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Questions and Answers
What is the primary purpose of a sinking fund?
What is the primary purpose of a sinking fund?
What is the wise approach to amortization arrangements for loans for unproductive purposes?
What is the wise approach to amortization arrangements for loans for unproductive purposes?
What should be the consideration for determining the amortization period for loans for productive purposes?
What should be the consideration for determining the amortization period for loans for productive purposes?
When is it not necessary to suggest amortization for loans for productive purposes?
When is it not necessary to suggest amortization for loans for productive purposes?
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What should be the normal relation of the rate of amortization to the revenue producing asset?
What should be the normal relation of the rate of amortization to the revenue producing asset?
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What happens when depreciation or renewal reserves are constituted for replacement of assets made for a loan fund?
What happens when depreciation or renewal reserves are constituted for replacement of assets made for a loan fund?
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What is the general principle for amortization arrangements for loans for unproductive purposes?
What is the general principle for amortization arrangements for loans for unproductive purposes?
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The guiding principles in respect of the audit of sanction of ______ are delineated below:
The guiding principles in respect of the audit of sanction of ______ are delineated below:
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If the sanctioning authority is vested with full powers in respect of certain class of ______, such sanction can be challenged by Audit only on the grounds of propriety;
If the sanctioning authority is vested with full powers in respect of certain class of ______, such sanction can be challenged by Audit only on the grounds of propriety;
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The financial power vested with the authority is to be expressed so clearly in precise terms, that the Audit Officer is bound to ascertain that it is obeyed in proper way in every ______;
The financial power vested with the authority is to be expressed so clearly in precise terms, that the Audit Officer is bound to ascertain that it is obeyed in proper way in every ______;
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For the purpose of financial sanctions, a group of work which forms one ______ shall be considered as one work and requires the sanction of a higher authority;
For the purpose of financial sanctions, a group of work which forms one ______ shall be considered as one work and requires the sanction of a higher authority;
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If any one item of a ______ requires sanction of a higher authority, the
If any one item of a ______ requires sanction of a higher authority, the
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In the case of sanctions to new ______ of expenditure, Audit should see whether a satisfactory accounting procedure has been adopted;
In the case of sanctions to new ______ of expenditure, Audit should see whether a satisfactory accounting procedure has been adopted;
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Audit should see whether a satisfactory accounting procedure has been adopted regarding the detailed cost and time schedules, physical targets and other ______ of the expenditure.
Audit should see whether a satisfactory accounting procedure has been adopted regarding the detailed cost and time schedules, physical targets and other ______ of the expenditure.
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The authority is vested with powers to sanction the ______ subject to fulfillment of certain criteria expressed in a general form;
The authority is vested with powers to sanction the ______ subject to fulfillment of certain criteria expressed in a general form;
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Sanctions accorded under those powers may be examined by audit in the following manner:- a.Whether the disregard of the ______ is considered to be so serious as to make the sanction perverse;
Sanctions accorded under those powers may be examined by audit in the following manner:- a.Whether the disregard of the ______ is considered to be so serious as to make the sanction perverse;
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Or b.Whether the facts of the case are such as to make the Audit Officer confident that one or more of the ______ have been disregarded;
Or b.Whether the facts of the case are such as to make the Audit Officer confident that one or more of the ______ have been disregarded;
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Study Notes
Sinking Fund and Loan Redemption
- A sinking fund is constituted regularly for the redemption of loans raised by the government.
- The Audit Officer ensures that credit to such a fund is in accordance with the terms and conditions specified by the government in the loan prospectus.
Amortization Arrangements for Loans
- Amortization arrangements for unproductive loans may be related to the loan's maturity period, but it's wiser to relate them to the objects of borrowing.
- Where material assets are produced, the amortization period should never exceed the asset's life.
Amortization for Productive Loans
- Amortization arrangements for productive loans depend on each case's particular circumstances.
- If an asset's net earning power exceeds the debt's interest, amortization might not be necessary.
- If depreciation or renewal reserves are constituted for asset replacement from a loan fund, amortization is often omitted altogether.
- Normally, the amortization rate should be related to the life of the revenue-producing asset.
Guiding Principles for Audit of Sanction of Expenditure
- The audit of sanction of expenditure can challenge the sanctioning authority's decision only on the grounds of propriety if the authority has full powers in respect of a certain class of expenditure.
Audit of Sanctions with Criteria
- If the authority has powers to sanction expenditure subject to certain criteria, the audit will examine:
- Whether the disregard of the criteria is so serious as to make the sanction perverse, or
- Whether the facts suggest that one or more of the criteria have been disregarded.
Financial Power and Authority
- The financial power vested with the authority must be clearly expressed in precise terms, ensuring that the Audit Officer ascertains that it is obeyed in every instance.
Project Sanctions
- A group of work that forms one project is considered as one work and requires the sanction of a higher authority.
- The necessity for obtaining the sanction of a higher authority to a project cannot be avoided, even if the cost of each particular work in the project does not require such sanction.
- If any one item of a scheme requires sanction of a higher authority, the entire scheme requires sanction.
New Schemes of Expenditure
- Audit should ensure that a satisfactory accounting procedure has been adopted for new schemes of expenditure, including:
- Detailed cost and time schedules
- Physical targets
- Other objects of the expenditure
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Description
This quiz covers the concepts of sinking funds and loan redemption in government borrowing, including amortization arrangements for unproductive loans.
