REVISION OF INSTRUCTION NO. 3/2007 ON NEW INTERNAL AUDIT SYSTEM - STRENGTHENING ROLE OF SUPERVISORY AUTHORITIES
INSTRUCTION NO. 15/2013 [F.NO. 246/94/2013-A&PAC.1], DATED 18-10-2013
Reference
is invited to Board's Instruction No.3 of 2007 dated 17.4.2007 on the
New Internal Audit System. The slow progress of work relating to
settlement of Internal Audit Objections and also quality &
coverage
of internal audit have been a matter of serious concern. The Public
Accounts Committee has also commented adversely on the present state of
affairs and directed proper monitoring mechanism for desired
improvement.
1.2 In order to streamline the system, it has been decided to strengthen roles of supervisory authorities as detailed below:
2.1 Role of CCIT (CCA): The CCIT (CCA) shall also-
| (i) | | Review
the performance of Internal Audit Wing on a monthly basis to monitor
the conformity to the Action Plan drawn for audit in terms of para III
(ii) of Instruction. Such Action Plan must be drawn by April 15 of each
year. |
| (ii) | | Assess
the progress in settlement of audit objections in terms of targets
prescribed through Central Action Plan and submit report in the Pro
forma at Annexure-I to the DIT (Audit) by the 10th of the succeeding
month with a copy to CIT (A&J). |
| (iii) | | Obtain
the particulars of such cases from the CIT (Audit) by April 30th of the
year, where Major revenue audit objections were accepted in the
preceding year but the Internal Audit had failed to point out the
mistake in their audit and monitor whether appropriate action against
the erring auditing officer as given in para 7.6 of the Instruction No 9
of 2006, with CIT (Audit) being the CIT concerned in whose charge the
mistake had occurred, has been taken. |
2.2 Role of Jurisdictional CCIT/DGIT: The CCIT/DGIT shall also
| (i) | | Review
the performance of settlement of Audit objections of his region,
including reconciliation of pendency reported by the CIT (Audit) &
the CIT (Admn), on a monthly basis and submit report in the Pro forma at
Annexure-I to CCIT (CCA) by the 5th of the succeeding month |
| (ii) | | Cover in the review, inter alia,
adherence to the timelines for submission of replies as per Central
Action Plan & taking of remedial actions wherever called for, in
terms of para V and VI of the Instruction |
| (iii) | | Strategise
to use the input in Half-yearly report submitted by the CIT (Audit) to
the CCIT/DGIT in respect of repeated/common errors noticed in the audit
in preceding two quarters, to educate and alert the Assessing Officers
so that such mistakes do not recur. |
| (iv) | | Exercise supervision in a manner as to facilitate zero-error assessments. |
| (v) | | Monitor
on a quarterly basis the progress in the matter of calling for
explanation of officers/staff concerned in terms of para VII of the
Instruction & suitable actions against defaulting officers/staff
within 15 days of the end of the quarter. |
3.1 Role of CsIT (Audit): The CsIT (Audit) shall also-
| (i) | | Hold a monthly meeting with each of the Administrative Commissioners to review the progress in settlement of objections |
| (ii) | | Furnish statement in Annexure-I as per his records to each jurisdictional CCIT/DGIT by the 3rd of the succeeding month. |
| (iii) | | Vet
each objection involving tax effect of Rs.10 crore and more, proposed
to be raised by Addl.CIT/Jt.CIT (Audit)/DCIT/ACIT (SAP)/ITO (IAP) before
the objection is raised |
| (iv) | | Submit
a half-yearly report to the CCIT (CCA) in respect of repeated/common
errors noticed in the audit in preceding two quarters. The report shall
be submitted by the 15th October & 15th of April with a copy to
every CCIT/ DGIT. |
| (v) | | Submit
a CIT charge-wise list of cases of accepted revenue audit objections
compiled from the LAR to the CCIT (CCA), where the internal audit was
conducted but had failed to notice the mistake subsequently pointed out
in an audit objection raised by the Revenue audit, and take appropriate
action against the erring auditing officer in accordance with the
procedure as given in para 7.6 of the Instruction No 9 of 2006 with
CIT'(Audit) being the Cll concerned, in whose charge the mistake had
occurred |
3.2 Role of Additional CsIT (Audit): The Addl/Jt CsIT (Audit) shall also, vet
each
objection involving tax effect of Rs 1 crore and more & less than
Rs.10 crore. proposed to be raised by ITO (IAP) before the objection is
raised.
4.1 Revision of classification of Major and Minor Audit Objections: There
is a need for revision of the present classification of Major and Minor
Audit Objections to make these consistent with the monetary limits
introduced by C&AG with effect from Audit Report Year (ARY) 2005.
4.2 As
per existing Instruction on Internal Audit, audit objections in case of
Income-tax/Corporation tax exceeding Rs. 1,00,000 and Rs.30,000 in case
of Other Taxes are classified as Major & the remaining as Minor. In
supersession of these limits and adopting a consistent approach with
C&AG, the definition of Major audit objection, for the purposes of
Internal Audit, is henceforth revised as one where the revenue effect is
Rs.2,00,000 or more for the purposes of Corporation Tax and Income Tax.
This will apply to all pending objections & reports shall be
revised for quarter ending December, 2013.
5. The Instruction No 3 of 2007 is amended and supplemented with effect from October 28, 2013 to the extent indicated above.
6. This may be brought to notice of all officers working under your jurisdiction for compliance.