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INTOSAI Auditing Standards Introduction

The INTOSAI Auditing Standards’ reflect a consensus of best practices among

SAIs. As such, it is clear that the standards codify generally accepted professional

practices, which are applied in carrying out an independent external audit, which may

also encompass the audit of activities with an environmental perspective

It follows from what was agreed at XV INCOSAI that an SAI should – to the full

extent appropriate – take the INTOSAI Auditing Standards into account when planning,

conducting, and reporting on an environmental audit.

In order to explain how the INTOSAI Auditing Standards might apply to

environmental auditing, and to identify relevant issues or risks resulting from their

application, this section of the guide sets out:

• A summary of the essential requirements of each basic postulate and auditing

standard.

• Particular issues or risks to be addressed.

• Possible strategies or responses to these issues or risks.

This guide does not constitute an INTOSAI Auditing Standard. As its title suggests,

it has been prepared to provide guidance on conducting audits of activities with an

environmental perspective.

Basic Postulates

The SAI should consider compliance with the INTOSAI auditing standards in all

matters that are defined material.

A matter may be judged material if knowledge of it would be likely to influence a

stakeholder or other user of the statement or audit report in which it is contained.

Materiality is often considered in terms of value, but the inherent nature or characteristics

of an item or group of items may also render the matter material. For example,

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compliance with national and international agreements, as well as certain aspects of

performance auditing, may have a significance to users or stakeholders that is quite

different from its materiality by value.

Furthermore, the importance attributed to the environment and sustainable

development by nations often increases significantly over time. Matters, which were not

significant originally, may well become significant.

Each SAI should establish a policy on which postulates and standards should be

followed in carrying out environmental auditing to ensure that the work and products are

of high quality.

The terms of the audit mandate of the SAI override any accounting or auditing

conventions with which they are in conflict. However, the SAI should recognize the

global nature of environmental matters and seek the removal of incompatibilities in its

own circumstances, where these may inhibit the adoption of desirable standards.

The nature of environmental audits may also necessitate increased co-operation

between auditors, Concurrent, co-ordinated, or joint audits of specific matters may need

to be undertaken. Situations may also arise where the country, which is the subject of the

audit, is not a signatory of the relevant international accord. While this may be a sensitive

issue, it is suggested that the SAI consider stating this fact in its report.

With increased public consciousness, the demand for the public accountability of

persons or entities managing public resources has become increasingly evident so that

there is a greater need for the accountability process to be in place and operating

effectively.

This postulate concerns all entities that have an impact on the environment. They

may be categorized into three groups:

• Entities whose operations directly or indirectly affect the environment, whether that

be positive or negative – such as by rehabilitations or (conversely) pollution and

utilization.

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• Entities with power to make or influence environmental policy formulation and

regulation – whether internationally, nationally or locally.

• Entities which have the power to monitor and control the environmental actions of

others.

These different impacts may complicate the accountability arrangements and SAIs

should be aware of the need to also consider the holistic impact on the environment and

address the accountability process itself where necessary. Each SAI should consider the

most appropriate approach bearing in mind its own mandate.

Development of adequate information, control, evaluation and reporting systems

within the government will facilitate the accountability process. Management is

responsible for the correctness and sufficiency of the form and content of the

financials reports and other information.’

At the highest level, the government is responsible for determining what

information it needs to ascertain whether its environmental objectives are being realized,

hoe the achievement of its objective is to be measured, and how often it wants the

information.

The entity and its management are directly responsible for the correctness and

sufficiency of information on the entity’s impact on the environment, be it with regard to

financial performance, assets or liabilities, compliance with legislation, or other

prescriptions for its performance. This obligation applies to entities in all three groups

listed in paragraph 110.

Situations are likely to arise in practice, however, where there is a lack of relevant

legislation providing for the disclosure of relevant environmental information, or where

there is a lack of disclosure for some other reason. In such situations the SAI should

report the shortcoming and may also have to consider the possible effects on its audit

opinion.

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The SAI may also need to give some attention to the fact that environmental

damage or restoration can imply real costs for the organization concerned. With the

growth of environmental regulation this will increasingly be likely.

When SAIs promote improvements to legislation or other prescriptions, they should

encourage audited entities to report impartially on their own environmental performance,

albeit a violation or lack thereof.

Appropriate authorities should ensure the promulgation of acceptable accounting

standards for financial reporting and disclosure relevant to the needs of government,

and audited entities should develop specific and measurable objectives and

performance targets.

Much developmental work is still required before acceptable accounting standards

for financial reporting and disclosure are likely to be in place for environmental matters.

For example, it may not be achievable at present to place a value on virgin forest or a

well-stocked fishing ground. Similarly, the liability associated with the restoration of

environmental damage may not be easily quantifiable or may be dependent on unreliable

and inaccurate estimates.

SAIs should work accounting standards setting organizations to help ensure that

proper accounting standards are developed, while the audited entities should also be

encouraged to set measurable and clearly stated environmental objectives. However, an

SAI should avoid the possibility of appearing to have a conflict of interest as a result of

both setting the standards and auditing against them.

Consistent application of acceptable accounting standards should result in the fair

presentation of the financial position and the results of operations.

Consistent application of accounting standards and of disclosure for environmental

matters, particularly when reviewing several accounting periods, will have to be phased

in as new standards which relate to the environment are set. This is likely to be an on-

going process for some time and SAIs should pay particular attention to the achievement

of fair presentation.

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Audit issues related to financial statement items affected by environmental matters,

particularly liabilities, contingencies, commitments or asset impairment provisions, are

often complex. Environmental costs, liabilities (including contingent liabilities) and

assets should be recognized, valued and reported on in accordance with generally

accepted accounting practice.

The existence of an adequate system of internal control minimizes the risk of errors or

irregularities.

Adequate internal control is equally of critical importance in the context of

environmental auditing. Internal control is, in the first instance, the responsibility of the

audited entity, although the auditor should submit proposals where controls are found to

be inadequate or non-existent. This is more likely to be the case with regard to

environment-related matters than with many others and the SAI should be prepared for

this.

It is important to recognize that, in order to encourage audited entities to institute

effective systems of internal environmental control, the SAI should avoid using the

findings and conclusions on their internal environmental controls to put the entities in a

negative light.

Legislative enactments would facilitate the co-operations of audited entities in

maintaining and providing access to all relevant data necessary for a comprehensive

assessment of the activities under audit.

Where this is compatible with the mandate of the SAI, it may be necessary to

review the provisions and requirements, which apply, to its responsibilities in respect of

maintaining and gaining access to relevant environmental data and information. Where

this is not the case, the SAI should report the fact and endeavor to rectify the situation.

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All audit activities should be within the SAI’s audit mandate.”

The full scope of government auditing – regularity (financial and compliance) and

performance – also applies to environmental auditing.

During an audit of financial statements, environmental issues may include the

following:

• Initiatives to prevent abate or remedy damage to the environment.

• The conservation o renewable and non-renewable resources.

• The consequences of violating environmental laws and regulations.

• The consequences of vicarious liability imposed by the state.

Compliance auditing with regard to environmental issues may relate to providing

assurance that governmental activities are conducted in accordance with relevant

environmental laws. Standards and policies, both at national and (where relevant)

international levels.

Performance auditing of environmental activities may include:

• Ensuring that indicators of environment-related performance (where contained in

public accountability reports) fairly reflect the performance of the audited entity.

• Ensuring that environmental programmes are conducted in an economical, efficient

and effective manner.

SAIs should work towards improving techniques for auditing the validity of

performance measures.

Environmental auditing adds a special challenge to the expanding role of auditors

and their responsibility to improve and develop new techniques and methodologies to

assess whether reasonable and valid environmental performance measures are used by the

audited entity. This is a good example of where auditors should avail themselves of

techniques and methodologies of relevant other disciplines.

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SAIs should avoid a conflict of interest between the auditor and the entity under audit.

The SAI needs to maintain both the fact and perception of its independence and

objectivity in carrying out the reporting the results of environmental audits.

General Standards

The general auditing standards include standards which apply both to the auditors

and to the SAIs and include the aspects of independence, competence and due care.

The auditor and the SAI must be independent.

The auditor and the SAI must be, seen to be, independent and objective in carrying

out environmental audits. They should be fair in their evaluations and in reporting on the

outcome of audits.

The auditor and the SAI should therefore not become involved in (for example) the

actual calculation of environmental costs and benefits. They should restrict themselves to

auditing the calculation and reporting on the fairness, or otherwise, of the financial

statements as a whole.

The auditor and the SAI must possess the required competence.

The wider the SAI’s mandate and the more discretionary in nature, the more

complex becomes the task of ensuring quality of performance across the whole mandate.

This applies directly to environmental auditing and may often be addressed by making

use of teams or by obtaining special expertise from experts in the field.

SAIs and their auditors and other who carry out environmental audits should

demonstrate at least the following level of expertise and attributes:

• Adequate knowledge in all respects of auditing and capability of performing

financial, compliance and performance audits.

• Adequate knowledge of environmental auditing acquired by training and practical

experience.

• An independent and unbiased approach.

• Adequate human relations and communication skills.

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Specialists may be involved in various stages of developing accounting estimates to assist

management, which may include the following:

• Identifying situations where estimates are required.

• Gathering the necessary data on which to base estimates.

• Developing assumptions as to the most likely outcome.

• Determining the amount of an estimate (which may include, for example,

determining the costs of remedial action planned by the entity) and considering

the financial statement disclosure.

If the SAI employs external experts, it must exercise due care to assure itself of

their competence and ability for the particular tasks involved. The SAI remains

responsible for ensuring that the auditing standards are applied. Obtaining advice from an

external expert does not relieve the SAI of responsibility for the opinions formed or

conclusions reached on the audit.

Because environmental expertise is an emerging specialty involving individuals

with diverse educational and professional backgrounds and experience, it may be

particularly difficult for the auditor to obtain reasonable assurance about the expert’s

reputation of competence and to be satisfied that the expert’s work is appropriate for

audit purposes. The auditor should therefore at least consider the following:

• The educational background of the expert.

• The length of time the expert has practiced.

• The relevancy of the expert’s work experience.

• Accreditation by a professional body.

The auditor will need to carry out appropriate procedures to be satisfied that the

work carried out by an expert is satisfactory for the purposes for which it is intended and

to gain an understanding of the following matters:

• The nature and purpose of the expert’s report

• The assumptions and methods used.

• The experts objectively and the risk that this may be impaired.

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The auditor and the SAI must exercise due care and concern in complying with the

INTOSAI auditing standards. This embraces due care in specifying, gathering and

evaluating evidence, and in reporting findings, conclusions and recommendations.

This standard applies equally to environmental auditing and may present particular

difficulties in establishing standards for acceptable audit evidence on which to base

findings, conclusions and recommendations.

Other general standards, which are applicable in an environmental auditing

context, are the following:

The SAI should adopt policies and procedures to recruit personnel with suitable

qualifications.

The SAI should adopt policies and procedures to develop and train SAI employees to

enable them to perform their task effectively and to define the basis for the

advancement of auditors and other staff.

The SAI should adopt policies and procedures to prepare manuals and other written

guidance and instructions concerning the conduct of audits.

The SAI should adopt policies and procedures to support the skills and experience

available within the SAI and identify those skills which are absent; provide a good

distribution of skills to auditing tasks and a sufficient number of persons for the audit;

and have proper planning and supervisions to achieve its goals at the required level of

due care and concern.

The SAI should adopt policies and procedures to review the efficiency and effectiveness

of the SAI’s internal standards and procedures.

Field Standards

The purpose of field standards is to establish the criteria or overall framework for

the purposeful, systematic and balanced steps or actions that the auditor has to follow.

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These steps and actions represent the rules of research that the auditor, as a seeker of

audit evidence, implements to achieve a specific result.

The auditor should plan the audit in a manner which ensures that an audit of high

quality is carried out in an economic, efficient and effective way and in a timely

manner.

The auditor should collect information about the audited entity. This should, where

applicable, also include relevant environmental information such as:

• The legal mandate of the entity.

• The entity approach to environmental issues, including its policy and objectives

and the existence of an environmental management system.

• Laws and regulation governing the entity’s environmental responsibilities or its

role in determining those of others. This aspect would include identifying legal

requirements imposed on the entity – or those which it imposes on others – such

as reporting requirements, emission limitations arising from its activities, or

responsibilities to restore degradation which it has caused.

• The existence of environmental assets and liabilities and any changes which may

have occurred in them during the financial period under review. Examples of such

liabilities are the costs of decommissioning a refuse disposal site operated by a

local authority, or to providing for such costs during the useful life of the site.

The objective and scope of the environmental audit should be clearly defined. In

addition to the financial, compliance and performance aspects usually encountered, there

may be an expectation (whether explicit or implicit) of the provision of additional

environment related audit assurance. For instance, the SAI may be expected specifically

to attest to the entity’s assertions about the effectiveness of its environmental

management systems or its environmental disclosures.

The work of the audit staff at each level and audit phase should be properly supervised

during the audit, and documented work should be reviewed by a senior member of the

audit staff.

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The specific needs of environmental auditing may require additional procedures to

be carried out. For the assurance required it may also be advisable to make use of a

specialist in the SAI to carry out a review of the planning and field work from an

environmental perspective.

The auditor, in determining the extent and scope of the audit should study and evaluate

the reliability of internal control.

In order to address environmental issues in a structured manner, management

should ideally design and document the key elements of its environmental management

system. This may embrace the following aspects, amongst others:

• Identifying applicable legislative and regulatory requirements.

• Establishing and maintaining policies and procedures to provide reasonable

assurance that the entity complies with those requirements.

• Evaluating and monitoring the entity’s compliance with external requirements,

environmental policies and procedures.

• Specifying reports that satisfy legal, regulatory or other requirements.

The auditor should study and evaluate the internal control measures instituted by

management for environmental matters and determine the extent of reliance that can be

placed on them. The extent of the study depends on the objectives of the audit and the

degree of reliance intended.

In conducting audits a test should be made of compliance with applicable laws and

regulations. Audit steps and procedures should provide reasonable assurance of

detecting errors, irregularities, and illegal acts that could have a direct and material

effect on the financial statements.

The subject matter for an environmental compliance audit is normally

management’s assertion that it has complied with all relevant rules. This assertion may be

given explicitly or implicitly- i.e. simply by default.

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Non-compliance with applicable laws and regulations is often tested with two

perspectives in mind. On the one hand, the entity may (for example) be undertaking

activities, which are not in terms of its mandate. While the financial statements may fairly

present the state of affairs and the results of these operations, the SAI may be expected

nevertheless to report on such a deviation in the interest of public accountability.

On the other hand, there may be a high risk of a material misstatement in the

financial statements, such as through the omission of a provision or liability in respect of

future expenditure to restore environmental damage and/or to provide for a penalty for

non-compliance

Competent, relevant and reasonable evidence should be obtained to support the

auditor’s judgements and conclusions regarding the organization, programme, activity

or function under audit.

Material misstatements in the financial statements of an environmental nature are

more likely to be of omission or understatement, rather than of overstatement. Most of

the related evidence available to the auditor is therefore likely to be persuasive rather than

conclusive. Audit evidence is likely to be obtained as a result o enquiry, audit procedures

or management representations other than those directed specifically at account balances

or to classes of transactions.

The audit evidence sought would therefore need to focus on matters of the

following nature:

• Liabilities that are not based on contractual obligations.

• Accounting estimates that do not have an established historical pattern.

• Recent or evolving environmental laws and regulations.

In addition, where environmental liabilities are quantified, they will often be based

on estimates. This will consequently affect the procedures that the auditor is likely to

apply in obtaining adequate audit evidence. The approach applied should comply with

that used when auditing other accounting estimates – including assessing the

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reasonableness of the assumptions, recalculating and evaluating the method followed, and

reviewing the qualifications and experience of the person responsible for preparing the

estimate.

Auditors should analyse the financial statements to establish whether acceptable

accounting standards for financial reporting and disclosure are complied with.

Given the nature of likely environmental misstatements in the financial statements,

the auditor should analyse the statements from an environmental perspective to identify

areas, which should be followed up. Of particular importance is likely to be the

appropriateness of accounting policies and the existence and disclosure of contingent

liabilities.

Reporting Standards

Written audit reports should be submitted to the management of the audited entity

as well as to its governing body, with reference to the particular circumstance of the SAI.

Depending on the nature of the audit, the report may include an opinion on the financial

information or on various other matters – such as compliance with the mandate of the

audited entity, performance or (the subject of this guide) environment-related activities.

It may be necessary to pay particular attention to the wording in reports on the

completeness of environmental assets and liabilities as well as on the audit assurance

given about accounting estimates.

At the end of each audit the auditor should prepare a written opinion or report, as

appropriate, setting out the findings in an appropriate form; its content should be easy

to understand and free from vagueness or ambiguity, include only information which

is supported by competent and relevant audit evidence, and be independent objective;

fair and constructive.

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With regard to regularity audits, the auditor should prepare a written report, which

may either be a part of the report on the financial statements or a separate report, on

the tests of compliance with applicable laws and regulations. The report should contain

a statement of positive assurance on those items tested for compliance and negative

assurance on those items not tested.

It is for the SAI to which the auditor belongs to decide finally on the action to be taken

in relation to fraudulent practices or serious irregularities discovered by the auditors.

With regard to performance audits, the report should include all significant instances

of non-compliance that are pertinent to the audit objectives.

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Auditing Standards in Indian Audit and Accounts Department -Some aspects

Financial Statement Audit

The Auditor should examine and analyse the financial statements to establish

whether acceptable accounting standards for financial report and disclosures are compiled

with. Analysis of financial statements should be performed to such a degree that a

rational basis is obtained to express an opinion on the statements. In the audit of

Government accounts, it also extends to ascertain whether the moneys shown in the

accounts as having been disbursed were legally available for and applicable to the service

or purpose to which they have been applied or charged and whether the expenditure

conforms to the authority which governs it.

Financial statements analysis aims at ascertaining the existence of the expected

relationships within and between the various elements of the financial statements,

identifying any unexpected relationships and any unusual trends. The Auditor should,

therefore, thoroughly analyse the financial statements and ascertain whether.

a) the financial statements are accurate and complete and are consistent with the

primary records, books and ledgers;

b) the financial statements are prepared in accordance with the accounting standards

and laws, if any, governing them;

c) the financial statements are presented with due consideration to the circumstances

of the audited entity;

d) sufficient disclosures are presented about various elements of financial statements

including any unusual items; and

e) the various elements of financial statements are properly evaluated, measured and

presented.

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The methods and techniques of financial analysis depend to a large degree on the nature,

scope and objective of the audit and on the knowledge and application skill of the

Auditor.

In the audit of Government accounts, the Auditor should satisfy that not merely the

expenditure does not exceed the provision but also that it is within the scope and

intention of the provision. Expenditure arising out of the adoption of a new policy or

provision of a new facility, or a substantial extension of a previous specific commitment

of facility is outside the scope and intention of the provision.

In the course of financial statement audit, efforts should be made to identify areas,

transactions etc. which would require further examination for regularity or value for

money audit.

Audit of Government Companies

The duties and responsibilities of the Audit in regard to Government companies extend to

giving directions to statutory auditors as to the manner in which their accounts shall be

audited as well as conducting a supplementary or test audit of the accounts.

Audit should review and comment upon, or supplement, the audit report of the statutory

auditor in such manner as may be considered appropriate.

A supplementary or test audit of the company’s accounts may also be conducted and the

supplementary or test audit shall be in conformity with the prescribed Auditing

Standards.

Audit Evidence

Due professional care should be exercised in specifying, gathering and evaluating

evidence during audit.

This standard places responsibility on the audit organization and the Auditor to use sound

professional judgement in their work. Due care denotes the appropriate element of care

and skill which a professional auditor would be expected to employ having regard to the

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complexity of the audit task, including careful attention to planning, gathering and

evaluating evidence and forming conclusions.

Audit should consider materiality and significance of evidence in planning the audit,

selecting the methodology, designing the audit tests and proceedings as well as in

deciding whether a matter requires disclosure in an audit report. Materiality and

significance depend on quantitative as well as qualitative aspects.

Sufficient, competent and relevant evidence should be obtained to support the audit

conclusions regarding the organization, project, programme, activity, transaction etc.

subjected to audit.

Audit conclusions and observations must be based on evidence. The evidence should be

complete, comprehensive and reliable to arrive at objective, proper and correct

conclusions.

Sufficient, competent and observations must be based on evidence. The evidence should

be complete, comprehensive and reliable to arrive at objective, proper and correct

conclusions.

The Auditor should have a sound understanding of the techniques and procedures such as

inspection, observation, enquiry and confirmation to collect audit evidence. The

techniques employed should be sufficient to reasonably arrive at audit conclusions.

The Auditor should adequately document the audit evidence in working papers. Adequate

documentation is important for several reasons. It will:

a) confirm and support audit conclusions;

b) increase the efficiency and effectiveness of the audit;

c) serve as a source of information for preparing audit reports, answering queries

from the audited entity, or from any other party;

d) serve as evidence of the Auditor’s compliance with the Auditing Standards;

e) facilitate planning and supervision;

f) help the Auditor’s professional development;

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g) ensure that delegated work has been performed satisfactorily and

h) provide evidence of work done for future reference.

Audit evidence should meet the basic tests of sufficiency, relevance and competence.’

(i) Sufficiency: Sufficiency is the presence of adequate, actual and convincing evidence

to support the audit observations and conclusions. Where appropriate, scientific sampling

techniques/methods should be used to establish sufficiency.

(ii) Relevance: Relevance refers to the relationship of the evidence to its use. The

information used to prove or disprove an issue is relevant if its has logical and sensible

relationship to that issue. Information that does not, is irrelevant and therefore, should not

be included as evidence. Collection of evidence involves use of scarce audit resources

and what is not relevant should not be collected.

(iii) Competence: To be competent, evidence should be valid and reliable. In

evaluating the competence of evidence, the Auditor should carefully consider whether

reasons exist to doubt its validity or completeness. If so, the Auditor should obtain

additional evidence or reflect the situation in the report.

The working papers turned in by the Auditor on conclusion of an audit assignment should

include interalia.

(i) the division and distribution of duties and functions amongst the audit

personnel;

(ii) the size of the sample and the specific units/entities/records etc. selected for

direct substantive testing and actually audited;

(iii) the records/document requisitioned and made available;

(iv) the audit memoranda issued for eliciting evidence;

(v) the replies and response to the audit memoranda;

(vi) the testimonial evidence, if any relied upon; and

(vii) analysis of evidence cross-referenced with primary evidence.

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The content and the arrangement of the working papers reflect the degree of Auditor’s

proficiency, experience, knowledge and application. Working papers should be

sufficiently complete and detailed to enable an Auditor having no previous connection

with the audit subsequently to obtain from them what work was performed to support the

conclusions. Working papers are the link between field work and the audit reports.

Reporting Standards

On the completion of each audit assignment, the Auditor should prepare a written report

setting out the observations and conclusions in an appropriate form; its content should be

easy to understand and free from vagueness or ambiguity, include only information

which is relevant and supported by sufficient and competent audit evidence and be

independent, objective, fair, complete and accurate, constructive and concise as the

subject-matter permits.

Reporting standards constitute the framework for the audit organization and the Auditor

to report the results of audit.

These standards are to assist and not to supersede the prudent judgement of the Auditor in

making his audit observations and conclusions.

The expression ‘Reporting’ embraces both the audit opinion on a set of financial

statements and the conclusions included in the Auditor’s report on completion of audit of

an entity.

The audit report should be complete: This requires that the report contains all pertinent

information needed to satisfy the audit objectives, and to promote an adequate and correct

understanding of the matter reported. It also means including appropriate background

information.

Accuracy requirement demands that the evidence presented is true and the conclusions

are correctly portrayed. The conclusions should flow from the evidence. The need for

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accuracy is based on the need to assure the users that what is reported is credible and

reliable.

Objectivity requires that the presentation throughout the report be balanced in content

and tone. The audit report should be fair and not be misleading and should place the audit

results in proper perspective. This means presenting the audit results impatiently and

guarding against the tendency to exaggerate or over-emphasis deficient performance. In

describing shortcomings in performance, the Auditor should present the explanation of

the audited entity and stray instances of deviation should not be used to reach broad

conclusions.

Being convincing requires that the information presented should be sufficient to

convince the users of the reasonableness of the audit observations and validity of the

audit conclusions.

Clarity requires that the report be easy to read and understand. Use of straightforward,

non-technical language is essential. If technical terms and unfamiliar abbreviations are

used, they should be clearly defined. Both logical organization of the material and

accuracy and precision in stating the facts and in drawing conclusions are essential to

clarity and understanding.

Being concise requires that the report be not longer than necessary to convey the

message. Too much of detail detracts from a report, may even conceal the real message

and may confuse the readers. Needles repetitions should be avoided. Although, there

exists room for considerable judgement in determining the content of the reports,

complete and concise reports are likely to receive greater attention.

Being constructive requires that the report also include well thought out and well-

articulated suggestions, in broad terms, for remedying the defects, deficiencies and

weakness noticed. Utmost care should be taken in presenting the suggestions, which

should be done with due regard to the requirements of rules and orders, operational

constraints and the prevailing milieu. The suggestions incorporated in the report should

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be discussed with the entities with sufficiently high level functionaries and as far as

possible, their acceptance obtained.

Timeliness: The audit report should be made available promptly to be of utmost use to

all users, particularly to the auditee organizations and/or Government who have to take

requisite action.

ENVIRONMENT AUDITING

Audit objectives and scope

3.19.1 The objectives of Environment Audit are to ensure that appropriate and adequate

policies and procedures are in place and are duly complied with in order to achieve the

goal of sustainable development, i.e. development without destruction of the environment

and without foreclosing the options for future needs. The interests of the industry and

environment have, thus, to be mutually supportive.

3.19.2 The scope of Environment Audit would extend to examination of:

(i) the environmental appraisal and impact assessment procedures in the

Central Government for developmental activities;

(ii) the extent of compliance with the related Government legislation and

regulations;

(iii) the effectiveness of waste minimization and pollution control programmes

and programmes for the conservation and utilization of energy, water and

other natural resources like flora, fauna, wild life, etc.

The scope of audit would also extend to an examination of the environmental policies and

initiatives of Government and of the measures taken to respect its international

commitments in this sphere.

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Audit Approach 3.19.3 Environment Audit would be conducted within the broad framework of

Regularity and Performance Audit.

Issues for audit scrutiny Environmental Impact Assessment (EIA)

3.19.4 The objectives of EIA are to identify and evaluate the potential beneficial as well

as adverse impact of development projects on the environmental and ecological systems.

It is a useful aid for decision-making, based on an understanding of the environmental

implications, including social, cultural and aesthetic concerns, which could be integrated

with the cost-benefit analysis of the projects concerned.

3.19.5 The Ministry of Environment and Forests has made EIA mandatory in a

Notification issued in January 1994 and amended in May 1994 in respect of twenty-nine

specified categories of developmental activities, including industrial projects, thermal

power plants, mining activities, river valley and hydroelectric schemes, and infrastructure

projects. In evaluating the EIA procedures, Audit will examine the following:

(i) Documents submitted by the project proponents which include:

a) Feasibility Reports;

b) site clearance in respect of site-specific projects mentioned in the EIA

Notification;

c) ‘No Objection’ certificates from the State Pollution Control Boards

(SPCBs) and other local authorities;

d) Environment Impact Assessment Reports;

e) Environment Management Plans;

f) Risk analysis and Emergency Preparedness Plans in the case of

projects involving hazardous substances;

g) Rehabilitation Plans in respect of projects likely to lead to large scale

displacement of the population; etc

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(ii) Minutes of meetings of Expert Appraisal Commitments in the Ministry,

along with Reports of their site visits with a view to ascertaining the

adequacy and efficacy of the appraisal procedures in the Ministry.

(iii) Reports on public hearings, if any, held in respect of particularly

controversial projects.

(iv) Adherence to prescribed time schedule for completing the impact

assessment.

(v) Recommendations of Appraisal Committees forming the basis of

environmental clearances and conditions attached there to and deviations,

if any, therefrom

3.19.6 In terms of the EIA Notification, on commissioning of the projects, the project

entities are required to submit half-yearly reports of compliance with the conditions

stipulated in the environmental clearances. These are to be examined in the Ministry. Six

Regional Offices of the Ministry located at Bangalore, Bhopal, Bhubhaneshwar,

Chandigarh, Lucknow and Shillong also undertake post-project monitoring of the cleared

projects. The adequacy of the action taken in the Ministry on the compliance reports with

particular reference to deficiencies, if any, and of the post-project monitoring by the

Regional Offices should be examined in audit.

3.19.7 Cases of non-compliance with the conditions subject to which environmental

clearances are accorded are brought to the notice of the SPCB concerned, which may

then initiate action against the defaulting entities. The action taken in this regard would

also need to be reviewed in audit for possible comment.

Prevention and Control Pollution

3.19.8 The Policy Statement for Abatement of Pollution issued by the Ministry of

Environment and Forests in 1992, provides instruments in the form of legislation and

regulation, fiscal incentives, voluntary agreements, educational programmes and

information campaigns in order to prevent, control and reduce environmental pollution.

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Various acts promulgated by the Ministry, besides the local Zoning and land use laws of

the State and Union Territory Governments govern and regulate the establishment and

functioning of any industry. Evaluation by Audit of the impact of various initiatives taken

to prevent and control pollution will involve the following:

(i) Scrutiny of the Acts promulgated by the Central, State and Union

Territory Governments to prevent and control pollution, with a view to

critically examining their adequacy and efficacy in controlling or

preventing pollution.

(ii) Examination of the adequacy of the monitoring systems and mechanism in

the Ministry to ensure compliance with these Acts through the Central and

State Pollution Control Boards.

(iii) Review of monitoring by different monitoring stations of the Central and

State Pollution Control Boards of air (including noise) and water quality

status intended for ensuring adherence by industries to the prescribed

emission and effluent standards.

(iv) Polluting units seeking consent under the Water (Prevention and Control

of Pollution) Act 1974, or the Air (Prevention and Control of Pollution)

Act 1981, or both and authorization under the Hazardous Wastes

(Management and Handling Rules), 1989, are required to submit an

Environment Statement to the SPCB concerned. This enables the units to

take a comprehensive look at their industrial operations, facilitates

understanding of material flows and ensures that they focus on areas

where waste reduction and consequently savings in input costs are

possible. Submission of these statements, wherever required, should be

watched in audit. Consents given by the SPCBs to establish and operate

the polluting units and the adequacy of the arrangements for a regular

review of these units by the Boards and of the action taken against

defaulting units should also be examined.

(v) The Central Pollution Control Board has identified 1,551 large and

medium industries in 17 categories as highly polluting ones. These are

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required to install the necessary pollution control equipment within the

specified time frame. The Central and State Pollution Control Boards are

also required to monitor compliance with the standards prescribed in this

regard. The reports of these Boards should be scrutinized with a view to

ascertaining the adequacy of the monitoring. The follow-up action taken

on these reports and the action taken against defaulting units should be

review in audit.

3.19.9 Audit should also review in depth, from the ECPA, VFM or 3Es perspective,

specific programmes and projects, such as the Ganga Action Plan, Taj Protection

Mission, Development and Promotion of Clean Technologies, Hazardous Substances

Management, etc. implemented or under implementation by the Ministry of prevention

and control of pollution.

Conservation of Natural Resources, including Forestry and Wild Life

3.19.10 The scope of Audit would extend to an in-depth review and evaluation of several

policy initiatives and action programmes undertaken by the Ministry for the conservation

and sustainable use of natural resources, including forestry and wild life.

A. Forestry

3.19.11 The Forest (Conservation) Act, 1980, as amended from time to time, checks the

indiscriminate diversion of forest land for purposes unrelated to forestry. The State and

Union Territory Governments are required to submit formal proposals received by them

from various investors and project entities to the Ministry, if these involve the diversion

of more than 20 hectares of forest land. The proposals will contain a map of the area,

details of the flora and fauna, the measures proposed for compensatory afforestation, etc.

An Advisory Committee in the Ministry scrutinises these proposals. Proposals involving

diversion of forestland of area between 5 and 20 hectares are to be processed by the

Regional Chief Conservator of Forests concerned in consultation with a State Advisory

Group, consisting of representatives of the State Governments concerned. Proposals

involving diversion of forestland of up to 5 hectares can be decided by the Regional

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Chief Conservator of Forests concerned under his delegated powers. Audit may examine

the processing of these proposals at different levels with a view to establishing that such

decisions as are arrived at are in conformity with the provisions of the Act and the

recommendations of the Advisory Groups. Audit shall also examine adherence to the

conditions stipulated in the clearance accorded by the authorities concerned and the

action, if any, taken against defaulters. Adequacy of the monitoring machinery to ensure

adherence to the stipulated conditions could also be ascertained in the course of audit.

3.19.12 The Ministry of Environment and Forests funds various conservation

programmes such as the National Forestry Action Programme, Wetland Conservations

Programme, Biodiversity Conservation, Conservation of Medical Plants, etc Similarly,

autonomous bodies like the National Afforestation and Eco-Development Board fund

schemes in the States with the mandate of promoting afforestation and ecological

restoration with special attention to degraded forest areas. These specific programmes

and initiatives should be reviewed in depth from the ECPA perspective. The Joint Forest

Management enunciated in National Forest Policy, 1988, envisaging the involvement of

the local populace in the development and protection of degraded forests, along with

catering to their subsistence needs, is yet another initiative the success of which would

need to be examined.

B. Wildlife

3.19.13 Audit scrutiny in relation to activities for the preservation of wild life would

extend to the enforcement of the Wildlife (Protection) Act 1972, through the offices of

the Regional Deputy Directors of Wildlife Preservation located at Kolkata, Chennai Delhi

and Mumbai with the assistance of the State Wildlife Departments. Further, the Ministry

has initiated specific programmes and schemes, such as Development of National Parks

and Sanctuaries, Project Tiger, Project Elephant, etc. for the conversation of wild life.

Autonomous bodies such as the Wildlife Institute of India, Central Zoological Authority,

National Zoological Park, etc., are also engaged in this sphere. Achievements under these

programmes and schemes and the functioning and performance of various autonomous

bodies in achieving the intended objectives could be reviewed and evaluated by Audit.

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Environmental Survey, Research, Education, Training and Information

Environmental Survey

3.19.14 The Ministry of Environment and Forests carries out surveys of natural

resources of flora and fauna through its subordinate offices and institutes. The surveys of

flora are conducted by the Botanical Survey of India, with its headquarters at Kolkata and

its nine circle/field offices. Similarly, the Zoological Survey of India with its

headquarters at Kolkata and sixteen regional stations located throughout the country,

undertakes surveys and exploration of fauna in different ecosystems and conservation

areas like national parks, wildlife sanctuaries, etc. The Forest Survey of India, with its

headquarters at Dehra Dun and four zonal offices at Bangalore, Kolkata, Nagpur and

Shimla, is entrusted with the responsibility for the survey of forest resources in the

country.

3.19.15 Based on a performance appraisal of these agencies, Audit will critically examine

the efforts of the Ministry in mapping and exploring the country’s natural diversity,

collection and conservation of endangered species of plants and animals and preparation

of the related database.

Environmental Research

3.19.16 In order to advance scientific understanding and to generate information for

developing strategies, technologies and methodologies for better environmental

management, the Ministry of Environment and Forests supports various research and

development schemes. Chief among them are the Environment Research Programme,

Ecosystems Research Scheme and Action-Oriented Research Programme for Eastern and

Western Ghats. Audit scrutiny will extend to an appraisal of the formulation,

implementation and monitoring of these programmes with particular reference to the

thrust areas defined by the Ministry. The guidelines relating to project management

discussed in paragraphs 3.18.4 to 3.18.9 will also be of relevance in this context. Audit

could also review and evaluate with advantage the performance of autonomous bodies

under the Ministry’s administrative control, such as the G.B. Pant Institute on Himalayan

Environment, Indian Council of Forestry Research and Education (ICFRE) and the

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Wildlife Institute of India, which are engaged in research activities respectively in the

spheres of environment, forestry and wildlife.

Environmental Education, Training and Information

3.19.17 The Ministry of Environment and Forests is also involved in the organization and

management of education plans and extension activities in the fields of forestry, wildlife

and environment through its institutes and autonomous bodies. The Ministry has

launched environment awareness campaigns and has established Eco Clubs and seven

centers of excellence with a view to strengthening awareness, research and training in

priority areas of environmental science and management. The functioning and

performance of these agencies and the extent to which they have achieved the intended

objectives could be examined in audit. An Environment Information System (ENVIS) has

been established in the Ministry with centers located all over the country with the

objectives of information collection, storage and dissemination to the user groups

concerned in the fields of environment and wildlife and associated spheres. The

achievement of the objectives envisaged under the programme could also be ascertained.

International Co-operation

3.19.18 The Ministry is the nodal agency in the country for implementation of the

initiatives taken by the United Nations Environment Programme (UNEP) and the South

Asia Co-operative Environment Programme. It also functions as the nodal agency for

participation in international agreements relating to the environment such as the

Convention on International Trade in Endangered Species, Vienna Convention for

Protection of the Ozone Layer, the Montreal Protocol, Basel Conventions on Biological

Diversity and Climate Change, etc. The Ministry also handles bilateral cooperation,

matters relating to regional bodies such as SAARC, ESCAP, etc.

3.19.19 Audit would examine various international agreements with a view to

ascertaining whether the country’s interest have been adequately safeguarded by these

accords. The measures taken by the Ministry to respect and honour its various

international commitments would also be key areas for audit scrutiny.