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For competitive exams, understanding the role and functions of constitutional bodies like the Comptroller and Auditor General (CAG) of India is very important. With its oversight of government finances and accountability mechanisms, the CAG plays an important role in ensuring transparency and fiscal responsibility. Aspirants preparing for exams such as UPSC, SSC, banking, and state-level civil services often get questions related to the CAG and its audits. This article covers everything you need to know about CAG UPSC, also addressing frequently asked questions that commonly appear in various competitive exams.
| CAG | Independent authority under the Constitution of India |
| Responsibilities | Head of the Indian audit & account department, chief Guardian of Public purse |
| Constitutional Provisions | Articles 148 to 151, along with relevant schedules and Acts |
| Appointment | Appointed by the President of India, provided tenure of 6 years or until the age of 65, whichever is earlier |
| Independence | Expanding audit scope, amending the CAG Act, adopting collegium-style appointments, adapting to modern governance challenges, leveraging technology, hosting international events for capacity development |
| Functions & Powers | Derived from Constitution, Acts, judgments, government instructions, and regulations |
| Auditing Scope | Covers expenditures from the Consolidated Fund of India, state funds, public-private partnerships, etc. |
| Reporting | Submits audit reports to President/ Governor, laid before Parliament/ State Legislature |
| Oversight | Assists Public Accounts Committee, guides on urgent matters, monitors corrective actions |
| Challenges | Complex audits, PPP scrutiny, appointment process, access to records, shortened tenures, etc. |
| Reforms Suggested | Expanding audit scope, amending CAG Act, adopting collegium-style appointments, adapting to modern governance challenges, leveraging technology, hosting international events for capacity development |
What is CAG?
Table of Contents
The CAG of India holds a unique position, often referred to by Dr. B.R. Ambedkar as the “most important office” alongside the Supreme Court, Election Commission, and UPSC, forming the pillars of a well-functioning democracy. Here’s a closer look at the CAG’s role and ongoing discussions for potential reform.
Appointment, Removal, and Tenure:
- Appointment: Currently, the Central Government appoints the CAG, raising concerns about potential political influence.
- Removal: Similar to a Supreme Court judge, removal requires a complex parliamentary procedure.
- Tenure and Salary: A six-year term with a 65-year retirement age is specified by law, with a salary on par with a Supreme Court judge. Critics argue for codifying these aspects directly in the Constitution for greater security.
Powers and Responsibilities:
- Audit Authority: The CAG audits government finances at all levels – Central, State, and Union Territories. This includes:
- Consolidated Fund, Public Account, and Contingency Fund.
- Trading and manufacturing accounts maintained by government departments.
- Stock and stores to ensure proper inventory management.
- Revenue receipts to identify potential leakages.
- Government-funded bodies and, at times, non-government entities.
- Public Sector Undertakings (PSUs) with varying levels of involvement depending on the specific PSU.
- Financial Reporting: The CAG prescribes the format for maintaining accounts of the Union and States.
- Certification of Net Proceeds: The CAG certifies whether taxes shared with states by the Central Government are calculated accurately (excluding administrative charges).
Accountability and Transparency:
- Audit Reports: The CAG submits reports to the President/Governor, who then present them to Parliament and state legislatures. However, no specific timeframe for tabling these reports is mandated.
- Post-Retirement Restrictions: The CAG is barred from holding any other government position after retirement.
A Case for Reform:
- Appointment Process: The current appointment system, solely at the discretion of the Central Government, raises concerns about potential bias.
- Comparative Practices: Several countries like England, Australia, and the USA involve parliamentary committees or confirmation processes for CAG appointments.
- Broad-Based Committee: A proposal suggests a committee comprising the Prime Minister, opposition leader, and Chief Justice of India for CAG appointments, similar to some less sensitive bodies like the CVC and NHRC.
Must Read: How to Prepare Current Affairs for UPSC?
The Comptroller and Auditor-General (CAG) of India is a prosecutor with a law that hobbles its functioning, a judge without the power to sentence, and a litigant with no right to appeal.
What are your thougts on this statement?
CAG: Roles and Responsibilities
The CAG of India plays a very important role in safeguarding public funds. Its functions are derived from two main sources:
- Article 149: This historical provision, still in effect, empowers the CAG to perform functions similar to those exercised pre-independence under the British.
- CAG (Duties, Powers and Conditions of Service) Act, 1971 (DPC Act): This Act lays out the specific responsibilities of the CAG.
Key Functions of the CAG:
- Auditing Government Finances: The CAG audits and reports on the expenditure incurred by the Central Government, State Governments, and Union Territories. This includes:
- Consolidated Fund: The main purse of the government, requiring parliamentary approval for withdrawals.
- Public Account: Funds like provident funds and small savings, do not need parliamentary approval for withdrawals.
- Contingency Fund: Used for unforeseen expenditures, requiring parliamentary approval after the fact.
- Trading and Manufacturing Accounts: The CAG audits these accounts maintained by the government departments.
- Stock and Stores Audit: This ensures proper management of government inventory (e.g., stationery).
- Revenue Receipts Audit: The CAG verifies that revenue collection procedures are effective in preventing leakages.
- Auditing Government-Financed Bodies: The CAG audits entities substantially financed by the government, and can even audit non-government bodies upon presidential request.
- Public Sector Undertakings (PSUs): The CAG audits PSUs, which are 100% government-owned entities like banks and insurance companies. However, the audit approach can vary:
- Full Audit: The CAG conducts a comprehensive audit.
- Supplementary Audit: The CAG can perform additional audits on top of those conducted by private auditors appointed for PSUs.
- Limited Involvement: Certain PSUs like RBI and LIC are outside the CAG’s purview entirely, with their own audit mechanisms defined by their governing laws.
Must Read: How to Prepare For Competitive Exams
Selecting the CAG: Qualifications Required
There’s no specific qualification mandated for appointing the CAG in India. Traditionally, the position has been filled by individuals from the Indian Audit and Accounts Service (IAAC) or retired IAS officers. You need to be aware of the below arguments in order to prepare the topic: CAG UPSC
Arguments for IAAC Appointees:
- IAAC members possess in-depth knowledge of accounting and auditing procedures.
- The first three CAGs were from the IAAC, establishing a tradition.
Arguments Against IAAC Appointees:
- Appointing from the same service that the CAG audits could raise concerns about impartiality.
- An IAAC background might not provide a well-rounded understanding of broader governance issues.
Arguments for Retired IAS Officers:
- Retired IAS officers bring a wealth of administrative experience to the table.
Concerns with Retired IAS Officers:
- They might be susceptible to favoring their former departments or colleagues.
- Appointments could become influenced by political considerations.
Finding the Right Balance:
Perhaps future selection processes could consider a wider pool of qualified candidates while ensuring better safeguards against bias and corruption.The ideal candidate for CAG should possess a strong combination of:
- A solid understanding of accounting principles and auditing practices.
- The ability to conduct audits impartially and without political influence.
- A proven track record of ethical conduct.
Single Member Body Vs Multi-Member Body
This table provides a comparison between single-member bodies, like the Comptroller and Auditor General (CAG), and multi-member bodies, such as the Board of Audit in Japan or other bodies like UPSC, ECI, and Supreme Court judges. It highlights aspects such as composition, expansion provision, staffing, the possibility of comparative analysis, and effectiveness.
| Aspect | Single Member Body | Multi-Member Body |
| Composition | Consists of a single member | Consists of multiple members |
| Examples | Comptroller and Auditor General (CAG) | Board of Audit in Japan, other bodies like UPSC, ECI, Supreme Court judges |
| Expansion Provision | No provision for expansion mentioned | Can be expanded as needed |
| Staffing | Typically less staffed due to single member | Usually more staffed due to multiple members |
| Comparative Study | No comparative analysis on effectiveness | Comparative analysis possible |
| Effectiveness | Effectiveness may vary based on individual | Collective expertise and perspective may increase effectiveness |
Types of Audits Conducted by the Comptroller and Auditor General (CAG) of India
The Comptroller and Auditor General (CAG) of India plays a very important role in ensuring transparency and accountability in government spending. Section 23 of the DP&C Act empowers the CAG to define the scope of audits conducted. Let’s understand the various types of audits typically performed by the CAG:
1. Compliance Audit:
- This audit ensures funds are spent legally and for their intended purposes.
- Types of compliance audit :
- Legality Audit: Checks if financial transactions comply with relevant laws and regulations.
- Statutory Audit: Evaluates whether activities align with the provisions of governing statutes and acts.
- Transaction Audit: Examines the legality, regularity, and propriety of individual financial transactions. Here, it’s confirmed that funds were available and used as authorized.
2. Financial Audit:
- This audit assesses the accuracy and fairness of financial statements presented by government entities.
- Verifies if proper books of account are maintained.
- Ensures financial statements accurately reflect actual transactions.
3. Performance Audit:
- This audit goes beyond financial aspects, evaluating the effectiveness, efficiency, and economy of government programs and activities.
- Determines if a program achieves its intended outcomes. (e.g., Did the education policy with a ₹100 crore budget lead to the construction of 20 schools?)
- Analyzes if a program delivers results at the lowest possible cost.
- Assesses if resources are used prudently and without waste.
- Performance audits aim to expose lapses in government execution, not simply evaluate individual performance.
4. Efficiency Audit (Not always conducted by CAG):
- This audit evaluates whether financial decisions were made in a cost-effective manner, analyzing alternative approaches and identifying potential savings.
5. Proprietary Audit (Not always conducted by CAG):
- This audit goes beyond compliance and examines the wisdom behind financial decisions, questioning if better alternatives exist.
Why the CAG Should Conduct Audits:
- Audits ensure taxpayer money is used responsibly and effectively.
- These audits have unearthed major financial scams, like the 2G scam.
Government’s Arguments Against Certain Audits:
- Auditors often have the benefit of hindsight, criticizing decisions made with incomplete information at the time.
- Audits might not fully understand the complex circumstances surrounding a decision.
- Audits may create bureaucratic hurdles, slowing down government processes.
The Importance of Proprietary Audit:
- This audit encourages wise financial decisions by questioning their rationale.
- Given the public’s stake in government spending, the CAG has an important role in promoting responsible financial management.
CAG UPSC Questions for Practice
Let us solve some CAG UPSC Questions for practice to check if you have correctly understood the concepts related to CAG UPSC
Who appoints the Comptroller and Auditor General (CAG) of India?
a) Prime Minister
b) President of India
c) Chief Justice of India
d) Parliament
Answer: b) President of India
Which article of the Indian Constitution deals with the provisions related to the CAG?
a) Article 143
b) Article 148
c) Article 151
d) Article 156
Answer: b) Article 148
According to Dr. B.R. Ambedkar, what did he refer to as the “most important office” alongside the Supreme Court, Election Commission, and UPSC?
a) Prime Minister’s Office
b) Ministry of Finance
c) Office of the CAG
d) Ministry of External Affairs
Answer: c) Office of the CAG
What is the tenure of the CAG of India?
a) 5 years
b) 6 years
c) 7 years
d) 8 years
Answer: b) 6 years
Which of the following audits is NOT conducted by the CAG?
a) Compliance Audit
b) Financial Audit
c) Performance Audit
d) Regulatory Audit
Answer: d) Regulatory Audit
The appointment process of the CAG in India is criticized for:
a) Lack of transparency
b) Being too lengthy
c) Involving too many stakeholders
d) Lack of qualifications
Answer: a) Lack of transparency
The removal process of the CAG is similar to that of a:
a) High Court Judge
b) Supreme Court Judge
c) District Court Judge
d) Civil Servant
Answer: b) Supreme Court Judge
Which of the following is NOT a suggested reform for the CAG?
a) Expanding audit scope
b) Adopting collegium-style appointments
c) Reducing the tenure to 4 years
d) Leveraging technology
Answer: c) Reducing the tenure to 4 years
The CAG audits government finances at which level(s)?
a) Central Government only
b) State Governments only
c) Central, State, and Union Territories
d) Municipal level only
Answer: c) Central, State, and Union Territories
What is the role of the CAG in financial reporting?
a) Preparing financial statements
b) Auditing financial statements
c) Certifying financial statements
d) Prescribing the format for maintaining accounts
Answer: d) Prescribing the format for maintaining accounts
What is the primary responsibility of the CAG regarding public funds?
a) Spending public funds
b) Safeguarding public funds
c) Distributing public funds
d) Investing public funds
Answer: b) Safeguarding public funds
Which of the following is NOT an audit conducted by the CAG?
a) Regulatory Audit
b) Compliance Audit
c) Efficiency Audit
d) Performance Audit
Answer: a) Regulatory Audit
What does the CAG certify regarding taxes shared with states by the Central Government?
a) Accuracy of tax calculations
b) Efficiency of tax collection
c) Compliance with tax laws
d) Timeliness of tax refunds
Answer: a) Accuracy of tax calculations
Which historical reference suggests abolishing the CAG position?
a) Nehru Report
b) Sarkaria Commission
c) Pant Appleby’s Suggestion
d) Rajamannar Committee
Answer: c) Pant Appleby’s Suggestion
What term is used to describe the pressure faced by public officials from the CBI, CVC, and CAG?
a) Triple Threat
b) Triple Trouble
c) Three Musketeers
d) The 3Cs
Answer: a) The 3Cs
The appointment process for the CAG in India involves the:
a) President, Prime Minister, and Leader of the Opposition
b) President, Chief Justice of India, and Prime Minister
c) President, Governor, and Chief Justice of India
d) President, Chief Election Commissioner, and Prime Minister
Answer: b) President, Chief Justice of India, and Prime Minister
Which act specifies the responsibilities of the CAG?
a) Indian Audit Act, 1866
b) CAG (Duties, Powers and Conditions of Service) Act, 1971
c) Constitution of India, 1950
d) Central Vigilance Commission Act, 2003
Answer: b) CAG (Duties, Powers and Conditions of Service) Act, 1971
The CAG prescribes the format for maintaining accounts of:
a) Union only
b) States only
c) Union and States
d) Municipalities
Answer: c) Union and States
Which audit evaluates whether financial decisions were made cost-effectively?
a) Performance Audit
b) Compliance Audit
c) Financial Audit
d) Efficiency Audit
Answer: d) Efficiency Audit
What is the age limit for the retirement of the CAG?
a) 60 years
b) 62 years
c) 65 years
d) 70 years
Answer: c) 65 years
The CAG submits audit reports to:
a) Prime Minister
b) President/Governor
c) Chief Justice of India
d) Parliament/State Legislature
Answer: b) President/Governor
According to the provided information, what is the main responsibility of the CAG?
a) Conducting elections
b) Auditing and reporting on government finances
c) Enforcing tax laws
d) Issuing passports
Answer: b) Auditing and reporting on government finances
What was Pant Appleby’s suggestion regarding the CAG position?
a) Strengthen its powers
b) Abolish the position
c) Increase its tenure
d) Expand its scope
Answer: b) Abolish the position
Who appoints the CAG according to the current system in India?
a) Prime Minister
b) President
c) Chief Justice of India
d) Speaker of Lok Sabha
Answer: b) President
The removal process of the CAG is similar to that of a:
a) Cabinet Minister
b) Supreme Court Judge
c) Chief Minister
d) Civil Servant
Answer: b) Supreme Court Judge
Which audit evaluates whether financial decisions were made cost-effectively?
a) Performance Audit
b) Compliance Audit
c) Financial Audit
d) Efficiency Audit
Answer: d) Efficiency Audit
According to the provided information, what is the main responsibility of the CAG?
a) Conducting elections
b) Auditing and reporting on government finances
c) Enforcing tax laws
d) Issuing passports
Answer: b) Auditing and reporting on government finances
What was Pant Appleby’s suggestion regarding the CAG position?
a) Strengthen its powers
b) Abolish the position
c) Increase its tenure
d) Expand its scope
Answer: b) Abolish the position
Who appoints the CAG according to the current system in India?
a) Prime Minister
b) President
c) Chief Justice of India
d) Speaker of Lok Sabha
Answer: b) President
The removal process of the CAG is similar to that of a:
a) Cabinet Minister
b) Supreme Court Judge
c) Chief Minister
d) Civil Servant
Answer: b) Supreme Court Judge
What is the age limit for retirement of the CAG?
a) 60 years
b) 62 years
c) 65 years
d) 70 years
Answer: c) 65 years
The CAG prescribes the format for maintaining accounts of:
a) Union only
b) States only
c) Union and States
d) Municipalities
Answer: c) Union and States
Which audit evaluates whether financial decisions were made cost-effectively?
a) Performance Audit
b) Compliance Audit
c) Financial Audit
d) Efficiency Audit
Answer: d) Efficiency Audit
According to the provided information, what is the main responsibility of the CAG?
a) Conducting elections
b) Auditing and reporting on government finances
c) Enforcing tax laws
d) Issuing passports
Answer: b) Auditing and reporting on government finances
What does the CAG certify regarding taxes shared with states by the Central Government?
a) Accuracy of tax calculations
b) Efficiency of tax collection
c) Compliance with tax laws
d) Timeliness of tax refunds
Answer: a) Accuracy of tax calculations
Which historical reference suggests abolishing the CAG position?
a) Nehru Report
b) Sarkaria Commission
c) Pant Appleby’s Suggestion
d) Rajamannar Committee
Answer: c) Pant Appleby’s Suggestion
What term is used to describe the pressure faced by public officials from the CBI, CVC, and CAG?
a) Triple Threat
b) Triple Trouble
c) Three Musketeers
d) The 3Cs
Answer: d) The 3Cs
The appointment process for the CAG in India involves the:
a) President, Prime Minister, and Leader of Opposition
b) President, Chief Justice of India, and Prime Minister
c) President, Governor, and Chief Justice of India
d) President, Chief Election Commissioner, and Prime Minister
Answer: b) President, Chief Justice of India, and Prime Minister
Which act specifies the responsibilities of the CAG?
a) Indian Audit Act, 1866
b) CAG (Duties, Powers and Conditions of Service) Act, 1971
c) Constitution of India, 1950
d) Central Vigilance Commission Act, 2003
Answer: b) CAG (Duties, Powers and Conditions of Service) Act, 1971
The CAG prescribes the format for maintaining accounts of:
a) Union only
b) States only
c) Union and States
d) Municipalities
Answer: c) Union and States
FAQs
CAG stands for Comptroller and Auditor General. Its function includes auditing government accounts and ensuring financial accountability.
No, the CAG is not necessarily an IAS officer. The position is usually held by a senior civil servant but not exclusively IAS.
CAG stands for Comptroller and Auditor General, a constitutional authority responsible for auditing government finances and ensuring accountability.
Girish Chandra Murmu was appointed as the Comptroller and Auditor General of India on 7th August 2020, succeeding Rajiv Mehrishi.
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