The Constitution (Article 149) authorises the Parliament to prescribe the duties and powers of the CAG in relation to the accounts of the Union and of the states and of any other authority or body. Accordingly, the Parliament enacted the CAG’s (Duties, Powers and Conditions of Service) act, 1971. This Act was amended in 1976 to separate accounts from audit in the Central government.
The duties and functions of the CAG as laid down by the Parliament and the Constitution are:
1. He audits the accounts related to all expenditure from the Consolidated Fund of India, consolidated fund of each state and consolidated fund of each union territory having a Legislative Assembly.
2. He audits all expenditure from the Contingency Fund of India and the Public Account of India as well as the contingency fund of each state and the public account of each state.
3. 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.
4. He audits the receipts and expenditure of the Centre and each state to satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue.
5. He audits the receipts and expenditure of the following:
(a) All bodies and authorities substantially financed from the Central or state revenues;
(b) Government companies; and
(c) Other corporations and bodies, when so required by related laws.
6. He audits all transactions of the Central and state governments related to debt, sinking funds, deposits, advances, suspense accounts and remittance business. He also audits receipts, stock accounts and others, with approval of the President, or when required by the President.
7. He audits the accounts of any other authority when requested by the President or Governor. For example, the audit of local bodies.
8. He advises the President with regard to prescription of the form in which the accounts of the Centre and the states shall be kept (Article 150).
9. He submits his audit reports relating to the accounts of the Centre to President, who shall, in turn, place them before both the Houses of Parliament (Article 151).
10. He submits his audit reports relating to the accounts of a state to governor, who shall, in turn, place them before the state legislature (Article 151).
11. He ascertains and certifies the net proceeds of any tax or duty (Article 279). His certificate is final. The ‘net proceeds’ means the proceeds of a tax or a duty minus the cost of collection.
12. He acts as a guide, friend and philosopher of the Public Accounts Committee of the Parliament.
13. He compiles and maintains the accounts of state governments. In 1976, he was relieved of his responsibilities with regard to the compilation and maintenance of accounts of the Central Government due to the separation of accounts from audit, that is, departmentalisation of accounts.
The CAG submits three audit reports to the President—audit report on appropriation accounts, audit report on finance accounts, and audit report on public undertakings. The President lays these reports before both the Houses of Parliament. After this, the Public Accounts Committee examines them and reports its findings to the Parliament.
The appropriation accounts compare the actual expenditure with the expenditure sanctioned by the Parliament through the Appropriation Act, while the finance accounts show the annual receipts and disbursements of the Union government.
The role of CAG is to uphold the Constitution of India and the laws of Parliament in the field of financial administration. The accountability of the executive (i.e., council of ministers) to the Parliament in the sphere of financial administration is secured through audit reports of the CAG. The CAG is an agent of the Parliament and conducts audit of expenditure on behalf of the Parliament. Therefore, he is responsible only to the Parliament.
The CAG has more freedom with regard to audit of expenditure than with regard to audit of receipts, stores and stock. “Whereas in relation to expenditure he decides the scope of audit and frames his own audit codes and manuals, he has to proceed with the approval of the executive government in relation to rules for the conduct of the other audits.”
The CAG has ‘to ascertain whether money shown in the accounts as having been disbursed was legally available for and applicable to the service or the purpose to which they have been applied or charged and whether the expenditure conforms to the authority that governs it’. In addition to this legal and regulatory audit, the CAG can also conduct the propriety audit, that is, he can look into the ‘wisdom, faithfulness and economy’ of government expenditure and comment on the wastefulness and extravagance of such expenditure. However, unlike the legal and regulatory audit, which is obligatory on the part of the CAG, the propriety audit is discretionary.
The secret service expenditure is a limitation on the auditing role of the CAG. In this regard, the CAG 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 under his authority.
The Constitution of India visualises the CAG to be Comptroller as well as Auditor General. However, in practice, the CAG is fulfilling the role of an Auditor-General only and not that of a Comptroller. In other words, ‘the CAG has no control over the issue of money from the consolidated fund and many departments are authorised to draw money by issuing cheques without specific authority from the CAG, who is concerned only at the audit stage when the expenditure has already taken place’. In this respect, the CAG of India differs totally from the CAG of Britain who has powers of both Comptroller as well as Auditor General. In other words, in Britain, the executive can draw money from the public exchequer only with the approval of the CAG.