Comptroller and Auditor General: Independence, Scope of Audit and its Role in Administrative Accountability

Financial accountability depends on somebody outside the executive examining what the executive has done with public money and saying so publicly. The Comptroller and Auditor General is that person, and the Constitution protects the office in the manner it protects the judiciary, because an auditor who can be removed by those he audits is useless. Ambedkar described the office as the most important under the Constitution, more so in his view than the judiciary. What the office does has widened considerably: from checking that money was spent with authority, to asking whether it was spent wisely, to examining whether a programme achieved what it was meant to achieve, and in recent years to auditing the revenue share of private companies operating public resources under licence. This topic sets out the office, its independence, the kinds of audit it conducts and the limits of its role.

1. The Office and its Independence

Articles 148 to 151

Article 148(1) provides that there shall be a Comptroller and Auditor General of India, appointed by the President by warrant under his hand and seal, and removed only in like manner and on the like grounds as a Judge of the Supreme Court. Article 148(2) prescribes the oath in the Third Schedule. Article 148(3) provides that the salary and conditions of service shall be as Parliament determines and, until then, as in the Second Schedule, and that neither the salary nor the rights in respect of leave and pension shall be varied to his disadvantage after appointment. Article 148(4) makes him ineligible for further office under the Government of India or of any State after ceasing to hold office. Article 148(6) charges the administrative expenses of his office, including salaries and pensions, on the Consolidated Fund of India, so they are not votable. Article 149 provides that he shall perform such duties and exercise such powers in relation to the accounts of the Union, the States and other authorities or bodies as Parliament may by law prescribe. Article 151 requires his reports relating to the Union to be submitted to the President and laid before each House of Parliament, and those relating to a State to the Governor and laid before the State legislature.

Parliament exercised the power under Article 149 by enacting the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971, which fixes the tenure at six years or until the age of sixty-five, whichever is earlier, and sets out the duties of audit in detail.

2. Kinds of Audit

Kind	The question it asks
Regularity or legality audit	Was the expenditure covered by a sanction and within the appropriation voted?
Propriety audit	Was the expenditure wise, faithful and economical, judged by the standards a person of ordinary prudence would apply to his own money?
Efficiency and performance audit	Did the programme achieve its objectives, and were the resources used economically and effectively?
Receipt audit	Were the taxes and duties due actually assessed and collected, and were exemptions properly granted?
Audit of stores and stock	Were purchases, custody and disposal of stores properly managed?
Audit of government companies and corporations	Conducted under the Companies Act and the governing statutes, with supplementary audit and directions to auditors
Audit of bodies substantially financed from public funds	Under sections 14 and 15 of the 1971 Act, where grants exceed the prescribed thresholds

The movement from the first kind to the third is the most significant development in the office. A regularity audit asks only whether rules were followed, and an administration that observes every rule while achieving nothing passes it. A performance audit asks whether the public got what it paid for, which is a far more useful question and a more contested one, since it comes closer to evaluating policy.

3. The Reach of the Audit

📖 Association of Unified Telecom Service Providers of India v. Union of India, (2014) 6 SCC 110

Facts: Telecom licensees operating under a revenue-sharing arrangement were required to pay the Union a percentage of their adjusted gross revenue as licence fee and spectrum charges. The Comptroller and Auditor General sought to examine the accounts of these private companies to verify whether the revenue on which the share was computed had been correctly stated. The companies objected that they were private entities, that the CAG's mandate extends to the accounts of the Government and of bodies substantially financed from public funds, and that audit of their books was beyond the constitutional and statutory powers of the office.

Held: The Supreme Court upheld the CAG's power to conduct the audit. It held that the spectrum is a natural resource belonging to the people, and that where the Union parts with the right to use it in return for a share of revenue, the receipts of the Union are directly dependent on the accounts of the licensee; the CAG is charged under the Constitution and the 1971 Act with the audit of the receipts of the Union, which necessarily requires examination of the material from which those receipts are computed. The Court held that such examination does not convert the private company into a government body and does not amount to auditing it generally; it is confined to ascertaining whether the Union has received what was due to it. The Court also observed that the CAG's function is not merely arithmetical or accounting: it examines the propriety, wisdom, faithfulness and economy of transactions and reports on them.

Ratio: The CAG's audit of the receipts of the Union extends to examining the accounts of a private licensee where the Union's revenue is computed from them. The office is not confined to accounting but examines propriety, faithfulness and economy.

4. Appointment and its Scrutiny

📖 Arun Kumar Agrawal v. Union of India, (2013) 7 SCC 1

Facts: The appointment of the Comptroller and Auditor General was challenged in public interest proceedings on the ground that the person appointed had held positions in which he might be called upon to audit his own earlier decisions, and that the selection had been made without any transparent procedure, no criteria having been published and no zone of consideration disclosed.

Held: The Supreme Court declined to set aside the appointment. It held that Article 148 vests the power of appointment in the President, that the Constitution prescribes no procedure, no consultation and no eligibility criteria beyond what the office implies, and that the Court cannot read into the Article a selection process that the framers did not provide; the appointment was therefore not liable to be quashed. At the same time the Court observed that the office is of the highest importance to financial accountability, that it is desirable that appointments to it be made from a wider field and through a transparent procedure with published criteria and a broad-based selection, and it left the matter to the Government to consider. On the specific objection, the Court held that no case of bias or conflict had been made out that would vitiate the appointment.

Ratio: The appointment of the CAG is made by the President under Article 148 and the Constitution prescribes no procedure, so the courts will not quash an appointment for want of a selection process, though a transparent procedure is desirable.

5. What the Audit Can and Cannot Do

Question	Position
Was the expenditure authorised and within the grant?	Squarely within the audit
Was it wasteful, extravagant or improper though authorised?	Within propriety audit
Did the scheme achieve its stated objectives?	Within performance audit
Were revenues due to the Union correctly computed and collected?	Within receipt audit, extending to a licensee's accounts (AUSPI)
Was the policy itself a wise one?	Outside; policy is for the executive and the legislature
Should a different method of allocating a resource have been chosen?	The audit may quantify the consequences of the method chosen, but the choice is policy
Can the CAG impose a penalty or recover money?	No; the office reports, and consequences follow from the legislature and other agencies
Are the reports binding?	No; they are laid before the legislature and examined by the Public Accounts Committee

6. Criticisms and Reform Proposals

Single-member office. Unlike the Election Commission and the Central Vigilance Commission, the CAG is one person, and proposals have been made for a multi-member body to distribute responsibility and reduce personalisation of reports.
Appointment without procedure. The absence of published criteria or a broad-based selection process invites the criticism that the auditor is chosen by those to be audited (Arun Kumar Agrawal).
Post facto character. Audit is retrospective, so waste is identified after it has occurred; the answer is that prior approval would make the auditor a participant in administration.
Estimation in performance audit. Where an audit quantifies a notional loss from a policy choice, it necessarily rests on assumptions about the alternative, which is where audit comes closest to evaluating policy and attracts most criticism.
Delay. Reports often relate to years long past, reducing their practical effect.
No power of enforcement. The office reports and nothing more; action depends on the Public Accounts Committee, the executive and other agencies.
The Comptroller function is nominal. Unlike the British office, the Indian CAG has no effective control over the issue of money from the Consolidated Fund and is in substance an auditor only.

⚠ The office is protected like a court because it is expected to be disbelieved

The constitutional protections given to the Comptroller and Auditor General, appointment by warrant, removal only as a Judge, charged salary, a bar on further office, are the protections given to a person whose findings will be unwelcome to the Government of the day and who must be able to publish them anyway. They exist because the value of an audit lies entirely in its credibility: a report that the executive could have influenced is worth nothing, whatever it says. That is also why criticism of the office tends to focus on appointment and on the assumptions behind performance audit, since those are the two points at which credibility can be attacked without disputing the figures, and why the reform proposals concentrate on making the selection transparent rather than on altering the powers.

7. The Position in Summary

The Comptroller and Auditor General is appointed by the President under Article 148 and removed only in the manner and on the grounds applicable to a Judge of the Supreme Court, with charged salary, protected conditions and a bar on further office.
His duties and powers are prescribed by Parliament under Article 149 through the 1971 Act, and his reports are laid before the legislature under Article 151.
Audit has developed from regularity through propriety to performance audit, and extends to receipts, stores, government companies and bodies substantially financed from public funds.
Audit of the receipts of the Union extends to examining the accounts of a private licensee from which those receipts are computed, and the office examines propriety, faithfulness and economy rather than merely accounts (AUSPI).
The Constitution prescribes no procedure for appointment and the courts will not quash one for want of a selection process, though transparency is desirable (Arun Kumar Agrawal); the office reports and cannot itself enforce.

8. Related Topics and Provisions

Public Accounts Committee (Topic 153): the forum in which audit findings are pursued.
Legislative Control over Administration (Topic 149): financial control in the wider scheme.
Administrative Accountability (Topic 147) and Control over Administration (Topic 148).
Public Corporations (Topic 140): audit of government companies and statutory corporations.
Public Interest and Administrative Discretion (Topic 57): the allocation of natural resources.
Constitution of India: Articles 148 to 151, 265 and 266; Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971.