## Expenditure Audit – Five Standards
Government expenditure is subject to audit under five distinct standards. The first four are covered here; Performance Audit is a separate topic.
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### Standard 1: Audit of Sanctions
Test: Was the expenditure properly sanctioned by a competent authority?
- The sanction may be General (applicable to a class of cases) or Special (for a specific case)
- If expenditure is incurred without a valid sanction from the appropriate authority, the audit will flag it
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### Standard 2: Audit against Provision of Fund
Two sub-tests:
1. Was the expenditure incurred for the purpose for which the Grant was provided?
2. Does the expenditure not exceed the appropriation made?
> Extra expenditure beyond the appropriation is permissible only if authorised by a competent authority. This is a separate sub-check.
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### Standard 3: Propriety Audit
Test: Was the expenditure incurred with regard to broad general financial propriety?
The auditor must bring out cases of improper or avoidable expenditure, even when that expenditure was incurred in accordance with existing rules and regulations.
Four Principles of Financial Propriety:
| Principle | Rule |
|---|---|
| A | The amount involved in the transaction should not be insignificant |
| B | Every officer should exercise the same vigilance as they would if spending their own money — no authority should exercise power to its own advantage |
| C | Public money should not be used for the benefit of a particular person or community unless (i) the amount is insignificant, or (ii) a claim exists enforceable in court, or (iii) the expenditure is in pursuance of recognised policy |
| D | Allowances (e.g., Travelling Allowance) granted to meet expenditure should not result in a profit to the recipient |
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### Standard 4: Audit against Rules and Orders (Regularity Audit)
Test: Does the expenditure conform to the relevant provisions of statutory enactments, financial rules, and regulations framed by a competent authority?
The auditor examines whether regulations and orders satisfy all four conditions:
| Condition | Check |
|---|---|
| a | They are not inconsistent with any provision of the Constitution or any law made thereunder |
| b | They are consistent with the requirements of Audit & Accounts as determined by C&AG |
| c | They do not conflict with orders of any higher authority |
| d | In the case of orders not made under rule-making power, they have been separately approved by the authority competent to issue them |
Categories of Rules & Orders covered:
1. Rules regulating powers to incur/sanction expenditure from Consolidated Fund or Contingency Fund (Union/State)
2. Rules dealing with mode of presentation of claims against government / withdrawal of money from Consolidated Fund or Contingency Fund; general rules prescribing detailed procedure for government servants dealing with public accounts transactions
3. Rules and orders regulating conditions of service — pay, allowances, pension of government servants