Introduction of audit Audit was originally confined to ascertaining whether the accounting party had properly accounted for

all receipts and payments on behalf of his principal, and was in fact merely a cash audit. Modern audit not only examine cash transactions, but also verify the purport to which the cash Transactions relate. Meaning of Audit Audit is, therefore, an examination of accounting records Undertaken with a view to establishing whether they correctly and completely reflect the transactions to which they purport to relate.

Introduction to Telecom Industry

India's telecom sector has reached a major milestone recently with the country's mobile user base surpassing 500 million. More over its boosted by a staggering 17.7 million new activations in Nov 2009.When we dig further in to the performance growth of the telecom sector in India we get some strong impressive figures which depict India have a huge untapped potentiality in 2010 and beyond. According to the Telecom Regulatory Authority of India. India's mobile customer base crossed 506 million at the end of November. Currently, 43 out of every 100 Indians own a cell phone. Including roughly 37 million fixed lines, India now has a total of 543 million telephone lines, a penetration rate of around 46%.

A large population, low telephony penetration levels, and a rise in consumers' income and spending owing to strong economic growth have helped make India the fastest-growing telecom market in the world. The first and largest operator is the state-owned incumbent BSNL, which is also the 7th largest telecom company in the world in terms of its number of subscribers. BSNL was created by corporatization.

Special points to be considered under audit programmer

Individual Accountability. The audit trail supports accountability by providing a trace Of user actions. While users cannot be prevented from using resources to which they Have legitimate access authorization, audit trail analysis can be used to examine their Actions.

Reconstruction of Events. An organization should use audit trails to support after-the fact Investigations of how, when, and why normal operations ceased.

Intrusion Detection If audit trails have been designed and implemented to record Appropriate information, they can assist in intrusion detection. Intrusions can be Detected in real time, by examining audit records as they are created or after the fact, by Examining audit records in a batch process.

Problem Identification Audit trails may also be used as online tools to help identify problems other than intrusions as they occur. This is often referred to as real-time auditing or monitoring.

Control Online Audit Logs. Access to online audit logs should be strictly controlled.

Separation of Duties . Organizations should strive for separation of duties between security personnel who administer the access control function and those who administer the audit trail.

Facts for considerations

1 Revenue recognition
Telecoms face challenges when applying the revenue recognition requirements under telecom industry . International Accounting Standard 18 Revenue and related International Financial Reporting Interpretations Committee interpretations are principle-based rather than sector-specific, which has resulted in a degree of inconsistency in the recognition of revenues by telecoms. When faced with arrangements such as bundled products, free handsets, broad-band connectivity and television and installation fees, telecoms reporting must assess whether the risks and rewards of ownership have been trans-ferred in order to determine when to recognise revenue. Accordingly, the individual facts and circumstances always will need careful consideration as they may vary between entities and also between different contracts within the same entity. In todays era of fierce competition and bundled pricing, free products, such as free handsets, modems or set-top boxes, are offered to customers by telecoms on subscribing to their wireless or fixed-line services.

Call transmission
Telecoms will need to consider various contractual rights and obligations before arriving at the decision that revenues from international calls are recorded on a net or gross basis, as facts and circumstances likely will be different in each case. Some of the questions to consider include the following: Does the telecom control decisions on the routing of traffic? Is the telecom involved in determining the scope of services provided? Do end customers have claim over the telecom for service interruption or poor quality of transmission?

2 Capacity transactions: Indefeasible rights of use is it a lease?

. Indefeasible rights of use (IRU) are contracts that entitle telecoms to buy and/or sell capacity on networks. Accounting for IRUs can be complex and vary based on the facts and circumstances of individual contracts.

The first step in any contract review is to establish whether the IRU is a lease, a service contract or a sale of goods. Telecom industry Determining whether an Arrangement contains a Lease, is used to analyse whether the IRU is or contains a lease, focusing on whether a specific asset is being used and the right of use of that asset. Generally, it is not difficult to determine whether a right to use is being conveyed under the contract. However, difficulties arise in identifying whether a specific asset is being used. If an IRU is determined to be a lease, then the appropriate accounting is determined in accordance with IAS 17 Leases.

Other capacity issues A common issue facing telecoms is the accounting for exchange of capacities or sometimes referred to as swaps. The biggest challenge with respect to these exchange transactions is to ensure that there is a reasonable commercial basis for the transaction and that fair values are determinable. All property, plant and equip-ment and intangible assets received in exchange for non-monetary assets are mea-sured at fair value unless the exchange transaction lacks commercial substance or the fair value of neither the asset received nor the asset given up is reliably mea-surable. Comparative transactions may provide the best evidence of fair values; however, for capacity sales, finding comparability is a formidable challenge.

3 Intangible assets
Spectrum or wireless licenses, software both acquired and internally developed and goodwill are significant to the statement of financial position of telecoms and to the decision maker in any acquisition. Spectrum licenses are either acquired through government auctions or as part of an acquisition of another telecom, i.e., a business combination. The measurement of cost when purchased as part of a government auction includes the purchase price and any directly attributable costs such as borrowing costs, legal and professional fees. Alternatively, when such licenses are acquired as part of a business combination, they are measured at fair value. An

internally generated intangible asset, such as billing software, is measured based on the direct costs incurred in preparing the asset for its intended use. Internal costs relating to the research phase of research and development (R&D) are generally expensed. However, development costs are capitalized if certain criteria are met.

4 Provisions and contingencies Telecom generally will result in earlier recognition of provisions. Various types of provisions that affect telecoms include, but are not limited to warranties, environmental liabilities, decommissioning liabilities, disputes and legal claims which are covered under Provisions, Contingent Liabilities and Contingent Assets. The standard requires the recognition of a present obligation as a provision based on the probability of occurrence of outflow of resources, in which probable is defined as more likely than not. This may result in the recognition of additional amounts or earlier recognition of such amounts in the financial statements, as compared to the existing standards currently applied by telecoms. Management is required to recognize a provision for its best estimate of the expenditure to be incurred at the end of the reporting period.

5 Presentation of financial statements Regardless of accounting gaps that emerge from the assessment of accounting policies, telecoms need to review the presentation of their financial statements Presentation of Financial Statements does not prescribe specific formats to be followed. Instead it provides the minimum requirements for the presentation of financial statements, including its content and guidelines for their structure. In our experience, telecoms consider the presentation adopted by other telecoms in the sector. Statement of financial position. Statement of comprehensive income presented either in a single statement of comprehensive income that includes all components of profit or loss and other comprehensive income; or in the form of two statements, one being the income statement and the other the statement of comprehensive income, which begins with the profit and loss as reported in the income statement and displays separately the various components of other comprehensive income. Statement of changes in equity Statement of cash flows Notes comprising of the summary of significant accounting

policies and other explanatory information. In addition, a first-time adopter is required to present the statement of financial position at the start of its earliest comparative period. The standard provides entities the option to present an analysis of expenses either on the basis of nature (e.g., depreciation, purchases of material, transport costs, advertising costs, etc.) or based on function (e.g., selling costs, administrative costs, research and development, cost of sales). However, a telecom that discloses information based on function is still required disclosing in the notes to the financial statements, expenses by nature including depreciation and employee benefits expense. Within these parameters, the actual format of telecoms statements is quite varied.

Findings and Suggestion For example; mtnl company

AUDIT COMMITTEE The scope of the Audit Committee has been defined by the Board of Directors in accordance with the provisions of the Companies Act read with clause 49 of the listing agreement, which among others, includes:1. Reviewing the Company's financial reporting processes and systems. 2. Recommending the appointment and removal of statutory auditors, taking decisions regarding audit Fee and related expenses. 3. Reviewing the Company's financial and risk management policies 4. Reviewing with management the quarterly and annual financial statements, before submission to the Board, focusing primarily on: 5. Changes in accounting policies and practices; 6. Internal audit processes and systems Presently, the Audit Committee consists of the following:1. Smt. Usha Sahajpal Chairperson 2. Sh J.S. Deepak Member 3. Sh. Manish Sinha Member 4 Smt. Anita Soni, Director (Finance) Permanent Invitee 5 Sh. S.R. Sayal, Company Secretary Secretary Meetings and attendance of Audit Committee:
The Audit Committee held 8 meetings during the year 2008-09. The members' attendance at the Committee Meetings was as under:-

Remuneration Committee The whole time Directors of the company including the Chairman and Managing Director are appointed by the Government of India and Committee. The non-official part-time Directors are paidRs.10,000/- by way of sitting fees for attending every meeting of the Board/Committee of the Board attended by them. No other remuneration is paid to the non-official part-time Directors. are being paid remuneration as per the terms of their appointment. The Company, therefore, has not constituted a Remuneration SHAREHOLDERS/INVESTORS' GRIEVANCES COMMITTEE Pursuant to the Listing Agreement, a Shareholders/Investors' Grievances Committee exists in MTNL to look into the investors' complaints, if any, and to redress the same expeditiously. The Committe reviews all matters connected with the Securities' transfers. The Committee looks into redressing of shareholders complaints like non-receipt of Balance Sheet, non receipt of dividends, etc. The Committee also oversees the performance of the Registrar and Transfer Agents, and recommends measures for overall improvement in the quality of investors services. The committee held 2 meetings during the year 2008-09.

AUDITORS REPORT

1.

We have audited the attached Balance Sheet of Mahanagar Telephone Nigam Limited as at March 31, 2009, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto, in which, the accounts of 3 units namely Delhi unit, Mumbai unit and Mobile Service Unit (Delhi & Mumbai both) are incorporated, which are audited by the branch auditors appointed by the Comptroller & Auditor General of India. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Auditing Standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order 2003, as amended by the Companies (Auditors Report) Order, 2004 (together the Order), issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, and on the basis of such checks as we considered appropriate and according to the information and explanation given to us, we give in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable to the company.

2.

3.

We report that:
i) We have obtained all the information and explanations, which to the best of our knowledge and belief Were necessary for the purposes of our audit; ii) In our opinion, proper Books of Account, as required by law, have been kept by the Company, so far as Appears from our examination of those books except that the following items referred to in paragraph l (i) of Significant Accounting Policies are consistently accounted on cash basis, instead of on accrual Basis as required under section 209 of the Companies Act, 1956: a) Interest Income / Liquidated Damages, when reliability is uncertain. b) Annual recurring charges of amount up to Rs.0.10 Million each for overlapping period. c) Revenue on account of service connections is being accounted for when the recovery for the same is established. iii) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report, are in agreement with the books of account; iv) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 v) Since the company is a Government company, clause (g) of sub-section (1) Attention is further invited to the following without making them a subject matter of qualification: a) Note No.11 regarding overdue of Rs.1000 million by one of the Govt. Company which have Considered good on the basis of comfort letter issued by the concerned Ministry. b) Non availability of information about the transactions required to be entered in the registers Maintained under section 301 of the Companies Act, 1961. c) Note No.6 (c) Pending the decision of the review petition before the Honble Supreme Court Of India of a sum of Rs.32.29 millions, payable in terms of earlier directions of Honble Supreme Court of India to various Companies, has not been provided for by the company. d) Note No.17 regarding non provision of diminution in the value of investments in subsidiaries and joint venture considering the diminution as temporary in nature. e) The amount of service tax included in debtors and adjusted from deposit is not generated from the system and is done on manual basis. Service Tax ageing is also not available. f) Revenue from pre paid services has been recognised on the basis of SIM activated and its usage output generated through system and certified by the management being a technical matter. For Bansal Sinha & Co. Chartered Accountants Place : New Delhi (Ravinder Khullar) Dated : August 1, 2009 Partner Membership No. 82928

Conclusion
No technological development is possible without effect upon society. Witness the changes brought about by gunpowder, electricity, the radio and the fixed telephone in their turns. Today, it is nuclear power, rockets, the Internet and the mobile phone that are in the forefront. Of tomorrow, we know not. Clearly, no one will deny the evolving nexus between technological innovation and the human condition. Never before have technical devices played such an important role in our daily lives. The development of mobile technologies has been pivotal in this transformation. Moreover, electronic messaging (i.e. email and SMS) has become the medium of choice for business and personal communications. And through rapid innovation in wireless connectivity and portable Internet access, technology is becoming increasingly personalized. Indeed, its ubiquity is no less a social phenomenon than it is a technical one. Of course, with the spread of anywhere, anytime communication infrastructure comes increased convenience, better access to information and streamlined business processes. The capacity of current and future technologies to enter the private sphere of human lives, however, is correspondingly increased. At their end, developers are considering ways in which to facilitate machine-to-machine communications and foster convergence across networks, platforms and services. The extent to which humans and machines will be connected to each other, constantly transmitting vitals, data and private Information, can at this time, be only imagined.