In the Indian context, accounting and auditing have a very long history. However, accounting, auditing, and fraud risk management system have evolved over time to meet the needs and challenges of the growing society.

1. ACCOUNTING, AUDITING AND FRAUD RISK
MANAGEMENT
IN
KAUTILYA’S
ARTHASHASTRA

2. INTRODUCTION
 In the Indian context, accounting and auditing have
a very long history.
 Arthashastra written by Kautilya, prescribed
detailed rules on accounting and auditing of public
finances.
 Kautilya, also known as Chanakya and Vishnugupta,
was an ancient Indian scholar of great wisdom.
 He is known for his seminal work titled
‘Arthashastra’.
 Arthashastra was composed during the reign of the first
Maurya king, Chandragupta Maurya (321–297 BCE).
 It contains approximately 6000 sutras divided into 15
books, 150 chapters and 180 sections.
 According to Heinrich Zimmer, Arthashastra is the first
complete anthology of the ―timeless laws of politics,
economy, diplomacy, and war.
 Arthashastra includes guidance on the productive
enterprises, taxation, revenue collection, budget, and is in
this manner the scene of economics (Rangaranjan, 1992).

3. INTRODUCTION
 The three chapters of Book 2,
Chapter 6 - The Business of Collection of Revenue by
the Collector-General
Chapter 7 - The Business of Keeping up Accounts in
the Office of Accountants
Chapter 8 - Detection of Embezzlement
Chapter 9 - Examination of the Conduct of
Government Servants
deal mostly with concepts, rules, and regulations
related to business, accounting, auditing, and fraud
risk management.
 However, accounting, auditing, and fraud
risk management system have evolved over
time to meet the needs and challenges of
the growing society.

4. ACCOUNTING IN ARTHASHASTRA
 Accounting is a very old concept – as old as money.
 A description of proper keeping of accounts is found in “Arthashastra”.
 In Arthashastra, chapter 7 of Book 2 has been prescribed that:
 The Superintendent of Accounts should get the accountants' office constructed in
such a way that its door faces either north or east, with seats kept aside (for clerks)
and the shelves of account books well arranged.
 Three hundred fifty-four days and nights is a working year.

5. ACCOUNTING IN ARTHASHASTRA
 In Arthashastra, chapter 7 of Book 2 has been prescribed that:
 Accounts shall be submitted at the close of the month of Ashádha.
 the role and duties of clerks (kārmika), superintendent of accounts (kāraṇika),
accountants, government officer, and ministers (mahāmātras).
 provisions of the rewards and punishment.
 In Arthashastra, it has been also described the descriptions of various works and
results which should be recorded in regularly prescribed registers or books by
departments.

6. ACCOUNTING IN ARTHASHASTRA
 Following of these shall be regularly entered in prescribed registers or/ books-
 the description of the work carried on by several departments and of the results realised in several
manufactories (karmānta);
 the amount of profit, loss, expenditure, delayed earnings, the amount of vyāji (premia in kind or
cash) realised, the status of government agency employed, the amount of wages paid, the number
of free labourers engaged (viṣṭi) pertaining to the investment of capital on any work;
 in the case of gems and commodities of superior or inferior value, the rate of their price, the rate of
their barter, the counterweights (pratimāna) used in weighing them, their number, their weight,
and their cubical measure; the history of customs, professions, and transactions of countries,
villages, families, and corporations;

7. ACCOUNTING IN ARTHASHASTRA
 Following of these shall be regularly entered in prescribed registers or/ books-
 the gains in the form of gifts to the king’s courtiers, their title to possess and enjoy lands, remission
of taxes allowed to them, and payment of provisions and salaries to them;
 the gains to the wives and sons of the king in gems, lands, prerogatives, and provisions made to
remedy evil portents;
 the treaties with, issues of ultimatum to, and payments of tribute from or to, friendly or inimical
kings
 The superintendent shall furnish the accounts from these books as to the forms of work in hand, of works
accomplished, of part of works in hand, of receipts, of expenditure, of net balance, and of tasks to be
undertaken in each of the several departments.

8. AUDITING IN ARTHASHASTRA
 Auditing is a systematic examination and verification of the books of accounts, transaction
records, other relevant documents and physical inspection of inventories of any entity by
qualified and authorized persons called auditors.
 In chapter 7 of book 2, it is laid down that -
 The table of daily accounts submitted by accountant along with the net revenue shall be
checked -
 with reference to the regulated forms of righteous transactions and precedents, and
 by applying such arithmetical processes as addition, subtraction, inference, and
 by espionage.

9. AUDITING IN ARTHASHASTRA
 In chapter 7 of book 2, it is laid down that -
 It shall also be verified with reference to (such divisions of) time as days, five nights, pakṣās,
months, four-months, and the year.
 The receipt shall, on the Vyuṣṭa, the new year’s day, be verified with -
 reference to the place and time pertaining to them,
 the form of their collection (i,e. capital, share),
 the amount of the present and past produce,
 the person who was paid it, the person who caused its payment, the officer who fixed the
amount payable, and the officer who received it.

10. AUDITING IN ARTHASHASTRA
 In chapter 7 of book 2, it is laid down that -
 The expenditure shall, on the Vyuṣṭa, or new year’s day, be verified with
 reference to the cause of the profit from any source,
 in the place and time pertaining to each item,
 the amount payable,
 the amount paid,
 the person who ordered the collection, the person who remitted the same, the person who
delivered it, and the person who finally received it.

11. AUDITING IN ARTHASHASTRA
 In chapter 7 of book 2, it is laid down that -
 The net revenue shall on the Vyuṣṭa day be verified with
 reference to the place, time, and source pertaining to it,
 its standard of fineness and quantity, and
 the persons who are employed to guard the deposits and magazines (of grains, etc.).
 When an official (karanika) does not facilitate, or prevents, the execution of the king's order,
or grants receipts and expenditure other than those prescribed, he shall first be punished.

12. FRAUD RISK MANAGEMENT IN ARTHASHASTRA
 In Chapter No. 8 of Book 2 titled “Detection of Embezzlement”, It describes 40 ways people can steal money
or defraud others.
 These 40 methods are really important, especially in today's world of corporate fraud.
 They help us understand how people can cheat and misuse money in businesses.
 They provide guidance in preventing and detecting fraud.
 Chapter 9 focuses on examining the work of officials, what they actually did and recorded.

13. REFERENCES
• https://www.wisdomlib.org/hinduism/book/kautilya-
arthashastra/d/doc366055.html
• https://www.bis.org/review/r211104c.htm
• https://library.bjp.org/jspui/bitstream/123456789/80/1/R.%20Shamas
astry-Kautilya%27s%20Arthashastra%20%20%20%281915%29.pdf
• https://indiaforensic.com