Constitutional Basis

The Comptroller and Auditor General (CAG) of India is established under Article 148 of the Constitution. The CAG is described by Dr. B. R. Ambedkar as the "most important officer in the Constitution of India." It is the Supreme Audit Institution (SAI) of India.

Article Provision
Art. 148 Appointment, oath, and removal of the CAG
Art. 149 Duties and powers of the CAG (as prescribed by Parliament)
Art. 150 Form of accounts of the Union and States on advice of CAG
Art. 151 CAG's audit reports submitted to President (Union) and Governor (State)

Governing Legislation: The Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 governs the duties and powers in detail.

Appointment and Removal (Article 148)

Feature Detail
Appointment By the President by warrant under hand and seal
Oath Takes oath before the President to uphold the Constitution
Tenure 6 years or until the age of 65 years, whichever is earlier
Reappointment Not eligible for reappointment after completing term
Removal Only in the same manner as a Judge of the Supreme Court — by Presidential order after an address by both Houses of Parliament passed by special majority (absolute majority + 2/3rd of members present and voting)
Grounds for removal Proved misbehaviour or incapacity
Service conditions Cannot be varied to CAG's disadvantage after appointment

The salary and service conditions of the CAG are charged upon the Consolidated Fund of India — not subject to Parliamentary vote. This ensures financial independence.

Functions (Article 149 & CAG Act 1971)

The CAG audits the accounts of:

  1. Union Government — all receipts and expenditures from the Consolidated Fund of India
  2. State Governments — all receipts and expenditures from Consolidated Funds of States
  3. Contingency Funds and Public Accounts of Union and States
  4. Government companies — under the Companies Act
  5. Bodies substantially financed by grants from the Consolidated Fund
  6. Autonomous bodies — universities, statutory corporations, as required
  7. Panchayati Raj Institutions — where directed by the President or Governor

Key distinction: The CAG audits expenditure already incurred; it does not have pre-audit or comptroller functions in respect of Union expenditure (this function was separated in practice — the CAG acts as an auditor, not a comptroller, for Union government).

Types of Audit Conducted by CAG

1. Compliance Audit (Regularity and Propriety Audit)

Examines whether government transactions comply with the Constitution, Acts, laws, rules, regulations, budgetary provisions, and sanctions. Checks:

  • Whether spending was authorised and properly accounted for
  • Whether financial rules and procedures were followed

2. Performance Audit

Evaluates whether government programmes and schemes are being implemented with economy, efficiency, and effectiveness (the "3 Es"). Answers:

  • Was money spent economically?
  • Was the programme efficiently executed?
  • Were the intended outcomes (effectiveness) achieved?

3. Propriety Audit (Value-for-Money Audit)

A discretionary audit that examines the wisdom, faithfulness, and economy of government expenditure. Goes beyond legality to check:

  • Whether expenditure is extravagant or wasteful
  • Whether public money was spent with the same prudence a person would apply to their own money

4. Financial Audit

Certification of government accounts and financial statements — ensuring accounts reflect a true and fair view.

Reports to Parliament (Article 151)

The CAG submits audit reports to the President, who causes them to be laid before each House of Parliament. For States, reports go to the Governor, who places them before the State Legislature.

Three main reports to Parliament:

Report Content
Audit Report on Civil Expenditure Union government's civil departments
Audit Report on Revenue Receipts Tax and non-tax revenue of Union
Audit Report on Defence Expenditure Defence ministry accounts

These reports are then examined by:

  • Public Accounts Committee (PAC) of Parliament — examines CAG's audit report on government expenditure
  • Committee on Public Undertakings (COPU) — examines CAG reports on government companies

CAG as Guardian of Public Finances

The CAG plays a crucial watchdog role in the Indian parliamentary democracy:

  • Acts as the "sentinel of the public purse"
  • Ensures accountability of the executive to the legislature
  • Provides independent assurance to Parliament that public money was spent as authorised

Key limitation: CAG cannot disallow expenditure or recover money — it can only report irregularities. Executive action follows based on Parliamentary committee recommendations.

Relationship with Parliamentary Committees

Committee Role
Public Accounts Committee (PAC) Examines accounts and CAG reports; 22 members (15 Lok Sabha + 7 Rajya Sabha); chaired by Leader of Opposition
Committee on Public Undertakings (COPU) Examines reports on public sector undertakings; 22 members
Estimates Committee Works on budget estimates — separate from CAG audit function

Exam Relevance

Prelims traps:

  • CAG's tenure: 6 years or 65 years, whichever earlier — not reappointable
  • Removal: same process as Supreme Court judge (special majority in both Houses)
  • CAG's expenses charged on Consolidated Fund of India — not votable
  • Article 150: Form of accounts on advice of CAG — not at CAG's discretion, but the President acts on CAG's advice
  • CAG audits both Union and State accounts

Mains angles:

  • CAG's role in strengthening legislative oversight and executive accountability
  • Limitations: no pre-audit power over Union; reports come after expenditure; government not bound to act on CAG findings
  • Significance of CAG reports in exposing major scams (2G spectrum, Commonwealth Games, coal block allocation)
  • Debate on CAG's jurisdiction over PPP projects, private entities receiving government grants