What is CAG? – Types of Audit and Power

By Advisorymandi
21-November-2018 10:38:28 AM

You may have heard the news that The Comptroller and Auditor General of India (CAG) is carrying out a performance audit of Goods and Services Tax (GST) that will be tabled in the winter session of the parliament starting December 11, 2018. Now, a question crops up here is what is CAG and its role in Indian economy? Why it reviews or scrutinizes government programs or policies? Well, let’s dig out the answers.


What is Comptroller and Auditor General of India (CAG)?

In layman’s language, CAG is a like a ‘watchman’ of the national finance. CAG is essentially a supreme independent body established by the Constitution of India under Article 148. All the official payments of the central and state government must be approved by the CAG. The bodies and authorities that are substantially financed by the government must get a payment approval from CAG before carrying out any kind of economic expenditure. It is also the head of the Indian Audit and Accounts Department.


Kinds of Audit Carried Out by CAG

There are various kinds of audits being carried out by the CAG, which are mentioned below:


Auditing Accounts Related to the Expenditure of:

  • Consolidated Fund of India;
  • Consolidated fund of each state;
  • Consolidated fund of each Union Territory having a Legislative Assembly;
  • Contingency Fund of India;
  • Public Account of India;
  • A contingency fund of each state;
  • Public account of each state;
  • Trading, manufacturing, profit and loss accounts of any Central Government and state government departments.


Auditing Receipts and Expenditure of:

  • Centre and each state;
  • All bodies and authorities substantially financed from the Central or State government.
  • Government companies


What Happens After the Auditing Process is Completed by CAG?

After the completion of the auditing process, then three main reports are submitted by the CAG to the President, which are:

  • Audit report on appropriation accounts
  • Audit report on finance accounts
  • Audit report on public undertakings


The reports are then tabled by the President in both the houses of the Parliament (Lok Sabha and Rajya Sabha). The Public Accounts Committee (PAC), then examines the audit report and details the Parliament about its findings. PAC is a basically a committee of the selected members of Parliament, formed by the Parliament of India.


Appointment of CAG

The appointment of CAG is carried out by the President of India and the powers, functions, and duties of the CAG are elaborated through the act of the Indian Parliament passed in the year 1971. Before taking over the office, the CAG officials take an oath before the President. He is required to hold the office for 6 years. He is free to resign anytime and must provide a letter of resignation to the President. Besides the resignation, he can also be removed by the President by passing a resolution in both the houses of the Parliament on the ground of misbehavior or inability to hold to the office.


Powers of CAG

Under the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act 1971, the powers of CAG are mentioned below:

  • Formulating rules with regard to maintenance of the government accounts.
  • Look after the work of the external auditors under the Indian Companies Act.
  • Give views on the wastage and extravagance of the government expenditure.
  • To make use of the audit experts from outside to undertake an audit of the specialized companies belonging to various fields like engineering, chemicals, iron and steel and so on.
  • To provide guidance to the government on the important legal matters, referred by the President.
  • He is provided all the rights and benefits being provided to the member of a parliament.



CAG is like a guardian which is given some special powers by the President to keep a close tab on the government finances, expenditure and functioning. It plays a very important role in an economy by auditing various bodies of the government to ensure that all the expenditures are transparent and has been used for the betterment of the people.


Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.

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Author: Advisorymandi

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