The Comptroller and Auditor General (CAG) of India

The Comptroller and Auditor General (CAG) of India is an authority, established by the Constitution under Constitution of India Article 148, which audits all receipts and expenditure of the Government of India and the state governments, including those of bodies and authorities substantially financed by the government. The CAG is also the external auditor of Government-owned corporations and conducts supplementary audit of government companies, i.e., any non-banking/ non-insurance company in which Union Government has an equity share of at least 51 per cent or subsidiary companies of existing government companies. The reports of the CAG are taken into consideration by the Public Accounts Committees (PACs) and Committees on Public Undertakings (COPUs), which are special committees in the Parliament of India and the state legislatures. The CAG is also the head of the Indian Audit and Accounts Department, the affairs of which are managed by officers of Indian Audit and Accounts Service, and has over 58,000 employees across the country.


1. Though he is appointed by president, he can be removed only by parliament (like judges) on grounds of – (a) proven misbehavior, and (b) incapacity.

2. His salary is charged on Consolidated Fund of India (CFI) and is statutory (can’t be voted by parliament adversely during his tenure).
3. He can’t hold any public office post his retirement (but can join a political party). He submits resignation to president.

Duties of CAG

1. Apart from auditing government accounts of states and center, he also audits accounts for any institution substantially funded by public funds. Thus it includes PSUs.

2. His job is to check if all expenditures are as per laid down by the law. This means its his duty to check for corruption in expenditure of public funds. Similarly all taxes have been collected as per law.

CAG’s Jurisdiction

1. Art 149 of © states that CAG “shall perform such duties and exercise such powers in relation to the accounts … as may be prescribed under law.” 

2. Parliament made a law CAG (Duties, Powers & Control) Act wherein it stated that CAG’s duty is to ‘audit’ all expenditure from the CFI and states. 

3. But the word ‘audit’ has not been defined anywhere. When audit is viewed as a partner in good governance, allegations of trespass into the executive territory lose their relevance. Another way is to look at international experience and conventions.

4. CAG has a responsibility to evaluate whether the collection and allocation of revenue was optimized or if the ‘rules and procedures’ fail to secure an effective check on the collection and allocation of the revenue. To this extent it can subject the policy to scrutiny but can’t make recommendations on its efficacy or implementation. So it can merely highlight the collection and allocation inefficiencies in its report to the parliament (which is exactly what CAG has done i.e. the delays in implementing a competitive bidding has led to a potential loss).

5. CAG can’t question policy matters. But if in the making of the policy its financial implications were not considered at all or faulty assumptions were used, there is no record of a considered policy decision, or if the policy benefits some groups or individuals to the exclusion of public, or the implementation of the policy defeats the policy itself then CAG has a mandate to report it under the performance audit. 

Shortcoming in CAG Appointment Process

1. The present selection process for the CAG is entirely internal to the Government machinery; no one outside has any knowledge of what criteria are applied, how names are shortlisted and how a final selection is made. 

2. In most of the other countries there is no scope for the head of the Supreme Audit Institution to be chosen at the discretion of the Government. 

3. Another related issue is that of the appointment of IAS officers as the CAG. This has had a demoralising effect on the IAAS cadre. 
4.ICAI Code of Ethics states that an auditor’s independence has two aspects- independence in fact and independence in appearance. The appointment of former secretaries as CAG may compromise the independence of this institution because of apparent/perceived conflict of interest.

Issues With CAG

Issues with the audit process
1. CAG’s reports are not timely because there is substantial time gap between occurrence of an irregularity and its audit. It reviews programmes after these have run for a few years. 
2. Audit findings are based exclusively on documents and files. The situation on the ground is quite different from what is reflected in the papers. There is practically no verification to validate the audit findings.
3. CAG reports tend to be unduly negative and their focus is on irregularities and faultfinding. They do not recognize the practical constraints under which the departments function.
4. They do not give due credit for good performance.
5.They do not discriminate between errors arising out of bonafide/malafide intentions. Audit as such could act as a dampener against new initiatives and risk taking.
6. They do not delve into the root causes of the problems and how to address them.
7. Reporting each year a large number of problems which are already known does not add value. Audit must therefore identify systemic problems.
8. The relationship between the auditor and auditee is not always harmonious. Generally interaction is confined mainly to the lower levels. Audit is viewed as a policing. There is poor response to external audit which seriously reduces the effectiveness of audit.
9. There is inadequate coordination between external audit and internal audit.

Issues with post audit process

1.There is hardly any accountability for not taking timely action on audit observations. Thousands of reports containing a huge number of observations are lying unattended in the departments. Audit Committees comprising representatives of audit and government agencies have been set up to review the departmental action taken on inspection reports but their functioning is not satisfactory. 
2. Detailed examination of paras included in the Audit Reports by PAC is barely about 15-20 against the total number of 1000 – 1500 paras in the CAG reports
3. The Ministries take only those audit paras seriously which come up for discussions in the PAC
4. PAC and CoPU must form sub-committees and consider more paras this way. Other paras should be assigned to the respective Departmental Standing Committees.

5. Ministries are supposed to submit Action Taken Notes on the paras not discussed. But such Action taken Notes are largely formal rather than substantive
6. In the State Legislatures, there is a huge pendency of Audit Paras to be examined by State PACs. Some of the pending paras are 10 to 20 years old.

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