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Bill to do away with CAG role in PSUs' audit

J. Venkatesan

Move based on the recommendations of the J. J. Irani Panel

NEW DELHI: The Centre is planning to take away the powers of the Comptroller and Auditor General of India to scrutinise and audit the working of government companies and public sector undertakings (PSUs) and give the task to chartered accountants.

According to highly placed sources in the government, a committee has been asked to draft a Bill to do away with the role of CAG on 1,200 and odd government companies and PSUs (including 49 listed companies) and the Bill is likely to be ready by next month.

The sources say the move is based on the recommendations of the J. J. Irani Committee.

Earlier attempts in 1997, 2001 and 2003 to introduce such a measure proved futile due to the disapproval of parliamentary standing committees. This time the task of drafting the Bill has been entrusted to a committee and it is understood that in the document, the supplementary and test audit by CAG (other than the statutory audit by a chartered accountant) may be made optional at the discretion of the auditee organisation.

The Irani Committee, in its report, says that since the statutory audit is conducted by the statutory auditor appointed by CAG in the manner directed by him, the test/supplementary audit is superfluous .

The sources say that the Irani committee has made "very hasty'' recommendations in respect of CAG's audit without seriously examining any of the issues involved. To say that Government audit should be removed only to provide a level playing field to PSUs, according to sources, is immature. It is pointed out that CAG while conducting statutory audit analyses the transactions mainly as to the propriety and regularity and makes suitable comments on accounts of the entity. The chartered accountants do not go into these aspects, as they have to report on specified matters only — mainly pertaining to internal control systems and related party transactions. The directives issued by CAG are in the nature of indicative areas for detailed probing. CAG being the auditor of all expenditure and income from/to the Consolidated Fund, has the responsibility to see that the expenditure incurred are in accordance with the policy decisions and no revenue leakage or under assessment of receivables to the Consolidated Fund of India take place. In the process, CAG identifies the persons responsible for wasteful expenditure or under recoveries.

The sources feel that a professional chartered accountant cannot discharge social responsibilities of watchdog functions of the CAG.

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