Download case-study-solution-Part-II - National Academy Of Audit and

Suggested Solution to Case studies –Part II
Case 1
There is no audit observation relating to the clear-cut segregation of project assessed cost,
resource deployment and source of funding under each unit of ITCSC.
Revised Recommendation
The Organisation may consider implementing better reporting mechanisms as a managerial tool.
Case 2
In terms of ISSAI 300/3000-3100, any limitations on the scope of the work and the reasons for
this should be described. It is customary for SAIs to provide a detailed report amplifying the
opinion in circumstances in which it has been unable to give an unqualified opinion. In the
context of UN organisations, any limitation on the scope of the audit work is viewed far more
seriously than the audit observation. We cannot give disclaimer regarding limitation on scope of
audit without making efforts at all level. In case of non-production or slow pace of
records/information, it suggested that:

The team leader should take up the matter with the higher management by writing emails as
well as seeking meetings.

Simultaneously, he/she should inform the Director of External Audit as well as Director
General (IR).

The team leader should maintain records of emails/discussions, etc. regarding
records/information. Chronological order of requisitions seeking records and receipt of
records may also be kept.

When all efforts failed to get the requisite records/information, the issue of disclaimer
regarding limitation of scope of audit should be mentioned in the exit conference.

Further, we need to differentiate between the two situations – (i) documents not made
available which were existing with the Organisation and (ii) information not being collected
at all or not available in the manner asked for by audit (hence not made available). While the
first situation may be a case for scope limitation, the later is not. In case of the second case,
we may, if required, highlight the impact of non-availability / non-maintenance of such
information and give recommendation to do so in future.
Further, in the instant case the audit team has not been able to counter the detailed matrix
provided by the entity to support their contention that all requested documents were
provided.

Case 3
It is incorrect comment, as liabilities in respect of cases pointed out were already captured
through accruals. These were adjustment entries either (i) to transfer an amount from general
liability account to a specific vendor account or (ii) to record goods receipt which were
provisionally entered in the system in the year of acquisition. These adjustment entries do not
have any financial impact.
Case 4
No suggestion
Case 5
This is incorrect audit finding and cannot be taken in the Audit Report. Here, one Unit (Centre)
has borrowed funds from Headquarters Endowment Fund. This is an internal transaction, and
hence cannot be treated as Liability. Further, it has been incorrectly indicated that management
accepted the audit finding.
Case 6
Para is deficient in respect of following areas:

Rental income cannot be linked with the exchange rate fluctuation. We cannot say that if
Yen becomes weak – rent should be increased. Can we say that if Yen becomes strong –
rent should be decreased? Management’s response in this regard is correct.

UN Organizations/UN Agencies are not subject to market rent. Quite often, various
countries offer their premises free of cost. Moreover, in the audit finding we also could
not indicate as to what was the market rent.

Financial impact in respect of sub-bullet (e) has not been worked out. Hence, audit
finding is not complete.
Case 7 & 8
Case 7:

Only one case of recruitment has been brought out. On this basis we cannot comment on
the system.

Reply that Head of the Department had intimated the Hiring Manager to “consider with
priority those candidates whose nationality is not represented in the Secretariat” is also
convincing, and the same has also not been countered.
Case 8:

Para is very lengthy and not well structured.

In the 2nd para we are saying that “the previous vacancy announcement done in January
was initially closed on 23 March 2014 and it was subsequently extended for 30 days with
a closing date of 12 September 2014”. How extension of 30 days from 23 March 2014
resulted in a closing date of 12 September 2014 is not clear in the para.

Case 9

Since this amount has been received on 17 March 2015 after the Balance Sheet date
(31.12.2014), we should have commented only to the effect that this being a material
transaction after Balance Sheet date-should be disclosed in the Notes to Accounts. We
should not insist that these should have been accounted for in the books of accounts.
Further, this
cannot be a basis for qualification, we may take the audit finding in the
Long Form Report. Though, this was a good point, the recommendation was wrong.

Case 10

Para is too long and needs to be redrafted and condensed. We are giving the same
information ( Utilization of Programme and Institutional Budget, Grants expired, Grants
utilizing 100% of budget, Grants which could not be utilized fully) in respect of Regional
and Country offices. This entire information may be given in a table with a general
comment of non-utilization of budget. Para is also mere factual without any audit
analysis.
Case 11
1. Poorly drafted audit observation containing language/grammar/sentence formation mistakes.
For example, “We reviewed the both cases received”, “This resulted in failure on the part of
the management did not ask” indicate language mistakes and reflect poorly on the part of
external auditor.
Case 12
Reply is convincing and there is no recommendation. Audit has not even refuted the reply.
Hence there seems to be no reason to keep the para in ML/AR