The external control of municipal expenditure is exercised by the state governments through the appointment of auditors to examine municipal accounts. The municipal corporations of Delhi, Bombay and a few others have powers to appoint their own auditors for regular external audit. The important
objectives of audit are:
- reporting on the fairness of the content and presentation of financial statements;
- reporting upon the strengths and weaknesses of systems of financial control;
- reporting on the adherence to legal and/or administrative requirements;
- reporting upon whether value is being fully received on money spent; and
- detection and prevention of error, fraud and misuse of resources.
Audit is another method of financial control on local governments. This provision is coupled with the privilege of ultra vires. An action of the local authority if it is beyond legal authority can result in ‘surcharge’ by audit. This procedure is a legacy of colonial days and even in England it is being resorted to less and less. This may well be because of the increasing competence of the local government authorities. In addition to the external audit, it is also opined by the learned author that there should be a system of internal audit in all municipal institutions. Internal audit should be provided by the institutions’ own staff. It should be performed on a continuous basis according to a well defined programme. The external auditor should be able to rely upon the work of the internal audit as forming part of a complete system of internal financial control. Where there is no internal audit, as may happen in the case of small or poorly staffed municipalities, the external auditor himself has to detailed checking. As described under government audit above, increasing attention is being given, to what is described as ‘value for money’ audit. This kind of audit focuses upon assessment of whether urban institutions are fulfilling their responsibilities with efficiency, economy and effectiveness (sometimes known as ‘the three Es’).