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.