Importance of Comptroller and Auditor General (CAG)


    In News 

    • Recently, the Prime Minister of India addressed an event to mark the first Audit Diwas.
      • He highlighted the importance of CAG which had created a legacy with the passage of time.

    Major Points 

    • The CAG had changed rapidly by adopting modern procedures and it was now using advanced analytics tools, geo-spatial data and satellite imagery.
    • CAG studies on the current government initiatives could become a source of knowledge and inspiration for future generations.
    • The CAG not just kept track of the nation’s accounts, but also did value addition in productivity and efficiency.
    • The CAG has also started assisting urban local bodies in providing technical guidance and support.
    •  It has developed a ‘Practice Guide’ for this purpose consisting of best practices. 
    • Despite the pandemic, in 2020-21, the CAG submitted 123 audit reports, of which 67 were performance audits.

    What is an Audit? 

    • It is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following a documented system of recording transactions. 
    • It is done to ascertain the accuracy of financial statements provided by the organisation.
    • The audit can be done internally by employees or heads of a particular department and externally by an outside firm or an independent auditor.
      • The idea is to check and verify the accounts by an independent authority to ensure that all books of accounts are done in a fair manner and there is no misrepresentation or fraud that is being conducted.

    Audit Diwas 

    • It is being celebrated to mark the historic origin of the institution of CAG and the contribution it has made to the governance, transparency and accountability over the past several years.
    • It was organised by the Comptroller and Auditor General(CAG).

    About Comptroller and Auditor General(CAG)

    • The Constitution of India provides for an independent office of the Comptroller and Auditor General of India (CAG).
    • He/she is the head of the Indian Audit and Accounts Department and is the guardian of the public purse and controls the entire financial system of the country at both the levels, the Centre and the States.
    • He shall be appointed by the President by warrant under his hand and seal.
    • It is his/her duty to uphold the Constitution of India and the laws of Parliament in the field of financial administration.
    • Evolution:
      • The idea of CAG evolved in British India. In May 1858, for the first time, a separate department was set up with an Accountant General, who was responsible for accounting and auditing the financial transactions under the East India Company (EIC).
      • In the Montford Reforms of 1919, the Auditor General became independent of the government.
      • The Government of India Act 1935 strengthened the position of the Auditor General by providing for Provincial Auditors General in a federal set-up.
    • Conditions of the service: 
      • The salary and other conditions of service of the Comptroller and Auditor-General shall be such as may be determined by Parliament by law and, until they are so determined, shall be as specified in the Second Schedule.
        • Provided that neither the salary of a Comptroller and Auditor-General nor his rights in respect of leave of absence, pension or age of retirement shall be varied to his disadvantage after his appointment.
    • Term of Office:
      • He shall hold office for a term of six years from the date on which he assumes such office:
        • Provided that where he attains the age of sixty-five years before the expiry of the said term of six years, he shall vacate such office on the date on which he attains the said
      • He shall not be eligible for further office either under the Government of India or under the Government of any State after he has ceased to hold his office.
    • Duties and functions: 
      • He audits the accounts related to all expenditure from Consolidated Fund of India, consolidated Fund of each state and union territory having a legislative assembly.
      • He audits all expenditures from the Contingency Fund of India and the Public Account of India as well as the Contingency Fund and Public Account of each state.
      • He audits all trading, manufacturing, profit and loss accounts, balance sheets and other subsidiary accounts kept by any department of the Central Government and State Governments.
      • He audits the receipts and expenditures of each State and Centre to satisfy himself that the rules and procedures on that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue.
      • He audits the accounts of any other authority when requested by the President or Governor.
    • Removal: 
      • He shall only be removed from office in like manner and on like grounds as a Judge of the Supreme Court.

    Constitutional Provisions for CAG

    • Article 148: Appointment, oath and conditions of service.
    • Article 149: Duties and powers.
    • Article 150: The accounts of the Union and of the States shall be kept in such form as the President may, on the advice of the CAG, prescribe.
    • Article 151: Deals with the Audit Reports.
      • The reports of the CAG relating to the accounts of the Union shall be submitted to the president, who shall cause them to be laid before each House of Parliament.
    • Article 279: Mentions that the calculation of “net proceeds” is ascertained and certified by the CAG, whose certificate is final.
    • Third Schedule: Section IV of the Third Schedule of the Constitution of India prescribes the form of oath or affirmation to be made by the Judges of the Supreme Court (SC) and the CAG at the time of assumption of office.
    • Limitations:
      • Its report is post-facto i.e. after the expenditure is incurred and has only prospective value in improving systems and procedures. 
      • Secret service expenditure is outside the purview of the CAG and he cannot call for particulars of expenditure incurred by the executive agencies, but has to accept a certificate from the competent administrative authority that the expenditure has been so incurred.
      • There is no provision for auditing of funds that are given to an NGO and elected local bodies. 
        • Today NGOs have become a conduit for a multitude of government schemes. It does not have the full authority to audit the PRIs and ULBs also. 
    • Way Forward: 
      • The criteria for selection of the CAG should include possession of the requisite professional knowledge and background, the ability of an exceptional order and impeccable integrity. 
        • This is essential for preserving the integrity and credibility of the institution of public audit.”
      • Essential bodies that are outside the purview of the CAG  can come under it. 

    Source: TH