Propriety
audit is a method of audit which verifies the reasonableness of expenditure
incurred by an organization and is not detrimental to public interest. This
audit is generally applicable to the government organizations.
According to
E. L. Kohler, " Propriety means that which meets the test of public
interest, commonly accepted customs and standards of conduct. Propriety audit
is an audit in which various actions and decisions are examined to find out
whether they agree in public interest and whether they meet the standards of
conduct."
Propriety
audit not only determines the accuracy of books of accounts but also justify
the expenditure in term of propriety and reasonableness. Therefore, this audit
tests the public interest and evaluates its financial propriety in relation to
standards or commonly accepted customs. Propriety audit is generally applicable
to the government organizations as it involves a huge public money. So, public
accountability is the main criteria of propriety audit. It evaluates the
efficiency and prudence of government department and its propriety in relation
to public money. The scope and objectives are:
a)
Confirm
collection of revenue: Propriety audit helps to assess whether revenue are
properly collected and recorded in the books of accounts.
b)
Helps to
detect fraud and misrepresentation: This audit helps to judge whether there is
any fraud and misrepresentation of funds.
c)
Wastage of
funds: With the help of propriety audit wastage of public funds can be
determined and also its utilization can be verified.
d)
Verify
justification of expenditure: Verify Justification of expenditure in relation
to generally accepted standards and customs.
e)
Not
detrimental: It verifies that the contracts made by the organization with the
third parties are not detrimental to the public interest.
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