CAG not to reduce number of PSU audits

The Comptroller and Auditor General of India (CAG) has turned down the government's recommendation to reduce the number of audits in PSUs. The ad-hoc committee under Arjun Sengupta, had said the supplementary audit done by CAG was a duplication of the work done by the statutory auditors.

The CAG, however, justified the continuation of supplementary audits in the wake of the additional revenues it generates for the government each year.

"The supplementary audits generate a lot of money for the government, even after the commercial audit which are conducted by private auditors," CAG VN Kaul told Business Standard. CAG audits over 1,400 PSEs at the Central and state level.

Not only does CAG conduct a supplementary audit, it also does a transaction or a propriety audit. The committee feels that CAG scrutinizes the propriety of the transaction while the authority to conduct such audits is not spelt out in the Companies Act.

The CAG audits highlight those business decisions which 'tend to get glossed over', and which sometimes affects the corporate image of the company, the committee report said.

Kaul, however, said that the CAG was mandated to conduct both transaction and performance audits. "The purpose is not to interfere with decision-making processes of the PSEs, we are in favour of autonomy for PSEs but it is the taxpayers' money which is at stake and the parliament has the right to demand accountability," he said.

The duplication of audits, also leads to delay in the finalisation of accounts. This results in non-compliance of directives of the Securities and Exchange Board of India regarding publication of results, according to the committee.

PSEs have their own system of internal audit in compliance with the standards laid down by the Institute of Chartered Accountants of India.

"Under section 619 of the Companies Act, 1956, CAG appoints the statutory auditors. Why do we need another supplementary audit by CAG?" S M Dewan, Director General, Standing Conference on Public Enterprises, SCOPE, said. However, CAG explains that it is a constitutional body unlike the ICAI.