The importance of being CAG

One can understand a government which is at the receiving end of the Comptroller and Auditor General's (CAG) riveting scrutiny criticising the institution of CAG almost instinctively as a reflex action, but not a section of the media which while refusing to give the concerned governments a clean chit, accuses the CAG of overreach and playing to the galleries.

CAG's remit

Contrary to the allegation made, the CAG has not stepped into territories considered out of bound for it. Its remit is not just to comment on the genuineness of receipts and expenditures such as the auditor of a private sector company appointed under the company law.

The Constitution has envisioned for it a more proactive and all-encompassing role. To use a jargon, it is in addition to doing a routine audit understood in the conventional sense, called upon to do both propriety and performance audits.

For example, the statutory auditor of a private sector company would not be bothered if a massive investment has been made in plants that are languishing without producing a single unit for over a number of years assuming there is no financial impropriety involved in the deal, but CAG would be exercised about the matter and report it to the government because idle investments tell on the fortunes of the company sooner or later.

In other words, unlike a statutory auditor of a private sector company, the CAG performs in addition to financial audit, also efficiency and performance audits at the same time. If this is overkill or overreach, then the law should be amended with predictable disastrous consequences.

Why CAG does better

Had the infamous Satyam been audited by CAG under the audit norms expected of it, perhaps the Satyam scandal would not have happened. The independent directors did not have a clue as to the goings on in the company. The statutory auditors confined themselves to books, and did not even bestir to ask for confirmation of deposits from banks with whom these non-existent deposits were purportedly made.

The scheme of things envisioned in the company law in the context of private sector audit breeds buck passing, inefficiency and loss of confidence in the institution of audit.

The CAG may be nosy. After all, an auditor is supposed to be nosy. Small wonder, CAG has won plaudits from the cognoscenti for doing a relatively thorough job. Even chartered accountants auditing public sector companies under the watchful eyes and superintendence and dictates of the CAG do a much better job vis-à-vis the audit of private sector companies.

While this may have something to do with the system of appointment of auditors of the public sector companies, the truth is that well-designed checklists and huge expectations drive them to go the extra mile and not do audit in a perfunctory manner.

In a country where the rule of law is flouted with impunity, constitutional overseers like the Election Commission and CAG are bound to stumble upon violations at every step.

And they cannot be faulted for doing their jobs any more than a diligent school teacher can be accused of fostering inferiority complex in a wayward child.

And when there is a scam every now and then, the CAG cannot help having a field day. It is a pity that a section of the fourth estate of all the people is making a grievance out of vigilance displayed by CAG.

Let there be no doubt that financial propriety and efficiency can be best monitored only by auditors.

(The author is a Delhi-based chartered accountant.)

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