UNDERSTANDING COMPTROLLER AND AUDITOR GENERAL

The term 'comptroller' evolved in the 15th century through a blend of the Middle English 'countreroller' (someone who checks a copy of a scroll, from the French 'contreroule') and the French 'compte' (an account), thus creating a title for a comptroller who specializes in checking financial ledgers.

In 1858, When the East India Company's administration was taken over by the Crown, a complementary post of Accountant-General at the India office was created to prepare the accounts of the expenditure incurred in England. Simultaneously, an independent Auditor was appointed by the Crown for the audit of these accounts. This arrangement was, however, short lived. In 1860, both accounting and auditing functions were amalgamated and placed in charge of the Accountant-General to the Government of India, who was designated as 'Auditor General'.

The statutory recognition of the Auditor General came in 1919, with the introduction of Constitutional Reforms. He was made independent of the Government of India and was appointed by the Secretary of State and held office as the administrative head of the Indian Audit Department. During his Majesty's pleasure, the Government of India Act 1935 gave further recognition to the importance and status of this office. After independence the same was incorporated in the Constitution of India as a separate body to look after the account and the audit of the Government.

The Comptroller and Auditor General (CAG) of India is an authority, established by the Constitution of India, who 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 companies. The reports of the CAG are taken into consideration by the Public Accounts Committees, which are special committees in the Parliament of India and the state legislatures. The CAG of India is also the head of the Indian Audits and Accounts Service, which has over 58,000 employees across the country. He is appointed by President. He can hold his office for 6 years or up to age of 65 years. He can give resignation at any time or can be impeached by President through Parliament resolution with special majority.
Baba Saheb Ambedkar had considered the CAG institution as one of the most important in the country. The importance of CAG is easily understood by the following words of his: 
“I am of the opinion that this dignitary or officer (CAG) is probably, the most important officer of the Constitution of India. He is the one man who is going to see that the expenses voted by parliament are not exceeded, or varied from what has been laid down by Parliament in what is called Appropriation Act. His duties are far more important than the duties of the Judiciary.”

Working system of CAG in Indian government: -
According to article 151, CAG represents audit report to the president or governor before putting reports on parliament or state legislatures respectively.
To begin with, when the audit takes place, during the course of inspection of various organization, 'inspection report' of each unit is prepared. About 72000 reports are prepared and sent every year. 
The reports submitted to parliament of president contain two parts: 
1.Audit report on appropriation accounts – this shows that the money granted by the legislature for various grants or purpose is properly used or not.
2. Audit report on the financial report – shows annual receipts and expenditure during the year.

The audit report in brief contain a narration of cases involving financial irregularities, losses, frauds, wasteful expenditure and saving etc.

Major functions of CAG: -
1. To prescribe, with the approval of president, the form in which the accounts of union and states are to be kept
2. To perform such duties and exercise such powers in relations to accounts of union or states or any other body , as may be prescribed by any law made by parliament.
3. To report the president or governor of the state on the account of country or state.

ROLE  of Comptroller & Auditor General: -
- To enhance accountability of the executive to the Parliament and State Legislatures by carrying out audits in the public sector and providing accounting services in the states in accordance with the Constitution of India and Laws as well as best international practices.
- Where entrusted, to provide technical guidance and support to local bodies including Panchayati Raj Institution to enhance their accountability.

The Comptroller & Auditor General of India plays a key role in the functioning of the financial committees of Parliament and the State Legislatures. He has come to be recognized as a 'friend, philosopher and guide' of the Committee. His Reports generally form the basis of the Committees' working, although they are not precluded from examining issues not brought out in his Reports. He scrutinizes the notes which the Ministries submit to the Committees and helps the Committees to check the correctness submit to the Committees and helps the Committees to check the correctness of facts and figures in their draft reports.
The Financial Committees present their Report to the Parliament/ State Legislature with their observations and recommendations. The various Ministries / Department of the Government are required to inform the Committees of the action taken by them on the recommendations of the Committees (which are generally accepted) and the Committees present Action Taken Reports to Parliament / Legislature.

The organizations subject to the audit of the Comptroller and Auditor General of India are: -
•   All the Union and State Government departments and offices including the Indian Railways and Posts and Telecommunications.
•   About 1500 public commercial enterprises controlled by the Union and State governments, i.e. government companies and corporations.
•   Around 400 non-commercial autonomous bodies and authorities owned or controlled by the Union or the States.
•   Over 4400 authorities and bodies substantially financed from Union or State revenues.

Audit of Government Companies (Commercial Audit): 
There is a special arrangement for the audit of companies where the equity participation by Government is 51 percent or more. The primary auditors of these companies are Chartered Accountants, appointed by the Comptroller and Auditor General of India, who gives the directions to the auditors on the manner in which the audit should be conducted by them. The Comptroller and Auditor General of India is also empowered to comment upon the audit reports of the primary auditors. In addition, the Comptroller and Auditor General of India conducts a test audit of the accounts of such companies and reports the results of his audit to Parliament and State Legislatures.

Nature of Audit: -
While fulfilling his Constitutional obligations, the Comptroller & Auditor General examines various aspects of Government expenditure. The audit done by C&A G is broadly classified into Regularity Audit and Performance Audit.

Regularity Audit (Compliance):
•   Audit against provision of funds to ascertain whether the moneys shown as expenditure in the Accounts were authorized for the purpose for which they were spent. 
•   Audit against rules and regulation to see that the expenditure incurred was in conformity with the laws, rules and regulations framed to regulate the procedure for expending public money.
•   Audit of sanctions to expenditure to see that every item of expenditure was done with the approval of the competent authority in the Government for expending the public money.
•   Propriety Audit which extends beyond scrutinizing the mere formality of expenditure to it wisdom and economy and to bring to light cases of improper expenditure or waste of public money.
•   While conducting the audit of receipts of the Central and State Governments, the Comptroller & Auditor General satisfies himself that the rules and procedures ensure that assessment, collection and allocation of revenue are done in accordance with the law and there is no leakage of revenue which legally should come to Government.

Regularity Audit (Financial): 
In regularity (financial) audit and in other types of audit when applicable, auditors should analyse the financial statements to establish whether acceptable accounting standards for financial reporting and disclosure are complied with. Analysis of financial statements should be performed to such a degree that a rational basis is obtained to express an opinion on financial statements.

Performance Audit:
Performance audit is done to see whether the Government programmes have achieved the desired objectives at lowest cost and given the intended benefits.

Action on Audit Reports: -
The scrutiny of the Annual Accounts and the Audit Reports by the Parliament would be an enormous task, considering their diverse and specialized nature, besides imposing excessive demands on the limited time available to the Parliament for discussion of issues of national importance. Therefore the Parliament and the State Legislatures have, for this purpose, constituted specialized Committees like the Public Accounts Committee (PAC) and the Committee on Public Undertakings (COPU), to which these audit Reports and Annual Accounts are referred.

The Public Accounts Committee(PAC) satisfies itself that
a. the moneys (shown in the accounts) were disbursed legally on the service or purpose to which they were applied.
b. the expenditure was authorized.
c. re-appropriation i.e. distribution of funds was legal..
It is also the duty of the PAC to examine the statement of accounts of autonomous and semi-autonomous bodies, the audit of which is conducted by the Comptroller & Auditor General either under the directions of the President or by a Statute of Parliament.

The Committee on Public Undertakings exercises the same financial control on the public sector undertakings as the Public Accounts Committee exercises over the functioning of the Government Departments. The functions of the Committee are:-
a. to examine the reports and accounts of public undertakings.
b. to examine the reports of the Comptroller & Auditor General on public undertakings.
c. to examine the efficiency of public undertakings and to see whether they are being managed in accordance with sound business principles and prudent commercial practices. 

Challenges: -
In the present era of liberalization, many difficult financial issues are coming to surface and it is a challenge to the CAG to audit these issues. Hopefully CAG will accept this challenge and will be successful in their mission.

The recent report of the Comptroller and Auditor General of India (CAG) on the issue of spectrum allocations by Department of Telecommunications has created a storm. The CAG report has worked out the presumptive loss at Rs. 1.76 lakh crore to the Exchequer, on allocation of spectrum licenses to 137 applicants. The report highlights undue haste in receiving and processing applications, arbitrarily deciding the cut-off date, awarding licenses on the basis of first-come-first-served basis in 2008 at the 2001 rate, and ignoring the advice of the Ministry of Communications and Information Technology, Ministry of Law and PMO.

C&AG is meant to find the black spots of and lapses in the governance of any Government organization and to report to the President of India upon which the Public Accounts Committee of the Parliament takes action by summoning the heads of the concerned Government Department to explain their position. The role of C&AG is limited to the appropriation of the public money, misuse of financial delegations, improper public expenditure etc., but not about good governance.

The CAG is unable to access necessary data for carrying out the audit process. It has no remedy against executive inaction. Making audit work as a catalyst for good governance would require reforms in the CAG's statutory powers. At present, even to get the relevant records for audit is increasingly becoming a serious challenge.

While the Constitution has undergone more than 100 amendments and several statutes have been completely overhauled, the law on audit and accounting of public money has remained practically static over the last 40 years or so. Audit-related statutes in the UK, France, Australia, Canada and South Africa have undergone substantial changes to keep pace with the changing times.

In many respects, enforceability of the CAG's right to information is weaker than that of an ordinary citizen under the RTI Act. Deliberate delay, non-production of records or incomplete production of records can be tackled only by introducing the requisite penal provision in the Act. CAG reports are not placed in Parliament or state legislatures for periods long enough to facilitate discussion. As a consequence, the Executive does not take the necessary remedial action. The CAG has no remedy against such delays.