## Objectives and Audit Programme for Local Bodies

### Objectives of Audit of Local Bodies

#	Objective
(a)	Report on fairness of content and presentation of financial statements
(b)	Report on strengths and weaknesses of systems of financial control
(c)	Report on adherence to legal and/or administrative requirements
(d)	Report on whether value is fully received on money spent
(e)	Detection and prevention of error, fraud, and misuse of resources

> Ultra Vires & Surcharge: Audit is a method of financial control. If a local authority acts beyond its legal authority (ultra vires), the audit can result in a surcharge against the responsible officers — a key power unique to local body audit.

### Audit Programme — Six Key Steps

(i) Appointment

Local Fund Audit Wing of the State Government is generally in-charge
Larger corporations (e.g., Delhi, Mumbai) may appoint their own external auditors
Auditor must first confirm his appointment is valid

(ii) Auditor's Concerns

Same as the five objectives above — fairness of statements, financial control, legal adherence, value for money, detection of fraud/error

(iii) Rules & Regulations

Expenditure must conform to relevant legal provisions and financial rules framed by competent authority

(iv) Authorisations

All types of sanctions (special or general) must be accorded by the competent authority

(v) Provisioning

Funds must be budgeted/provisioned; expenditure must be within the provision and authorised

(vi) Performance

Verify that schemes, programmes, and projects are running economically and achieving expected results (value-for-money audit)

Worked example

### Example 1

Scenario: A municipal officer sanctions expenditure on a function that is not within the powers granted to the municipality under local laws. What can the auditor do? Answer: This is an ultra vires act. The auditor can report it, and this may result in a surcharge — the officer may be personally liable to make good the amount.

### Example 2

Exam question: List any four objectives of audit of local bodies. Answer: (a) Report on fairness of financial statements, (b) Report on strengths/weaknesses of financial control systems, (c) Report on adherence to legal/administrative requirements, (d) Report on whether value is received on money spent.

### Example 3

Scenario: An auditor is auditing a large infrastructure project of a municipal corporation. Under which step of the audit programme would he verify whether the project is delivering expected results within budget? Answer: Step (vi) — Performance audit. The auditor checks that the project is running economically and achieving expected outcomes.

⚠️ Common exam mistakes

Students write 'detection of fraud' as the only/primary objective, ignoring the other four objectives — all five carry equal weight in exams.
Forgetting the 'ultra vires and surcharge' concept — this is a distinctive feature of local body audit not found in company audit, and examiners specifically test it.
Confusing 'authorisations' with 'provisioning' — authorisation means sanction from competent authority; provisioning means the budget allocation exists.
Missing that the Local Fund Audit Wing of the State Government (not a private auditor) is generally in charge — private auditors are the exception (large corporations like Delhi/Mumbai).

Reference:

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