developed into potential Audit Report material.

3 Audit Objectives

The objectives of audit will remain the same whether it is manual audit or IT audit. In the

case of financial audit , the audit objective would be to identify cases of significant non-

compliance with applicable laws, rles and regulations as well as cases of financial

impropriety. In this case of performance audit, the audit objective would be to identify

whether the auditees activities are being carried out with due regard to economy, efficiency

and effectiveness.

On the other hand, given the position in India where the AG (A&E) compiles the monthly

and annual accounts of the State Government from the initial accounts rendered by the

treasuries, the AG (A&E) would try to make sure that the accounts compiled by his/her office

are free from errors , omissions and misclassifications.

The queri es given i n thi s structur ed tr ain in g courseware (STC), th erefore, address the

requir ements of both AG (Au dit) as well as AG (A& E).

4 Pre-requisites for this Courseware

Participants/users should possess the following skills in order to take advantages of this

courseware:

Sound understanding of the concepts behind Government accounting. Knowledge of the manual procedures involved in Government accounting both at

the Treasury/PWD/Forest Divisions as well as in different sections of the AG (A&E)

Office. Ability to use a computer, in particular Microsoft Office Good knowledge of MS-Access and SQL syntax would be desirable.


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The ability checklists and queries given in this courseware are only illustrative of the possible

lines on which the VLC data can be analysed. These queries are all based on an analysis of the

data of AG (A&E), Jharkhand for 2003-04. The software for this VLC system was developed by

M/s. Mecon Ltd. and is applicable to the IAAD offices in Bihar, Jharkhand, Orissa, West Bengal,

Karnataka and Kerala (subject to local customization). While these offices can use these

checklists as they are, the other user offices can modify them as required, depending on the

specific needs of the Office and the structure of the database. Obviously, the results of the

queries covered in this courseware are only as good as the data itself (in terms of its

completeness and accuracy); hence there is need for verifying the results of these queries on a

sample basis with the physical vouchers to rule out data capture errors.

It may be noted that this courseware is confined to an analysis of the VLC data. It does not deal

with the audit of the VLC system which would involve a review of the system design,

development methodology, internal controls, performance, security, disaster management etc.

Further, to the extent that the recommendations of the Ganapathi Committee have been

implemented in the VLC software by different vendors across by different vendors across

different zones in IAAD, suitable reports for audit have been designed as part of the software

(eg. Capturing the existence of the DDOs signature/Treasury Officerss signature on each

vouchers). To avoid duplication, this courseware does not cover such reports, which are already

availability in the VLC software.

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