👉 Comptroller and Auditor General of India (CAG): Powers, Functions & Constitutional Role

The Comptroller and Auditor General of India (CAG) is a pivotal constitutional authority, often described as the "Guardian of the Public Purse." Established under Article 148 of the Indian Constitution, the CAG's primary role is to audit all receipts and expenditures of the Government of India and the state governments, including those of autonomous bodies and corporations substantially financed by the government. Dr. B.R. Ambedkar, a principal architect of the Indian Constitution, famously remarked that the CAG is "the most important Officer under the Constitution of India," underscoring its vital role as a bulwark of India's democratic system, alongside the Supreme Court, the Election Commission, and the Union Public Service Commission.

1. Introduction

The Comptroller and Auditor General (CAG) of India stands as the supreme audit institution of the country. This independent authority plays a crucial role in ensuring transparency, accountability, and good governance in the management of public funds. The office oversees financial administration at both central and state levels, conducting financial, compliance, and performance audits to assess the economy, efficiency, and effectiveness of government expenditures and programs. The reports submitted by the CAG to the Parliament and state legislatures are instrumental in holding the executive accountable and fostering public trust.

2. Historical and Constitutional Background

The evolution of the CAG's office is deeply intertwined with India's administrative and constitutional history.

2.1. Historical Evolution

The origins of the CAG's office can be traced back to 1858, when the British Crown took over administrative control of India from the East India Company, leading to the establishment of the Office of the Accountant General.

• 1860: Sir Edward Drummond was appointed as the first Auditor General, holding both accounting and auditing functions.
• 1866: The position was renamed Comptroller General of Accounts.
• 1884: It was re-designated as the Comptroller and Auditor General of India.
• Government of India Act, 1919: This act marked a significant milestone, granting statutory backing and independence to the Auditor General from the government.
• Government of India Act, 1935: This further strengthened the position by providing for Provincial Auditors General in a federal setup and detailing appointment and service procedures.
• Accounts and Audits Order, 1936: This order provided detailed accounting and auditing functions for the Auditor General.

This framework remained largely consistent until India's independence in 1947.

2.2. Constituent Assembly Debates

During the Constituent Assembly debates, the importance of an independent audit institution was widely recognized. Dr. B.R. Ambedkar emphasized the CAG's critical role in ensuring financial accountability and upholding the democratic system. Despite India being a federation, the idea of having a single Auditor General for both the Union and the States was preferred over separate state Auditors General, to ensure uniformity and strength of audit across the country.

3. Key Provisions & Articles of the Constitution

Articles 148 to 151 in Part V, Chapter V of the Indian Constitution primarily deal with the institution of the CAG.

• Article 148: Comptroller and Auditor-General of India

  • Appointment: The CAG is appointed by the President of India by a warrant under his hand and seal.
  • Oath: Before assuming office, the CAG makes and subscribes an oath or affirmation according to the form set out in the Third Schedule of the Constitution, pledging to uphold the Constitution and perform duties impartially.
  • Tenure: The CAG holds office for a term of six years or until the age of 65 years, whichever is earlier.
  • Removal: The CAG can only be removed by the President in the same manner and on the same grounds as a Judge of the Supreme Court. This requires a resolution passed by both Houses of Parliament with a special majority (majority of the total membership and a majority of not less than two-thirds of the members present and voting) on grounds of proved misbehavior or incapacity.
  • Ineligibility for Further Office: The CAG is not eligible for further office, either under the Government of India or under the government of any state, after ceasing to hold office. This provision is crucial for safeguarding the CAG's independence.
  • Conditions of Service: The salary and other conditions of service of the CAG are determined by Parliament and cannot be varied to his disadvantage after appointment. The salary is equivalent to that of a Supreme Court judge. The conditions of service of persons serving in the Indian Audit and Accounts Department and the administrative powers of the CAG are prescribed by rules made by the President after consultation with the CAG.

• Article 149: Duties and Powers of the Comptroller and Auditor-General

  • This article empowers Parliament to prescribe the duties and powers of the CAG in relation to the accounts of the Union and of the States and of any other authority or body.
  • Until such provision is made by Parliament, the CAG performs duties and exercises powers as were conferred on the Auditor General of India before the commencement of the Constitution.
  • In pursuance of this Article, Parliament enacted The Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (DPC Act).

• Article 150: Form of Accounts of The Union and of The States

  • The accounts of the Union and of the States shall be kept in such form as the President may, on the advice of the CAG, prescribe.

• Article 151: Audit Reports

  • The reports of the CAG relating to the accounts of the Union are submitted to the President, who causes them to be laid before each House of Parliament.
  • The reports relating to the accounts of a State are submitted to the Governor of the State, who causes them to be laid before the Legislature of the State.

• Article 279: Calculation of "net proceeds", etc.

  • The CAG ascertains and certifies the "net proceeds" of any tax or duty, and the CAG's certificate in this regard is final.

• Third Schedule: Contains the form of oath or affirmation for the CAG.

Diagram: Constitutional Framework of CAG

Explanation: This flowchart illustrates the constitutional articles directly governing the Comptroller and Auditor General of India, showcasing their interconnectedness and hierarchical placement within the Indian Constitution. It highlights that the DPC Act, 1971, derives its authority from Article 149.

4. Institutional Framework & Functions

The CAG heads the Indian Audit and Accounts Department (IA&AD), which is a large organization responsible for auditing public expenditure.

4.1. The CAG (Duties, Powers and Conditions of Service) Act, 1971

This Act, enacted by Parliament under Article 149, elaborates on the duties and powers of the CAG. It has been amended in 1976, 1984, 1987, and 1994 to adapt to changing governance landscapes.

Key Provisions of the DPC Act, 1971:

• Sections 1-2 (Preliminary): Short title and definitions.
• Sections 3-9 (Salary and Other Conditions of Service): Details the salary (equivalent to a Supreme Court Judge), term of office (6 years or 65 years), leave, pension, and other conditions.
• Sections 10-12 (Compilation of Accounts): Initially, the Act made the CAG responsible for both accounting and auditing for central and state governments. However, in 1976, the CAG was relieved from accounting functions for the Union Government and these functions were transferred to the Controller General of Accounts. The CAG continues to compile accounts for state governments.
• Sections 13-21, 23, 24 (General Provisions Relating to Audit): These sections define the extensive audit mandate of the CAG.

4.2. Duties and Powers of the CAG

The CAG's duties and powers are comprehensive, ensuring robust financial oversight.

• Audit of Government Accounts: The CAG audits all receipts and expenditure from:

  • The Consolidated Fund of India.
  • The Consolidated Fund of each state and Union Territory having a legislative assembly.
  • The Contingency Fund of India and the Public Account of India.
  • The Contingency Fund and Public Account of each state.

• Audit of Government Undertakings:

  • Audits all trading, manufacturing, profit and loss accounts, balance sheets, and other subsidiary accounts kept by any department of the Central Government and state governments.
  • Audits accounts of stores and stock kept in government offices or departments.
  • Audits government companies as per the provisions of the Companies Act, 2013, and conducts supplementary audits of government companies where the government has at least 51% equity share.
  • Audits accounts of corporations established by or under law made by Parliament, in accordance with the provisions of their respective legislations.
  • Audits bodies and authorities substantially financed by government revenues, as well as those receiving government grants or subsidies.

• Audit of Local Bodies and Panchayati Raj Institutions: The CAG's mandate is also extended to Panchayati Raj Institutions, though this area has been a subject of calls for formal inclusion and enhanced powers.

• Advisory Role: Advises the President on the form in which the accounts of the Union and the States shall be kept.

• Certification of Net Proceeds: Ascertains and certifies the net proceeds of any tax or duty, and the CAG's certificate is final in this regard (Article 279).

• Types of Audit: The audit conducted by the CAG is comprehensive and includes:

  • Financial Audit: Verifies the accuracy and completeness of financial records.
  • Compliance Audit: Checks adherence to laws, rules, and regulations.
  • Performance Audit (Economy, Efficiency, and Effectiveness Audit): Examines whether government programs are achieving their intended goals efficiently and effectively, identifying areas of wastage, over-expenditure, and underutilization of resources. The Supreme Court has upheld the CAG's power to conduct performance audits.
  • Propriety Audit: Looks into the wisdom, faithfulness, and economy of government expenditure and comments on the extravagance and wastefulness of such expenditure.
  • Systems Audit: Reviews the internal control systems and procedures.

• Access to Information: Has the power to inspect any office or department subject to audit, examine all transactions, question the person in charge, and call for any records, papers, and documents from any audited entity.

Table: CAG of India vs. CAG of the UK

Explanation: This table provides a comparative analysis of the Indian CAG and the UK CAG, highlighting key differences in their roles, powers, and relationship with their respective Parliaments. This comparison is vital for understanding the unique characteristics of India's audit institution.

5. Judicial Interpretations and Landmark Cases

The Supreme Court has, on several occasions, clarified and reinforced the mandate and powers of the CAG.

• Arvind Gupta v. Union of India (2013): The Supreme Court held that the CAG's functions to carry out examinations into economy, efficiency, and effectiveness with which the Government has used its resources (i.e., performance audit) is inherent in the 1971 Act.
• Association of Unified Tele Services Providers & Others v. Union Of India (2014): This landmark judgment upheld the right of the CAG to audit the books of private telecom companies involved in revenue-sharing deals with the government. The Court emphasized that any entity using public resources and sharing revenue with the government can be audited by the CAG. It also subtly suggested that the CAG's powers under Article 149 could be considered part of the basic structure of the Constitution, preventing their erosion by legislation or constitutional amendment.
• S. Subramaniam Balaji v. State of Tamil Nadu and others (2013): The Supreme Court reiterated that the CAG is a constitutional functionary appointed under Article 148, whose main role is to audit the income and expenditure of the government, government bodies, and state-run corporations, with the extent of duties listed in the 1971 Act.
• Arun Kumar Aggarwal v. Union of India (2013): The Court clarified that a CAG audit report itself cannot be directly accepted by the Court to grant relief or initiate action, as it is subject to scrutiny by Parliament. This underscores the CAG's accountability to Parliament.
• Pathan Mohammed Suleman Rehmat Khan vs State of Gujarat & Ors: The Supreme Court held that the CAG cannot question the policy objectives of the state government. This has sparked debate regarding the CAG's ability to comment on policies that might lead to financial wastage.

6. Current Relevance & Criticisms

The CAG remains a critical institution for democratic accountability and financial integrity in India.

6.1. Significance in Indian Democracy

• Guardian of Public Purse: The CAG ensures that public funds are utilized efficiently, effectively, and lawfully, preventing wastage and misappropriation.
• Accountability of Executive: Through its audit reports, the CAG secures the accountability of the executive (Council of Ministers) to Parliament in financial administration.
• Transparency: CAG audits and reports bring transparency to government financial operations, enhancing public trust.
• Facilitates Parliamentary Oversight: The CAG acts as a "guide, friend, and philosopher" to the Public Accounts Committee (PAC), a key parliamentary committee that examines the CAG's audit reports.

6.2. Relationship with Public Accounts Committee (PAC)

• The PAC, established under the Government of India Act, 1919, is a parliamentary standing committee that scrutinizes the audit reports of the CAG.
• The CAG's reports, particularly on appropriation accounts, finance accounts, and public sector undertakings, are submitted to the President (for Union accounts) or Governor (for State accounts), who then cause them to be laid before Parliament/State Legislature.
• The PAC then examines these reports, and the CAG assists the committee in its deliberations, even preparing lists of urgent matters for the PAC's attention. The CAG is often referred to as the "ear" and "eye" of the PAC.

6.3. Recent Reforms and Debates

Despite its crucial role, the CAG's office has faced criticisms and calls for reforms to enhance its effectiveness and independence.

• Appointment Process: Concerns have been raised about the opaqueness of the CAG's appointment process, which is currently an executive-controlled process, often resulting in the appointment of IAS officers rather than specialists in auditing and financial management.
  • Proposed Reforms: Suggestions include a collegium system for appointment, involving the Prime Minister, Chief Justice of India, and Leader of Opposition, similar to the selection of the Chief Vigilance Commissioner. The National Commission to Review the Working of the Constitution (NCRWC) in 2000 also recommended consultation with the Speaker of Lok Sabha and the Chairman of the Public Accounts Committee for the CAG's appointment.
• Scope of Audit (PPP and Private Entities): Former CAG Vinod Rai, among others, has advocated for amending the 1971 Audit Act to explicitly bring all private-public partnerships (PPPs), Panchayati Raj Institutions, and societies receiving government funds within the CAG's audit ambit. While the Supreme Court has upheld the CAG's right to audit private firms in revenue-sharing deals, a legislative backing would provide greater clarity and enforcement.
• Access to Information: There have been instances where CAG officials faced denial of access to documents, highlighting the need to strengthen the CAG's powers to access information. Proposed reforms suggest providing auditors with priority access to records within a defined timeframe, similar to the RTI Act.
• Multi-Member Body: The vastness of India and the increasing complexity of government finances have led to suggestions that the CAG should be a multi-member body, similar to Japan's Audit Commission.
• Questioning Policy Matters: The Supreme Court's ruling that the CAG cannot question the policy objectives of state governments has raised concerns among some, who argue that it might limit the CAG's ability to highlight financial wastage arising from flawed policies. However, the counter-argument is that the CAG can still comment if financial implications were not considered or wrongly assessed before a policy decision.
• Ex post facto Audit: The CAG largely conducts ex post facto audits (after the expenditure is incurred), which some view as a limitation, as it cannot prevent financial irregularities in advance. While the Indian CAG functions as an Auditor General, the UK CAG also acts as a Comptroller, controlling the issuance of funds.

7. Conclusion & Summary

The Comptroller and Auditor General of India is an indispensable institution safeguarding the financial health and democratic integrity of the nation. Enshrined in the Constitution, the CAG's independence, extensive audit mandate, and role as an agent of Parliament are crucial for executive accountability. While historically evolving from colonial administrative structures, the post-independence framework has significantly strengthened its position. The DPC Act, 1971, further delineates its powers and duties, enabling it to audit a wide array of government expenditures and entities. Landmark Supreme Court judgments have consistently upheld and clarified its mandate, including the ability to audit private entities in revenue-sharing agreements.

However, ongoing debates and calls for reform, particularly concerning the appointment process, the scope of audit for PPPs, access to information, and potentially transforming it into a multi-member body, underscore the need for continuous adaptation to a dynamic governance landscape. By addressing these issues, the CAG can further strengthen its capacity to promote fiscal discipline, enhance transparency, and uphold public trust in India's vibrant democracy.

8. Practice Questions & Answers

✅ Multiple-Choice Questions (MCQs)

1. Which Article of the Indian Constitution primarily deals with the appointment, oath, and conditions of service of the Comptroller and Auditor General of India? a) Article 149 b) Article 150 c) Article 148 d) Article 151

Answer: c) Article 148 Explanation: Article 148 of the Constitution specifically outlines the provisions related to the appointment, oath, conditions of service, tenure, and removal of the CAG.

2. The Comptroller and Auditor General of India (CAG) is removed from office in a manner similar to a: a) Judge of a High Court b) Chief Election Commissioner c) Judge of the Supreme Court d) Attorney General of India

Answer: c) Judge of the Supreme Court Explanation: Article 148 states that the CAG can only be removed from office in the like manner and on the like grounds as a Judge of the Supreme Court, requiring a special majority in both Houses of Parliament.

3. Which of the following statements correctly describes a key difference between the CAG of India and the CAG of the United Kingdom? a) The Indian CAG is a member of Parliament, while the UK CAG is not. b) The Indian CAG controls the issue of money from the Consolidated Fund, while the UK CAG does not. c) The Indian CAG performs primarily as an Auditor General, while the UK CAG acts as both Comptroller and Auditor General. d) The Indian CAG's reports are directly actionable by courts, unlike the UK CAG's reports.

Answer: c) The Indian CAG performs primarily as an Auditor General, while the UK CAG acts as both Comptroller and Auditor General. Explanation: The CAG of India conducts audits ex post facto (after expenditure) and does not control the issuance of funds, thus functioning mainly as an Auditor General. In contrast, the UK CAG has powers as both a Comptroller (controlling fund issue) and an Auditor General.

4. The CAG submits its audit reports relating to the accounts of a State to whom? a) The President of India b) The Prime Minister c) The Governor of the State d) The Chief Minister of the State

Answer: c) The Governor of the State Explanation: Article 151(2) states that the reports of the Comptroller and Auditor-General of India relating to the accounts of a State shall be submitted to the Governor of the State, who then causes them to be laid before the Legislature of the State.

5. Which of the following bodies acts as a "guide, friend, and philosopher" to the Public Accounts Committee (PAC)? a) Finance Commission b) Comptroller and Auditor General of India c) Attorney General of India d) Election Commission of India

Answer: b) Comptroller and Auditor General of India Explanation: The CAG plays a crucial role in assisting the Public Accounts Committee (PAC) in examining government accounts and audit reports, earning the epithet "guide, friend, and philosopher."

🔍 Scenario-Based Questions

Scenario 1: A state government enters into a Public-Private Partnership (PPP) agreement for a major infrastructure project, where a private company receives substantial government funding and shares revenue with the state. The state government argues that since it's a private entity involved, the Comptroller and Auditor General (CAG) does not have the mandate to audit its accounts.

Question: Based on constitutional provisions and landmark judgments, what is the CAG's likely stance and what legal backing does it have to audit the private company's accounts in this scenario?

Answer: The CAG would likely assert its right to audit the private company's accounts in this PPP arrangement. The legal backing for this stance comes from:

1. CAG (Duties, Powers and Conditions of Service) Act, 1971: This Act, particularly sections relating to audit of bodies and authorities substantially financed by government revenues, would be invoked. The fact that the private company receives "substantial government funding" directly brings it under the CAG's audit purview.
2. Landmark Supreme Court Judgment: The Association of Unified Tele Services Providers & Others v. Union Of India (2014) case is a direct precedent. The Supreme Court unequivocally upheld the right of the CAG to audit private firms involved in revenue-sharing deals with the government, emphasizing that any entity using public resources and sharing revenue with the government can be audited. Therefore, despite the private nature of the company, its involvement in a PPP with substantial public funding and revenue sharing makes its accounts subject to CAG audit.

Scenario 2: During an audit, the CAG identifies a government policy decision that, while legally compliant, has led to significant financial wastage due to poor planning and inefficient implementation. The executive branch challenges the CAG's authority to comment on the "wisdom" or "propriety" of a policy, citing the Supreme Court's ruling that the CAG cannot question policy objectives.

Question: How can the CAG justify its comments on the financial implications and effectiveness of such a policy within its constitutional and statutory mandate, even if it cannot question the policy objective?

Answer: The CAG can justify its comments by distinguishing between questioning the "policy objective" and auditing the "financial implications, efficiency, and effectiveness" of a policy's implementation.

1. Performance Audit Mandate: The CAG's mandate includes performance audit, which assesses the economy, efficiency, and effectiveness of government programs and expenditures. The Arvind Gupta v. Union of India (2013) judgment affirmed that the CAG's functions to examine economy, efficiency, and effectiveness are inherent in the 1971 Act.
2. Propriety Audit: Beyond legality and regularity, the CAG also conducts a propriety audit, which scrutinizes the wisdom, faithfulness, and economy of government expenditure and can comment on extravagance or wastefulness.
3. Financial Implications: Even if the objective of a policy is deemed sacrosanct by the executive, the CAG's role allows it to scrutinize whether: _ The financial implications of the policy were thoroughly examined before the decision. _ The assessment of financial implications was accurate.
   • The implementation of the policy resulted in wastage or inefficient use of public funds. Thus, while the CAG might not question why a policy was made, it can certainly comment on *how* it was executed financially and whether public money was utilized prudently and effectively to achieve the stated objectives.

🔄 Match-the-following / Chronology exercises

1. Match the following Constitutional Articles with their corresponding provisions regarding the CAG:

Select the correct match: a) A-II, B-III, C-I, D-IV b) A-I, B-II, C-III, D-IV c) A-IV, B-I, C-II, D-III d) A-III, B-IV, C-II, D-I

Answer: a) A-II, B-III, C-I, D-IV Explanation:

• Appointment of CAG: Article 148.
• Duties and Powers of CAG: Article 149.
• Audit Reports: Article 151.
• Form of Accounts: Article 150.

2. Arrange the following historical developments related to the CAG's office in chronological order:

1. Enactment of the CAG (Duties, Powers and Conditions of Service) Act.
2. Office of the Accountant General established.
3. Auditor General became independent of the government under the Government of India Act.
4. CAG relieved from accounting functions for the Union Government.

Select the correct chronological order: a) 2 - 3 - 1 - 4 b) 3 - 2 - 1 - 4 c) 2 - 1 - 3 - 4 d) 1 - 2 - 3 - 4

Answer: a) 2 - 3 - 1 - 4 Explanation:

1. Office of the Accountant General established: 1858.
2. Auditor General became independent of the government under the Government of India Act: Government of India Act, 1919.
3. Enactment of the CAG (Duties, Powers and Conditions of Service) Act: 1971.
4. CAG relieved from accounting functions for the Union Government: 1976.

🧠 Diagram-based/Case-based reasoning

Diagram: CAG's Reporting Mechanism

Question: Based on the provided diagram and your understanding of the CAG's role, explain the significance of the CAG's reporting mechanism in ensuring democratic accountability.

Answer: The CAG's reporting mechanism is a cornerstone of democratic accountability in India. Its significance lies in several aspects:

1. Accountability of the Executive to the Legislature: The CAG acts as an agent of Parliament (and State Legislatures) to audit the expenditures incurred by the executive. By submitting detailed audit reports to the President (for Union) and Governors (for States), and subsequently having them laid before Parliament and State Legislatures respectively, the CAG provides an independent assessment of how public funds have been utilized. This mechanism enables elected representatives to scrutinize government spending and hold the executive accountable for financial propriety, efficiency, and compliance with laws and budgetary allocations.
2. Facilitating Parliamentary Oversight: The reports are not merely presented but are actively examined by the Public Accounts Committee (PAC) at both central and state levels. The CAG's direct assistance to the PAC, acting as its "guide, friend, and philosopher," ensures that the complex audit findings are properly understood and deliberated upon by the legislators. This empowers the PAC to formulate recommendations, which can then lead to corrective actions, policy changes, and improved financial governance.
3. Transparency and Public Trust: The ultimate laying of these reports before the legislatures makes the government's financial operations public. This transparency builds public trust by demonstrating that an independent body scrutinizes how taxpayer money is spent. It allows for public discourse and informed debate on financial matters, reinforcing the democratic principle of government accountability to its citizens.
4. Identification of Irregularities and Improvements: The reports highlight financial irregularities, inefficiencies, and lapses in governance. While the reports themselves are ex post facto, their scrutiny by the PAC and subsequent legislative action drive improvements in financial management, internal controls, and overall public administration for the future.

Recommended Books

You can explore these highly recommended resources for a deeper understanding.

• Indian Polity (English) by M Laxmikanth for UPSC CSE 2025 | 7th edition (latest) | Civil Services Exam - Prelims, Mains and Interview | State PSCs exams/ PCS exams - by M Laxmikanth
• Oswaal NCERT One For All Book for UPSC & State PSCs | Indian Polity Classes 6-12 - by Oswaal Editorial Board
• Bharat Ki Rajvyavastha (भारत की राजव्यवस्था) - M Laxmikanth for UPSC CSE