In 1860, the first Auditor General of India was appointed and he looked after both audit and accounts functions. A statutory independent status was given to the Auditor General with the passing of the Government of India Act, 1919. Under the subsequent Government of India Act, 1935, the position of the Auditor General was further enhanced. He was appointed by the Governor General and could be removed from office in the same manner as a Judge of the Federal Court. The duties and powers of the Auditor General were regulated by the Government of India Audit and Accounts Order, 1936 which continued till 1971 when the Comptroller and Auditor General’s (Duties, Powers, Conditions of Service) Act, 1971 was passed by Parliament under the Constitution of India which came into effect from January 26, 1950. Under the Constitution, the former Auditor General of India was designated as Comptroller and Auditor General of India (CAG). The duties of the CAG related to audit and accounts of the Union Government and the State governments. In 1976, the CAG was relieved of the responsibility of compiling and keeping accounts of the Union Government but not of the State governments. The accounts of the States are still compiled and kept by the State Accountants General under the CAG and have not been taken over by the States.
Public audit of Central and State governments was restricted to regularity audit to see whether laws, rules and regulations were complied with in handling funds and to financial audit to see whether the financial statements of accounts presented a fair and correct state of affairs of the government with reference to vouchers and other initial records of accounts.
In the 1960s, the area of audit was extended from expenditure audit to revenue audit which was included in the CAG’s (DPCS) Act, 1971 also later. From the 1970s the CAG undertook performance audit (value for money audit) of various development programmes/schemes/projects and of government organisations with due regard to economy, efficiency and effectiveness. The audit of the Public Sector Enterprises (PSEs) came under the purview of the CAG by a suitable provision in the Indian Companies Act or by a provision in the Act setting up a Corporation. A system of performance appraisals of the PSEs was introduced in 1970 through the Audit Board. Autonomous bodies substantially financed by the government are also within the ambit of audit by the CAG under the Act of 1971.
Under Articles 148 to 151 of the Constitution, the independence of the CAG is ensured, his salaries and allowance and the administrative expenses of his office, including salaries of officers and staff, are charged on the Consolidated Fund of India. He submits his reports as a result of audit to the President/Governor of the State who causes them to be laid before Parliament/the State Legislature as the case may be. These reports are remitted to the Central/State PACs which has to examine them. The members of the PAC, both at the Centre and States, have no time to examine all paras and reviews of the audit reports and therefore a selective approach is adopted to examine them.
The existing duties of the CAG enjoin on him to audit the Central/State expenditure and revenue and to submit audit reports. The tremendous work done by the CAG and his officers in auditing and producing audit reports is rendered infructuous as the PACs have no time to examine them. Even in respect of the few paras and reviews examined by the PAC, adequate action is not taken by the government. No adequate action is taken on paras not selected by the PAC.
The CAG of India is the CAG of the Union Government and also of the States. The State Accountant General (AG) under the CAG does not have any legal status. The book suggests that the State AG should be given the legal status equivalent to a Judge of the High Court, even though working within the general superintendence of the CAG of India as in other countries like the USA, Germany, Canada, Australia and the UK which have separate Auditor Generals in provinces. This suggestion is in line with the provision in the 1935 Act and in the original draft of Constitution and the recommendation of the National Commission to Review the Working of the Constitution (NCRWC).
The Constitution does not lay down any qualifications for the appointment of the CAG of India and also does not prescribe any procedure for making the appointment except that the CAG shall be appointed by the President of India by a warrant under his hand and seal. The book advocates the laying down of qualifications for such appointment and only persons with vast experience in audit and accounts and finance in government should be eligible to hold this high office as was intended in the debates in the Constituent Assembly in this matter in 1949. Further, the appointment should be made on the recommendation of an independent Committee which should include the Speaker of the Lok Sabha, the Chairman of the Central PAC and the Leader of the Opposition in the Lok Sabha as its members. In the UK the appointment of the CAG is ratified by the House of Commons on the recommendation of the PM made in agreement with the Chairman of the PAC and the CAG is made an officer of the House of Commons.