Comptroller & Auditor General’s

Manual of Standing Orders

(AUDIT)
Second Edition - 2002

Ashutosh Anil Vishnoi

Asst. Audit Officer
9004020361
vishnoiaa.mh1.sca@cag.gov.in
Article 148 - Comptroller and Auditor-General of India

• There shall be a Comptroller and Auditor-General of India who shall be appointed

by the President by warrant under his hand and seal and shall only be removed
from office in like manner and on like grounds as a Judge of the Supreme Court.
• Every person appointed to be the Comptroller and Auditor-General of India shall,
before he enters upon his office, make and subscribe before the President or some
person appointed in that behalf by him, an oath or affirmation according to the
form set out for the purpose in the Third Schedule.
• The salary and other conditions of service of the Comptroller and Auditor-General shall be
such as may be determined by Parliament by law and, until they are so determined, shall be as
specified in the Second Schedule:
Provided that neither the salary of a Comptroller and Auditor-General nor his rights in respect
of leave of absence, pension or age of retirement shall be varied to his disadvantage after his
appointment.
• The Comptroller and Auditor-General shall not be eligible for further office either under the
Government of India or under the Government of any State after he has ceased to hold his
office.
• Subject to the provisions of this Constitution and of any law made by parliament, the
conditions of service of persons serving in the Indian Audit and Accounts Department and the
administrative powers of the Comptroller and Auditor-General shall be such as may be
prescribed by rules made by the President after consultation with the Comptroller and Auditor-
General.
• The administrative expenses of the office of the Comptroller and Auditor-General including all
salaries, allowances and pensions payable to or in respect of persons serving in that office,
shall be charged upon the Consolidated Fund of India.
Article 149 - Duties and Powers of the Comptroller and Auditor-General

• The Comptroller and Auditor-General shall perform such duties and exercise such
powers in relation to the accounts of the Union and of the States and of any other
authority or body as may be prescribed by or under any law made by Parliament
and, until provision in that behalf is so made, shall perform such duties and
exercise such powers in relation to the accounts of the Union and of the States as
were conferred on or exercisable by the Auditor-General of India immediately
before the commencement of this Constitution in relation to the accounts of the
Dominion of India and of the provinces respectively.
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 Comptroller and Auditor-General of India,
prescribe.
Article 151 - Audit Reports

• The reports of the Comptroller and Auditor-General of India relating to the

accounts of the Union shall be submitted to the president, who shall cause them to
be laid before each House of Parliament.
• 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 shall
cause them to be laid before the Legislature of the State.
 DPC ACT, 1971

The comptroller and auditor general's

(Duties, Powers and Conditions of Service)

Amendment ACT, 1971

Comptroller and Auditor General of India

Content
Chapter-I Preliminary •Short Title
•Definitions
Chapter-II Salary and Other •Salary
Conditions of Service of the •Term of Office
Comptroller and Auditor- •Explanation
General •Leave
•Pension
•Commutation of pension
•Right to subscribe to General Provident Fund
•Other conditions of service
Chapter-III •Comptroller and Auditor General to compile accounts of Union and States
Duties and •Comptroller and Auditor General to prepare and submit accounts to the President Governors of States and
powers of the Administrators of Union territories having Legislative Assemblies
comptroller and •Comptroller and Auditor General to give information and render assistance to the Union and States
auditor general •General provisions relating to audit
•Audit of receipts and expenditure of bodies or authorities substantially
financed from Union or State Revenues
•Functions of Comptroller and Auditor General in the case of grants or
loans given to other authorities or bodies
•Audit of receipts of Union or of States
•Audit of accounts of stores and stock
•Powers of Comptroller and Auditor General in connection with audit of
accounts
•Audit of Government companies and corporations
•Laying of reports in relation to accounts of Government companies
and corporations
•Audit of accounts of certain authorities or bodies
Chapter-IV •Delegation of power of Comptroller and Auditor General
Miscellaneous •Power to make rules
•Power to make regulations
•Power to dispense with detailed audit
•Repeal
•Removal of doubts
Comptroller & Auditor General’s

Manual of Standing Orders

(AUDIT)
Second Edition - 2002
CONTENTS

• Section I – Functions of the Comptroller and Auditor General of India

• Section II – General Principles and Practices of Audit
• Chapter 1 – General Principles and Practices
• Chapter 2 – Audit of Expenditure
• Chapter 3 – Audit of Receipts
• Chapter 4 – Audit of Accounts of Stores and Stock
• Chapter 5 – Audit of Commercial Accounts
• Chapter 6 – Audit of Non-Commercial Autonomous Bodies and Non-
Government Institutions
• Section III – Supplementary Audit Instructions Chapter 1 – Central Audit
• Chapter 1 – Central Audit
• Chapter 2 – Gazetted Government Servants’ Audit
• Chapter 3 – Establishment Audit
• Chapter 4 – Audit of Contingent Expenditure
• Chapter 5 – Audit of Grants-in-aid
• Chapter 6 – Pension Audit
• Chapter 7 – Audit of Contracts
• Chapter 8 – Efficiency-Cum-Performance or Value for Money Audit
• Chapter 9 – Integrated Audit of Departments
• Chapter 10 – Audit of the Accounts of Embassies and Missions Abroad
• Chapter 11 – Audit of Deposits
• Chapter 12 – Audit of Service, Provident and Other Funds
• Chapter 13 – Audit of Borrowings, Loans, Advances, Guarantees, Reserve Funds, Suspense
Transactions and Interest Payments
• Chapter 14 – Audit of Remittance Transactions
• Chapter 15 – Appropriation Audit
• Chapter 16 – Certification of Finance Accounts and Appropriation Accounts
• Chapter 17 – Audit of World Bank and Other Externally Assisted Project
• Chapter 18 Audit of Scientific Departments
• Chapter 19 – Environment Audit
• Chapter 20 – Systems Audit
• Chapter 21 – Manpower Audit
• Chapter 22 – Audit of Computerised Systems
• Chapter 23 – Miscellaneous
• Chapter 24 – Internal Audit
• Section IV – Public Works Audit
• Chapter 1 – Scope of Audit
• Chapter 2 – General arrangements for and methods of Central Audit
• Chapter 3 – Audit of Monthly Accounts and Related Records
• Chapter 4 – Objection on Public Works Transactions
• Section V – Forest Audit
• Section VI – Inspections and Local Audit
• Chapter 1 – General Instructions
• Chapter 2 – Inspection of Public Works Offices
• Chapter 3 – Inspection of Public Sector Banks
• Chapter 4 – Inspection of Public Debt Offices
• Section VII – Results of Audit
• Chapter 1 – Raising and Pursuance of Objections
• Chapter 2 – Detailed Procedure for Registration and Clearance of Objections
• Chapter 3 – Preparation of Audit Reports
• Chapter 4 – Submission of Audit Reports and Subsequent Action
• Forms – M.S.O. (AUDIT) 1 to 16
Section-1
Duties and Powers of the Comptroller and Auditor General
1.1.2 The duties entrusted to the Comptroller and Auditor General of India under the
provisions of the Act fall broadly under two categories, namely those relating to
(i) Compilation and keeping of accounts, and
(ii) Audit.
Miscellaneous Powers

1.1.19 Under Section 23 of the Act, the Comptroller and Auditor General is
authorised to make regulations for carrying into effect the provisions of the Act, in
so far as they relate to the scope and extent of audit including laying down for the
guidance of the Government departments the general principles of Government
accounting and the broad principles in regard to audit of receipts and
expenditure.
The instructions relating to audit as contained in this manual and other departmental
publications issued under the authority of the Comptroller and Auditor General are
covered under the provisions of this Section.
Section II – Chapter 2

• 2.2.11 All important cases detected either in Central Audit or Local Audit and
Inspections should be examined by the Accountant General with reference to
Government files, if necessary, before raising an audit query.
Constitutional Provisions

Central Government
• Procedure in Financial Matters
• Article 112. Annual financial statement.
• Article 113. Procedure in Parliament with respect to estimates.
• Article 114. Appropriation Bills.
• Article 115. Supplementary, additional or excess grants.
• Article 116. Votes on account, votes of credit and exceptional grants.
• Article 117. Special provisions as to financial Bills.
Constitutional Provisions

State Government
• Procedure in Financial Matters
• Article 202. Annual financial statement. 203. Procedure in Legislature with
respect to estimates.
• Article 204. Appropriation Bills.
• Article 205. Supplementary, additional or excess grants.
• Article 206. Votes on account, votes of credit and exceptional grants.
• Article 207. Special provisions as to financial Bills.
2.2.14 Under the provisions of Articles 114 to 116 of the Constitution in the case of
the Union, Articles 204 to 206 in the case of a State, and Sections 29 to 31 of the 23
Government of Union Territories Act, 1963, in the case of a Union Territory having a
Legislature, no expenditure can be met from the respective Consolidated Fund on or
after 1st April of a financial year unless an Annual Budget (Annual Financial
Statement of Estimated Receipts and Expenditure) is prepared and an Appropriation
Act authorising withdrawal of funds from the Consolidated Fund to the extent of
provisions in the Annual Budget is passed in accordance with the provisions of Article
114 or 204 of the Constitution or Section 29 of the said Act, as the case may be.
All disbursements from the Consolidated Fund during a financial year, which are not
within the sums authorised by an Appropriation Act passed by the appropriate
Legislature before the close of the year, will therefore be challenged by Audit as
unauthorised expenditure under the provisions of Section 13(a) of the Comptroller
and Auditor General's (Duties, Power and Conditions of Service) Act, 1971, until
regularised by an Appropriation Act.
Under Article 267 of the Constitution/Section 48 of the Government of Union
Territories Act 1963, advances from Contingency Fund of India or of a State or of a
Union Territory can be drawn for meeting unforeseen expenditure pending
authorisation of such expenditure by the Parliament/Legislature concerned.
On such authorisation the advances drawn will be recouped to the Contingency Fund.
Note:
If the Annual Budget for the ensuing year is not likely to be passed by the
concerned Legislature before 31st March, it becomes necessary for the Central or
the State or Union Territory Government, as the case may be, to obtain a ‘Vote on
Account’ from the Parliament/Legislature authorising the incurring of expenditure
for the initial part of the financial year pending passing of the budget for that year.
The ‘Vote on Account’ is intended to enable the Government to carry on its
functions and activities till such time as the budget for the whole year is passed.
The expenditure incurred on the authority of the ‘Vote on Account’ is subsequently
adjusted against the regular budget and the ‘Vote on Account’ becomes non-
operational when the budget is passed. This authority cannot, however, be invoked
for expenditure on a new service.
• 2.2.25 It is an important function of Audit to ensure that rules and regulations are
observed not merely in their letter but also in their spirit.
For example, sanctions and orders for the grant of special pay or other
allowances or concessions should be questioned in Audit if they are in conflict
with the broad spirit or main principles of the relevant service rules.
• 2.2.39 It is imperative that the utmost care and attention should be devoted to
work connected with the audit of sanctions to expenditure because once a sanction
has been accepted in audit, expenditure there against may have to be admitted for
an indefinite period.
Chapter–3

• 2.3.4 It is not the duty of Audit to review a judicial decision nor does Audit
normally review the judgment exercised by officers in individual cases in areas
purely falling in their discretion. But it must be recognized that an examination of
such cases is important for judging the effectiveness of assessment procedures,
recovery procedures, etc. Where the information available on an individual case is
insufficient to enable Audit to ascertain how the requirements of the law have
been complied with, Audit may consider it is its duty to ask for any further
information to enable it to form the judgment required of it as to the effectiveness
of the system.
Chapter–5

• 2.5.4 Under Section 19(1) of the Comptroller and Auditor General’s (Duties,
Powers and Conditions of Service) Act, 1971, audit of the accounts of
Government companies is to be conducted by the Comptroller and Auditor
General in accordance with the provisions of the Companies Act, 1956.
SECTION–III Chapter–4

• 3.4.1 The instructions contained in this Chapter govern the audit not only of
contingent charges proper, but also of other expenditure, which according to the
rules of financial procedure made by Government is to be treated in the same
manner as contingencies. The term contingent charges or contingencies used in
this Chapter covers all such charges.
3.4.2 The actual classification of contingent charges is determined by the orders of
the Government concerned and, as a result, it may be different for different
Governments. It will, however, be found that all contingencies fall into one or other
of the following five categories:-
(i) Contingent charges met from a lump sum grant placed at the disposal of a
disbursing officer for expenditure, at his discretion, on certain specified
objects. Such charges are known as Contract Contingencies and generally
consist of charges the annual incidence of which can be averaged with
reasonable accuracy.
(ii) Contingent charges regulated by scale laid down by the competent
authority. Such charges may be called Scale Regulated Contingencies.
(iii) Contingent charges, whether recurring or non-recurring, which cannot be
incurred without special sanction in each case of a superior authority. These
may be termed Special Contingencies.
(iv) Certain contingent charges may be incurred without special sanction. They
nevertheless require the approval and countersignature of a superior authority before
they can be admitted as legitimate expenditure against the Consolidated Fund of
India or of a State. Such charges are known as Countersigned Contingencies.
Countersignature is ordinarily obtained after the bills are paid but, in rare cases, it is
necessary before payment.
(v) Contingent charges which require neither special sanction nor countersignature,
but may be incurred by the disbursing officer on his own authority subject to the
necessity of accounting for them. Such Contingencies may be termed Fully Vouched
Contingencies. In actual practice, however, the Comptroller and Auditor General
dispenses with the production to audit of vouchers of less than a prescribed amount.
3.4.3 It must be recognised that the five categories of contingencies described in the
foregoing paragraph are not necessarily mutually exclusive.
There may be instances of Special Contingencies being regulated by scale, or of a
bill relating to Scale Regulated Contingencies requiring countersignature.
Where a contingent bill falls under two or more classes, the methods of audit
prescribed for each of those categories should, as far as possible, be applied to it.

3.4.4 It is for the Government to prescribe what classes of expenditure will be

brought under the contract system and to which departments the system will be
extended. It is also the prerogative of Government to lay down any scale for
regulation of contingent charges, to determine the authority competent to sanction
special contingencies, and to designate the controlling authority whose signature
will be necessary in respect of Countersigned Contingencies.
Source Documents

• 3.4.5 The source documents necessary to conduct audit are the following:
(i) Documents containing details of Grants/appropriations provided by the
Government and funds allotted by the Head of the Department.
(ii) Sanctions accorded by Government and other competent authorities.
(iii) Vouchers and sub-vouchers of contingent bills.
(iv) List of abstract contingent bills received from Accounts and Entitlement
Office.
(v) Voucher Level Computerised accounts and packages maintained in the
Accounts and Entitlement Office and relevant nodes supplied to the Audit
Office.
Audit Approach
3.4.6 The responsibility for the effective control of contingent expenditure rests primarily
upon the heads of offices and departments.
The Audit office merely examines the fulfilment of that responsibility by auditing such
expenditure, the extent of which varies greatly with the different categories of contingent
charges.
It is the least in the case of contract contingencies.
It is somewhat greater in respect of Scale Regulated and Special Contingencies because
Audit has to satisfy itself in the former case that the charges incurred are in accordance with
the scale that governs them and watch the expenditure against the necessary sanction of the
superior authority in the latter case.
Apart from certain definite responsibilities to be discharged by Audit, the countersigning
authorities exercise the major portion of the control over Countersigned Contingencies.
The responsibility of Audit is the greatest in the case of Fully Vouched Contingencies. For
all categories of contingent charges alike, other than Contract Contingencies, these
responsibilities should be discharged only in so far as the rules relating to those
contingencies permit.
Issues for audit scrutiny General checks
• 3.4.7 The Accountant General (Audit) has the following minimum responsibilities
in respect of all contingent bills audited. He must see:
• (i) that each class of expenditure:
• (a) is a proper charge against the Grant or Appropriation concerned;
• (b) has received such sanction as is necessary; and
• (c) has been incurred by a Government servant competent to incur it;
• (ii) that such vouchers as are required by audit have been submitted (see
paragraph 3.4.18 ff.);
• (iii) that any certificates required under the financial rules of the Government
concerned have been provided;
• (iv) that the rates are apparently not extravagant and that standards of financial
propriety have been properly observed;
 (v) that the bill is in proper form and the classification is correctly recorded
thereon;
(vi) that, unusually large incidence of expenditure in the month of March does
not lead to irregularities; and
(vii) that stores not immediately required or in excess of requirement have not
been procured merely to avoid lapse of budget grant and remain unutilised.
• In addition, the control system in the offices of the drawing and countersigning
officers should be checked in local audit to ensure that adequate arrangements
exist to prevent more than one drawal against a single sanction or a double
payment of a recurring charge.
Audit of Contract Contingencies
3.4.8 Rules governing Contract Contingencies differ from Government to
Government, the principal variations being in the types of expenditure brought
under the contract system and in the department to which the system has been
extended.
In some cases, the contracts are entered into directly with the disbursing officers,
while in others the contract grants are placed at the disposal of controlling officers,
who distribute them annually among their subordinates, reserving a small portion
for subsequent allotment in cases of need.
In spite of these and other minor variations, the essential features of the system are
common to all Governments.
No details of the expenditure beyond such totals of the various contract items as
may be required for purposes of classification, need to be furnished in the bills.
Disbursing officers are held personally responsible for any expenditure in excess of
the contract grant until the excess is regularised by sanction of the competent
authority.
Audit of Scale Regulated Contingencies

3.4.9 Contingencies regulated by scale will include such charges as cost of liveries,
rewards for destruction of wild animals, batta to witnesses and the like.
The authority prescribing the scale will also lay down the conditions precedent for
its applicability in each case, making it clear whether the special sanction of a
superior authority is necessary, whether bills must be countersigned before or after
payment, and what certificates should support the bills.
According to the conditions laid down, charges regulated by scale may become
Special, Contract, Countersigned or Fully Vouched contingencies.
These should be audited under the rules applicable to the particular category within
which they fall. In addition, the Accountant General (Audit) should satisfy himself
that the charges incurred are in accordance with the scale governing them.
Audit of Special Contingencies

3.4.10 The principal duty of the Accountant General (Audit) in respect of Special
Contingencies is to watch the expenditure against the necessary sanction of the
superior authority.
When an order or sanction contains no indication of the amount or ceiling of 89
expenditure sanctioned, enquiry should be made from the issuing authority, and the
charges should not be admitted in audit until complete sanction is received.
When expenditure against a lump sum sanction is incurred in instalments, it should
be verified in local audit that arrangements exist in the drawing and countersigning
offices to watch the progressive outlay against the sanctioned total.
Audit of Countersigned Contingencies
A. Bills Countersigned after payment
• 3.4.11 In the case of bills countersigned after payment, the money is actually
drawn on an abstract bill, and the approval of the superior authority as indicated
by its countersignature is subsequently received by the Accountant General
(A&E)/Pay and Accounts Officer on the monthly detailed countersigned bill.
• Both the abstract bill and the detailed monthly bill require scrutiny in audit.
3.4.12 Scrutiny of the abstract bill is limited to seeing that an authorized officer has
drawn the bill, the necessary grant or appropriation is available, prescribed
certificates have been furnished, the summations are correct and that the bills
contains no extraordinary or unusual features.
Receipt of a detailed bill in respect of each abstract bill drawn is watched by the
Accountant General (A&E)/Pay and Accounts Officer.
The Accountant General (A&E) shall arrange regular transmission of Drawing
Officer-wise lists of abstract contingent bills along with the vouchers to the Audit
Office for audit.
The detailed bills received by him should be checked in audit with reference to the
principles laid down in paragraph 3.4.8 supra.
Chapter–7

• 3.7.3 Deviations from contracts require authority not inferior to that required for
the conclusion of the original contract. Audit should also see that any payments
outside the 104 strict terms of the contract or in excess of the contracted rates are
not made without the consent of the competent financial authority.
• 3.7.4 Cases in which there is evidence that an officer or agent of a contracting
department has an undue common interest with the other contracting party should
be brought to the notice of the competent higher authority for such action as it
may deem necessary.
• 3.7.5 Standing contracts should be reviewed occasionally and if Audit has reason
to believe that the rates accepted in those contracts are considerably higher than
the rates prevailing at the time of review, such variations should be brought to the
notice of the competent authority.
Source Documents

• 3.7.6 The following are the main source documents to be checked in the audit of
contracts and agreements:
(i) Contract files maintained by the departments or institutions.
(ii) Accounts and payment vouchers received from the treasuries.
(iii) Administrative Approvals and Technical Sanctions of the competent
authority forming the basis of the contracts.
(iv) Portfolio Registers maintained by the Integrated Audit Unit Section.
(v) Bills for supply of Stores.
(vi) Copies of Contracts and Agreements.
(vii) Any other documents that would facilitate effective audit.
Chapter–10 Audit Objectives and Scope
3.10.1 The important objectives of auditing the accounts of embassies and missions abroad are
to ascertain whether:
(i) remittances received for meeting fund requirements are properly accounted for and are not
in excess of immediate requirements;
(ii) payments made on behalf of the ministries and departments of the Central Government,
State Governments and public sector undertakings and other autonomous bodies are based on
valid sanctions;
(iii) clearance, from the foreign exchange angle, of the Ministry of Finance or other competent
authority has been obtained for incurring expenditure involving the outgo of foreign exchange;
(iv) various entitlements and personal claims of personnel posted in missions and posts abroad
have been regulated strictly according to the applicable rules and instructions and the
objectives of audit of expenditure are satisfied; and
(v) revenues collected by the missions and posts for rendering various consular services have
been properly accounted for and remitted to the Ministry of External Affairs.
Source Documents
3.10.2 In addition to the normal establishment bills and contingent bills, other
important source documents that are to be test checked in audit are as follows:
(i) Book of Reserve Bank of India Drafts.
(ii) Records relating to investments of surplus funds.
(iii) Sanctions received from various ministries and departments of the Central and
State Governments.
(iv) Special Seal Authorities received from the State Accountants General.
(v) Letters received from public sector undertakings, statutory bodies, etc.,
containing requests to make payments on their behalf against advance deposits.
(vi) Vouchers.
(vii) Contract Agreements.
(viii) Tender documents.
(ix) Accounts of remittances received from India.
(x) Monthly Accounts.
(xi) Instructions and documents relating to:
(a) Foreign Allowance of India-based personnel.
(b) Rental ceilings for hired accommodation.
(c) Engagement of local employees.
(d) Payment of Cash Allowance on first arrival abroad.
(e) Reimbursement of cost of car insurance.
(f) Payment of Children’s Education Allowances.
(g) Admissibility and utilization of Representational Grant.
(h) Payment of Garden Grants.
(i) Personal files of officers.
(xii) Documents relating to expenditure relating to visits of dignitaries and delegations
from India.
(xiii) Stock Register of Passports.
(xiv) Documents relating to consular and visa services.
Audit Arrangements
3.10.3 The accounts of the High Commissioner for India in London are audited by
the Principal Director of Audit, India Audit Office, London.
The Director of Audit, Indian Accounts, Washington, is responsible for the audit of
the accounts of the Embassy of India, Washington, and its Supply Wing.
The Director General of Audit, Central Revenues, New Delhi, is responsible for the
audit of the accounts of the Ministry of External Affairs and its affiliated offices and
departments.
He is also responsible for reviewing the cash accounts of all the Missions and Posts
abroad that render accounts to the Controller of Accounts, Ministry of External
Affairs.
Two Resident Audit Parties have been created for this purpose.
The detailed functions and Audit procedures are contained in the Manual of the
Embassy Audit compiled by the Director General of Audit, Central Revenues, New
Delhi.
• Note: The results of review of vouchers of the Missions and Posts abroad
conducted by the Resident Audit parties should be communicated in duplicate to
the Director (Finance), Ministry of External Affairs, the Head of Chancery of the
Mission or Post concerned; and the Controller of Accounts, Ministry of External
Affairs.
3.10.4 The local audit of all the Missions and Posts abroad is arranged at periodical
intervals by the Officers mentioned below:
(i) Principal Director of Audit, India Audit Office, London: All Missions and
Posts in Europe, other than the Missions in Turkey and Cyprus.
(ii) Director of Audit, Indian Accounts in U.S.A., Washington: All Missions and
Posts in North and South America.
In addition, he is also responsible for
(a) the concurrent audit of contracts for supply of stores entered into by the
Supply Wing of the Indian Embassy in Washington and of payments
relating thereto; and
(b) the audit of tenders and contracts in cases where the purchases are made
through the Supply Wing and the contracts are entered into in the United
States of America and payments relating thereto.
(iii) Director General of Audit, Central Revenues, New Delhi: All Missions and
Posts other than those mentioned above, namely those in Asia, Africa, Australia,
New Zealand, Turkey and Cyprus.
Notes:
(i) The periodicity of local audit will be regulated in terms of the orders on the subject
issued by the Comptroller and Auditor General from time to time.
(ii) A gist of the important and interesting cases noticed in the local audit of Missions
and Posts abroad should be mutually exchanged between the three Audit Officers
mentioned above. Lists containing the gist of these cases may be exchanged among the
three Audit Officers twice a year, in the months of January and July.
(iii) Copies of the inspection reports issued by the these three Audit Officers may
invariably be sent to the Office of the Comptroller and Auditor General and the Ministry
of External Affairs.
(iv) Detailed instructions and guidelines for the settlement of outstanding audit
observations and inspection reports on the accounts of Indian Missions and Posts
abroad and of overseas branches of Central public sector undertakings and in regard to
interaction between the Overseas Audit Offices and Audit Offices in India for the further
processing of and follow-up action on important audit objections and potential draft
paragraphs are contained in the Annexure to this chapter.
Chapter–12
Issues for audit scrutiny
Audit of vouchers relating to drawals from the Fund
3.12.6 Audit of vouchers relating to drawals from the accounts of individual
subscribers consists in examining inter alia the following:
(i) The competent authority has sanctioned the advance or withdrawal to which
the voucher pertains.
(ii) The amount sanctioned is in conformity with the rules governing the
admissibility of such advances or withdrawals and is not in excess of the
balance at the credit of the subscriber.
(iii) Advances from the Fund are recovered regularly in terms of the sanctions.
(iv) Payment of the advance or amount withdrawn has been posted in the
subscriber’s ledger account.
SECTION–VI
Audit Objectives and Scope Inspection
6.1.2 The primary objectives of inspection are:
(i) to see that the initial accounts from which the accounts rendered by
departmental officers are compiled, or on which they are based, are
properly maintained in the prescribed format and that financial rules and
orders are being adhered to; and
(ii) to test the degree of care exercised over the accuracy of original records by
the departmental authorities responsible for maintaining accounts. This will
involve, inter alia, scrutiny of instances of non-adherence to or failure to
ensure adherence to the codal provisions and internal control procedures
and principles, nonmaintenance of basic and control registers, etc., resulting
in fraudulent drawal of pay and allowances and contingent bills.
Simultaneously, a test check may be applied to such accounts, vouchers,
etc. as are not audited in Central Audit or as cannot be checked adequately
except in local audit. The purpose of this test check is to provide the
material upon which conclusions in regard to (i) and (ii) above may be
reached.
6.1.3 An Inspecting Audit Officer is not expected merely to confine himself to routine audit
and inspection. He should avail of this opportunity to assist and advise the departmental
officers and accountants on matters affecting accounts, budget, etc, or the 287 financial
regularity of transactions. He may even offer suggestions having a bearing on the economic
utilisation of public moneys and is expected to do so in all cases of superfluous clerical work
connected with accounts and audit. There are various directions in which an intelligent
Inspecting Officer can find scope for his inquiries.
For instance, he may find that there are chronic delays in a Public Works Division either in
measuring work done or in making payments after measurements have been taken, and it
may reasonably be presumed that such delays lead to enhancement of rates. He may notice
that no attempt is made to encourage competition amongst contractors, or that the
arrangements for entering into contracts for works or supplies are otherwise defective and
Government possibly do not receive full value for the payments made. An examination of
the authorised Schedules of Rates, or their comparative analysis, may reveal that the data
forming the basis of cost estimates of works for sanction of the competent authority are not
so satisfactory as to secure the most economical results. He may observe peculiar features of
the revenue receipts or expenditure of the division that may be suggestive of possible
leakage of revenue, of untapped sources of revenues, or of inadequate attention to economic
considerations.
6.1.4 An Inspecting Officer must, however, keep it prominently in his mind that he
is concerned primarily with the accuracy of accounts and regularity of financial
transactions and not with administration.

Local Audit
6.1.5 Local Audit may be distinguished from Inspection in that its purpose is to
audit the initial accounts maintained in certain Government institutions and offices
on the spot. The scope of Local Audit is not confined merely to seeing whether the
initial accounts are maintained in proper form or whether the financial rules are
properly observed but include a test audit in sufficient detail to verify the accuracy
and completeness of accounts
Audit Approach Demarcation of Duties

6.1.7 There should be clear demarcation of duties of the personnel in the audit
parties. A broad outline of responsibilities and duties of various categories of
personnel in the 288 inspection parties conducting local audit of Civil Offices and
Treasury Inspection is contained in the Annexure to this chapter.
The Audit Officer in charge of the Inspection Party is, however, not precluded from
making changes in the distribution, to be indicated by him in writing, keeping in
view the suitability of the individual official for performing the duties proposed to
be entrusted or other relevant factors such as the absence of any of the members of
the Audit Party.
The inspection personnel should be involved in clearly defined areas of work so that
their contribution in terms of quality and quantum of audit results can be identified
and their accountability ensured.
Notes:
(i) The instructions in this paragraph and the subsequent one generally apply also to
Commercial, Railway, Posts and Telecommunications, Defence and Receipt Audit
Parties, subject to any special instructions regarding devolution of duties in those
parties issued by the concerned wings of the Office of the Comptroller and Auditor
General.
(ii) Due to the wide diversity of activities, varying scales of operations and different types
of records maintained by commercial undertakings and also due to the fact that the
Comptroller and Auditor General is the sole Auditor in certain cases while he is
required to conduct only a superimposed audit in other cases, the allocation of duties
of the field staff in the Commercial Audit Wing has to be prescribed separately by the
local Accountants General, Principal Directors of Commercial Audit and Ex-Officio
Members, Audit Board, in respect of each commercial undertaking or group of
undertakings of the same type under their control, keeping in view the guidelines
issued by the Office of the Comptroller and Auditor General. In the case of multi-unit
undertakings, the duty lists will be finalised by the Principal Director of Commercial
Audit and Ex-Officio Member, Audit Board, auditing the unit.