The Comptroller and Auditor General (CAG) of India is an authority, established by the Constitution of India under Chapter V. He is the head of Indian Audit and Accounts Department.
The current CAG of India is Shri Shashi Kant Sharma, who was appointed on 23 May 2013.
The CAG is responsible for auditing the accounts of the Government of India and the State Governments and public sector organisations, and for maintaining accounts of the State Governments.
The Indian Accounts & Audit Services (IA&AS) aids the CAG in the discharge of his functions.
The authority for audit by the CAG is derived from Articles 149 and 151 of the Constitution of India and the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (DPC Act). Principles and methodologies for various audits are prescribed in the Auditing Standards and the Regulations on Audit and Accounts, 2007 issued by the CAG.
In so far as the social sector is concerned, the Principal Accountant General (General & Social Sector Audit), Andhra Pradesh and Telangana is responsible for audit of 20 departments of the Government of Andhra Pradesh and Telangana and Local Bodies/ Public Sector Undertakings/ Autonomous Bodies thereunder.
All welfare departments, viz., Social Welfare/ Tribal Welfare/ Backward Classes Welfare/ Minorities Welfare/ Women, and Child Welfare, Welfare of Disabled & Senior Citizens, Health, Medical & Family Welfare, Labour Employment Training & Factories, Consumer Affairs, Food & Civil Supplies, Housing, Municipal Administration & Urban Development, Panchayat Raj & Rural Development, Youth Advancement, Tourism & Culture; all Education Departments, viz., School Education, Higher Education (including Technical Education); all General Sector Departments, viz., General Administration, Home, Law, Legislature, Governor’s establishment, Finance & Planning and Revenue Departments (District Collectorates only).
The PAG (GSSA) also conducts audit of certain companies in which the Andhra Pradesh and Telangana State Government has an equity share of at least 51 per cent. Only those companies which are under social sector departments are audited by PAG (GSSA).
CAG is solely responsible for Certification Audit of Finance and Appropriation Accounts of the State Government, Accounts of the Central Assistance under various State Plan, Central Plan and Centrally Sponsored Schemes and Statements of Expenditure of externally aided projects.
In pursuance of the recommendations of the Eleventh Finance Commission, CAG has been entrusted with Technical Guidance & Supervision / Support (TGS) of Panchayat Raj Institutions (PRIs) and Urban Local Bodies (ULBs) in the States where 73rd & 74th amendments are applicable.
The audit of the CAG is bifurcated into three streams namely Financial Audit, Performance Audit and Regularity (Compliance) Audit.
Performance Audit is conducted in respect of the State Schemes as well as the Central Schemes being implemented in the State. Performance audit is conducted to see that Government programmes have achieved the desired objectives at lowest cost and given the intended benefits.
Compliance Audit refers to examination of the transactions relating to expenditure, receipts, assets and liabilities of the audited entities to ascertain whether applicable laws, rules, regulations and various orders and instructions issued by competent authorities are complied with.
In Financial Audit, the Auditors analyse the financial statements to establish whether acceptable accounting standards for financial reporting and disclosure are complied with.
Audit process commences with the assessment of risk of the department/organisation/ autonomous body/scheme, etc. based on the expenditure incurred, criticality/ complexity of activities, priority accorded for the activity by the Government, level of delegated financial powers, and assessment of internal controls and concerns of stakeholders. Previous audit findings are also considered in this exercise.
Annual Audit Plan is the plan for audit to be undertaken during the year ahead.
Based on the risk assessment mentioned above, topics for performance and compliance audit are decided and included in the Annual Audit Plan.
High risk areas where the chances of an entity going wrong are identified as focus areas for audit. For example, the risk is high in areas where substantial funds are involved, the coverage of beneficiaries is large, and where there is wide-scale non-compliance or disregard of laws / rules / regulations, etc. resulting in non-attainment or under-achievement of the objectives of programme / scheme / entity.
High risk areas may also comprise gross irregularities reported in previous Inspection Reports (IR) / Audit Reports on which no or insufficient action was taken by Government / Department / Audited Entity.
No. The topic for audit could include areas concerning the plight of children, women and other disadvantaged groups which are subjected to social evils of exploitation, slavery, etc. Audit’s responsibility would be to probe and report on Government’s indifference / inaction / non-compliance to laws dealing with such evils. Examples are child labour laws, Persons with Disabilities Act, etc.
The following is the order of allocation of audit resources:
Certification Audit of State Government Finance and Appropriation Accounts, financial audit of entities of which the CAG is the sole auditor and certification audit of expenditure of externally aided projects
Performance Audit on topics proposed in the Annual Audit Plan
Compliance Audit of Government organisations and of autonomous bodies / local bodies, etc. included in the Annual Audit Plan
A portion of available party days is also proposed for planning, preparation of guidelines, check-lists, consolidation and preparation of performance / compliance audit reports, attending to queries/comments, etc.
Normally, 4 months’ time is allotted for field audit in case of Performance Audit and 2 months in case of Compliance Audit. This may vary depending upon the nature and volume of work involved.
Once topics are selected, guidelines (plan of action) are prepared for conduct of audit. All the material related to the topic has to be collected and studied. This should help formulation of audit guidelines.
The audit guidelines lays down the brief description of the topic, the organisation structure of the department to be audited, programmes / schemes implemented by the department (related to the topic), source and flow of funds, budget allocation, release and expenditure details for the past 3/5 years, audit objectives, the scope of audit, audit criteria and methodology, identification and sample size of units to be audited along with the basis (criteria) for selection of the units. The years to be covered in audit, the start date and end date of audit has to be specified in the guidelines itself and the detailed tour programme for audit has to be got approved before commencement of field audit. The duration of audit of each unit is fixed based on the estimated volume of the work involved.
The sample size should be representative in character. It should be sizeable enough to be able to form an audit opinion on the performance of a scheme / entity and should be acceptable to the entity reported upon.
The audit objectives would relate to the topic and would flow from the related scheme / organisational objectives or applicable laws / rules.
Audit Criteria indicate the standards, laws, rules and regulations, bye-laws, codes, manuals, Government Orders, instructions, Departmental instructions, benchmarks for performance etc. against which the compliance / performance of the concerned entity / applicable authority is measured. All Audits are conducted vis-à-vis Audit Criteria which is normally quoted while making observations in Audit.
The criteria adopted for selection of units should be suitable to the topic selected. For example, if the topic relates to health, the criteria could be a health indicator (like maternal mortality rate, infant mortality rate). If the topic is related to women, children, minorities, etc., the relevant indicator like overall crime rate among women, juveniles, etc., extent of under-nutrition among children, lactating mothers, etc., census data (like disabled population, minority population, child population engaged in labour) would be adopted as a criteria. If the topic is related to education, student pass percentage, no. of school /college dropouts could be a suitable criterion.
The findings relating to an audited entity is reported through Inspection Reports (IR). The field party which audits the entity prepares the draft IR in which significant cases of irregularity and non-compliance to rules, regulations, etc. and some performance related matters are brought out. Some of the observations (serious cases of irregularity and non-compliance to rules, etc.) may get included in CAG’s Audit Reports as Draft Paragraphs (DPs).
The DPs highlight important cases of malpractice, exceptional deviation from norms, etc. which are specific to a Drawing and Disbursing Officer (DDO). However, it does not draw conclusions on the functioning of a department / organisation or implementation of a scheme / programme as a whole, and hence does not serve as an effective tool to assist decision-makers (Government, Heads of organisations, etc.).
The traditional audit approach revolves around individual DDOs. The focus is on a DDO, and not a specific issue or area or a theme. The risk based audit approach or the theme based audit approach focuses on a particular theme or subject area and only those departments / entities touched by that subject matter would only be audited. This approach is capable of attracting Government’s attention towards the overall performance of the implementation of the scheme / programme / laws in the sampled units. In DDO based audit, the emphasis is on a DDO, while in the thematic based audit, the focus is on the theme or area of importance.
After completion of audit of each unit, Inspection Report (IR) containing audit findings is issued to the head of the unit with a request to furnish replies within one month of receipt of the IR. Whenever replies are received, audit findings are either settled or further action for compliance is advised. Significant audit observations pointed out in these IRs, which require attention at the highest level in the Government, are processed for inclusion in the Audit Reports which are submitted to the Governor of Andhra Pradesh and Telangana under Article 151 of the Constitution of India for causing them to be laid on the Table of the State Legislature.
Heads of offices and the next higher authorities are required to respond to the observations contained in the IRs and take appropriate corrective action. The audit observations communicated in the IRs are also discussed in the meetings at district level by the officers of the departments with the officers of the AG’s office.
The Comptroller and Auditor General of India (CAG)'s audit arrangements in respect of the Government of Andhra Pradesh were restructured with effect from April 2012 with the aim of integrating audit efforts and presenting a sectoral perspective. Audit of Government offices, special purpose agencies, local bodies, Public Sector Undertakings, etc., has been integrated on suitable sectoral lines, such as ‘Social’, ‘Economic’, ‘Revenue’ and ‘General’.
Pursuant to this restructuring, from 2011-12 onwards, Audit Reports covering sector-wise State Government departments are being prepared separately by the CAG for submission to the Governor as per the provisions of the Constitution of India.