Summary
Highlights
The speaker addresses common queries about auditing regulations, specifically whether to follow the 2017 or 2020 version. It is clarified that both versions are fundamentally the same, with only minor amendments, such as updates to referenced acts like the Companies Act. The key content and objectives remain consistent, making either version suitable for study. Viewers are advised not to waste time on this distinction.
The Comptroller and Auditor General (CAG) derives its authority to audit Union and State Government companies and corporations from the Constitution and the DPC Act of 1971. The Constitution designates the CAG as the sole authority responsible for auditing the accounts of all levels of government, including Union, State, and Union Territories. Sections 13, 16, and 17 of the DPC Act further task the CAG with auditing government expenditures, receipts, and other transactions.
Section 14 of the DPC Act specifies the CAG's duty to audit substantially financed bodies, authorities, government companies, and other corporations. Specifically, Section 14 outlines the auditing of substantially financed bodies and authorities, while Section 19 addresses the auditing of government companies. These sections are crucial for understanding the breadth of the CAG's audit responsibilities.
There are three primary types of audits: Financial Audit, Compliance Audit, and Performance Audit. Financial Audit involves checking financial statements for proper preparation, completeness, and presentation, including disclosures. Compliance Audit verifies adherence to constitutional provisions, applicable laws, regulations, rules, and instructions. Performance Audit assesses whether an organization's working is economical, effective, and efficient.
The scope of an audit, as defined by Section 23 of the DPC Act, refers to the types of audits to be conducted, such as financial, compliance, performance, or IT audits. It also includes the assessment of internal controls. This encompasses the definitions and classifications of various audit methodologies.
The extent of an audit, also defined under Section 23 of the DPC Act, refers to the quantum of audit and includes four key aspects: the period of coverage (e.g., past five years), the specific units of the auditable entity to be examined, the extent of testing (e.g., 50% or 60% sampling), and the boundaries of audit inquiry. These factors determine how comprehensively an audit will be conducted.
The CAG is an independent body, meaning that the executive cannot issue direct instructions related to audit. While the executive can request specific audits, the final decision to accept or reject such requests rests solely with the CAG. The CAG's independence ensures unbiased auditing processes. Additionally, auditors typically cannot be members of management committees, offering advice in an advisory or recommendatory capacity. The CAG also has the authority to engage external specialized agencies for audit activities.
Requests for special audits of specific programs or projects are considered by the CAG only if they come with the approval of the Secretary of the concerned department. The request must detail the necessity of the special audit, include information on any previous inquiries or investigations, and specify the period to be covered. The CAG has the final authority to decide whether to conduct such a special audit.
The results of a special audit are reported by the CAG to the Secretary of the requisitioning department. If the department belongs to a Union Territory with a legislative assembly, the results are also reported to the Secretary of the Finance Department. The CAG retains the power to communicate special audit results to the Ministry of Finance and may choose to include these findings in its overall audit report.