The propriety audit stands for the verification of transactions based on public interest, commonly accepted customs, and standards of conduct.
Principles of propriety audit
- Expenditure is not prima facie more than the occasion demands and that every official exercise the same degree of vigilance in respect of expenditure as a person of ordinary prudence would exercise in respect of his own money.
- The authority exercises all its power of sanctioning the expenditure to pass an order which will not directly or indirectly accrue to its own benefit/advantage.
- Funds are not utilized for the benefit of a particular person or group of persons.
- Apart from the agreed remuneration of the reward, no other revenue is kept open to indirectly benefit the management personnel, employees, and others.
Scope of Propriety audit
Instead of too much dependence on documents, vouchers, and evidence, it shifts the emphasis to the substance of the transaction and looks into the appropriateness thereof on a consideration of financial prudence, standards of conduct, public interest, and prevention of wasteful expenditure.
Thus propriety audit is concerned with the scrutiny of executive actions and decision bearing on financial and profit and loss situation of the company with special regard to the public interest and commonly/generally accepted customs, and standards of conduct.
Problems in propriety audit
- The expression propriety is a moral term and can be understood by reference to the concept of morality accepted by society at a given time.
The propriety audit has an inherent element of subjectivity because it is very difficult to establish standards of public interest, commonly accepted customs, standards for conduct which is not a firm basis for audit evaluation.
- An element of subjectivity has caused the proper discharge of duty very delicate and demands direction, but the wisdom of taking commercial decisions under dynamic environment (the economic, social and political) must be evaluated concerning the circumstances in which these were taken and therefore, the auditor in his field must reconstruct such circumstances.
- The judgment of the auditor must be objective as otherwise, it would dampen the initiative of management and others in taking commercial decisions and propriety audit would prove itself to be counterproductive.
- To take care of this situation, C&AG has developed the norms of propriety for the expenditure of public funds in our country. By laying down the standards of propriety government expenditure the CAG has tried to tackle practically the complex problem of subjectivity inherent in a situation calling for propriety consideration.