Regulation on Audit and Accounts

Sl Points Key to point

No.
Introductory
1. Regulation of Audit and Accounts has been issued by the CAG in pursuant of Section 23 DPC
2. These Regulations shall apply to IAAD and all ministries and departments of the Govt.
as well as bodies, authorities and enterprises, to which the audit or accounts
jurisdictions of the CAG extend.
3. Audit Board is constituted by the CAG for performance audits of Central Public Sector
Undertakings;
4. a memorandum or letter issued during the course of audit for eliciting information, Audit Memo
confirmation of facts or any other matter considered necessary by the audit officer in
conduct of audit
5. a note issued by an audit office containing the results of audit conducted with Audit Note
reference to data, information or documents available in an audit or accounts office
6. Audit report of the Comptroller and Auditor General Article 151
Sec 49 of UT Act
7. the committee constituted by an Accountant General (Audit) for finalisation of Audit Review
performance audits of State Public Sector Enterprises; Committee
8. Government company means a Government company as defined under Section 617
of the Companies Act, 1956
9. A company covered under Section 619B of the Companies Act, 1956 Deemed Govt.
Company
10. An auditor, by whatever designation called, generally appointed by a State Govt. for Local Fund
audit of accounts of panchayati raj institutions and/or urban local bodies Auditor
11. The detailed instructions on audit or on accounting matters being consistent with the Practice Note
Regulations, standing orders and guidelines issued by the CAG
12. an audit report containing audit observations on the accounts of an authority, body or Separate Audit
corporation whether or not required to be laid before the legislature; Report
13. an auditor or an auditing firm appointed under the Companies Act, 1956 for the audit Statutory
of accounts of a Government company or a deemed Government company Auditor
General
14. The CAG is the sole authority prescribed in the Constitution entrusted with the
responsibility of audit of accounts of the Union and of the States.
15. The audit reports of the CAGare placed before Parliament or the legislature of the
State or the Union Territory, as the case may be.
16. The duties of the CAG also extend to audit of Government companies and corporations
and bodies and authorities in accordance with the laws made by the legislature and
rules made thereunder.
17. whether the financial statements are properly prepared, are complete in all respects Financial audit
and are presented with adequate disclosures
18. whether the provisions of the Constitution, the applicable laws, rules and regulations Compliance
made thereunder and various orders and instructions issued by competent authority audit
are being complied with
19. the extent to which an activity, programme or organisation operates economically, Performance
efficiently and effectively audit
20. Constitution>Regulation>Standing Orders>Guidelines>Practice Note
21. (i) To inspect any office of accounts under the control of the Union or of a State, Section 18 (1)
including treasuries and such offices responsible for the keeping of initial and DPC Act
subsidiary accounts, as submit accounts to the CAG
(ii) to require that any accounts, books, paper and other documents which deal with
or form the basis of or are otherwise relevant to the transactions to which his duties

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 in respect of audit extend, shall be sent to such place as the CAG may appoint for his
inspection and
(iii) to pose such questions or make such observations as the CAG may consider
necessary to the person in charge of the office and to call for such information as the
CAG may require for the preparation of any account or report which it is his duty to
prepare.
22. The person in charge of the office or department, the accounts of which are to be Section 18 (2)
inspected and audited by the CAG, to afford all facilities for such inspection and to DPC Act
comply with requests for information in as complete a form as possible and with all
reasonable expedition.
23. Auditors should ordinarily not become members of management committees and if
advice is to be given, it should be conveyed as audit advice or recommendation and
acknowledged clearly as such
24. There is no power of direction by the executive in relation to the performance of the Independence
audit mandate, however, this does not preclude requests to the CAG by the executive of Audit
proposing matters for audit. Decision in this regard shall rest finally with the CAG
Scope and Extent of Audit
25. The scope and extent of audit shall be determined by the CAG u/s 23
26. Audit scope is determined to ensure that ensuring that the objectives of audit are
achieved.
27. The scope of audit includes the assessment of internal controls in the auditable
entities. Such an assessment may be undertaken either as an integral component of
an audit or as a distinct audit assignment.
28. The quantum of audit including the period, the units of the auditable entity, the extent Extent of Audit
of test check and the boundaries of audit enquiry to be covered in an audit.
29. the CAG may, dispense with any part of detailed audit of any accounts or class of Section 24 of
transactions and apply such limited check in relation to such accounts or transactions DPC Act
as he may determine.
30. (i) with reference to such accounts, vouchers and records as may be received in the Conduct of
audit office and/or in the accounts office and may include online data, information Audit
and documents of the auditable entity
(ii) in the office of the auditable entity or at the site where the relevant records for
audit are available or at such other place as may be decided by Audit.
31. When request is made with the approval of the Secretary to Government of the Special Audit
concerned department
32. Request shall state the justification and reasons that necessitate a special audit,
including the results of any preliminary inquiry, investigation or study that may have
already been conducted
33. Request should specify the period to be covered in the special audit.
34. The decision of the Comptroller and Auditor General or any officer so authorised in
regard to the special audit shall be final
35. The Accountant General (Audit) shall report the results of the special audit to the
Secretary to Government of the concerned department
36. In case of a State or a Union Territory with legislative assembly, also report these
results to Secretary to Government, Finance Department.
37. The CAG reserves the right to communicate the results of any special audit to the
Ministry of Finance, Government of India and to include them in the audit report.
Guiding Principles of Auditing Standards
38. Provide guidance to the auditor to help determine the auditing steps and procedures Auditing
that should be applied in audit and constitute the criteria or the yardstick against Standards
which quality of audit results is evaluated.
39. (i) Auditing standards provide the framework for performing high quality audit. Relevance &
(ii) Auditing standards shall apply both to the individual auditor and the audit Applicability
department.
Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
 (iii) auditing standards shall apply to all types of audit including financial audit,
compliance audit and performance audit.
(iv) Auditing standards shall be consistent with the guiding principles of auditing
Standards
40. (i) Basic postulates (ii) General standards (iii) Field standards (iv) Reporting standards Scope of
auditing Std.
41. basic premises and requirements which help in developing auditing standards and Basic Postulates
guide the auditors in forming their opinions and reports, particularly in cases where
no specific standards apply.
42. (i) complied with by the auditors in all matters that are deemed material. Elements of
(ii) own judgement to the diverse situations that arise in the course of audit. Basic Postulates
(iii) effective accountability process in operation.
(iv) The Government shall be responsible for establishment, development and
enforcement of adequate information, control, evaluation and reporting systems
within the Government to facilitate the accountability process
(v) promulgation of acceptable accounting standards for financial reporting and
disclosure by competent Govt. authorities
(vi) adequate system of internal control by Govt.
(vii) cooperation of auditable entities in the course of audit
(viii) All audit activities shall be consistent with the audit mandate of the CAG.
(ix) avoid conflict of interest between the auditor and the auditable entity.
43. Standards that describe the qualifications of the auditor and the audit institution, the General
compliance of which enables them to carry out the tasks related to conduct of audit Standard
and reporting of audit findings in a competent and effective manner.
44. These standards establish a foundation for credibility of work of the auditor and the
audit institution.
45. (i) Independence (ii) Professional Competence (iii) Due Care (iv) Professional Elements of
Judgement (v) Quality Control (vi) General Std.
46. Standards that provide an overall framework for conducting and managing an audit. Field Standards
Separate field standards may be formulated for financial audit, compliance audit and
performance audit.
47. The field standards are related to both the general standards and Reporting Standards
48. (i) Planning (ii) Supervision and review (iii) Examination and evaluation of internal Elements of
controls (iv) Compliance with applicable laws, rules and regulations (v) Audit evidence Field Standard
49. Standards that provide an overall framework for the auditor and the audit institution Reporting
for reporting the results of audit. Standards
50. The reporting standards shall apply equally to all kinds of reports submitted by the
Government auditors to the executive and the legislature, including inspection
reports, audit reports and audit certificates on financial statements or statements of
expenditure.
51. (i) Reporting standards shall be meant to assist, and not to supersede
(ii) Prudent judgement of auditor in framing conclusions and recommendations
(iii) Report should be Complete, Accurate, Objective, Convincing, Clear, Concise,
Constructive and Timely
(iv) The form and content of all audit opinions and reports need to be consistent with
the principles laid down in regard to (a) objectives and scope, (b) completeness, (c)
addressee, (d) identification of subject matter, (e) legal basis, (f) compliance with
standards, and (g) timeliness.
(v) Audit opinion on the basis of materiality by value, nature and context
(vi) In some case auditors should report illegal acts promptly to the audited entity
without waiting for the full report to be prepared after the audit.
(vii) The reporting of instances of fraud and corruption need not wait for final report
of the auditor

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 (viii) Reporting on weakness/deficiency in internal control, financial management
system.
(ix) In follow up of recommendations, the auditor should maintain objectivity and
independence
(x) Audit reports shall be forwarded by the audit department to the appropriate
authorities of the audited entity.
(xi) Systems and procedures should be in place to assess whether adequate, prompt
and proper follow up action has been taken on audit reports.
Financial Audit
52. Under the Constitution of India and the Act, it is the duty of the CAG to audit and
report on the accounts of the Union Government and of the Governments of each
State and Union Territory having a legislative assembly.
53. These reports are submitted to the President or the Governor of a State or the
Administrator of a Union Territory having a legislative assembly, as the case may be,
for being placed before the appropriate legislature.
54. The CAG examines and certifies the Finance Accounts and the Appropriation Accounts Certification of
of the Union and of each State and the Union Territory having a legislative assembly, Govt. Accounts
irrespective of the agency that is responsible for their compilation.
55. Accounts that show the receipts and disbursements of the Government for the Finance
financial year, together with the financial results disclosed by the revenue and capital Accounts
accounts, the accounts relating to public debt and assets and other liabilities as
prescribed.
56. Accounts that show the expenditure of the Government compared with the amounts Appropriation
authorised by the legislature with explanations for significant variations between the Accounts
two by way of saving or excess beyond the prescribed limits of such variations.
57. The primary purpose of financial audit is to verify whether the accounts of Checking point
Government are properly prepared, are complete in all respects and are presented of financial audit
with adequate disclosures.
58. (i) Books of accounts and the financial statements for their compliance with the
applicable laws/regulation/accounting principle/format etc.
(ii) Completeness, accuracy, timeliness and adequacy of disclosures of books of
accounts
59. (i) the amount of actual expenditure for its legal availability for and application to the Additional point
service or purpose in accordance with the scope and intent of the grant for checking
(ii) the orders of re-appropriation and surrender of funds for their legality, Appropriation
competence and propriety and Accounts
(iii) the explanations for the significant variations between the amounts of actual
expenditure and the amounts authorised by the legislature, beyond the prescribed
limits of such variations, for their veracity.
60. Government departments shall send copies of all orders of re-appropriation and
surrender of funds to the audit office and the accounts office as soon as these are
issued.
61. A consolidated statement of all such orders issued during a financial year shall also be
sent to the audit office and the accounts office so as to reach within one month after
the close of the financial year.
62. A nil statement shall be sent if no such order was issued.
63. Re-appropriation/Surrender of fund shall comprehensively and explicitly state the
reasons
64. Government departments shall furnish to the audit office and the accounts office,
within such time as may be specified, reasons for any excess or shortfall in expenditure
beyond the limits prescribed for the purpose under any unit of appropriation vis-à-vis
the amount provided for it.

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65. (i) reason for significant variation between the amounts of expenditure and the Information to
amounts of receipts of the year of accounts and the corresponding amounts for the be furnished to
preceding year the audit Office
(ii) Statement of periodical adjustment with relevant orders
(iii) Reason for difference of cash balance as per RBI and books of accounts
(iv) Explanation for any unusual including adverse and insufficient balances
(v) Reason for variation between CB (PY) and OB (CY)
(vi) Outstanding and overdue loan and interest
(vii) Explanation for variation in figure as per detailed account and books of
accounts/Financial statement
(viii) Statement of guarantee and guarantee fees (original, outstanding, received in
arrears, invoked during the year etc.)
(ix) details of works having excess expenditure than the limit prescribed
(x) Year-wise amount outstanding under Remittance and Suspense Accounts.
Compliance Audit
66. Type of audit that examines the transactions relating to expenditure, receipts, assets Compliance
and liabilities of Government for compliance with Audit
(i) the provisions of the Constitution of India and the applicable laws and
(ii) he rules, regulations, orders and instructions issued by the competent authority
either in pursuance of the provisions of the Constitution of India and the laws or
delegation
67. intra vires the provisions of the Constitution of India and the laws Legality
68. Sufficiently comprehensive and ensure effective control over Government receipts, Adequacy
expenditure, assets and liabilities
69. clear and free from ambiguity and promote observance of probity in decision making Transparency
70. judicious and wise Prudence
71. effective and achieve the intended objectives and aims Effectiveness
72. Copies of all rules, regulations and general orders regulating the raising of revenues,
incurring of expenditure and liabilities and management of assets and liabilities, as
soon as these are issued shall be sent to Audit & Accounts Office
73. Any revision of rules or substantive codes undertaken by the Govt departments and
having financial, accounting or auditing implications may be referred to the concerned
AG (A&E) or AG (Audit), as the case may be, for scrutiny before issue.
74. Audit of expenditure from Consolidated Fund of Union/State/UT with Leg. Assembly Section 13
75. Audit of expenditure from Contingency Fund & Public Account of Union/State/UT with Section 13 (2)
Leg. Assembly (e)
76. Audit of expenditure incurred from the Consolidated Fund examines and verifies
whether adequate, proper and sound systems and procedures are in place and are
being complied with, both in letter and spirit, for spending public money
77. (i) expenditure is within the scope and intent of the grant and does not attract the
limitation of new service or new instrument of service
(ii) Authorisation by the authority that is competent to do so
(iii) Compliance with the requirement of the applicable laws/rule/regulation etc.
(iv) Evidence by way of vouchers, payees’ acknowledgements, etc.
(v) Recorded in the books of accounts of spending officer
(vi) Accounting in the books of Govt.
(vii) Monitoring, control and reporting as prescribed
(viii) compliance with the broad and general principles of financial propriety.
78. Copies of all orders sanctioning expenditure issued by Government departments shall
be endorsed or otherwise sent to the audit office as soon as these are issued.
79. Heads of departments shall also send to the audit office quarterly statements on the
15th day of each of the months of July, October, January and April, of all sanctions
issued in respect of their department during the preceding quarter.

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80. A nil statement shall be sent in case no such order was issued during the preceding
quarter.
81. The CAG may exempt any department or a particular class or classes of orders from
the requirement of sending copies to audit office.
82. Copies of contract agreements need not be sent to the audit office. Only quarterly
statements (including nil statements) of all contracts entered into in the preceding
quarter need to be sent to audit office
83. Audit may also examine the transactions for their legality, competence and propriety
and
(i) in the case of Public Account, for the availability of credit for any withdrawal and
(ii) in the case of Contingency Fund, for the availability of sufficient balance in the Fund
for any amount of advance as well as timely resumption to the Fund of any such
amount
84. Copies of all sanctions of advance from the Contingency Fund as well as resumption Finance Ministry
of the advance to the Contingency Fund as soon as these are issued to be sent to audit /Department
and accounts offices by
85. Audit of receipt to satisfy that the rules and procedures are designed to secure an Section 16
effective check on the assessment, collection and proper allocation of revenue and
are being duly observed.
86. Audit of receipts includes an examination of the systems and procedures and their Points of audit
efficacy in respect of of receipt
(i) identification of potential tax assessees, ensuring compliance with laws as well
as detection and prevention of tax evasion;
(ii) Pursuit of claim with diligence and abandonment/reduction with authority
(iii) Prompt investigation of fraud, illegal cases and avoid recurrence
(iv) Use of discretionary power in appropriate manner
(v) Appropriate action to safeguard the interest of Govt. against orders passed by
departmental appellate authorities
(vi) Schemes of the government
(vii) Measures for improvement of revenue administration
(viii) Maintenance of records for arrears and speedy its recovery
(ix) Refund, rebate, remission, drawbacks etc
(x) Achievement of target, accounting and reporting the receipt
(xi) Other ancillary and non-assessment functions
(xii) Any other matter as determined by the CAG
87. The department shall furnish within six months of the close of each FY, an annual
statement to the AG (Audit) containing the details of follow up action taken on audit
observations, including recoveries, in respect of accepted paragraphs included in the
audit reports laid before Parliament or legislature till the end of that FY
88. Authority of the C&AG for audit of stores and stock Section 17 (2)
(e)
89. The accounts of stores and stock shall be kept in the manner prescribed by the Union
Government in consultation with the CAG
90. (i) establishment, proper assessment and authorisation of requirement of stores
(ii) Cost-effective procurement of store
(iii) Receipt, inspection, custody, issue and accounting of store
(iv) Segregation of duties of personnel and reconciliation of store accounts with
books of accounts.
(v) Periodical physical verification and reconciliation
(vi) Identification and disposal of obsolete and surplus store
91. Audit shall not normally assume responsibility for physical verification of stores
which rests with the Government. It, however, reserves the right to investigate store
balances and highlight discrepancies.

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92. CAG to audit trading, manufacturing and profit and loss accounts and balance Section 13 (2)
sheets and other subsidiary accounts kept in any department of the Union or of a (e)
State or of a Union Territory having a legislative assembly and to report on accounts
so audited by him.
93. Audit of grants-in-aid and loans is primarily an extension of audit of expenditure
and the broad principles of audit of expenditure shall apply.
94. (i) Purpose for sanction (ii) Proper and fair identification and selection of Key of audit of
loanee/grantee (iii) determination of amount of assistance and its timely release (iv) loan/grant-in-
proper accounting by loanee/grantee (v) fulfilment of condition of assistance (vi) aid
Judicious use of assistance and achievement of objectives (vii) Refund of unused
amount and (viii) timely recovery of loan and interest on it.
Performance Audit
95. an independent assessment or examination of the extent to which an organisation, Performance
programme or scheme operates economically, efficiently and effectively. Audit
96. Minimising the cost of resources used by acquiring them in due time, appropriate Economy
quantity and quality and at the best price.
97. Resources include (i) Human (ii) Financial and (iii) Material
98. To assess whether resources have been acquired, held and used economically and
acquired in due time, in appropriate quantity and quality at the best price leads to
judging
99. The relationship between resources employed and outputs delivered; in terms of Efficiency
quantity, quality and timing.
100. To assess whether the resources have been put to optimal or satisfactory use or
whether the same or
similar results in terms of quality and turn-around time could have been achieved with
fewer resources to determine
101. relationship between the quality and quantity of goods and services yielded and the
cost of resources used to produce them, in order to achieve the results indicates
102. A finding on efficiency can be formulated by means of a comparison with similar
activities, with other periods or with a standard, which the entity has explicitly
adopted.
103. When matters are so complex that there are no standards to weigh the efficiency,
assessments must be based on the best practices and available information.
104. Efficiency embraces aspects such as
(i) human, financial and other resources are efficiently used
(ii) n public sector programmes, entities and activities are efficiently managed,
regulated, organised and executed
(iii) services are delivered in a timely manner and
(iv) the objectives of public sector programmes are met cost-effectively.
105. Meeting the objectives set and achieving the intended results. Effectiveness
106. It addresses the issue of whether the programme/activity has achieved its objectives.
When focusing on effectiveness, it is important to distinguish between the immediate
outputs or products and the ultimate impacts or outcomes.
107. Outcomes are important to the effectiveness of programmes/activities but may be
more difficult to measure and assess than the inputs and outputs.
108. Effectiveness embraces aspects such as whether
(i) objectives of and the means provided are proper, consistent, suitable or relevant
to the policy
(ii) observed direct or indirect social and economic impacts of a policy are due to the
policy or to other causes
(iii) identify factors inhibiting satisfactory performance or goal-fulfilment
(iv) the programme complements, duplicates, overlaps or counteracts other related
programmes

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 (v) assess the adequacy of the management control system for measuring, monitoring
and reporting a programme's effectiveness and
(vi) Identify ways of making programmes work more effectively.
109. The responsibility for the development of measurable objectives and performance
indicators as also the system of measurement rests with the Government
departments or heads of entities.
110. Process of PA
(i) entry conference (ii) issuance of audit engagement letter (iii) data collection process
(iv) collecting audit evidence (v) developing audit findings and conclusions and
developing recommendations
111. Reason for effective communication
(i) PAs are not conducted on a regular basis, hence channel of communication may not
already exist
(ii) Often there are no predefined criteria and therefore an intensive exchange of views
with the audited entity is necessary.
(iii) An active effort is required to obtain insight into the points of view of the various
stakeholders to bring out a balanced report
(iv) Effective communication increases the likelihood that audit recommendations will
be implemented by the stakeholders.
112. Entry conference at the commencement of performance audit is to be held with Entry
Secretary of the department concerned by the Accountant General. Conference
113. Wherever, more than one department/agency is involved, representation from such
agencies/departments should be insisted upon.
114. The purpose of this conference is to inform the entity about the areas to be audited
along with audit objectives, the audit approach and the time-frame within which the
audit is expected to be carried out.
115. A protocol for conduct of audit is to be set up during this conference including
nomination of liaison officers, production of records, arranging joint inspections,
authentication of audit evidence including photographs etc., issuing of audit
observations, time period for replies to be received and other logistic arrangements.
116. Minutes of the proceedings which should be shared with the audited entity and
acknowledgement requested.
117. The performance audit should be concluded with an exit conference with the Chief Exit Conference
executive of the audited entity e.g. Secretary/ Pr. Secretary to the Government
concerned as the case may be.
118. Wherever, more than one department/agency is involved, representation from such
agencies/departments should be insisted upon.
119. The AG or the Group officer should lead the exit conference and all audit findings,
conclusions and recommendations are to be discussed and as far as possible direct
responses of the audited entity are to be solicited and recorded.
120. The minutes of exit conference should be recorded and endorsed to the entity with a
request to acknowledge the minutes within two weeks stating that in case of non-
receipt of acknowledgement within stipulated period, it will be presumed that audited
entity concurs with the minutes.
121. Where the exit conference could not be held even after pursuance, this fact should be
recorded in the report.
122. The audit of bodies and authorities, other than Government establishments and 14, 15, 19(2),
companies, by the Comptroller and Auditor General is governed by the provisions 19(3), 19A and
contained in Sections 20 of the Act.
123. audit the receipts and expenditure of a body or authority if Section 14 (1)
(i) the amount of Government grant or loan paid to it in a financial year is not less than
rupees twenty-five lakh (₹2500000) and also
(ii) the amount of such grant or loan is not less than seventy-five per cent (75%) of its
total expenditure during the year.

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124. with the previous approval of the President or the Governor of a State or the Section 14 (2)
Administrator of a Union Territory having a legislative assembly, as the case may be,
audit all receipts and expenditure of a body or authority where the amount of
Government grants or loans to the body or authority in a financial year is not less than
rupees one crore (₹10000000).
125. Where the receipts and expenditure of a body or authority are audited by the CAG Section 14 (3)
under sub-section (1) or (2) of Section 14 for a particular year, CAG is authorised under
Section to continue to audit its receipts and expenditure for a further period of two
years
126. Governments and heads of departments which sanction grants and/or loans to bodies
or authorities shall furnish to the audit office by end of July every year a statement of
such bodies and authorities to which grants and/or loans aggregating rupees ten lakh
or more were paid during the preceding year indicating amount of assistance, purpose
and total expenditure of that body
127. (i) the aggregate of the amounts of grant(s) and loan(s) paid to a body or authority Quantum of
shall be reckoned together Govt. assistance
(ii) the amounts of grant(s) and loan(s) paid to a body or authority by the
Union/State/UT Government shall be reckoned together and
(iii) the amounts remaining unspent out of grant(s) and loan(s) paid to the body or
authority during preceding year(s) but not refunded to the Government.
128. The audit office shall communicate the results of audit (IR) to the chief executive
officer of the body or authority with a copy to administrative ministry/department
129. the CAG is authorised to scrutinise the procedures by which the sanctioning authority Section 15 (1)
satisfies itself as to the fulfilment of the conditions subject to which such grants or
loans were given from Consolidated Fund
(ii) authority or body, shall not be a foreign state or international organisation,
(iii) CAG will be authorised to have access to books of accounts of grantee
body/authority with reasonable previous notice
130. President/Governor/Administrator may, with the consultation of the CAG, relieve the Section 15 (2)
CAG from such scrutiny
131. Audit of accounts of corporations established by or under law made by Parliament are Section 19 (2)
performed and exercised in accordance with the provisions of the respective
legislations.
132. Every corporation that is subject to audit by the CAG shall send copies of the agenda
notes and minutes of the meetings of its governing body and the audit committee, if
formed, to the Accountant General (Audit).
133. Corporation shall comply with the accounting standards prescribed by the ICAI
134. In addition to the financial audit of accounts of a corporation, the CAG may conduct
any other types of audit where scope of audit may extend to more than one FY
135. On the completion of financial audit, the audit office shall send to the chief executive
officer a draft separate audit report that will form part of the audit certificate on the
accounts.
136. A copy of the same shall also be sent to the Government in case it contains any
observation on which reply of the Government is necessary
137. Reply to the above shall be furnished within two weeks of issue such other period as
prescribed failing which it shall be presumed that Executive/Govt. concurs the findings
138. The AG (Audit) shall send the audit certificate and the separate audit report to the
Secretary to Government of the concerned department with a copy to the CEO.
139. The CEO shall place the audit certificate and the separate audit report before the
governing body and intimate to the AG (Audit) the date on which these are presented
to the governing body
140. The Government shall cause every audit certificate and separate audit report to be Section 19A
laid before appropriate legislature(s). Date to AG will be intimated by Secretary.

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141. The results of other audits including compliance and performance audits of a
Government corporation are reported through audit notes, inspection reports and
audit reports.
142. The responsibility for settlement of audit observations is that of the management of
the corporation.
143. In case a large number of audit observations included in the inspection reports remain
outstanding for more than two years, each such corporation shall constitute an ‘audit
arrears committee’ consisting of sufficiently senior officers of the corporation
144. The concerned Government may take steps to ensure constitution of these
committees and their effective functioning.
145. Entrustment of Audit of the accounts of State Govt./UT Corporation to the CAG by the Section 19 (3)
Governor/Administrator with consultation of the CAG and after giving due
opportunity to corporation
146. Entrustment of Audit of the accounts of body/authority, the audit of which has not Section 20 (1)
been entrusted to the CAG, by the President/Governor/Administrator with
consultation of the CAG and in the manner agreed to by the CAG and the Govt.
147. CAG may propose President/Governor/Administrator regarding entrustment of Audit Section 20 (2)
of the accounts of body/authority, the audit of which has not been entrusted to the
CAG.
148. Entrustment of audit u/s 20 (1) and (2) if it in the public interest and after giving Section 20 (3)
reasonable opportunity to the concerned body or authority to make representation
149. (i) Entrustment of audit preferably for 5 year. Review after this period. Condition for
(ii) Scope, extent and manner shall be decided by the CAG audit u/s 20(1)
(iii) Report to Governing body and Government concerned
(iv) CAG have the right to report the results of audit to Parliament/Legislature
(v) Expenditure on this account shall be borne by the body/authority concerned
150. Proposal to CAG for audit
(i) Union Govt. & UT without Legislative Assembly-O/o the CAG
(ii) State Govt. & UT with Legislative Assembly-AG (Audit) concerned
151. The letter of entrustment of audit of a body or authority to the CAG shall be issued in
the name of the President/Governor/Administrator as the case may be
Audit of Government Companies
152. the duties and powers of the CAG in relation to the audit of accounts of Govt. Section 19 (1)
companies shall be performed and exercised by him in accordance with the provisions
of the Companies Act,
153. The accounting standards and standard audit practices issued by the ICAI shall be kept
in view while conducting the audit of Govt. companies
154. Copies of the agenda notes and minutes of the meetings of its board of directors,
board level committees and the audit committee shall be sent to the AG (Audit)
155. The administrative ministry/department concerned shall intimate the CAG in writing
about the formation/cessation/conversion of a Govt. company and forward a copy of
its certificate of incorporation within one month of its incorporation.
156. A Govt. company shall also intimate to the CAG about its formation/conversion along
with the shareholding pattern, details of the management and a copy of the
memorandum of association and articles of association within one month of its
incorporation.
157. (i) The statutory auditor of a Govt. company shall be appointed by the CAG from Statutory
amongst persons qualified to act as auditors under the Companies Act, 1956. auditor
(ii) Appointment for a FY and re-appointment on year to year basis unless special
circumstances warrant appointment for a longer period.
(iii) The total period of appointment including the initial appointment should not
ordinarily exceed four financial years.

Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)

158. The statutory auditor shall send acceptance of the audit assignment in writing to the
CAG within three weeks of the date of issue of communication of appointment, failing
which the offer of appointment is liable to be cancelled without any notice.
159. Termination of Statutory auditor before normal term of engagement only after giving
him/her due opportunity for his/her representation.
160. In case of serious irregularities on the part of statutory auditor, the CAG may
constitute a committee and debar him/her on the recommendation of the committee
after giving him/her due opportunity to represent for period the CAG considers fit and
also refer to ICAI for disciplinary action.
161. The statutory auditor should prepare the programme of audit in consultation with the
company and the Accountant General (Audit)
162. On completion of audit, the statutory auditor shall prepare his audit report under the
Companies Act, 1956 and submit a copy to the Accountant General (Audit).
163. The statutory auditor, at the time of submission of his report shall also forward to the
AG (Audit) a copy of any communication containing matters of governance issued by
him to the management of the company
164. The statutory auditor shall attend the meetings of the audit committee, if formed, held
in pursuance of the Companies Act, 1956
165. The statutory auditor shall retain the working paper relating to his/her report for a
period of 5 years unless required for a longer period.
166. The company shall make available the balance sheet and the profit and loss account Supplementary
along with other requisite statement, duly adopted by the Board of Directors and Audit
audited by the Statutory Auditor, to the AG (audit) within 3 months from the close of
the FY.
167. In the case of companies not listed on the stock exchange, the AG (Audit) may extend
the said date by one month.
168. The significant and material observations made in supplementary audit shall be issued
as comments of the CAG under the Companies Act, 1956
169. Any comments made by the CAG upon or supplement to the audit report on the
accounts of the company shall be signed by the AG (Audit) and shall be placed by the
management before the annual general meeting of the company
170. The CAG may, at his discretion, dispense with supplementary audit of the accounts of
a company for any particular year
171. The CAG has, in consultation with the Government of India, established an Audit Board Audit board
for central public sector undertakings.
172. The Audit Board is a permanent body for performance audits of the central PSUs
conducted at periodic intervals focusing on critical areas of their performance.
173. The thematic issues may relate to a particular entity or cut horizontally across several
entities and scope of PA may extend to more than one financial year.
174. The Audit Board shall function in an advisory and recommendatory capacity.
175. (i) Chairperson-Dy. CAG (Commercial) Composition of
(ii) Members-Senior Officers of IAAD as notified from time to time Audit Board
(iii) Co-opted Invitee- One or two experts by Admin. Ministry in consultation with CAG
176. The meetings of the Audit Board shall be held with the available members and there Meeting
shall be no requirement of a quorum. Periodicity not defined.
177. The Audit Board may at its discretion confine itself to making recommendations for
the selection of topics for performance audit and the audit may, thereafter, be
conducted by the AG (Audit) without any further reference to the Audit Board.
178. (i) to consider and make recommendations on the audit objectives, criteria, guidelines, Meetings where
and methodology AB guides the PA
(ii) to consider the draft audit report and make recommendations for its finalisation.
The CEO and the Secretary of the concerned department shall attend such meeting
and there shall be no separate exit conference.

Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)

179. (i) Chairperson-AG (Audit) of the concerned State Audit review
(ii) Members-AG (Audit) or AG (A&E) in a neighbouring State Committee
(iii) Govt. Nominee-CEO & Secretary of the concerned department.
(iv) Technical expert- Nomination by Govt. if required
(v) CAG Nominee- By Dy. CAG/Addl. Dy. CAG (State Commercial)
180. The reports of the CAG in relation to the accounts of a Government company shall be 19A of the Act
submitted to the Government concerned under Section
CAG’s Role in Audit of Panchayati Raj Institutions and Urban Local Bodies
181. The legislature of a State may, by law, make provisions with respect to the Article 243 J and
maintenance of accounts and the auditing of such accounts of panchayati raj 243 Z
institutions (PRIs) and urban local bodies (ULBs). respectively
182. An officer of the State Government, is responsible for audit of panchayati raj Local Fund
institutions and urban local bodies. Auditor (LFA)
183. States where Local Fund Auditor is an officer of the CAG Bihar, Jharkhand
& West Bengal
184. Audit of the PRIs and ULBs by CAG under Section 14, 19 and 20
185. The model forms in which the accounts of PRIs and ULBs may be kept and the forms CAG
in which their budgets may be prepared and presented, have been prescribed by the
186. Functions of technical guidance and support to audit of PRIs and ULBs entrusted to Section 20 (1)
the CAG under
187. (i) Submission of annual plan by the LFA to AG (Audit) by the end of March every year TGS
(ii) Methodology and procedures in accordance with the various acts of the State Govt. arrangement
and guidelines prescribed by the CAG
(iii) Copy of the IRs to AG (Audit) to facilitate him monitor the quality of IRs
(iv) Returns as prescribed by the CAG
(v) AG (Audit) will conduct test check of some of PRIs and ULBs and the report will be
submitted to the LFA. It does not include the certification of accounts of PRI/ULBs
(vi) Reporting matter of serious irregularities to AG (Audit) by the LFA
(vii) Development of internal control by LFA in consultation with the AG (Audit)
(viii) Training and Capacity Building to LFA staff by the AG (Audit)
188. The AG (Audit) will send to the concerned Secretary or Secretaries an annual technical the end of June
inspection report based on the results of audit of PRIs/ULBs conducted by his office every year
during the preceding year by
189. In the States of Bihar, Jharkhand and West Bengal, the technical inspection report shall AG (Audit)
be prepared by the Examiner of Local Fund Accounts and countersigned by
Auditing in Information Technology Environment
190. Audit examines the economy, efficiency and effectiveness of the IT systems in the
utilisation of resources to achieve the organisational goals.
191. (i) Feasibility study (ii) system development (iii) implementation (iv) maintenance. Stages
192. IT audit is conducted to ensure that IT assets are safeguarded and that appropriate
controls are in place to ensure
(i) integrity of the system (ii) reliability, availability and confidentiality of the data and
information (iii) (c) compliance of the system with rules and procedures
193. An auditable entity is required to maintain complete documentation related to all the
stages of development of an IT system.
194. The documentation shall also include user requirement specifications, system
requirement specifications and system design and development details
Audit Evidence
195. The audit evidence retained as working papers and not included explicitly in the final
report of audit, viz. audit notes, inspection reports, audit reports, etc. may be shared
with the auditable entity at various stages of audit.
196. Evidence should be Competent, Relevant and Reliable CRR
197.

Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)

198. If third party evidence as relied upon by auditable entity is found to be insufficient in Accountant
Audit, additional information may be requisitioned by Audit from the auditable entity General (Audit).
with prior approval of the
199. On receipt of such requisition, the same shall be obtained by the auditable entity from
the third party and provided to Audit.
200. The evidence both internal and external used by the audit officer shall normally and
as far as possible be documentary including electronic records, photographs, results
of any study or survey, etc.
201. Conduct of physical verification by the Audit on approval by the AG (Audit)
202. Where external experts are associated, the same shall be intimated to the Govt.
department concerned and auditee entity.
Conduct of Audit
203. It shall be the duty of the head of the office of the auditable entity to provide Section 18
appropriate and reasonable office accommodation and other office amenities to the
audit team for official use and at par with facilities available in the auditable entity.
204. Heads of departments shall supply to the audit office a list of the offices under them December-
as at the end of December so as to reach the audit office before the end of January of January
the following year.
205. The audit office shall as far as possible give advance intimation of a minimum period
of three weeks to the officer in charge of the office to be audited except in case of
surprise check where no advance intimation shall be needed.
206. Information about an auditable entity acquired in the course of the auditor's work
shall not be used for purposes outside the scope of audit. However, this does not
preclude Audit from reporting offences against the law to appropriate prosecuting
authorities wherever necessary.
207. The documents classified as ‘confidential’ or ‘secret’ or ‘top secret’ made available to
Audit shall be dealt with by Audit in accordance with the standing instructions of the
Government for handling and custody of such documents.
208. The inspecting officer may hold a meeting with the officer in charge as soon as the Entry
work of audit commences to discuss objective, scope, methodology etc. Conference
209. Cases of failure to provide data, information and documents shall be reported by the
audit office to the controlling officer and, if considered necessary, the concerned
Government for appropriate action and these authorities shall inform the audit office
about the action taken within three months of such report(s).
210. The inspecting officer and the officer in charge shall discuss the draft inspection report Exit Conference
at the close of audit. The officer in charge shall confirm the facts and figures included
in the draft inspection report.
211. A written record of the proceedings of the meeting duly signed by both the parties
shall be kept.
Audit Notes and Inspection Reports
212. The audit office shall as far as possible issue the inspection report or audit notes within
six weeks from the date of completion of audit or such other period as prescribed in
this regard.
213. The officer in charge of the auditable entity shall send the reply to an audit note or
inspection report within four weeks of its receipt.
214. Even if it is not feasible to furnish the final replies to some of the observations in the
audit note or inspection report within the aforesaid time limit, the first reply shall not
be delayed on that account and an interim reply may be given indicating the likely date
by which the final reply shall be furnished.
215. In the case of an inspection report that relates to the public works department, the
reply shall be sent through the next higher authority along with the observations of
that authority. A copy may also be sent to Head of the Department

Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)

216. The AG (Audit) shall intimate every instance of major irregularity detected in Audit
through a special management letter to the Secretary with a copy to the Head of the
Department within six weeks of the instance coming to notice in audit.
217. The AG (Audit) shall also intimate every such instance to the CAG in the manner
prescribed.
218. a preliminary report by the Govt. confirming or denying the facts within six weeks of
receipt of intimation from him.
219. Where report accepted, a detailed report within three months of preliminary report
indicating remedial measures and actions taken against responsible one.
220. The AG (Audit) may write a management letter to the Secretary to Government of the
concerned department by the end of April every year communicating significant
observations and conclusions emerging out of audit during the preceding year.
221. The Secretary shall inform the AG (Audit) of the action taken within a period of three
months.
222. Govt. may establish an audit committee for the purpose of monitoring and ensuring Audit
compliance and settlement of pending audit observations. Committee
223. Each committee so established shall comprise of a representative each from the
administrative department, Audit and a nominee from the Finance Department
besides the head of the department of the auditable entity.
224. In the case of Central Govt. establishments located in the States, the Ministry may
nominate a State level audit committee in consultation with AG (Audit) for settlement
of audit observations.
225. Minutes of the meetings of the audit committee shall be recorded.
226. Each Head of Department shall in the first quarter of each year make an annual public
statement regarding pending audit observations relating to his department.
Audit Reports
227. The form, content and time of submission of audit reports shall be decided by the CAG
228. The AG (Audit) shall send a copy of the proposed audit observations in the form of a
draft paragraph to the concerned Secretary by name for communicating the
comments, observations and explanation of the Govt. within a period of six weeks
from the date of the letter or within such other period of time as may be specified.
229. The Accountant General (Audit) shall also offer to discuss the draft paragraph with the
Secretary at mutual convenience within the aforesaid period..
230. A discussion may not be necessary in the case of a draft performance audit report that
has been separately discussed with the Secretary at an exit conference
231. The AG (Audit) shall simultaneously send one copy of the draft paragraph to the
Secretary to the Government, Ministry of Finance or Finance Department, by name.
232. The draft paragraph shall be annotated with reference to the supporting audit
evidence.
233. Explanation of the Government on the draft paragraph in writing to the AG (Audit) by
name within the specified period by the secretary concerned
234. The AG (Audit) will proceed on the assumption that the Government has no
comments, observation and explanation in the matter in case a final reply is not
received within the specified period or the extended period agreed to.
235. After the draft paragraph has been finalised for inclusion in the audit report, a copy
shall be sent to the Secretary of the department/ministry concerned and secretary of
Finance Ministry/Department
236. An officer authorised by the CAG shall send copies of the audit report duly signed by
the CAG to the Secretary to the Government, Ministry of Finance or Finance
Department as the case may be, for submission of the audit report to the
President/Governor/Administrator who shall cause to present it to legislature.
237. An unsigned copy of the audit report shall simultaneously be sent to the Secretary to
the President or the Governor or the Administrator.

Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)

238. The AG (Audit) shall send copies of the audit report to the Secretary to Government
of concerned department after the presentation of the report in Parliament or the
legislature, as the case may be.
239. The Secretary of the concerned department shall cause preparation of self-
explanatory action taken note(s) on the audit paragraph(s) relating to his department,
that are included in the audit report, for submission to the PAC/COPU
240. The Secretary of the concerned department shall send two copies of the draft ATN to
the AG (Audit) for vetting who shall return the same duly vetted as soon as possible
but not later than one month of its receipt.
241. The Secretary shall send the requisite number of copies of the vetted note, as
prescribed by the PAC/COPU to the secretariat of PAC/COPU and copy each to Finance
Ministry/Department and AG
242. The Government’s response on the recommendations of the PAC/COPU shall be sent
to the AG (Audit) for vetting before its submission to the respective Committee
243. The AG (Audit) will report cases of delay to Secretary (Expenditure), Ministry of
Finance in the case of the Union Government and to the Chief Secretary/Administrator
in the case of a State/UT with a legislative assembly. Cases of delay may also be
appropriately commented in the audit report.
General Principles of Government Accounting
244. The duties and powers of the CAG in regard to the accounts of the Union and State 10 to 12 and 23
Governments are laid down under Articles 149 & 150 and Sections of DPC
245. The CAG shall perform such duties and exercise such powers in relation to the Article 149
accounts of the Union and of the States and of any other authority or body as may
be prescribed by or under any law made by Parliament.
246. The accounts of the Union and the States shall be kept in such form as the President Article 150
may, on the advice of the CAG, prescribe.
247. Compiling the accounts and for keeping related accounts of the Union and of each Section 10
State and Union Territory
248. Relieve CAG from compiling by President (Union/UT) and Governor with approval
of the President (State Govt.) after consultation with the CAG
249. the CAG shall submit these accounts to President/Governor/Administrator Section 11
250. Relieve from above duty by President (Union/UT) and Governor with approval of
the President (State Govt.) after consultation with the CAG
251. Rendering assistance to the Government Section 12
252. The CAG to lay down general principles of Government accounting. Section 23
253. For the purpose of Section 23 of the Act, it shall be deemed to be the general GAR 1990
principles of Government accounting.
254. Accounting Rules for Treasuries and the Account Code, Volume III issued by or Detailed rules of
with the approval of the CAG accounts
255. Respective accounts manuals and departmental regulation Post & other
technical dept.
256. The format of accounts in respect of autonomous bodies and authorities other than
Government establishments and companies is prescribed by the concerned
Government in consultation with the CAG
257. The format of accounts of PRIs/ULBs recommended by the CAG has been accepted
by the Union Government and has been adopted by many State Governments
258. Set-up in the office of the CAG with the support of the Govt. Government
259. Responsible for making recommendations regarding accounting standards to be Accounting
observed in Government departments and organisations Standards
260. chaired by the Dy. CAG other members CGA, CGDA, Financial Commissioner Advisory Board
(Railways)
261. Entrusted with the responsibility of preparing a framework and a roadmap for shift
to accrual accounting.
Special Provisions
Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
262. Any authority exercised by the AG (Audit) or AG (A&E) under these Regulations
shall be exercisable by any of his superior officers or any other officer so authorised
by the CAG.
263. These Regulations shall not apply to any international assignment relating to audit
or accounts taken up or being taken up by the CAG
264. The CAG may issue any general or special orders and guidelines to carry into effect
the provisions of these Regulations.
265. Removal of doubts, modification and relaxation rest with CAG
266. The standing orders, the guidelines and the practice notes already issued by the
CAG or on his behalf shall continue to apply as immediately before the date of issue
of these Regulations till the same are revised, revoked or modified.

Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)