F . NO . 206/10/99 Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs

1 · . Data management for Audit preparations;

2 · . Audit Report format;

3 · . Total period of the Audit;

4 · . Evaluation of the Audit Report through a scoring system;

5 · . System of institutionalised monitoring;

6 · . Training;

7 · . Availability of computer; and

8 · . Audit of units between Rs . 1 crore and Rs . 5 crore revenue .

1 · . The first view expressed was that data must be collected by all Commissionerates in a standardised format so that only absolutely essential information relevant for the conduct of audit is collected . This standardised collection would also facilitate maintenance of a computerised database al l over the country . In this connection , Standardised Format for Assessee ' s Profile has been devised to serve as a standard for collection of data relevant for Excise Audit -2000 , which is enclosed as Annexure -I .

1 · . In addition to this , it would be of advantage to the Department to know certain critical ratios relating to an assessee ' s factory/business from the data available in the Balance Sheets (Annual Reports) of the assessee/Assessee ' s profile/Other Reports before the audit is contemplated . For example , raw material cost: sale value , discount; sale , outward freight: sale , power consumption (units): production quantity , change in profit: assessable value etc . . The officers of the Audit Wing may be trained to derive these ratios . These ratios , wherever possible , should be studied at the time of " Desk Review " .

2 · . The Assessee ' s profile and the ratios will serve as a useful database for the conduct of ' Desk Review ' which is the first step in the Audit Programme explained in both the Excise Audit Manual and the Standard Audit Programme . Needless to mention a comprehensive database would help in proper preparation for conduct of Audit .

2 · . The Audit Manual speaks about completion of an Audit Report (Chapter 8) . No format of the Audit Report has been provided . It is important that the Audit Report findings are standardised . Keeping in view the need to ensure brevity and objectiveness , a standardised format has been prepared which is enclosed at Annexure-II . The Audit Report format particularly focuses on action on old audit points; the summary of the audit objections along with reasons and important points for future compliance . This must be prepared after finalisation of the Working Papers . The Audit Report should also substantiate findings , drawing from material in the Working Papers . Both these documents should be put in computer .

3 · . Every Audit undertaken must have a reasonably defined timeframe . This would also help to bring in the much-needed discipline in the conduct of audit . Keeping in view the fact that EA-2000 requires more pointed audit of financial records it has been decided that the total time limit for the conduct of audit and submission of the audit report should not exceed 20 -25 days from the commencement of the Audit in the Assessee ' s unit .

4 · . One of the keys to good audit is a system of good monitoring and evaluation of audit reports . EA -2000 makes this task easier by prescribing that all audit work must be clearly documented in the Working Papers . Senior officers at the level of Joint Commissioner/Additional Commissioner must evaluate these Working Papers . After due deliberation , a scoring system has been evolved which may be used to evaluate an audit report which consists of the Working Papers , the Summary sheet (part of the Working Papers) and the Audit report itself . The Scoring system which is enclosed as Annexure -III divided the entire process of Audit into five parts: (I) preparation of the audit plan; (ii) conduct of audit; (iii)

5 · . In the Board ' s Circular No . 491/57/99 -CX . 6 dated 28 th of October , 1999 it was suggested at Para 18 that an Excise Audit Monitoring Cell be constituted headed by the Commissioner . It must be ensured that the Monitoring Cell meets once a fortnight and also specially examines in the audit report improtant points raised . Assistant Commissioner/Deputy Commissioner/Joint Commissioner/Additional Commissioner (Audit) should meet all the Audit Parties at least once in a month to review their functioning and ensure the exchange of information among the audit parties .

6 · . To start with , a copy of the score sheet should be forwarded to DG (AE) as soon as it is ready . A suitable device will be worked out for seeing the Audit Reports for Rs . 5 crores and above units; selectively in due course .

7 · . Audit Protocol is a limited initiative within the overall EA -2000 . Out of the eight corporate with whom discussions had been held , five , namely , IndianOil Corporation , Maruti Udyog Ltd; TISCO , Steel Authority of India Ltd . And Hindustan Lever have already singed Protocol . MRF has given a letter agreeing to sign the Protocol . As stated in Chariman ' s letter on Audit Protocol , Assistant Director (Cost) must accompany the audit teams for Protocol audits . In case the Commissionerate does not have an Assistant Director (Cost) , the AD (Cost) from any Commissionerate within the zone should be a part of the audit team .

8 · . Normally , for all Rs . 5 crores and above units , AD (Cost) should , as far as possible , be also involved in audit .

9 · . The success of Ea -2000 is critically dependent on the requisite training imparted to Auditors . Since in a number of Commissionerates the Audit teams have not been exposed to any training on Accountancy , it is necessary , keeping in view the emphasis being placed on scrutiny of business records , that Commissioners ensure that this training programme on Accountancy is organised for staff not covered so far . The faculty may be drawn either from serving officers like AD(Cost) . Such training should have a practical orientation so that the lectures are linked to practical application which is necessary to sustain interest .

10 · . It is learnt some of the Commissionerates have not been able to provide a computer to Audit Branch . This should be done priority basis .

11 · . Field formations may be suitably informed . Any difficulties noticed in this regard may be brought to the notice of the Director general (Anti-Evasion) immediately .

1 · . Name of the Assessee :

2 · . Registration Certificate No . :

3 · . New ECC No . :

4 · . General Details :

5 · . Commodity-wise details

6 · . Major Input and Output in the Modvat declaration .

1 · . Major item/sub-heading declared as Capital Goods under Rule 57Q .

2 · . Major Audit Points:

3 · . Major Preventive Points:

10 · . Marketing pattern , clearance pattern etc .

7 · . Clearance to U . N . and other aided projects

1 · . Summary of major audit objections from the Working Paper:

2 · . Suggestions for better compliance including systemic improvements and notifications in the legal arrangements: