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Manual of Standing Orders (Audit)
1053 rules • Comptroller and Auditor General of India • 2002
Comprehensive manual issued by CAG containing standing orders and instructions for conduct of all types of audit — expenditure, receipts, stores, grants, companies, and performance audit.
2 - Detailed Procedure for Registration and Clearance of Objections • Introduction 7.2.1 319 • Registration of objections 7.2.2 319 • Registration of objections relating to insufficient or irregular sanctions 7.2.3 319 • Registration of financial irregularities 7.2.4 319 • Registration of overlapping objections 7.2.5 319 • Other guidelines for registration of objections 7.2.7 320 • Objections that need not be registered 7.2.11 320 • Clearance of objections 7.2.12 322 • Money value of objections 7.2.15 322 • Preparation, despatch, return and final disposal of objection statements 7.2.18 323 • Objection book 7.2.24 324 • Adjustment register 7.2.29 325 • Closing of objection book 7.2.32 326 • Review of objection 7.2.34 326 • Combination of objection statement and objection book 7.2.37 327 Chapter 3 – Preparation of Audit Reports • Mandate 7.3.1 328 • Scope and content of audit reports 7.3.2 328 • Responsibility for preparation 7.3.6 330 • General lay out and contents 7.3.8 331 • Drafting of reports and their submission 7.3.27 338 • Printing and presentation of reports 7.3.53 341 • Reports on accounts of statutory corporations, autonomous bodies etc. 7.3.61 342 • Annexure 1 – General lay out of the Audit Report 345
Para 1.1.12Under Section 19A of the CAG Act, after auditing a government company or corporation under Section 19, the CAG submits audit reports to the concerned gover...Para 1.1.18Under Section 21 of the CAG Act, the CAG can delegate any of their powers to officers of the department. However, no officer can submit constitutional repo...Para 1.1.9Under Section 16 of the CAG Act, the CAG must audit all receipts (revenue) going into the Consolidated Fund of India, States, and Union Territories with le...Para 1.1.11Section 19 of the CAG Act deals with auditing government companies and corporations. For government companies, the CAG follows the Companies Act provisions...Para 1.1.6Under Section 13 of the CAG Act, the CAG must also audit all transactions related to Contingency Funds and Public Accounts of the Union, States, and Union ...Para 1.1.7When the government gives grants and loans to various bodies and authorities, the CAG audits this spending too — but only using government records. The aud...Para 1.1.13Under Article 151 of the Constitution, the CAG submits audit reports on Union accounts to the President (who places them before Parliament) and on State ac...Para 1.1.19Under Section 23 of the CAG Act, the CAG can make regulations to implement the Act's provisions on audit scope and extent. This includes laying down genera...Para 1.1.16Beyond the main statutory duties, the CAG also handles some additional responsibilities: monitoring whether states comply with the President's financial di...Para 1.1.8Section 20 of the CAG Act allows the audit of bodies or authorities whose accounts are not already covered under other provisions. The President, Governor,...Para 1.1.14Under Article 279(1) of the Constitution, the CAG has a specific duty to ascertain and certify the net proceeds of certain taxes or duties mentioned in the...Para 1.1.20Under Section 24 of the CAG Act, the CAG can decide to skip detailed audit of certain accounts or types of transactions when circumstances warrant it, and ...Para 1.1.21The Indian Audit and Accounts Department (IA&AD) works under the CAG and derives its authority from Section 21 of the CAG Act (delegation of powers). Accou...Para 1.1.22The Accountant General must work closely with the State Government, particularly the Finance Department, to enforce financial propriety and regularity in s...Para 1.1.2The CAG has two broad categories of duties under the law: compiling and maintaining government accounts, and auditing those accounts. These are the two pil...Para 1.1.3Sections 10-12 of the CAG Act deal with how the CAG compiles accounts for the Union and States. The President can relieve the CAG from compiling Union acco...Para 1.1.10Under Section 17 of the CAG Act, the CAG has the authority to audit and report on the accounts of stores and stock held in any office or department of the ...Para 1.1.5Section 13 of the CAG Act mandates audit of all expenditure from the Consolidated Fund of India, States, and Union Territories with legislatures. The audit...Para 1.1.17Section 18 of the CAG Act gives the CAG strong powers to carry out audit effectively. The CAG can inspect any government accounts office or treasury, deman...Para 1.1.4The audit-related provisions are found in Sections 13 to 21, 23, and 24 of the CAG Act. This paragraph introduces those provisions, which are explained bri...Para 1.1.15Under the Sixth Schedule of the Constitution, the CAG audits the accounts of District and Regional Councils in tribal areas of Assam, Meghalaya, Mizoram, a...Para 2.1.14Compliance testing follows four steps: (1) identify the sub-system to test (e.g., 'Assessment of Duty' in Customs), (2) identify the control objective for ...Para 2.1.2Auditing Standards are the established norms, principles, and practices that auditors must follow when conducting audit. These standards are published sepa...Para 2.1.9If an audited office persistently fails to cooperate even after the matter has been brought to the attention of the Chief Executive (Chief Secretary/Secret...Para 2.1.16Single-component comparison is an analytical review technique that comes in two forms: comparing a figure against its budget estimate, or comparing it agai...Para 2.1.10Audit conclusions must be based on sufficient, competent, and relevant evidence obtained from the auditee's records. Evidence can be gathered through physi...Para 2.1.11There are three standard audit procedures used to obtain assurance in all types of audit: compliance testing (checking whether internal controls work), ana...Para 2.1.20Regression analysis is a statistical technique that mathematically models how one variable relates to others. It is similar to predictive analysis but more...Para 2.1.21Business analysis is a high-level (macro) review of financial statements using critical ratios related to profitability, liquidity, financial stability, an...Para 2.1.12Compliance testing is an audit procedure focused on evaluating whether internal controls are working properly. Unlike other tests, its goal is not to find ...Para 2.1.13During audit planning, the auditor should first make a preliminary assessment of the auditee's internal controls. If the controls appear reliable, formal c...Para 2.1.15Analytical review is an audit procedure that analyzes significant ratios, trends, and data patterns to spot anomalies — things that deviate from what the a...Para 2.1.17Cross-component comparison (ratio analysis) examines relationships between two or more financial figures — for example, receivables-to-turnover ratio or gr...Para 2.1.18System analysis is an analytical technique that scans individual entries within an account balance to find unusual or anomalous items, rather than looking ...Para 2.1.19Predictive analysis creates an expected value for a financial figure using non-accounting data — operating statistics or external information independent o...Para 2.1.22Analytical review follows five steps: (1) develop an expectation of what a figure should be, (2) define what counts as a significant difference from that e...Para 2.1.23Direct substantive tests examine actual transactions and account balances to verify that they are complete, accurate, and valid. The auditor selects a samp...Para 2.1.24Direct substantive testing follows five steps: (1) identify the sub-system to test (e.g., purchases in the Transport Department), (2) identify the specific...Para 2.1.25All audit offices must prepare a biennial (two-year) audit plan that integrates all types of audit work — central audit of vouchers, routine inspections, f...Para 2.1.26When planning audits, clear objectives must be set from the start. The audit plan should cover as many government offices as possible given available staff...Para 2.1.27Every audit office must have an Audit Planning Group (APG) led by its head officer (Director General, Principal AG, or AG Audit). This group is the top-lev...Para 2.1.3Government audit has three broad objectives: first, to check whether the government's financial statements are reliable and fair; second, to verify that la...Para 2.1.5It is the government's responsibility to create financial rules and set up internal controls to prevent misuse of public funds. Audit's job is not just to ...Para 2.1.4The Comptroller and Auditor General (CAG) is the sole authority who decides what type of audit to conduct and how deep or wide it should be. No other autho...Para 2.1.7When auditing government accounts, auditors have the right to ask any questions, make observations, and demand any records, statements, returns, or explana...Para 2.1.6Enforcing economy in public expenditure is the Executive Government's responsibility, not the audit department's. However, it is audit's duty to flag waste...Para 2.1.8Under Section 18(2) of the CAG's DPC Act 1971, it is the legal duty of the officer in charge of any department being audited to provide all facilities for ...Para 2.1.1This section covers the general principles for auditing expenditure, receipts, stores, commercial accounts, autonomous bodies, and non-government instituti...Para 2.2.19When the government needs to spend on something not included in the annual budget, it requires supplementary authorization from the Legislature before spen...Para 2.2.8Auditing expenditure sanctions is a key area of audit work. Sanctions and orders from both Union and State Governments, as well as subordinate authorities,...Para 2.2.14No government expenditure can be incurred from the Consolidated Fund from April 1 of any financial year unless the Annual Budget has been prepared and an A...Para 2.2.17Audit must examine the budget formulation and expenditure control systems in ministries and departments to ensure they are adequate. Key areas of scrutiny ...Para 2.2.1Under Section 13 of the CAG's DPC Act 1971, the CAG has a statutory duty to audit all expenditure from the Consolidated Fund of India, the Consolidated Fun...Para 2.2.37When auditing sanctions for competency, audit follows different approaches based on the type of powers held by the sanctioning authority. If the authority ...Para 2.2.4Irregularity in government expenditure goes beyond just rule violations. It also includes spending money without achieving the intended results, meaning ex...Para 2.2.5Financial rules and orders issued by the President are scrutinized at different levels depending on their scope. General rules are examined by the CAG pers...Para 2.2.11When important audit findings are detected -- whether through Central Audit (at headquarters) or Local Audit and Inspections (at field offices) -- the Acco...Para 2.2.6Financial rules and regulations issued by the President or subordinate authorities that apply to the Defence Services are scrutinized by the Director Gener...Para 2.2.12Junior audit staff should be actively encouraged to submit references and suggestions for improving audit quality. Those who contribute particularly valuab...Para 2.2.9Each audit office has a dedicated section for propriety and efficiency audit work, usually called the Efficiency-cum-Performance Audit (ECPA) Section. This...Para 2.2.3Expenditure must comply not just with specific rules but also with broad principles of financial propriety. When spending violates these general principles...Para 2.2.7All financial rules and standing orders issued by State Governments or their subordinate authorities must be scrutinized by the Accountant General of the c...Para 2.2.31Sometimes a delegation order may technically be within rules, so no formal audit objection can be raised, but the AG may still feel it could seriously weak...Para 2.2.16Each Grant or Appropriation is a single total sum, but it is internally broken down into sub-heads and items based on detailed estimates presented to the L...Para 2.2.22Regularity audit checks whether expenditure complies with the Constitution, laws, and rules framed by competent authorities. The rules audited against fall...Para 2.2.24When expenditure does not appear to be covered by the rule or order cited to justify it, audit must bring this to the competent authority's notice. A depar...Para 2.2.36One of audit's key functions is to verify that every expenditure item has proper sanction from a competent authority. This involves two checks: first, that...Para 2.2.44For Union Government sanctions, every financial order communicated to Audit must indicate that proper financial concurrence was obtained. If a Ministry or ...Para 2.2.26In the context of regularity audit of expenditure, it is audit's duty to examine all financial rules and orders issued by executive authorities that affect...Para 2.2.32The audit department is not required to formally scrutinize departmental manuals that merely reproduce existing codes and regulations -- doing so would mak...Para 2.2.41When a recurring payment depends on certain conditions being met (such as continued eligibility for an allowance) or continues until a specific event happe...Para 2.2.47This para lays down the four fundamental standards of financial propriety that auditors must apply. First, spending should not exceed what the occasion dem...Para 2.2.29When applying the third check from Para 2.2.27 (ensuring rules do not conflict with higher authority orders), the AG should follow the guiding principles f...Para 2.2.35The specific extent and conditions of financial powers delegated to different government authorities are set out in the financial rules of each respective ...Para 2.2.39Auditors must exercise extreme care when reviewing sanctions to expenditure because of their long-term impact. Once a sanction is accepted during audit, al...Para 2.2.33Accountants General and Principal Directors of Audit have the authority to independently accept, object to, or request amendments to the financial rules an...Para 2.2.40Every sanction to expenditure must be properly recorded and attested in the audit register or other prescribed record. This creates a trail so auditors can...Para 2.2.42Sanctions that remain valid for a long time or are permanent in nature need to be reviewed periodically by audit. The purpose is to flag cases where the or...Para 2.2.48This para provides an extensive annexure listing all the types of tasks that may be assigned to the Propriety Audit Section. These tasks span general propr...Para 2.2.38When auditing a sanction for expenditure, it is not enough to check whether the right authority approved it. Auditors must also verify that the expenditure...Para 2.2.43The Audit wing is entitled to receive a separate copy of every expenditure sanction or audit-enforceable order from the competent authority. The procedure ...Para 2.2.45Sometimes financial rules require one Ministry to consult the Finance Ministry before issuing certain orders, and the Finance Ministry may want Audit to wa...Para 2.2.46Propriety Audit goes beyond checking whether rules were technically followed. Its purpose is to identify improper expenditure, waste of public money, or mi...Para 2.2.15Audit of expenditure against provisions of funds has two main checks: first, that money was spent only on the services and purposes for which the Grant or ...Para 2.2.10Auditors must pay special attention to the rates paid for government works and supplies. While objections on rates can only be raised on grounds of financi...Para 2.2.18The Accountant General must verify that all expenditure being audited falls within the scope of an approved Grant or Appropriation Act, and that total spen...Para 2.2.28When checking whether rules are consistent with CAG's audit and accounting requirements (the second check in Para 2.2.27), the Audit Officer should follow ...Para 2.2.21The primary responsibility for monitoring expenditure against a Grant or Appropriation lies with the Executive Government, not with audit. However, audit s...Para 2.2.13Article 266(3) of the Constitution states that no money can be withdrawn from the Consolidated Fund of India or any State without proper legal authorizatio...Para 2.2.20A Grant or Appropriation covers all charges for a financial year, including past liabilities paid in that year. It is valid only until March 31 -- any unsp...Para 2.2.23Regularity audit is quasi-judicial in nature because it involves interpreting the Constitution, statutes, and rules. However, the CAG does not have the fin...Para 2.2.27When scrutinizing rules and orders, audit must verify four things: (1) they do not violate the Constitution or any law; (2) they are consistent with accoun...Para 2.2.34The power to sanction expenditure from the Consolidated Fund and Contingency Fund of India and Union Territories is vested in the President (or the UT Admi...Para 2.2.25Audit must ensure that rules and regulations are followed not just in their literal text (the 'letter') but also in their underlying purpose and intent (th...Para 2.2.30All orders delegating financial authority must be carefully scrutinized by the Accountant General personally before they are accepted for audit purposes. T...Para 2.3.4Audit does not normally review judicial decisions or question the discretionary judgment exercised by revenue officers in individual cases. However, examin...Para 2.3.1Under Section 16 of the CAG's Act of 1971, the Comptroller and Auditor General has a statutory duty to audit all receipts payable into the Consolidated Fun...Para 2.3.2Audit of receipts covers all tax and non-tax revenues of the Central Government, State Governments, and Union Territories. The CAG must satisfy himself tha...Para 2.3.3Audit should never try to perform the job of the revenue authorities, such as making tax assessments themselves. However, audit must verify that individual...Para 2.3.5Audit can point out obvious errors in tax assessments and computations, leaving it to the tax department to correct them as they see fit. The audit departm...Para 2.3.7The primary responsibility for correctly assessing, realizing, and crediting government revenue lies with the departmental authorities, not with Audit. Aud...Para 2.3.8When auditing departments that receive public money, audit must examine whether the department has adequate fraud prevention and detection mechanisms. This...Para 2.3.13This para provides a comprehensive 14-point checklist summarizing what audit must verify in relation to government revenue. The key areas include: ensuring...Para 2.3.15Detailed procedures for auditing specific tax receipts like Income Tax, Wealth Tax, Gift Tax, Central Excise, and Customs Duties are contained in a separat...Para 2.3.10When financial rules prescribe specific amounts or intervals for government recoveries, auditors must check that these are being followed without unauthori...Para 2.3.11Audit should actively review outstanding government dues and suggest practical ways for departments to recover them. If certain dues appear to be irrecover...Para 2.3.12Audit must verify that the department's internal procedures properly handle the full cycle of government revenue: raising demands, collecting payments, and...Para 2.3.14When auditing tax assessments, the returns filed by taxpayers may not always reveal underreporting of income or sales. In such cases, auditors should use a...Para 2.3.16The procedures for raising and pursuing audit objections that are prescribed for expenditure audit also apply to receipt audit, with necessary modification...Para 2.3.6While major tax receipts like income tax and GST have dedicated separate audit processes, other departmental receipts (fees, fines, rent, etc.) are usually...Para 2.3.9Receipt audit is primarily guided by the applicable statutory provisions (as interpreted by courts), financial rules, and government orders. If during test...Para 2.4.8Auditors must check that all received stores were examined for quality, quantity, and specifications upon delivery, and that they were properly recorded in...Para 2.4.1The audit of payments for purchasing stores (government supplies and materials) follows the same rules that the CAG has prescribed for auditing expenditure...Para 2.4.3Government departments maintain stores and stock accounts as part of their initial records, and these are audited locally by audit teams. The audit checks ...Para 2.4.12The specific step-by-step procedures for conducting stores and stock audit are to be mutually agreed upon between the Accountant General and the State Gove...Para 2.4.13The same procedure used for raising and pursuing audit objections on expenditure also applies to stores and stock audit objections. This ensures consistenc...Para 2.4.5Auditors must verify that stores in government custody are properly safeguarded, physically verified regularly, and that any discrepancies between book and...Para 2.4.4When auditing government store purchases, auditors must verify that purchases were properly sanctioned, made economically through competitive tendering, an...Para 2.4.10Audit must ensure that government stores are physically counted and verified periodically to confirm that actual stocks match the book balances. While Audi...Para 2.4.2The CAG's audit reports submitted to the President, State Governors, or UT Administrators must cover the totality of government accounts, which includes no...Para 2.4.6Irregularities in disposing of government stores are as serious as misusing public funds, so audit of purchases is incomplete without also checking how sto...Para 2.4.11For furniture in residences of high officials (such as Governors, Chief Ministers, or senior officials), audit may require an annual verification certifica...Para 2.5.3Under Section 619A of the Companies Act, the Government must prepare an annual report on the working and affairs of every government company within three m...Para 2.5.1Nationalised industries and state undertakings whose commercial accounts are audited by the CAG fall into four broad categories: government companies (wher...Para 2.5.12The audit of central government companies, statutory corporations, and autonomous bodies operating commercially is handled by the Principal Directors of Co...Para 2.5.13This paragraph introduces the section detailing the specific duties and responsibilities of the Comptroller and Auditor General when it comes to auditing g...Para 2.5.15The CAG issues formal directions to statutory auditors under Section 619(3) of the Companies Act for conducting audit of government companies. These direct...Para 2.5.16The CAG conducts supplementary or test audit of government companies, which goes beyond routine financial checking to include efficiency and propriety aspe...Para 2.5.17During audit of government companies, auditors must specifically examine whether the Companies Act and relevant statutes have been complied with, the compa...Para 2.5.2Government companies are defined and governed by the Companies Act, 1956, and are subject to all laws that apply to limited liability companies in general....Para 2.5.20Major irregularities discovered during the audit of government companies are included in the CAG's Report to Parliament or the State Legislature. This repo...Para 2.5.23For statutory corporations where the CAG is the sole auditor, the concerned Accountants General must issue Separate Audit Reports (SARs). These reports ser...Para 2.5.4Under Section 19(1) of the CAG's DPC Act, 1971, the audit of government company accounts must be conducted by the CAG in accordance with the provisions of ...Para 2.5.6Statutory corporations, boards, and similar bodies are governed by their own specific Acts of Parliament or State Legislature, which define their scope, fu...Para 2.5.7Under Section 19(2) of the DPC Act, the CAG is responsible for auditing the accounts of corporations established by or under laws made by Parliament. The a...Para 2.5.5Under Section 619B of the Companies Act, certain non-government companies (where the government does not hold 51% shares) can be classified as deemed gover...Para 2.5.14Statutory auditors of government companies must work within the framework of the Companies Act, 1956. Their primary job is to examine and certify the Profi...Para 2.5.8For corporations established by State or Union Territory legislatures, the audit by the CAG is not automatic. Under Section 19(3) of the DPC Act, the Gover...Para 2.5.10When auditing the accounts of government companies and corporations, the fundamental goal is to check whether the financial statements present a true and f...Para 2.5.22While deemed government companies are subject to the same audit procedures as regular government companies, there is one important exception: the requireme...Para 2.5.21Deemed government companies are subject to the same audit framework as regular government companies. This means the statutory provisions regarding audit, t...Para 2.5.9Departmentally managed concerns are government commercial or quasi-commercial operations that are run directly under a ministry or department. Unlike gover...Para 2.5.18When reviewing the statutory auditor's report, the CAG's team must check that no important defects or irregularities have been omitted from the report. The...Para 2.5.19Under Section 619A of the Companies Act, the statutory auditor's report on each government company, along with any comments or supplementary observations m...Para 2.5.11The detailed audit of government companies and deemed government companies is carried out by statutory auditors who are appointed under the Companies Act b...Para 2.6.1The CAG's audit powers over government corporations come from Section 19 of the DPC Act. Sub-section (2) covers corporations established by parliamentary l...Para 2.6.2Under Section 19(3) of the DPC Act, the Governor or UT Administrator can entrust audit of state/UT legislature-established corporations to the CAG, but onl...Para 2.6.3Bodies and authorities not covered under Section 19 of the DPC Act can still be audited by the CAG under Sections 14, 15, or 20. The terms 'body' and 'auth...
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Para 2.21.7System-based manpower audit, which examines the staffing patterns and human resource management systems of government offices, should normally be conducted...Para 2.6.10When the CAG's audit is entrusted under Section 20 of the DPC Act, two conditions must be met: first, the President (for central bodies), Governor (for sta...Para 2.6.11The audit of autonomous institutions under Sections 14, 19, and 20 of the DPC Act has two main objectives: checking how government financial assistance is ...Para 2.6.13When a body's rules, regulations, or articles incorporate provisions about the CAG's audit duties and powers, these must be worded in discretionary terms (...Para 2.6.14When the CAG takes up audit of any institution, the scope of audit is determined by first reviewing the institution's existing audit arrangements and condu...Para 2.6.18Before the CAG can take up audit of a body under certain provisions (Section 14(2), 15(2), or 20(2)), prior approval from the President, Governor, or UT Ad...Para 2.6.23When auditing local bodies (like municipal corporations or zilla parishads), the Accountant General must verify that they are following the rules prescribe...Para 2.6.26When auditing non-commercial autonomous bodies, the CAG applies the same general principles used for government accounts, unless their founding legislation...Para 2.6.27When the CAG audits bodies that received specific-purpose grants or loans under Section 15 of the DPC Act, the auditor must verify three things: that the b...Para 2.6.29The CAG's audit report on a body audited under Section 19 or 20 of the DPC Act must be sent to both the body and the concerned government. For Section 19 c...Para 2.6.33The procedure for settling audit objections raised in a Separate Audit Report is also documented in the Manual of Instructions for Audit of Autonomous Bodi...Para 2.6.9Under Section 20(2), when the CAG believes that a body or authority should be audited because of substantial government investment or advances, even though...Para 2.6.30When audit reports are to be placed before Parliament or a State Legislature, the draft report must first be shown to the CAG for approval. At the same tim...Para 2.6.8Section 20 is an enabling provision for auditing bodies not otherwise covered by the CAG. If the President, Governor, or UT Administrator requests the CAG ...Para 2.6.15To judge whether an institution's existing audit arrangements are adequate, seven criteria are used: regularity of audits, coverage of the audit, qualifica...Para 2.6.21When the CAG's office takes up audit of an institution for the very first time, auditors should first hold a personal meeting with the head and senior offi...Para 2.6.12If an autonomous body already has its own audit arrangements established by the legislation that created it, the CAG's audit does not replace them. Both au...Para 2.6.24Auditors must examine whether the institution being audited has proper systems in place for six critical areas: accounting for receipts, expenditure and as...Para 2.6.16Section 24 of the DPC Act allows the CAG to dispense with detailed audit and apply limited checks when circumstances warrant. The use of words like 'shall'...Para 2.6.22Regardless of whether the CAG is the sole auditor or shares audit responsibility, auditors must first evaluate the institution's accounting systems and pro...Para 2.6.28When auditing the accounts of bodies and authorities, the CAG's audit team must not independently approach taxpayers or members of the general public for i...Para 2.6.19Before formally proposing that the CAG take up audit of a body under Sections 14(2), 20(2), or 15(2), the Accountant General should first have a personal d...Para 2.6.25Beyond checking whether systems exist, auditors must also examine whether the institution has the right organizational setup for accounting — meaning quali...Para 2.6.31Bodies audited under Section 14 do not get a separate audit report. Instead, significant audit findings are included in the conventional CAG Audit Report s...Para 2.6.20When the government gives grants, loans, or makes investments in any institution, it should include a condition requiring that institution to open its book...Para 2.6.32Detailed instructions for auditing bodies and authorities under Sections 14, 15, 19, and 20 are contained in a separate document called the Manual of Instr...Para 2.6.17Even when primary auditors (like chartered accountants or internal auditors) are appointed for an institution, the CAG retains overall responsibility for r...Para 3.1.10Every audit office must have a specific schedule prescribing deadlines for completing audit of each month's vouchers, and this schedule must be documented ...Para 3.1.11March vouchers deserve special attention during audit because government departments tend to rush spending at the end of the financial year to avoid lapse ...Para 3.1.12Physical vouchers should never be transported to the AG (Audit) office for central audit, because moving them between offices risks them being lost or misp...Para 3.1.13The AG (A&E) and AG (Audit) must work in close coordination and mutual cooperation for central audit work, since both serve the common objective of efficie...Para 3.1.14Where the AG (A&E) office has implemented Voucher Level Computerisation (VLC), the audit office should fully leverage the computer-generated reports and da...Para 3.1.15As a general rule, government officers draw money from treasuries or banks under the Treasury Rules framed under Article 283 of the Constitution, and the a...Para 3.1.16The duties of Central Audit Support Sections and Central Audit Parties are broadly laid out in annexures, but the AG (Audit) has flexibility to reassign wo...Para 3.1.18The Assistant Audit Officer (AAO) leading a Central Audit Party must ensure that all party members perform their duties promptly, regularly, and efficientl...Para 3.1.25Copies of all government sanctions (approvals for expenditure) are received by the Central Audit Support Sections, where they are examined against the MSO ...Para 3.1.27All government sanctions (approvals) for foreign travel must be logged in a dedicated register at the Central Audit Support Section. Copies of these entrie...Para 3.1.28The Central Audit Parties must thoroughly verify the Abstract Contingent (AC) Bill Register maintained by the Accountant General's office. They need to cro...Para 3.10.1The audit of Indian embassies and missions abroad focuses on five key objectives: ensuring remittances are properly accounted for and not excessive, verify...Para 3.1.3Central Audit has six primary objectives. It checks whether vouchers follow the prescribed format and rules, whether government orders themselves are legal...Para 3.1.30Once audit and review are complete, the Central Audit Party sends the Selection Register, completion certificate, and audit notes/memos (in three copies) t...Para 3.1.31The Accountant General (Audit) must monitor how effectively the AG (A&E) follows up on accounting-related objections such as missing DC Bills, vouchers, pa...Para 3.1.8Central Audit can be supplemented by local audit and inspections as directed by the CAG. However, for departments that have their own separate accounting s...Para 3.10.12When auditing remittance transactions, auditors verify five things: that foreign exchange to rupee conversions use correct approved rates, that transaction...Para 3.10.2Beyond regular establishment and contingent bills, auditors of embassy accounts must test-check several additional source documents. These include the RBI ...Para 3.10.14The London High Commission and Washington Embassy make payments on behalf of other ministries, state governments, PSUs, and statutory bodies. After departm...Para 3.10.19When public sector undertakings, autonomous bodies, or statutory bodies need the London or Washington missions to make payments on their behalf, they must ...Para 3.10.27This paragraph extends payment provisions to all Indian missions and posts abroad other than London and Washington. These missions also make payments on be...Para 3.10.28For payments on behalf of other central ministries and departments, missions other than London and Washington follow the same procedures prescribed in Para...Para 3.10.3Three audit authorities are responsible for embassy accounts. The Principal Director of Audit in London audits the High Commission's accounts. The Director...Para 3.10.30When auditing State Government payment transactions through missions other than London and Washington, auditors must verify two things: (1) that payments a...Para 3.1.4The Accountant General (Audit) is accountable to the Comptroller and Auditor General (CAG) for auditing all government transactions recorded by the AG (A&E...Para 3.1.1Since March 1, 1984, the offices of State Accountants General have been split into two separate offices: one handling Accounts and Entitlement (A&E) functi...Para 3.1.19Auditors and others performing audit duties must not relax any audit requirements on their own initiative. Prescribed checks must be followed in both spiri...Para 3.1.7A Central Audit Support Section is also responsible for auditing vouchers in the Loan, Book, Deposit, and Account Current Sections of the Accounts Office. ...Para 3.1.17Every member of a Central Audit Party is personally responsible for the audit work assigned to them, including the Assistant Audit Officer (AAO). Auditors ...Para 3.1.23If vouchers or supporting documents were not received with the monthly account, they must be audited the same way when they arrive later. Any vouchers that...Para 3.1.5This paragraph lists the key source documents that Central Audit must examine. These include contingent vouchers, list of payments, monthly accounts from P...Para 3.1.21After completing the audit of a voucher, the auditor must mark it as 'Audited' in red ink and sign their initials. Alternatively, the AG (Audit) may author...Para 3.1.2In the AG (A&E) office, treasury transactions are processed through several specialized sections. The Central Treasury Section receives district accounts, ...Para 3.1.20This is a comprehensive checklist of requirements for auditing payment vouchers during central audit. It covers 13 main areas including: voucher format and...Para 3.1.26There must be close coordination between each Central Audit Support Section and the related Central Audit Parties. The results of sanction scrutiny must be...Para 3.1.9Central Audit of a month's vouchers should begin as soon as the monthly accounts are closed and vouchers are posted in the prescribed registers by the A&E ...Para 3.1.24When a Certificate of Payment is submitted as a substitute for a lost voucher or missing payee receipt, it must be audited in full detail — even if the ori...Para 3.1.29After auditing a voucher, the auditor must mark on it (called 'audit enfacement') showing the amount approved or objected to. The Assistant Audit Officer t...Para 3.1.6Central Audit is conducted every month by audit parties that visit the Accounts and Entitlement office. Central Audit Support Sections in the Audit Office ...Para 3.1.22When an auditor raises an objection on a voucher or any item in a schedule or account, the objection must be recorded on the document itself in red ink. Th...Para 3.1.32To improve audit efficiency, important cases handled by various sections should be shared across the office as they arise. Additionally, a half-yearly dige...Para 3.10.22For payments related to transactions financed from foreign loans, as well as debt servicing payments (interest and principal repayments) against those loan...Para 3.10.20When PSUs or autonomous bodies make advance deposits with the Controller of Accounts, MEA, the London and Washington missions will process payments only af...Para 3.10.24When the London or Washington missions need payments made in India on their behalf, they send RBI drafts for the required amounts to the State Accountants ...Para 3.10.11Most Indian missions abroad receive their foreign exchange through remittances from MEA and the Ministry of Commerce (for unattached trade sections) via th...Para 3.10.17For other payments made by London and Washington missions on behalf of central ministries, no separate authorization from the Controller of Accounts, MEA i...Para 3.10.23Certain categories of payments — such as pensions to Indian nationals abroad, overseas scholarships from the Ministry of Education, and specific Defence Mi...Para 3.10.13Missions other than London and Washington normally should not invest surplus funds in fixed deposits — instead, they should cancel or reduce future remitta...Para 3.10.25The London and Washington missions can authorize other Indian missions abroad to spend on their behalf without needing separate approval from the Controlle...Para 3.10.31PSUs and autonomous bodies needing payments through missions other than London and Washington must remit funds in foreign exchange (or Indian rupees for el...Para 3.10.15When officials are deputed abroad for more than three months, the London and Washington missions can pay their foreign exchange entitlements (pay and allow...Para 3.10.21After receiving accounts from the missions, the Controller of Accounts, MEA matches (pairs off) the debits (payments made) and credits (deposits received) ...Para 3.10.33Every sanction that involves expenditure in foreign exchange must explicitly mention that foreign exchange clearance has been obtained from the Ministry of...Para 3.10.10The Embassy of India in Washington receives funds from three sources: periodic remittances from MEA through the Reserve Bank of India, interest earned on t...Para 3.10.16For deputations of two months or less, missions can pay all entitlements except salary without waiting for the Last Pay Certificate, based solely on the de...Para 3.10.26Government officers traveling abroad on behalf of PSUs or autonomous bodies must get their foreign tour programmes approved through normal procedures (dele...Para 3.10.32Certain special categories of payments that missions have been making under standing arrangements or special orders will continue under those same arrangem...Para 3.10.29For State Government payments through missions other than London and Washington, the State AG sends two copies of the sanction to the Controller of Account...Para 3.10.18Payments on behalf of State Governments are made by the London and Washington missions based on valid sanctions received through the State Accountant Gener...Para 3.10.5Audit responsibilities for Mission payments are split between the overseas audit officer and the audit officer in India. The overseas auditor checks that p...Para 3.10.9The Indian High Commission in London operates two bank accounts with the State Bank of India, London. The 'Stores Account' is used for paying for purchased...Para 3.10.4Local audit of Indian Missions and Posts abroad is conducted at periodic intervals by three designated audit officers: the Principal Director of Audit in L...Para 3.10.8For payments made by Indian Missions other than the High Commission in London and the Embassy in Washington on behalf of Central and State Governments, the...Para 3.10.34When Indian Missions abroad make payments on behalf of public sector companies or autonomous bodies, Audit must check that these organisations deposited mo...Para 3.10.6The final audit of certain payments made in London by the High Commissioner for India is conducted by the Audit Officer in India. This covers payments to s...Para 3.10.35Given the growing activities of Indian Missions and public sector undertakings abroad, CAG may approve comprehensive Value For Money (VFM) audits and perfo...Para 3.10.7For miscellaneous payments of varied nature (like UN subscriptions or general average payments), the audit responsibility is divided based on who authorise...Para 3.11.5Treasuries and departmental offices maintain their own accounts of deposit receipts and payments, so many audit checks must be done during local audit (at ...Para 3.11.6This rule lays out the key checks Audit must perform on deposit receipts and repayments. Audit must ensure that money is deposited only when authorised by ...Para 3.11.12The Accountant General (Audit) decides whether initial accounts of Personal Deposits need to be audited and whether such audit should happen locally (where...Para 3.11.11Personal Ledger Accounts can also be opened in favour of specified government officers for executing projects and schemes, with funds transferred from the ...Para 3.11.15Central Audit of deposits involves verifying plus and minus memoranda to confirm that Personal Ledger Accounts were opened properly, accounts that should c...Para 3.11.1The audit of government deposits has three main objectives. First, it checks that money is not diverted from the Consolidated Fund and parked unnecessarily...Para 3.11.13Certain deposit accounts are governed by special rules issued by the Government for specific purposes, such as deposits for work done for public bodies or ...Para 3.11.10Personal Deposits (also called Personal Ledger Accounts or Personal Deposit Accounts) are maintained at treasuries and function like banking accounts. They...Para 3.11.3This paragraph lists the source documents that auditors must examine when auditing deposit accounts. These include plus and minus memoranda, challans (paym...Para 3.11.14Local audit of deposits must verify several critical points: that deposits are properly recorded and reconciled with treasury records, repayments go to the...Para 3.11.9Audit of lapsed deposits involves three verifications: checking that the lapsed amounts were correctly written off in the March plus and minus memoranda; c...Para 3.11.7When reviewing year-end closing balances of deposit accounts, Audit must verify two things: first, that balances have been correctly carried forward from o...Para 3.11.2Government deposits covered under the audit rules fall into three broad categories: Civil Deposits (including revenue deposits, civil court deposits, and c...Para 3.11.4The monthly plus and minus memoranda, along with repayment vouchers and annual lapsed deposit statements received from treasuries and courts, are checked i...Para 3.11.8Every year, an annual return of revenue and court deposit transactions must be sent to the AG (A&E). The amounts for deposits that have lapsed (remained un...Para 3.12.3This paragraph lists the key source documents that auditors must examine when auditing Provident Fund accounts. These include paid vouchers, subscriber led...Para 3.12.6When auditing vouchers for Provident Fund withdrawals, auditors must check four things: that a competent authority sanctioned the advance or withdrawal, th...Para 3.12.1The Government acts as custodian of Provident Funds, which are part of the Public Account. Audit of Provident Funds has two objectives: first, to verify th...Para 3.12.4In most States, the AG (A&E) maintains the detailed Provident Fund accounts of State Government employees, unless the CAG has been relieved of this respons...Para 3.12.8After the A&E office closes the annual Provident Fund accounts, the audit of Finance Accounts must analyse how the accumulated PF funds have been utilised ...Para 3.12.2This paragraph lists the types of Government Provident Funds covered by the audit rules. These are funds within the meaning of the Provident Fund Act, 1925...Para 3.12.5The AG (Audit) conducts only a concurrent scrutiny of paid PF vouchers in the A&E Office, limited to the prescribed quantum (sample size). In States where ...Para 3.12.7Local audit of departmentally-maintained Provident Fund accounts involves selecting a representative sample for test check, tracing entries from recovery s...Para 3.13.18When the Union or State Government guarantees someone else's loan, it creates a potential future liability (called a contingent liability). Audit must keep...Para 3.13.19When the government guarantees a loan for a public body or institution, the Accountant General (Audit) must ensure that body's accounts are audited by qual...Para 3.13.2Pay and Accounts Officers and departmental officers keep records of loans given by the government, including revenue advances, permanent advances, and pers...Para 3.13.26The Accountant General (Audit) conducts test audit of the Public Debt office's work. For this purpose, the AG assumes the principal amount on the voucher i...Para 3.13.28When auditing interest payments on loans borrowed from institutions like LIC, NCDC, and other financial bodies, the auditor must verify that these payments...Para 3.13.3The audit of interest payments on borrowings managed by RBI's Public Debt Offices is split between the Audit and Accounts Department and the Public Debt of...Para 3.13.6This para lays out the comprehensive audit checks for government borrowings. Audit must ensure borrowings do not exceed legislative limits, loan proceeds a...Para 3.13.8Various authorities maintain detailed loan accounts depending on the type of loan. Accountants General (A&E) maintain subsidiary loan registers for loans t...Para 3.13.7The government provides loans and advances to various bodies and individuals for developmental and other purposes. Audit plays a critical role by checking ...Para 3.13.12Permanent advances are standing cash advances given to officers who need to make urgent payments before they can draw money through normal bill procedures....Para 3.13.16Audit of loans and advances to government servants involves five main checks: verifying that competent authorities sanctioned the loans per governing rules...Para 3.13.4Under Article 292 of the Constitution, the Union Government can borrow against the security of the Consolidated Fund of India within limits set by Parliame...Para 3.13.5Under Article 293, State Governments can borrow within India against the security of their Consolidated Fund, within limits set by the State Legislature. H...Para 3.13.11Audit of Revenue Advances is limited to two checks: first, verifying that the transactions comply with the governing rules; and second, ensuring that prope...Para 3.13.22Suspense heads are temporary accounting entries used for transactions that will eventually be cleared by actual cash payment, recovery, or book adjustment....Para 3.13.9During local audit, auditors review the loan registers and broadsheets maintained by Pay and Accounts Officers and departmental offices. They check whether...Para 3.13.14Detailed accounts of loans and advances to government servants are maintained by either the AG (A&E)/Pay and Accounts Officers or the departmental officers...Para 3.13.23Auditing suspense heads involves not just normal checks on expenditure and receipts but also verifying that unadjusted balances represent genuine governmen...Para 3.13.21Union and State Governments maintain various Reserve Funds under Sector J in their accounts for specific purposes, funded by contributions from the Consoli...Para 3.13.27When auditing interest vouchers on government securities, auditors must verify five specific things: that the half-yearly interest matches the loan amount ...Para 3.13.24Government borrows from two types of sources: autonomous institutions (like LIC, NABARD, NCDC) whose loans are managed by departmental officers, and the op...Para 3.13.20When the Union or State Government creates a Sinking Fund to repay its own loans, audit must verify two things: that the money credited to the fund matches...Para 3.13.25The audit of interest payments on government's open market loans is shared between two bodies. The Public Debt office of RBI is responsible for checking th...Para 3.13.10Revenue Advances are a category of government loans that include takavi advances under Land Improvement Acts and other advances made by Revenue Officers in...Para 3.13.1The audit of government borrowings, loans, advances, guarantees, reserves, reserve funds, and sinking funds has three primary objectives: verifying that tr...Para 3.13.13When auditing sanctions for permanent advances, auditors verify five things: the sanctioning authority is competent, the advance is for a subordinate offic...Para 3.13.15Government servants can receive various types of loans and advances, each accounted for differently. Long-term loans like house-building advances and conve...Para 3.13.17Audit must monitor the investment of funds that form part of the Public Account. Investments from sinking funds or other government-administered funds must...Para 3.14.2For vouchers under Remittance Accounts (Settlement Account), the Audit Officer of the department being charged is responsible for verifying that the charge...Para 3.14.3In certain special cases, the officer who audits a charge is different from the officer who adjusts it. This para provides a detailed table of nine such ex...Para 3.14.6Audit must check whether proper enquiries have been started for all remittances that have remained unadjusted for an unreasonably long time. The goal is to...Para 3.14.1Remittance transactions are not final transactions -- they are adjusting entries that temporarily appear in the accounts and must be cleared by matching cr...Para 3.14.7For Reserve Bank of India Remittances, the AG (A&E) first confirms that each entry in the payment schedules has a supporting voucher and amounts match. Aud...Para 3.14.5The AG (A&E) maintains broadsheets and Remittance Check Registers to track and clear remittance transactions from various departments (PWD, Forest, commerc...Para 3.14.8Sterling and dollar remittances are used to fund the Indian High Commission in the United Kingdom and the India Supply Mission in Washington. The detailed ...Para 3.14.4Cash remittances happen not only between departmental offices that render compiled accounts but also between treasuries and between treasuries and currency...Para 3.15.1The responsibility for keeping expenditure within the approved Grant or Appropriation rests with the Executive (government departments). The Accounts Offic...Para 3.15.8The AG must independently examine reasons for excesses and savings in at least two departments with substantial issues, going beyond the department's own e...Para 3.15.7The AG (Audit) must conduct comprehensive reviews of budgetary procedures and expenditure control for 5 to 10 Grants each year, selecting those with persis...Para 3.15.4The Appropriation Audit Wing conducts monthly audits as soon as the monthly Civil Accounts are available. Based on this monthly monitoring, the AG (Audit) ...Para 3.15.5When fund allotment and re-appropriation orders are received in audit, they must be scrutinised against eight specific checks: the issuing authority must b...Para 3.15.2Appropriation Audit has three primary objectives: first, to check that money was spent on the services and purposes for which the Legislature approved the ...Para 3.15.3This para lists the key source documents that auditors rely on when conducting appropriation audit. These include fund allotment and re-appropriation order...Para 3.15.6Audit must closely examine cases of unnecessary or injudicious re-appropriation of funds and inadequate surrender of savings. This requires studying actual...Para 3.16.22Capital expenditure creates permanent, material assets or reduces recurring liabilities, while revenue expenditure covers the government's day-to-day opera...Para 3.16.25When extraordinary calamities like floods, fires, earthquakes, or enemy action cause damage, the cost of repairs can be charged to Capital account, Revenue...Para 3.16.5The Accountant General (Audit) or Principal Director of Audit must audit the annual accounts before they are submitted to the CAG for certification. The CA...Para 3.16.2The CAG has been relieved of preparing the Finance Accounts for the Union Government, Goa, and Pondicherry, but still submits them to the President, Govern...Para 3.16.37This paragraph prescribes the specific accounting method for reserve fund transactions. Grants from agencies without spending control and inter-government ...Para 3.16.8Audit checks on Finance Accounts and Appropriation Accounts must be meaningful and completed within defined time limits. The Manual of Standing Orders (Acc...Para 3.16.3Different departments prepare their own Appropriation Accounts with specific signing authorities. Posts accounts are signed by the Member (Finance) of the ...Para 3.16.9An independent and thorough audit check of annual accounts is essential before the CAG certifies them. This responsibility falls on the Accountant General ...Para 3.16.1Under Section 11 of the CAG Act, the Comptroller and Auditor General must prepare annual accounts showing receipts and disbursements for the Union, each St...Para 3.16.13This para introduces the main points that auditors should specially examine while auditing annual government accounts. These points are elaborated in the f...Para 3.16.7To avoid delays in submitting annual accounts, audit offices should begin scrutinising the underlying materials well in advance, not wait for the final com...Para 3.16.10When preparing Appropriation Accounts, audit should select key areas in advance for detailed probing of unnecessary re-appropriations, inadequate fund surr...Para 3.16.16When exact figures are unavailable before accounts close for the year, provisional adjustments may be made. Audit must verify that these provisional entrie...Para 3.16.34When the government decides to write down capital (reduce the recorded value of capital assets), audit must verify that the write-down has been approved by...Para 3.16.18Government transactions are classified by function, programme, or activity rather than by the department that handles the money. For example, the cost of b...Para 3.16.24In theory, interest on borrowed money used to finance a project during construction can legitimately be charged to capital. However, since a government pro...Para 3.16.30While funding decisions are the government's domain, audit must flag cases where spending from borrowed funds appears contrary to prudent financial managem...Para 3.16.6Certification of annual accounts serves four primary objectives. First, verify that accounts are correct and complete. Second, check that the compilation s...Para 3.16.17Under Article 150 of the Constitution, the President prescribes the form in which government accounts are kept, acting on the advice of the Comptroller and...Para 3.16.23Once expenditure on creating a new asset is classified as capital, three main principles govern how costs are treated in accounts. Capital bears all initia...Para 3.16.35Governments can create Reserve Funds by setting aside money from the Consolidated Fund or from grants by other governments or outside agencies, to spend on...Para 3.16.20The Controller General of Accounts (CGA) has the ultimate responsibility for prescribing correct classification of government transactions, acting on the C...Para 3.16.26Capital receipts related to construction-phase expenditure that was already debited to capital should be used to reduce that capital expenditure. After con...Para 3.16.38The principles and procedures for reserve funds described in Paras 3.16.35 to 3.16.37 do not apply to the Famine Relief Fund or Sinking Funds for governmen...Para 3.16.21Audit will not object to the government's decision to fund expenditure from current revenue or from borrowings, as long as it aligns with the budget approv...Para 3.16.33Questions about how to split expenditure between capital and revenue, and whether it is legitimate to fund certain expenditure from outside the Revenue Acc...Para 3.16.11The AG (A&E) has the ultimate responsibility for finalising the Finance Accounts and Appropriation Accounts of State and UT Governments (except Goa and Pon...Para 3.16.14When the audit office certifies the Finance Accounts of a government, it must run through a detailed checklist covering 13 major points. These include veri...Para 3.16.12For Goa and Pondicherry, the respective governments themselves prepare the Finance Accounts and Appropriation Accounts. The Principal Director of Audit (Ce...Para 3.16.15When auditing the Appropriation Accounts, auditors must verify a checklist of 10 items to ensure grants and appropriations are properly recorded. This incl...Para 3.16.19Auditors must scrutinize the classification of every transaction to verify four critical things: that the account heads are authorised, that expenditure ma...Para 3.16.27The concept of capital expenditure in government accounts is borrowed from commercial accounting practices. Its defining feature is that such expenditure i...Para 3.16.28Capital expenditure can be financed from three sources: surplus revenue, borrowings (specific or general), or accumulated balances. For accounting purposes...Para 3.16.29It is the government's prerogative, not audit's, to decide how capital expenditure is funded. Audit simply ensures the correct accounting treatment follows...Para 3.16.31While charging expenditure to revenue may seem prudent, this only works if actual revenue from taxes and other sources is sufficient to cover it. If revenu...Para 3.16.32Audit has three key duties regarding the allocation of expenditure between capital and revenue. First, ensure that accepted accounting and commercial princ...Para 3.16.36Grants from other governments or outside agencies that do not retain control over spending are treated as ordinary revenue of the recipient government. Whe...Para 3.16.4The Accountants General (Accounts & Entitlements) prepare annual accounts including Appropriation Accounts for all state governments except Goa. The state ...Para 3.17.1When auditing externally assisted projects (such as World Bank funded schemes), audit must report to the funding agency whether implementing agencies have ...Para 3.17.10World Bank and IDA loan agreements with the Government of India include specific requirements for accounting and audit of funded projects. The borrower mus...Para 3.17.17When a government body receives a loan from an external agency like the World Bank, the money must be spent only on the specific project it was approved fo...Para 3.17.4Local audit of World Bank projects must examine several critical areas: whether contractors were eligible to bid, whether investment decisions were sound, ...Para 3.17.9The audit certificate must be issued within 9 months after the financial year ends, or earlier if the loan agreement requires it. Delays are usually caused...Para 3.17.18World Bank loan funds can only be spent on goods and services from companies based in World Bank member countries. Bidders from non-member countries, or th...Para 3.17.26During local audit, auditors must obtain a complete list of all SOEs submitted during the review period. For each expenditure, they must verify supporting ...Para 3.17.11The World Bank has accepted the CAG of India as an independent auditor for World Bank-funded projects executed by government departments and corporations u...Para 3.17.16The borrower (Government of India or its agency) is responsible for identifying projects, assessing their feasibility, and implementing them. The World Ban...Para 3.17.12The annual accounts certified for World Bank projects are the expenditure statements for government-department projects and the full accounts for bodies wh...Para 3.17.14The World Bank provides financial assistance in two ways. First, it can sanction and release funds in advance, giving the borrower money upfront before exp...Para 3.17.15India uses the reimbursement method for World Bank loans, meaning the government funds project expenditure first and then claims it back from the Bank. Wor...Para 3.17.2For auditing World Bank-funded projects, auditors need access to several key documents. These include the staff appraisal reports, loan agreements, monthly...Para 3.17.20The local audit party can examine whether all the conditions related to World Bank loan expenditure have been followed. If any condition is violated, the A...Para 3.17.21This rule provides a detailed list of what can and cannot be reimbursed from World Bank loans. For example, mobilisation advances and foreign exchange frei...Para 3.17.22All the reimbursement eligibility rules mentioned in the preceding paragraphs must be kept in mind by auditors when certifying expenditure statements. Both...Para 3.17.23In civil offices, project expenditure is initially drawn through Abstract Contingent (AC) bills, which are provisional. The actual admissible expenditure i...Para 3.17.27When an implementing agency handles both World Bank-aided and non-Bank projects, audit inspection report paragraphs must clearly identify which project or ...Para 3.17.24When the Statement of Expenditure (SOE) procedure is used for loan disbursement, the SOE should not be treated as a separate document. Instead, it must be ...Para 3.17.25Under the SOE procedure, the borrower periodically requests withdrawal of loan funds by submitting a statement of expenditures without attaching supporting...Para 3.17.3To properly scrutinize a World Bank-funded project and issue the audit certificate, auditors need six essential documents: the loan agreement, staff apprai...Para 3.17.7The Ministry of Finance requires that the Statement of Expenditure must reach the Accountant General (Audit) by July 31 after the financial year ends. The ...Para 3.17.5For certain miscellaneous payments like remittance vouchers, cheques, and discount vouchers, only a basic minimum level of audit can be prescribed. This mi...Para 3.17.6When issuing the audit certificate for a World Bank project, the auditor must verify that all expenditure was incurred for its intended purpose and followe...Para 3.17.8Any irregularities found during audit must be briefly summarized and included with the audit certificate. The certificate itself must be issued using the r...Para 3.17.19All expenditure under World Bank-funded projects must strictly follow the Bank's terms and conditions. This includes using funds only for the sanctioned pu...Para 3.18.15When a scientific project requires expensive and specialized equipment, auditors must verify three things: whether the equipment was procured and installed...Para 3.18.17The Department of Atomic Energy and its units (Nuclear Fuel Complex, Atomic Minerals Division, Nuclear Power Corporation, etc.) are engaged in activities b...Para 3.18.3Scientific department audit follows the general principles from Chapters 3 and 8 of MSO (Audit). For ministries and departments responsible for science pol...Para 3.18.9Auditors should check whether project approval guidelines include provisions for mid-term and final appraisals, and whether completed projects are evaluate...Para 3.18.5Auditors must examine how each scientific department approves research projects. Different bodies have different approval mechanisms — Task Force (DBT), Pr...Para 3.18.18The Nuclear Fuel Complex operates multiple plants that process raw uranium and zircon into fuel components for nuclear reactors. The process chain goes fro...Para 3.18.6When auditing government-funded research or development projects, auditors must carefully study the project proposals to understand what each project aims ...Para 3.18.2The audit of scientific departments covers four central ministries (Science & Technology, IT, Environment, Non-conventional Energy), three central departme...Para 3.18.20Heavy Water is essential for India's nuclear power reactors as a moderator. The Nuclear Power Board pools all Heavy Water production from different units a...Para 3.18.8Auditors should examine the roles of the institute director and the project investigator in ensuring effective project implementation. The project investig...Para 3.18.22When auditing reprocessing plants under construction, auditors must examine contract awards, works execution, purchases, and stores procedures for irregula...Para 3.18.23The Department of Space develops satellites, launch vehicles, and ground equipment. In addition to general scientific audit guidelines, auditors should exa...Para 3.18.19When auditing the Nuclear Fuel Complex and Atomic Minerals Division, auditors must examine a comprehensive list of commercial and operational parameters: p...Para 3.18.12Auditors must verify that scientific departments have proper systems to protect their intellectual property rights. This includes checking whether patents ...Para 3.18.11When a scientific project develops a new process or technology, auditors must check whether a proper system exists for transferring it to industry. The tec...Para 3.18.10Auditors must separate projects by their objectives — whether they aim at basic research or technology development — and evaluate them accordingly. When te...Para 3.18.1Audit of scientific departments must follow special guiding principles that recognize the unique nature of scientific work. Audit should be seen as a suppo...Para 3.18.13For basic research laboratories, the number and quality of research papers published is a key performance measure. Auditors should evaluate the publication...Para 3.18.14Scientific projects need adequate manpower to succeed. Auditors should check whether the ratio of scientific/technical staff to administrative staff follow...Para 3.18.21Since 1987, the Nuclear Power Corporation of India Limited (NPCIL) handles operation, maintenance, and construction of nuclear power reactors. As a governm...Para 3.18.16The general guidelines for auditing scientific departments apply to all laboratories, institutes, and R&D projects. However, the Departments of Atomic Ener...Para 3.18.24When auditing a production or fabrication plant under a scientific department, auditors should examine the plant's working results over several years to as...Para 3.18.25Audit findings related to scientific departments must be communicated with special tact and sensitivity. Auditors must respect the individualistic nature o...Para 3.18.4Auditors should conduct a risk analysis of all research projects within each programme and select the most significant ones for detailed scrutiny. Priority...Para 3.18.7Auditors must check whether approved government projects have clearly defined milestones, timelines, and cost estimates for each activity or component. The...Para 3.19.7When project entities fail to comply with the conditions under which they received environmental clearance, these cases are referred to the concerned State...Para 3.19.11The Forest (Conservation) Act, 1980 prevents uncontrolled diversion of forest land for non-forestry purposes. Proposals to divert forest land must be appro...Para 3.19.5The Ministry of Environment and Forests made Environmental Impact Assessment (EIA) mandatory in 1994 for twenty-nine categories of developmental activities...Para 3.19.1Environment Audit aims to verify that the government has appropriate policies and procedures in place to achieve sustainable development — meaning economic...Para 3.19.3Environment Audit is conducted within the established frameworks of Regularity Audit and Performance Audit. Regularity Audit checks whether environmental l...Para 3.19.10The scope of Environment Audit extends to a thorough review of policy initiatives and action programmes undertaken by the Ministry of Environment and Fores...Para 3.19.4Environmental Impact Assessment (EIA) is a process that identifies and evaluates both the beneficial and harmful effects of development projects on the env...Para 3.19.13Audit of wildlife preservation covers the enforcement of the Wildlife (Protection) Act, 1972 through regional offices in Kolkata, Chennai, Delhi, and Mumba...Para 3.19.6After projects are commissioned, the entities that received environmental clearance must submit half-yearly compliance reports to the Ministry showing they...Para 3.19.2The scope of Environment Audit covers three main areas: examining the government's environmental appraisal and impact assessment procedures for development...Para 3.19.8The government's 1992 Policy Statement for Pollution Abatement uses multiple instruments — legislation, fiscal incentives, voluntary agreements, educationa...Para 3.19.18The Ministry of Environment and Forests serves as India's nodal agency for implementing international environmental agreements and programmes, including th...Para 3.19.17The Ministry of Environment and Forests manages education, awareness, and information programmes in forestry, wildlife, and environment through its institu...Para 3.19.12The Ministry of Environment and Forests funds several conservation programmes such as the National Forestry Action Programme, Wetland Conservation, Biodive...Para 3.19.14The Ministry of Environment and Forests conducts surveys of India's flora and fauna through specialized institutions. The Botanical Survey of India (headqu...Para 3.19.15Based on performance appraisal of the survey agencies (Botanical Survey, Zoological Survey, and Forest Survey of India), auditors will critically examine h...Para 3.19.16The Ministry of Environment and Forests supports various research and development programmes to advance scientific understanding and develop better environ...Para 3.19.19Auditors should examine the various international environmental agreements India has signed to ensure that the country's interests have been adequately pro...Para 3.19.9Auditors should conduct in-depth reviews of specific environmental programmes and projects from the perspective of economy, efficiency, and effectiveness (...Para 3.2.13Eligibility for House Rent Allowance (HRA) and other compensatory allowances is determined by specific government rules and orders. During audit, two thing...Para 3.20.7This stage involves examining whether the organization has a proper system for authorizing transactions before they happen and recording them properly afte...Para 3.2.6Auditors are not required to check compliance with certain categories of recruitment rules, including rules about community representation, promotion-vs-di...Para 3.2.3Payments to gazetted government servants are regulated through authorizations from different sources depending on the type of department: the Accountant Ge...Para 3.2.11When a gazetted officer's pay needs to be fixed — on first appointment, transfer to a different pay scale, or upon pay revision — the Accountant General (A...Para 3.2.2Claims by gazetted government servants mainly fall into four categories: pay, travelling allowance, compensatory allowances and honoraria, and advances (fo...Para 3.2.18When a government servant's entitlement to travel class, accommodation, and daily allowance depends on their pay level, the auditor must cross-check the pa...Para 3.2.20Service Books and Leave Accounts for gazetted officers whose pay is drawn by Heads of Offices (rather than through AG-authorized pay slips) are maintained ...Para 3.2.16The responsibility for checking travelling allowance bills is shared between Controlling Officers and Audit Officers because some checks (like verifying th...Para 3.2.10When auditing pay claims of gazetted government servants, the auditor must verify ten key things: that the officer is entitled to the pay claimed, the pay ...Para 3.2.12When auditing the grant of compensatory allowances, fees, or honoraria to government servants, auditors must keep three key principles in mind: the entire ...Para 3.2.14Gazetted officers who draw pay through Accountant General (A&E) authorizations can claim reimbursement of medical expenses directly in their salary bills w...Para 3.2.19Gazetted officers entitled to passage concessions fall into three categories: those eligible under certain state government rules, Indian Foreign Service o...Para 3.20.12When reviewing and evaluating a system, the auditor should not just rely on the entity's own replies, manuals, or flowcharts. Instead, the auditor must ind...Para 3.20.2Systems Audit is based on the idea that if a detailed analysis of a system shows it has proper controls, checks, and safeguards against errors and fraud, t...Para 3.20.1A system is a structured arrangement of separate activities and procedures that work together to help an organization carry out its functions. Although eac...Para 3.20.5Systems Audit has seven main stages: (1) analyzing the organizational structure, (2) reviewing authorization and recording systems, (3) evaluating the acco...Para 3.20.10The auditor must check whether the organization has a proper system for evaluating the quality of its work and measuring actual performance against prescri...Para 3.20.9The auditor must examine whether each unit in the organization follows sound internal control practices. This includes physical safeguards like locked stor...Para 3.20.6The organizational analysis starts by identifying the entity's core objective or activity, then studying its organizational structure through charts and ma...Para 3.2.5Auditors should examine whether the appointment of a government servant is valid, but they need not delve into the procedural steps the government followed...Para 3.2.9When gazetted officers draw their pay and allowances through the regular establishment pay bills prepared by their Head of Office (rather than through a se...Para 3.2.4The objectives of auditing gazetted officers' claims are to ensure four things: the claim is against a sanctioned post to which the officer is actually app...Para 3.2.8When auditing pay claims, the auditor must verify that each claim follows the correct entitlements and financial rules. If a sample check reveals a signifi...Para 3.2.15When auditing travelling allowance (TA) bills, auditors must verify four key things: that the journey was necessary and properly authorized, that the journ...Para 3.2.1The instructions in this chapter are primarily meant for the Civil and Post and Telecommunications Audit Offices when auditing claims of gazetted governmen...Para 3.2.17In most cases, TA bills require countersignature by the Controlling Officer. This countersignature, or the drawing officer's signature when countersignatur...Para 3.20.3This para outlines the four general principles of Systems Audit. First, each procedure chain should be analyzed to identify and eliminate unnecessary steps...Para 3.20.11The auditor should check whether the organization has an internal audit unit and, if so, whether it operates independently from the departments it audits. ...Para 3.20.4This para lists the key documents that auditors should examine when conducting a Systems Audit. These source documents help evaluate whether the organizati...Para 3.20.8This stage requires the auditor to study the departmental accounts manual, relevant orders, and accounting policies to understand the accounting system. A ...Para 3.21.34When using the A&E payroll database for audit, at least 25% of major and medium Drawing and Disbursing Officers (DDOs) must be selected for voucher audit a...Para 3.21.8During manpower audit, auditors should examine a specific set of documents including government instructions on staffing procedures, files on manpower asse...Para 3.21.5The cadre controlling authority — not the auditor — is primarily responsible for designing and maintaining sound manpower management systems. The auditor's...Para 3.21.11Good personnel management requires knowing both how many people the organization needs (quantity) and what kind of people it needs (quality), both now and ...Para 3.21.4System-based manpower audit at the cadre controlling authority level must be supplemented by test checks at subordinate offices. These checks evaluate how ...Para 3.21.10Job analysis is the process of systematically examining a work assignment — collecting information about its duties, responsibilities, working conditions, ...Para 3.21.16In government, manpower requirements are usually assessed using standard formulae derived from work studies. Where no formula exists, past experience and a...Para 3.21.3Human resource management practices differ significantly across government departments based on factors like size, mandate, programmes, management philosop...Para 3.21.13The techniques of job analysis, job description, and job specification have multiple uses in manpower planning. They help define the nature and requirement...Para 3.21.19After computing how many staff will actually be available and comparing it with justified demand, any shortfall in manpower supply is identified. Sometimes...Para 3.21.14Every department must have proper systems for maintaining up-to-date job descriptions and job specifications for all categories of posts. During audit, the...Para 3.21.20When auditing the system for allocating and regulating manpower resources, the auditor should examine six key aspects: whether workload changes since initi...Para 3.21.21Work measurement is essential for evaluating any organization's capacity, efficiency, and accomplishment. It involves six broad steps: selecting specific w...Para 3.21.28When auditing work norms and the Staff Inspection Unit's functioning, the auditor should examine fourteen key questions. These cover whether measurement te...Para 3.21.24The technique of synthesis of elemental standard times is used when a job consists of elements that frequently appear in other jobs as well. If these commo...Para 3.21.32When evaluating an organization's training performance, the auditor should check five things: whether training plans (both short-term and long-term) were b...Para 3.21.30Coordination and control of manpower can be exercised in two main ways. The first is through a Management Information System (MIS), which uses prescribed r...Para 3.21.18When allocating manpower, two key factors matter: forecasting supply and accounting for financial constraints. Supply forecasting calculates actual staff a...Para 3.21.25Analytical estimating is used when a job involves wholly or partly non-repetitive elements that cannot be measured through standard time study. The job is ...Para 3.21.26Activity or work sampling is a technique where the auditor or analyst observes workers or machines at random intervals during a period and records what act...Para 3.21.27Each department must select appropriate work measurement techniques and set time norms for different types of jobs. An independent body called the Staff In...Para 3.21.29All the manpower management systems described earlier (forecasting, allocation, work norms, SIU reviews) need to be coordinated and controlled centrally to...Para 3.21.33The computerised payroll database maintained by the Accounts & Entitlements office can be a powerful tool for manpower audit. By comparing sanctioned stren...Para 3.21.12A well-written job description serves as a reliable checklist for performance appraisal, allowing supervisors to evaluate employees against clearly defined...Para 3.21.2This para clarifies the scope and purpose of the manpower audit guidelines in this chapter. The guidelines aim to improve systems and procedures for contro...Para 3.21.23Time study is a technique where every step of a job is broken down into individual elements, and the time required for each element is measured. The worker...Para 3.21.15Manpower requirements can be forecasted using four main methods: collecting opinions from supervisory and controlling officers within the department; using...Para 3.21.22Time estimates or work norms for various jobs in a department are developed using specific techniques. These include time study (directly measuring how lon...Para 3.21.1Manpower audit builds on the concepts of Systems Audit discussed earlier. During organizational analysis, auditors already examine whether staff responsibi...Para 3.21.17This para provides a comprehensive checklist of nine aspects the auditor should examine when auditing manpower forecasting systems. These include: whether ...Para 3.21.31When auditing manpower control systems, the auditor should examine nine key areas: whether a dedicated manpower branch exists with clear responsibilities; ...Para 3.21.9The computerised payroll database prepared by the Accounts & Entitlements office from State Government employee payrolls is a valuable resource for manpowe...Para 3.21.6Systems audit of manpower controls covers six main areas: job analysis and descriptions for each type of post, methods used to assess manpower needs, norms...Para 3.22.28When system development is outsourced to contractors, the contract itself and its management become key audit concerns. Audit must verify that the vendor p...Para 3.22.12After the preliminary evaluation, the auditor must decide between two approaches: system-based audit (examining and testing controls within the system) or ...Para 3.22.33Organisational controls in IT systems ensure three things: proper separation of duties to reduce fraud and sabotage risk, comprehensive written standards f...Para 3.22.35In any major IT system, five key functions must be kept separate: system design and programming, system support, routine IT operations and administration, ...Para 3.22.47The level of disaster recovery planning needed varies based on the organisation's IT infrastructure. Organisations with large IT departments, mainframe com...Para 3.22.5Information system controls fall into two broad categories: General Controls and Application Controls. General Controls cover the overall IT environment — ...Para 3.22.65Output controls ensure that computer-generated results are complete, accurate, and distributed to the right people. Strong output controls can sometimes co...Para 3.22.37Authorisation controls verify the identity and authority of any person attempting to perform an operation or procedure in the computer system. These contro...Para 3.22.42Change management controls ensure that any modifications to a computer system are properly authorised, tested, accepted by end users, and documented before...Para 3.22.62Processing controls within an application should ensure three things: only valid data and program files are used, processing is complete and accurate, and ...Para 3.22.4Controls in a computer information system are the policies, procedures, practices, and organisational structures that ensure intended objectives are achiev...Para 3.22.43Government organisations that update their computer systems must have both change management and configuration management controls. Configuration managemen...Para 3.22.75The audit trail should capture three categories of information: system information (startup time, shutdown time, restarts, recovery events), transaction in...Para 3.22.1As government organisations increasingly rely on computerised systems for their operations, audit must ensure that computer-generated data is reliable. IT ...Para 3.22.15Testing controls in computerised systems is difficult because they operate automatically and invisibly — only exceptions are normally recorded. Manual test...Para 3.22.3Computerisation has combined many previously separate functions, greatly increasing the potential for material system errors at considerable cost. Unlike m...Para 3.22.9When auditing computerised systems in government, the auditor must evaluate five key areas: how the computer was acquired and installed, whether the system...Para 3.22.11The first step in IT audit is a preliminary evaluation covering how the computer function is organised, hardware and software usage, the applications being...Para 3.22.18The choice of computer audit technique depends on the type of system being reviewed, extent of testing needed, availability of computer facilities and EDP ...Para 3.22.31While avoiding unproductive involvement in systems development, auditors should verify that a standard methodology is used for system design, all parties (...Para 3.22.2IT Audit is defined as the process of collecting and evaluating evidence to determine whether a computer system maintains data integrity, safeguards assets...Para 3.22.20Retrieval software packages offer significant advantages: they enable 100% review of data (not just sampling), ensure processing accuracy, and make efficie...Para 3.22.8When government departments switch from manual processes to computer systems, the fundamental goals of internal controls remain the same — only the methods...Para 3.22.19Many modern database management systems come with built-in query and report generation tools. Some advanced systems even support unstructured (ad-hoc) quer...Para 3.22.26Systems development (designing, building, or modifying computer systems) raises the same audit concerns as acquisition — proper planning, clear requirement...Para 3.22.7Controls in computerised systems are critical from an audit perspective because without them, the system may allow duplicate inputs, duplicate processing, ...Para 3.22.16IT audit techniques involve using computers as independent tools to test the auditee's data. These include processing test data with all possible error var...Para 3.22.29Systems development audit is categorised into three types. Monitoring audit evaluates progress throughout the development — checking milestones, expenditur...Para 3.22.41Operation and file controls protect computer hardware and data files from unauthorised access, loss, or theft. These controls ensure that data reception, c...Para 3.22.24When auditing IT acquisitions, the auditor should specifically examine six areas: the EDP policy and strategic plan, the administrative structure, the feas...Para 3.22.36Physical access controls protect computer hardware and software from damage, theft, and unauthorised access. These are environmental controls that apply ac...Para 3.22.34The auditor must verify that duties among IT staff are adequately segregated to reduce the risk of errors and fraud. Poor segregation could allow one perso...Para 3.22.40Access to computer systems must be controlled through login IDs, passwords, and menu restrictions. Organisations should have clear password policies that a...Para 3.22.46The auditor must verify that government organisations have adequate plans to resume computer processing if systems fail. The level of continuity planning s...Para 3.22.52Before evaluating application controls, the auditor must first understand the system by preparing a brief description of the application. This description ...Para 3.22.39Logical access controls can also restrict the use of powerful system utilities like file editors that could be used to modify data directly. They work alon...Para 3.22.51Application controls are specific to individual computer applications and directly affect how transactions are processed. These controls provide assurance ...Para 3.22.63Application processes may perform additional validation by checking data for duplication and consistency with information held elsewhere in the system. The...Para 3.22.49Regular backups of system software, financial applications, and data files are essential. Backups should follow a rotation cycle using daily, weekly, month...Para 3.22.55Proper system documentation should include seven key components: a system overview explaining the overall purpose and scope, a user requirements specificat...Para 3.22.67Computer output should be generated on a regular, predictable schedule so that users will notice if a report is missing. Even when the subject matter is ir...Para 3.22.60Processing controls ensure that both input data and system-generated data are processed completely and accurately. They achieve this through five mechanism...Para 3.22.66Output controls must ensure four things: output is produced and distributed on time, output is fully reconciled with pre-input control parameters, physical...Para 3.22.72Before defining audit requirements for a new system being developed, the auditor should thoroughly understand the existing system. They should identify thr...Para 3.22.70Master/Standing Data File controls protect the integrity and accuracy of reference data files that are critical to financial processing. Information in the...Para 3.22.71Audit requirements must be built into computer systems to ensure they can be audited effectively and efficiently. The system must maintain an audit trail t...Para 3.22.76In computer systems, the audit trail may not be as visible as in manual systems because data is stored on magnetic media and output is limited to summary t...Para 3.22.64Computerised financial systems must maintain a transaction log (audit trail file) containing enough information to trace each transaction back to its sourc...Para 3.22.10The objectives of IT audit are achieved by reviewing five key areas: how computer facilities were acquired, whether procedural controls remain valid after ...Para 3.22.14In a system-based audit approach, auditors evaluate five critical aspects of the computerised system: effectiveness (does it do what it is supposed to?), e...Para 3.22.22Acquisition of computer facilities falls into two main categories: hardware acquisition (setting up new installations, upgrading processors, adding periphe...Para 3.22.13When using direct substantive testing, auditors select a sample of transactions and verify them for correctness. The preliminary evaluation helps by provid...Para 3.22.17Computer audit techniques serve six main purposes: independently verifying ledger balances and control totals, recalculating critical computerised calculat...Para 3.22.25The feasibility report for IT acquisition must clearly state objectives, describe existing arrangements, present alternatives considered and proposed solut...Para 3.22.32Auditors must review the internal controls essential for proper operation and maintenance of computer systems. Some of these are 'general controls' (also c...Para 3.22.23When auditing computer facility acquisitions, the auditor must review whether the organisation has a sound administrative structure for analysing requireme...Para 3.22.27System testing and data transfer procedures must be carefully examined during audit. Inadequate testing before going live can result in a system that canno...Para 3.22.30The responsibility for building internal controls and audit trails into computer systems lies with the auditee organisation, not the auditor. While the aud...Para 3.22.38Logical access controls are software-based safeguards that protect financial applications and their underlying data from unauthorised access, modification,...Para 3.22.44Controls must ensure that all program and file amendments are authorised, logged, and monitored. The ability to introduce new programs into the system shou...Para 3.22.48Disaster recovery plans must be written down, periodically tested, and updated whenever systems change. An untested plan may look good on paper but could f...Para 3.22.59Applications transmitting data over networks face three main risks: data interception and alteration (either during transmission or at intermediate storage...Para 3.22.73Auditing an operational application system involves verifying input/output controls, processing controls, and the audit trail. The auditor uses a detailed ...Para 3.22.45When government organisations use local area networks (LANs), wide area networks (WANs), or web-enabled systems, they must implement comprehensive network ...Para 3.22.56Input controls are designed to ensure that data entering a computer system is genuine, complete, not previously processed, accurate, and properly authorise...Para 3.22.6Application controls are specific to individual computer applications and ensure that transactions are properly authorised, complete, accurate, and valid. ...Para 3.22.74The audit trail's purpose is to provide sufficient evidence about the reliability and integrity of an application system. It should contain enough informat...Para 3.22.50When reviewing General Controls, auditors must systematically verify hardware inventory, organisational structure of the IT department, personnel deploymen...Para 3.22.54Documentation standards ensure that comprehensive and current system documentation is maintained. The auditor relies on documentation to understand the sys...Para 3.22.58Data transmission controls are built into IT applications to ensure that data sent over local area networks (LANs) or wide area networks (WANs) remains val...Para 3.22.61The four objectives of processing controls are to ensure that transaction processing is accurate and complete, that each transaction is unique without any ...Para 3.22.53Application controls can be divided into six categories: documentation standards (ensuring system documentation exists and is current), input controls (ens...Para 3.22.57When evaluating input controls, the auditor should verify that all inputs including standing data changes are authorised, that terminal data entry is restr...Para 3.22.68Output files must be protected from unauthorised amendment to prevent tampering. People might alter computer output to cover up unauthorised processing or ...Para 3.22.69Output from one IT system often serves as input to another system before finally reaching the financial statements. For example, payroll system output may ...Para 3.23.16The Central Government provides financial assistance to state and UT governments for various plan and non-plan schemes through grants and loans. Some schem...Para 3.23.6The net proceeds of income taxes (excluding agricultural income tax) that are to be distributed to states under Article 270(2) of the Constitution are dete...Para 3.23.12For the CAG to certify the net proceeds of certain taxes, the Director General of Audit (Central Revenues) must furnish audited figures in prescribed forma...Para 3.23.7For determining the divisible net proceeds of income tax under Article 270(2), the CAG has accepted certain practical assumptions. Since Corporation Tax an...Para 3.23.17For most Plan schemes, the Central Government releases assistance in advance based on claims submitted by state or UT governments, with final adjustment do...Para 3.23.9The CAG must certify the net proceeds of Estate Duty on property other than agricultural land under Article 279(1). To do this accurately, auditors must te...Para 3.23.10Under the Constitution, a portion of Union Excise Duties collected by the Central Government may be shared with State Governments. The CAG is constitutiona...Para 3.23.5Under Article 279(1) of the Constitution, the CAG has the duty to ascertain and certify the net proceeds of any tax or duty (or any part thereof) for the p...Para 3.23.24In states where money for plan schemes is withdrawn from the treasury and parked in Civil Deposits, Personal Ledger accounts, or held as cheques or cash, t...Para 3.23.8For taxes and duties under Articles 269 and 272 of the Constitution, the net proceeds are calculated by taking gross receipts, deducting refunds and the co...Para 3.23.20Audit parties (both local and central) must include specific details in their Inspection Reports when they place amounts under objection during plan scheme...Para 3.23.25If the audit certificate for a plan scheme must be issued before local audit has been completed, the certificate must explicitly state two caveats: first, ...Para 3.23.21When certifying expenditure for Central assistance, routine objections like missing vouchers or absent budget allotments that do not affect the Central ass...Para 3.23.3When auditing government workshops, the auditor has three main responsibilities: verifying that stores received are properly accounted for and issues again...Para 3.23.14When government servants earn fees for work done for private bodies, and those fees are deposited into the government treasury, the bills for the governmen...Para 3.23.18After the financial year's accounts are closed, the AG (A&E) prepares Statements of Expenditure for Central grants, noting any items under objection. These...Para 3.23.1Chapter 23 of the MSO (Audit) is a catch-all chapter that covers audit topics not addressed elsewhere in the manual. It deals with specialised areas such a...Para 3.23.13The audit of stamp discounts (commission paid to stamp vendors) varies across states. In some states, the discount is recorded item-by-item with vendor rec...Para 3.23.11To compute net proceeds of Union Excise Duties for distribution to states, auditors must start with gross revenue, subtract refunds and drawbacks to get ne...Para 3.23.15All government orders that grant land, assign revenue, or provide concessions like mineral rights, forest rights, water power, or other privileges fall wit...Para 3.23.19The AG (Audit) must prepare an action plan, in consultation with the AG (A&E), for segregating actual expenditure under Central Plan, Centrally Sponsored, ...Para 3.23.22When expenditure cannot be clearly identified or segregated by scheme type for certification purposes, the auditor should furnish whatever information is a...Para 3.23.2Auditing workshop accounts goes beyond the routine check of whether payments are proper and accounts are correct. The auditor must also examine the cost ac...Para 3.23.23A common irregularity is that Plan assistance money is withdrawn from the Consolidated Fund and parked with autonomous bodies, local bodies, or public sect...Para 3.23.27For certain miscellaneous payments like remittance vouchers, cheques, and discount vouchers, only a minimum level of audit is required. This minimum audit ...Para 3.23.26The AG (Audit) must send a quarterly progress report to the CAG's office showing how many plan scheme certifications are pending and what progress has been...Para 3.23.4When auditing revenue refunds, the auditor must check two main things: first, that the refund was made with proper authority and supported by a duly receip...Para 3.24.3The ITA Section should be small, staffed with carefully selected, experienced personnel who can intelligently scrutinise work across the office and suggest...Para 3.24.5This paragraph lists 22 specific items of work that may be assigned to the ITA Section, ranging from scrutiny of audit party work and maintenance of portfo...Para 3.24.1Every Audit Office must have an Internal Test Audit (ITA) Section to independently verify that the audit office itself is following correct procedures. The...Para 3.24.2The ITA Section must not be given original audit work — its role is purely oversight and quality assurance. It functions similarly to the Principal Directo...Para 3.24.4The ITA Section should correct deficiencies on the spot by guiding staff rather than just reporting problems. Its inspection reports should go to the AG fo...Para 3.3.1The audit instructions that apply to gazetted government servants' pay and allowances (contained in paragraphs 3.2.4 to 3.2.6 and 3.2.12 to 3.2.19) also ap...Para 3.3.13Beyond auditing pay bills for selected months, the auditor must also test-check increments sanctioned to staff and pay fixation cases (on promotion or reve...Para 3.3.7During local audit, auditors must thoroughly check the Service Books of non-gazetted employees. Since Service Books are crucial for determining pension ben...Para 3.3.12For the months selected for test audit, the auditor must compare each government servant's pay and allowances in the pay bill with the corresponding entrie...Para 3.3.2Establishment audit is the government's way of checking that employee-related spending is correct and authorized. It has four main parts: verifying that sa...Para 3.3.8Leave accounts of government employees must be maintained in the form and office prescribed by the Government. Before granting leave, the sanctioning autho...Para 3.3.9When auditing leave salary payments, auditors must verify three key things: that the Head of Office signs the leave salary bill for non-gazetted staff (tak...Para 3.3.11When auditing the actual pay and allowances of individual non-gazetted employees, the auditor must check everything against service rules, government order...Para 3.3.4This rule divides establishment audit work between Central Audit and local audit. Central Audit handles the checking of sanctions, classification of expend...Para 3.3.6Every non-gazetted government employee must have a Service Book maintained by the Head of Office. This book records every important event in the employee's...Para 3.3.10When auditing establishment pay bills, the auditor must count the number of employees in three categories: those drawing substantive pay (S), those on leav...Para 3.3.14When the government orders a general pay revision affecting many employees, the department appoints an officer or arranges a mechanism to fix initial pay u...Para 3.3.5When Central Audit reviews establishment vouchers (salary-related payment documents), the check is limited to a general scrutiny. Auditors verify that vouc...Para 3.4.12When reviewing abstract bills, audit performs a limited check: verifying an authorized officer drew the bill, funds are available, required certificates ar...Para 3.4.8Contract Contingency rules differ across governments but share common features. The key principle is that drawing officers receive a lump sum grant and can...Para 3.4.17When wages of daily-rated or monthly-rated manual laborers (mazdoors) are charged to contingencies, Central Audit accepts them based on the disbursing offi...Para 3.4.11For countersigned contingent bills that are paid first and countersigned later, the process involves two types of bills. The money is initially drawn on an...Para 3.4.13When auditing detailed bills, auditors must specifically verify three things beyond the general checks: the bills are properly countersigned by the authori...Para 3.4.15When countersignature is required before payment rather than after, there is no abstract bill. Payment is made directly on a detailed bill that has already...Para 3.4.9Scale Regulated Contingencies include expenses governed by prescribed rates or limits — such as uniform costs, rewards for killing dangerous animals, or wi...Para 3.4.2All contingent expenditure falls into one of five categories: (1) Contract Contingencies — from a lump sum grant for specified purposes, (2) Scale Regulate...Para 3.4.18Government financial rules specify monetary limits for which sub-vouchers and payee receipts must be retained at the drawing office versus sent to the AG/P...Para 3.4.6The primary responsibility for controlling contingent expenditure lies with the heads of offices and departments, not with audit. Audit's role is to examin...Para 3.4.16Fully Vouched Contingencies are paid on detailed bills and audited like pre-countersigned bills. Audit has a duty to challenge extravagant rates or amounts...Para 3.4.5To conduct audit of contingent charges, auditors need five types of source documents: details of budget grants and fund allotments, sanctions from competen...Para 3.4.4It is the government's prerogative — not the auditor's — to decide how contingent expenditure is categorized. The government determines which expenses come...Para 3.4.10For Special Contingencies (expenditure requiring specific sanction from a superior authority), the Accountant General (Audit) must monitor spending against...Para 3.4.1This chapter covers the audit of contingent charges, which are miscellaneous expenditures incurred by government offices for their day-to-day operations. T...Para 3.4.14Auditors should generally not raise objections on items within a countersigned bill that fall within the countersigning officer's financial powers. However...Para 3.4.3The five categories of contingent charges are not mutually exclusive — they can overlap. A Special Contingency might also be governed by a scale, or a Scal...Para 3.4.7The Accountant General (Audit) has seven minimum responsibilities for all contingent bills: verifying the charge is proper against the grant, properly sanc...Para 3.4.19Sometimes contingency funds are used to pay for contracts made by government departments for supplies, materials, or stores from domestic or foreign suppli...Para 3.5.19State Governments that directly spend Central grant money are also not required to submit utilization certificates, since their expenditure is audited by t...Para 3.5.5Audit of grants-in-aid must be conducted by checking the original sanction order and also examining the delegation of financial powers — which authority wa...Para 3.5.22When the government gives grants to non-government or quasi-government bodies to acquire assets (like equipment or property), those assets cannot be sold o...Para 3.5.9Audit must verify that every grant expenditure is covered by a proper sanction from a competent authority. This means checking not just that a sanction exi...Para 3.5.10When auditing grants-in-aid sanctions, auditors must check five things: the sanction follows the Finance Ministry's approved pattern, the grantee instituti...Para 3.5.23When auditing departmental offices locally, auditors must test-check scholarship and stipend payment vouchers. They need to ensure that offices maintain a ...Para 3.5.18Central Government ministries and departments are exempted from the requirement of submitting utilization certificates for grants-in-aid. This is because t...Para 3.5.15For recurring grants-in-aid (those paid regularly, often annually), audit must verify that the institution receiving the grant is still functioning as inte...Para 3.5.1The main purpose of auditing grants-in-aid is to ensure that the grant money is spent on the intended purpose and that the recipient follows sound financia...Para 3.5.14Every grant sanction order must clearly state whether it is recurring or non-recurring, describe the purpose of the grant, and list any conditions attached...Para 3.5.21Every grant given for a specific purpose comes with two implied conditions even if the government does not explicitly state them: first, the money must be ...Para 3.5.12When grant-in-aid sanctioning power is delegated to subordinate officers with conditions the grantees must fulfill (like educational standards), audit gene...Para 3.5.16The scope of audit of grant expenditure depends on whether conditions are attached to the grant. For unconditional grants (where no conditions are specifie...Para 3.5.2Grants-in-aid audit is conducted through three channels: test checking records in Central Audit, performing local audit inspections, and reviewing relevant...Para 3.5.3Audit of grants-in-aid operates at two levels. First, auditors can examine the original grant itself — whether it was properly sanctioned, for the right am...Para 3.5.13Audit must watch that grants-in-aid are not paid in excess of what the grantee actually needs for the current financial year (or about one year from the sa...Para 3.5.17For conditional grants-in-aid, audit must verify that all attached conditions are fulfilled. This is done through multiple methods: direct audit of grant e...Para 3.5.20Given the large sums disbursed as grants-in-aid for development schemes, audit has five important monitoring functions: watching for fresh grants being giv...Para 3.5.24Certain categories of scholarships and stipends require a more thorough audit where auditors check the actual names of the beneficiaries. This includes gov...Para 3.5.25For scholarships and stipends that do not fall into the special categories requiring name-based audit, only a numerical audit is needed. This simpler form ...Para 3.5.26Auditors must verify that bills for educational scholarships and stipends follow the prescribed procedures and that all required certificates confirming th...Para 3.5.6All grant sanctions and their corresponding utilization certificates must be cross-checked against two key registers maintained by the Accountant General (...Para 3.5.4To identify which organizations are subject to audit under Sections 14 and 15 of the CAG's DPC Act, governments and heads of departments must provide the A...Para 3.5.8The audit of the grants themselves (as distinct from the grantee's expenditure) follows the same general principles used for auditing any government expend...Para 3.5.7The actual payment vouchers for grants-in-aid must be verified against the Register of Grants-in-aid. Auditors cross-check each voucher with the relevant s...Para 3.6.5Reports on pension admissibility are prepared in the Accounts Offices (AG A&E), which also issue the authority for pension payment. A specified percentage ...Para 3.6.3The pension audit instructions in this chapter apply to all pensions paid from the Consolidated Fund of the Union and State Governments, except Railway and...Para 3.6.4This paragraph lists nine categories of source documents that form the basis of pension audit. These include Service Books, Form 7 (pension calculation for...Para 3.6.1The primary objectives of pension audit are twofold: first, to verify that the retiring government employee meets all the qualifying conditions required fo...Para 3.6.15When a treasury or bank is not normally authorized to pay pension arrears without a special sanction (because arrears could indicate an irregularity or spe...Para 3.6.6After departmental authorities issue pension authorizations, audit must check the complete pension case using all available documents — service books, appl...Para 3.6.22Territorial and political pensions are a special category with their own Pension Payment Order Register maintained by the AG (A&E). However, the audit proc...Para 3.6.7For pensions authorized by Pay and Accounts Officers (PAOs) rather than the AG, service books and records may not be available at the PAO during local audi...Para 3.6.8Pension-issuing authorities (AG A&E offices, state departments, etc.) must send monthly treasury-wise lists of all pension authorizations to the AG (Audit)...Para 3.6.18The AG (A&E) maintains a Gratuity Register specifically for authorizing and tracking gratuity payments to retiring government employees. When a gratuity pa...Para 3.6.20Similar to the Gratuity Register, the AG (A&E) maintains a separate register for tracking the commuted value of pensions. When a pensioner commutes (conver...Para 3.6.12This paragraph provides a comprehensive checklist of 16 specific checks that auditors must apply when auditing pension cases. These range from verifying se...Para 3.6.16The AG (A&E) maintains separate registers for anticipatory pensions (paid when pension papers are still being processed) and provisional pensions (authoriz...Para 3.6.2For the purposes of the pension audit chapter in MSO (Audit), the term 'Pension' is defined broadly to include 'Gratuity' as well. This means that all gene...Para 3.6.13Pension payment vouchers do not need to be checked by central audit parties working in the AG (A&E) office. Instead, these vouchers are to be examined duri...Para 3.6.17The AG (Audit) must test-check anticipatory and provisional pension vouchers similar to regular pension vouchers, but with special attention to eleven key ...Para 3.6.11In states where departmental offices (rather than the AG) handle pension authorizations, the AG (A&E) maintains treasury-wise lists of Pension Payment Orde...Para 3.6.19When auditing gratuity payment vouchers, auditors must verify two key things: that the amount paid matches the authorized amount, and that the person legal...Para 3.6.10When a pensioner's payment needs to be made in a different accounting circle (e.g., the pensioner has moved to another state), the AG (A&E) of the originat...Para 3.6.14When auditing pension vouchers at treasuries or banks, auditors must verify not only that bills are in proper form and properly discharged (signed by the p...Para 3.6.21The AG (Audit) must check commutation authorizations the same way they check regular pension and gratuity authorizations. Specifically, auditors must verif...Para 3.6.9Upon receiving pension papers, the AG (A&E) applies the required checks, records the accounts enfacement in Part-II of Form 7, assesses the pension and gra...Para 3.7.6This paragraph lists the seven main source documents that Audit Officers must examine when auditing contracts and agreements. These include contract files ...Para 3.7.13This paragraph provides a comprehensive 15-point checklist for auditing tender acceptances, contracts, and agreements. Key checks include verifying complet...Para 3.7.7Contracts of civil departments are audited at two levels: central audit and local audit. For central audit, copies of all contracts worth Rs 5 lakhs and ab...Para 3.7.2The Union Government has established ten fundamental principles that govern all contracts involving expenditure from the Consolidated Fund of India. These ...Para 3.7.8To facilitate audit of payments against contracts, the Central Audit Support Section (also called Integrated Audit Unit Section) maintains a Register in Fo...Para 3.7.16When auditing bills from contractors or suppliers, the Audit Officer must verify a comprehensive checklist of ten points. These include confirming that the...Para 3.7.25This paragraph allocates audit responsibilities for overseas store purchases based on where the contract was signed and where the payment was made. When pu...Para 3.7.27For all overseas store purchases not covered by the specific provisions in Paras 3.7.22 to 3.7.25, payments are typically arranged through Indian Missions ...Para 3.7.28The instructions for overseas store purchases (Paras 3.7.22-3.7.25) apply equally to Defence, Railways, and Posts & Telecommunications, with necessary adap...Para 3.7.1While the executive branch is responsible for entering into and enforcing contracts for works and supplies, the CAG's audit has an important role in scruti...Para 3.7.10The Audit Officer of the Central Audit Support (Integrated Audit Unit) Section must critically review contract agreements and communicate findings to the c...Para 3.7.12When auditing sanctions for purchases and contracts, auditors must apply the broad principles of financial propriety from the Expenditure Audit chapter. If...Para 3.7.26This paragraph specifies who is responsible for auditing freight charges on stores purchased from abroad, depending on who arranged the shipment and who ma...Para 3.7.11While the general principles of contract audit have been outlined, the detailed instructions and procedures in the following paragraphs should not be treat...Para 3.7.15Before the Audit Officer examines expenditure on purchase bills, they must first confirm that the underlying sanctions (approvals) and agreements have alre...Para 3.7.20This paragraph explains the division of audit responsibility for contracts handled by the Directorate General of Supplies and Disposals (DGS&D). Since 1992...Para 3.7.3Any deviation from the terms of a contract requires approval from an authority at least as senior as the one who originally approved the contract. Audit mu...Para 3.7.17The Audit Officer must verify compliance with the provisions in Chapters 8, 9 and related appendices of the General Financial Rules (1963) and Schedule V o...Para 3.7.14Certain types of contract cases require deeper scrutiny and should be examined in consultation with the Propriety Audit Section. These include contracts wi...Para 3.7.24For stores purchased from abroad under categories (i) — directly from foreign firms on FOB basis — and (ii) — through government procurement agencies like ...Para 3.7.23For stores purchased directly from foreign firms (FOB basis), the audit responsibility lies primarily with the Audit Officers in India. When payments are e...Para 3.7.5Standing contracts (long-term contracts at fixed rates) should be periodically reviewed by Audit. If the Audit Officer finds that the rates in these contra...Para 3.7.4If during audit there is evidence that a government officer or agent involved in a contract has a shared or undue interest with the other contracting party...Para 3.8.39This paragraph provides a standard layout template for audit review reports of state government schemes and programmes. The layout covers 13 sections from ...Para 3.8.11A performance audit review of a selected project or scheme should be planned and executed through five structured phases: preliminary study of the scheme, ...Para 3.8.5This paragraph lists the key aspects that auditors should examine during a performance audit (ECPA) or Value for Money (VFM) audit. These include checking ...Para 3.8.6For a comprehensive performance review, auditors need to examine a wide range of documents including project reports, feasibility studies, budget documents...Para 3.8.2A performance review should cover both financial and socio-economic aspects of the project or scheme. On the financial side, the review should assess wheth...Para 3.8.27Most government schemes either lack accountability procedures entirely or have them only partially defined. As a result, programme managers at ground level...Para 3.8.22The financial management examination in a performance review should cover eleven key aspects: reliability of budget assumptions, whether funds are released...Para 3.8.28Some state governments divert excessive scheme funds to establishment costs (salaries, office expenses) beyond the limits specified in scheme guidelines. T...Para 3.8.3Efficiency-cum-Performance Audit (ECPA) examines how well government projects, schemes, and programmes are planned and carried out. The goal is to check wh...Para 3.8.23Government funds meant for scheme implementation should not be parked in the State Public Account as deposits — this goes against the purpose of agencies l...Para 3.8.35The main body of a review report should not be overloaded with statistical tables and data. Instead, detailed data should be organised in annexures (append...Para 3.8.26In many government schemes, procurement of materials, equipment, and consumables is a major component of expenditure. Performance audit must examine the pr...Para 3.8.38A review report is considered incomplete if it only points out problems without offering solutions. Every review must include well-thought-out recommendati...Para 3.8.40When the draft review report is ready, the Accountant General should send it to the Department Secretary with a covering letter summarising the key finding...Para 3.8.37All audit reporting must be accountability-centred, meaning every audit observation must clearly identify who or what system is at fault. There can be no v...Para 3.8.31Vigilance systems exist to ensure that government programmes deliver their intended outputs and to prevent misuse of resources. During a review, auditors s...Para 3.8.29In schemes where resources are spread thinly over many small works, physical verification of assets becomes critical. Accountants General should randomly s...Para 3.8.1Regular transaction-level audit (regularity and propriety) is not sufficient to assess whether government programmes, projects, or organizations are achiev...Para 3.8.13During the preliminary study, the review team must understand the project from its very conception. They should verify whether adequate surveys were done b...Para 3.8.12The preliminary study is an essential step where the audit team gathers a comprehensive understanding of the scheme beyond what was available during initia...Para 3.8.15The review should begin with an in-depth study at the administrative department and head of department offices, examining expenditure proposals. Five key a...Para 3.8.36When an audit finding is particularly important, auditors may include charts, diagrams, or photographs in the review to make the finding more impactful and...Para 3.8.4When conducting a performance audit, the minimum audit coverage should be at least 25% of both the total expenditure and the number of administrative units...Para 3.8.10The selection of schemes for performance audit review must be done with great care. All India reviews are communicated by CAG headquarters based on materia...Para 3.8.14After the preliminary study, a formal Audit Plan must be prepared covering the scope of audit, objectives, resource allocation, and timeline. The plan incl...Para 3.8.19A performance review is not merely a list of individual errors or shortcomings — it is an appraisal that expresses an audit opinion on internal controls qu...Para 3.8.32Drafting the review report is the final stage of the audit review process. All data collected from departmental offices and field units must be brought tog...Para 3.8.33Audit review reports should be written in third person active voice wherever possible, using passive voice only when absolutely necessary. The language sho...Para 3.8.16The systems-level study at administrative departments provides ideas and direction for subsequent field investigations. Based on the insights gained from t...Para 3.8.20The sample selected for a performance review must be clearly defined using both numerical and financial parameters, and presented as an annexure to the rev...Para 3.8.24A performance review must establish and analyze the relationship between financial expenditure and physical achievements, both state-wide and for sampled d...Para 3.8.34Every statement in an audit review must be specific -- naming the exact district, office, and responsible person. Vague comments allow departments to ignor...Para 3.8.30When conducting performance reviews, auditors must specifically examine the human and manpower resources of a programme. If there are shortages of key staf...Para 3.8.17Field studies involve visiting selected offices, examining samples of transactions thoroughly in a single visit, and collecting detailed information using ...Para 3.8.21When multiple government programmes with similar objectives operate in the same area, audit must make special efforts to check for overlap. The key concern...Para 3.8.25Performance reviews must distinguish between honest mistakes or negligence and deliberate, blatant misuse of funds. When scheme funds meant for employment ...Para 3.8.9The first step in criteria-based audit is checking whether the scheme's goals were clearly defined and whether a reliable methodology was used to plan how ...Para 3.8.7There is no single pre-set approach for conducting performance reviews because every government scheme is different in its objectives, scope, and structure...Para 3.8.8Meaningful performance reviews require the active cooperation of the audited department. Before starting a review, it is mandatory to hold a pre-review dis...Para 3.9.12When auditing budget formulation as part of integrated audit, auditors should examine not just whether budget rules were followed, but also whether the rul...Para 3.9.5Integrated audit requires a different and broader approach compared to auditing individual schemes or programmes. It demands newer audit methodologies and ...Para 3.9.1Integrated audit of a government department is a comprehensive examination that combines traditional financial audit with performance audit. It examines bo...Para 3.9.14When a government department provides grants to autonomous institutions, NGOs, or other external organisations, auditors must check whether the department ...Para 3.9.6Integrated audit should ideally begin at the Government (Secretariat) and Directorate levels, preceded by a thorough study of key departmental documents. T...Para 3.9.9After the preliminary study and meetings, field audit of selected Drawing and Disbursing Officers (DDOs) should begin simultaneously by deploying the requi...Para 3.9.10When framing recommendations from integrated audit findings, auditors must strictly follow the principles laid down in the Auditing Standards. After comple...Para 3.9.2Effective integrated audit requires a clear understanding of the department's mandate as defined in the allocation of business rules. The main audit focus ...Para 3.9.3Integrated audit has a much wider scope than regular audit. To be effective within a given timeframe, auditors must first identify the department's most si...Para 3.9.19Auditors should examine how the department ensures accountability at different levels. This means checking whether appropriate internal control mechanisms ...Para 3.9.18Integrated audit must comprehensively assess the quality of internal controls at all levels of the department -- Secretariat, Directorate, and field units ...Para 3.9.16Personnel management is an important aspect of integrated audit. Auditors should examine how the department plans its manpower needs, creates posts, utilis...Para 3.9.4Integrated audit of a department typically follows four stages: (1) surveying the department's activities and identifying key areas for examination, (2) de...Para 3.9.8Before beginning field inspections for integrated audit, the Accountant General should personally meet the Department Secretary to explain the scope and pu...Para 3.9.11Integrated audit requires a professional approach that focuses on significant, comprehensive findings rather than minor or trivial observations. If the rep...Para 3.9.15In an integrated audit, auditors should examine the department's entire programme management cycle -- from how schemes are planned and designed, through im...Para 3.9.13Expenditure control is a critical area in integrated audit. Auditors should examine whether the department has proper systems for allocating funds to DDOs ...Para 3.9.17Auditors should scrutinise major contracts and purchase agreements made by the department and its field offices. The focus should be on identifying flaws i...Para 3.9.7Before going to the field for integrated audit, the Accountant General (Audit) should study all available information from central audit of vouchers, previ...Para 4.1.15For civil works undertaken by State Governments, the Audit Office is generally not required to check whether a work has received administrative approval or...Para 4.1.19Where accounts are departmentalized, the initial records in PWD divisions are periodically inspected by Pay and Accounts Office staff. However, records tha...Para 4.1.18Generally, all expenditure (cash, stock, and other charges) on a work that is covered by an allotment is accepted in audit against the total technical sanc...Para 4.1.1Public Works Audit has five main objectives: ensuring initial accounts and vouchers are complete, verifying amounts are credited or debited to correct acco...Para 4.1.13The Accountant General (A&E) maintains detailed Works Register records (Part I) only for large works costing Rs 1 crore or more that span multiple PWD or I...Para 4.1.2This paragraph lists the eight categories of source documents that auditors must examine at different stages of Works Audit. These include monthly accounts...Para 4.1.9When the monthly accounts, schedules, schedule dockets, and vouchers from PWD divisions arrive at the AG (A&E) office, they undergo a preliminary check as ...Para 4.1.12Every financial sanction related to works expenditure, revenue, or other divisional transactions must be audited as soon as it arrives, following the guide...Para 4.1.6This paragraph details the comprehensive responsibilities of the Divisional Accountant across twelve areas. Key duties include preventing duplicate payment...Para 4.1.16The check over administrative approval and whether it is exceeded by the technical sanction (discussed in previous paragraphs) is done in Central Audit onl...Para 4.1.3Works transactions go through four sequential stages of checking. First, the Divisional Accountant performs a preliminary internal check in the Divisional ...Para 4.1.17When a competent authority decides that preparing a revised or supplementary estimate to cover an excess over a sanctioned estimate is unnecessary and offi...Para 4.1.8The Divisional Accountant must periodically inspect the accounts records of sub-divisional offices, as directed by the Divisional Officer, to check a perce...Para 4.1.11A critical part of works audit is scrutinising whether expenditure on a work is properly authorised. Two things must exist: (1) a sanctioned detailed estim...Para 4.1.7After examining accounts and vouchers from Sub-Divisional Officers, the Divisional Accountant must communicate the results to the SDOs whenever further inf...Para 4.1.10Central audit of works expenditure should follow the general principles in the MSO while also considering the specific financial rules of the concerned gov...Para 4.1.14For Union Government civil works, the Central Audit Party must verify two things: first, that administrative approval has been communicated to audit; and s...Para 4.1.4The Divisional Accountant is responsible for performing detailed preliminary checks on all accounts received from Sub-Divisional Officers. This includes ve...Para 4.2.11Once audit and review are complete, the Assistant Audit Officer or Section Officer signs the pass order that the Senior Auditor has recorded on the monthly...Para 4.2.2The instructions in this chapter supplement the general directions in the preceding chapter and in Chapter 1 of Section III, which apply to Works Audit unl...Para 4.2.10The Assistant Audit Officer or Section Officer must review and examine the audit notes prepared by the Senior Auditor or Auditor, confirming that all objec...Para 4.2.4Central Audit is carried out by Central Audit Support Sections (headed by an Audit Officer or Senior Audit Officer) with assistance from Central Audit Part...Para 4.2.13In addition to the regular note book, each Senior Auditor or Auditor must maintain a separate note book specifically for points noticed during Central Audi...Para 4.2.12Each Senior Auditor or Auditor must maintain a note book to record all audit points that cannot be noted in the Works Register but require follow-up action...Para 4.2.16Sanctions relating to fixed or recurring charges (like work-charged establishment salaries) and miscellaneous sanctions (such as sanctions for local purcha...Para 4.2.5Within the Central Audit Party, the Senior Auditor or Auditor is primarily responsible for auditing the accounts of one or more allotted divisions, under t...Para 4.2.1The instructions in this chapter and subsequent chapters of this Section are primarily meant for Central Audit Support Sections and Central Audit Parties w...Para 4.2.6Section Officers and Assistant Audit Officers posted to the Works Audit Branch should preferably have prior experience and training as a Divisional Account...Para 4.2.14Arrangements should be made so that audit points noticed by other audit sections (not just the Works Audit team) that need to be followed up during local i...Para 4.2.3This paragraph lists the five categories of important source documents that the Central Audit team must examine. These are: the accounts with schedules and...Para 4.2.7Audit work must begin immediately after the AG (A&E) office completes each month's accounting compilation. The Senior Audit Officer/Audit Officer of the Ce...Para 4.2.15The Senior Audit Officer or Audit Officer heading the Central Audit Support Section is responsible for auditing sanctions to contracts for works, supplies,...Para 4.2.8Supplementary Accounts submitted at year-end should be audited in the same manner as regular Monthly Accounts. However, auditors must remember that Supplem...Para 4.2.9The AAO/Section Officer shares auditing responsibilities with the Senior Auditor/Auditor for monthly accounts and supporting documents. Beyond his own audi...Para 4.3.23When auditing the Stock Account, start with Part II (the Detailed Account of Issues). Check that issues to works match the Schedule Dockets for the month, ...Para 4.3.12For Deposit Works (works executed on behalf of outside parties who deposit funds), cash receipts shown in the schedule must be verified against the Monthly...Para 4.3.17When auditing Public Works Remittances, the auditor must verify that the schedule totals for 'Remittances into Treasuries' and 'Public Works Cheques' are s...Para 4.3.21There should normally be no outstanding balance under this account head at the end of the financial year. To ensure timely clearance, the list of outstandi...Para 4.3.14When auditing the Schedule of Takavi Works (government loans for agricultural improvements), the auditor must verify that when a loan realization is credit...Para 4.3.2Audit must ensure that the balance for each individual item, work, or job is recorded separately and accurately. The balances of individual items under eac...Para 4.3.9If the Government requires separate schedules for building rents and land rents, the Accountant General (Audit) will prescribe the detailed audit procedure...Para 4.3.1Audit of monthly accounts and schedules for suspense and balanced heads goes beyond the standard expenditure and receipts audit procedures. It additionally...Para 4.3.7The Divisional Officer is primarily responsible for ensuring that all revenues and debts due to the Government are correctly assessed, collected, and credi...Para 4.3.25When auditing the Schedule of Purchases, verify that the current month's debits and credits match the original transfer entry orders attached to the schedu...Para 4.3.5The audit of Monthly Accounts involves four main areas: verifying proper format and completeness, examining the Memo of Cash Receipts and the Divisional Of...Para 4.3.20The credit entries listed in the Schedule should be cross-checked against the details provided in the Memo of Cash Receipts, which appears on the back side...Para 4.3.32The general audit principles apply to vouchers received with Monthly Accounts of Divisional Officers. Key checks include: notifying discrepancies in inter-...Para 4.3.16When a responding item (the counterpart of a remittance transaction) has been booked provisionally by the Divisional Officer, the auditor must examine the ...Para 4.3.29All transfer entry debits and credits appearing in the Schedule Dockets must be verified against the original transfer entries to ensure correctness. The a...Para 4.3.24The Schedule of Miscellaneous Works Advances (Form PWA 32) only lists items that changed during the month. For September and March, it must include a list ...Para 4.3.28The Divisional Officer's Annual Certificate of Balances (Form PWA 46) must be examined in Central Audit using the available schedules, and its correctness ...Para 4.3.13If a deposit work's schedule is accompanied by a progress report on expenditure intended for the responsible administrator (the party who deposited the fun...Para 4.3.10Revenue refunds must be classified in the same detail as revenue receipts and deducted from the revenue receipts under the relevant major head. Audit must ...Para 4.3.11When auditing the Schedule of Works Expenditure, the auditor must check four key aspects: that the sanctioned estimate/allotment reference is given when ex...Para 4.3.15This schedule is a catch-all for transactions that do not fit into any other prescribed schedule (Articles 213 to 224 of Account Code Volume III). The audi...Para 4.3.31The Schedule Docket for Percentage Recoveries (Form PWA 25) follows different rules from other Schedule Dockets. It must be checked alongside the expenditu...Para 4.3.6The Schedule of Revenue Realised should be audited based on the general directions in Section II of Chapter 3, along with the financial rules of the releva...Para 4.3.19When one government division does work or provides supplies for another division, those transactions are settled directly between the divisions in cash, wi...Para 4.3.22The Schedule of Debits to Stock (Form PWA 28) should be audited in the same way as the Schedules of Works Expenditure. When rules allow a detailed estimate...Para 4.3.26The Schedule of Deposits only shows items that changed during the month. Audit must pay special attention to several areas: ensuring no negative balances e...Para 4.3.3When auditing monthly accounts and supporting documents, Central Audit Parties should not repeat checks that have already been done by the Accounts and Ent...Para 4.3.27The accounts of special tools and plant must be checked through two forms: the Tools and Plant Received Sheet (Form 13) for receipts and the Tools and Plan...Para 4.3.30During the audit of Schedule Dockets, the auditor must check that sale accounts and survey reports are attached wherever needed. For credits representing s...Para 4.3.4The monthly accounts and supporting documents from Public Works Divisions are first subjected to preliminary checks by the Works Accounts Compilation Secti...Para 4.4.2The subsequent paragraphs in this chapter lay out the detailed procedures for preparing and disposing of audit notes for Public Works transactions. The Acc...Para 4.4.16The auditor must verify that replies and explanations on Audit Notes are signed by the Divisional Officer personally, not by the Divisional Accountant. If ...Para 4.4.15When Audit Notes are returned by the department, the Senior Audit Officer must review them and, if necessary, make further references to the Superintending...Para 4.4.6Once the two parts of an Audit Note are approved, the Assistant Audit Officer or Section Officer of the Central Audit Party must sign each part separately....Para 4.4.9The Objection Book should be organized by reserving dedicated sets of pages for each distinct category of objection — for example, separate sections for un...Para 4.4.13Certain items should not be entered in the Objection Book for tracking recovery or adjustment. These include advances and advance payments made under prope...Para 4.4.19All objection clearance entries must be attested (verified and signed) by the Assistant Audit Officer/Section Officer. For objections cleared by sanctions ...Para 4.4.23The Accountant General (A&E) must submit an annual review on the working of Public Works Divisions to the Government. The format and level of detail are mu...Para 4.4.5At the end of Part II of the Audit Note, certain standard objections should be grouped under appropriate headings. These typically cover missing sanctions ...Para 4.4.8Not every objection from the Audit Note needs to go into the Objection Book. Part I objections are excluded because they are already captured through the S...Para 4.4.18An objection should be removed from the Objection Book as soon as the necessary sanction is received, the expenditure is adjusted or recovered, or the issu...Para 4.4.11Under each account head in the Objection Book, every objection relating to a distinct transaction must be treated as a separate item and given its own seri...Para 4.4.10Each Senior Auditor or Auditor is responsible for recording objections in the Objection Book before communicating them to the Divisional Officers. This inc...Para 4.4.1When audit finds irregularities in Public Works transactions, they must communicate these as audit notes to the departmental officers. The three objectives...Para 4.4.17A register must be maintained in the Central Audit Support Section to track the timely disposal of both Parts I and II of Audit Notes. The Assistant Audit ...Para 4.4.12Objection amounts are recorded in the Objection Book in black ink for the current month, with the progressive total noted below in green ink. For 'Miscella...Para 4.4.14All entries in the Objection Book must be made carefully so that it always serves as a complete and accurate record. At any point in time, the book should ...Para 4.4.4Part II of the Audit Notes covers all objections not included in Part I. These include deviations from financial rules, violations of financial propriety s...Para 4.4.21During monthly closing, the AAO/Section Officer and the Senior Audit Officer must carefully review the Objection Book. If delays in settling objections or ...Para 4.4.20At the end of each month, entries in the Objection Book must be totalled separately for each category of objection and a general abstract prepared in a sep...Para 4.4.3Audit Notes are prepared in two parts using Form MSO (Audit)-3. Part I covers objections about missing financial sanctions (beyond technical sanctions) and...Para 4.4.7The Objection Book, maintained in Form MSO (Audit)-4, serves as the official register for tracking audit objections raised through Part II of the Audit Not...Para 4.4.22The Objection Book must be closed annually. Outstanding objection balances are carried forward to the next year's book, with entries attested by the AAO/Se...Para 5.1.2This paragraph lists the six types of source documents that must be audited for Forest Divisions. These include the Monthly Cash Account, payment vouchers,...Para 5.1.12The current review of audit for Forest Officers' accounts follows the same general instructions laid out in Section III, Chapter 1 of the MSO (Audit). This...Para 5.1.3Auditors must verify that the Monthly Cash Account of Forest Divisions correctly shows only totals for certain categories while listing other items in deta...Para 5.1.1This paragraph sets the scope for auditing Forest Officers' accounts. The AG (Audit) office must check the Monthly Cash Account and all supporting document...Para 5.1.7Establishment charges (i.e., expenditure on salaries, allowances, and related staff costs) in Forest Divisions are audited using the same standard rules an...Para 5.1.11When reviewing Ledger Accounts, auditors must pay attention to several key points: ensuring the March year-end abstract explains any items outstanding for ...Para 5.1.17The AG (A&E) is required to submit a review of the working of Forest Divisions to the State Government. The format and content of this review should be mut...Para 5.1.5Works and conservancy expenditures that exceed the Divisional Forest Officer's sanctioning powers — either because of their nature or their amount — must r...Para 5.1.13Audit findings from the examination of forest bills and accounts must be communicated to the Divisional Forest Officer through formal Objection Statements ...Para 5.1.8Auditors must verify that all charges are correctly classified under the appropriate accounting heads by cross-referencing voucher details, the Classified ...Para 5.1.15Audit objections arising from forest accounts must be registered and handled following the general instructions in Chapter VII, Chapter 1 of the MSO (Audit...Para 5.1.10When auditing the March accounts (the final month of the financial year), auditors must verify that all correcting entries affecting inter-government and r...Para 5.1.16Forest advances that have been sanctioned by proper authority and do not involve any financial irregularity should not be treated as audit objections. They...Para 5.1.4All payment vouchers from Forest Divisions must be examined with the same rigor as treasury payment vouchers. The auditor must verify that each charge is b...Para 5.1.14The AG (Audit) must send a monthly tracking list to the Conservator showing the dates when Objection Statements were dispatched to each forest division. Th...Para 5.1.9Auditors must verify that Column 8 of the Classified Abstract of Revenue and Expenditure (Form FA5) contains enough detail for charges to be clearly unders...Para 5.1.6When works expenditure extends over multiple months, auditors must check the cumulative total expenditure against the sanctioned amount, not just each mont...Para 6.1.5Local Audit is different from Inspection. Its purpose is to audit the initial (original) accounts maintained at specific government offices and institution...Para 6.1.1Central Audit at AG headquarters works from accounts and sanctions received from departments, but the original underlying records stay in the originating o...Para 6.1.18Senior audit officers should build strong professional relationships with the departments they audit. Good rapport, mutual understanding, and personal equa...Para 6.1.6Since Local Audit deals with a wide variety of accounts across different types of institutions, no single set of rules can cover all situations. Before aud...Para 6.1.10The biennial (two-year) audit plan has four key objectives: assuring the legislature that all significant entities were considered, providing a framework t...Para 6.1.16Before any audit party goes to the field for inspection or local audit, they must receive clear written guidelines and instructions. Additionally, Group Of...Para 6.1.4While the Inspecting Officer has broad scope to offer suggestions, they must remember their primary job is verifying the accuracy of accounts and the regul...Para 6.1.3An Inspecting Audit Officer should go beyond routine checking of accounts. They should proactively advise departmental officers on financial matters, sugge...Para 6.1.20The findings from local audit and inspections must be documented in an Inspection Report with three parts. Part I includes an introduction, a summary of ou...Para 6.1.11Every January, the Inspection (Civil) Headquarters Section must prepare an annual plan for all local audits and inspections to be carried out in the next f...Para 6.1.13Audit planning should recognize that some areas of investigation require specialized technical or professional expertise that audit staff may not possess. ...Para 6.1.17Guidelines issued for performance reviews must cover eight essential aspects: the review's objective, areas to be covered, specific points to examine, avai...Para 6.1.14This paragraph calls for strengthening risk assessment methodologies in audit planning and lists nine key risk indicators that auditors should watch for. T...Para 6.1.9Every audit office must prepare a formal two-year Audit Plan each year — a detailed plan for the first year and a broad framework for the second. The plan ...
14 -
Para 2.6.4Under Section 14(1), the CAG is required to audit any body or authority that is 'substantially financed' by government grants or loans from the Consolidate...Para 2.6.5If a body receives a government grant/loan of Rs 1 crore or more but the amount is less than 75% of its total expenditure, the CAG can still audit it under...Para 2.6.7Section 15(1) gives the CAG the right to access a beneficiary body's books and accounts for scrutiny purposes. However, if the beneficiary is a corporation...Para 2.6.6Under Section 15, the CAG scrutinizes whether the government authority that sanctioned a specific-purpose grant or loan has properly verified that the cond...
III -
Para 6.1.25Important matters that local audit staff and officers-in-charge should focus on are outlined in a confidential document called the Secret Memorandum of Ins...Para 6.1.26Instructions for inspecting Public Works Offices, Public Sector Banks, and Public Debt Offices are found in Chapters 2, 3, and 4 of this Section, supplemen...Para 6.1.23The results of cash management audit and the physical verification of cash by the DDO (done in the auditor's presence) should be forwarded along with the I...Para 6.1.21Inspection Reports should exclude trivial matters that were corrected on the spot or have no financial impact. However, if many similar minor errors are fo...Para 6.2.4The Divisional Officer must be given sufficient advance notice of the inspection dates so they can collect records from subordinate offices and be present ...Para 6.2.10After the Test Audit Note is prepared, it must be sent to the Divisional Officer so they can provide their remarks and return it. Any points raised in the ...Para 6.2.1The Accountant General must arrange for inspection and test audit of every Public Works Division's accounts. This is done by an Audit Officer from the AG's...Para 6.2.9Before the Inspection Report is sent out of the audit office, it must be reviewed by the Works Inspection (Headquarters) Section under the Group Officer's ...Para 6.2.13If the Inspecting Officer's note (submitted under Para 6.2.6) identifies any objection in the Inspection Report that is important enough to potentially be ...Para 6.2.7The Inspecting Officer must submit a specific report on their scrutiny of the Divisional Accountant's Objection Book covering the audit period. This report...Para 6.2.11Parts I and II of the Inspection Report must be sent in duplicate to the Divisional Officer in a tabular format with columns for the officer's replies, the...Para 6.2.12When serious irregularities are discovered during Public Works inspection, they may be brought to the notice of the Government. For cases proposed for incl...Para 6.3.1Under the departmentalised accounting system, public sector banks (including SBI and subsidiaries) handle government receipts and payments for each Ministr...Para 6.3.5Public sector banks also handle transactions for special government schemes like National Defence Fund, Public Provident Fund, pension payments to Central ...Para 6.3.3Since public sector banks essentially perform treasury functions for government transactions, the inspection of these banks should follow the same general ...Para 6.3.6This rule prescribes how often and for how long public sector bank branches handling pension payments should be audited. Branches with 200+ pensioners are ...Para 6.4.3The inspection results for Public Debt Offices are reported in a three-part Inspection Report as prescribed in Para 6.1.20. Copies must be sent to the PDO ...Para 6.4.2The audit of Public Debt Offices must follow the guidelines in the 'Manual of Instructions for the inspection of Public Debt Offices by the Indian Audit an...Para 7.1.20Parliament's Financial Committees require the Government to report the follow-up action taken on all observations in Audit Reports — even those the Committ...Para 7.1.22Once an audit objection is raised, it must be actively pursued — abandoning it without reason sends a harmful signal to the audited organization. An object...Para 7.1.17When the Audit Office discovers that a government employee was overpaid on a personal claim more than a year ago, the Accountant General should not demand ...Para 7.1.6This rule lays down eleven principles for communicating audit findings to departments and Government. Key requirements include: discuss major observations ...Para 7.1.13All audit objections outstanding for more than three years must be reviewed and analysed. The rule provides detailed guidelines for clearing old objections...Para 7.1.8When a report of defalcation (embezzlement) or loss of public money or property is received, the Accountant General (Audit) must investigate whether the lo...Para 7.1.10Every audit query or observation must be promptly addressed by the officer to whom it is directed. They must return it with the necessary documents and exp...Para 7.1.4The final authority on whether to press or drop an audit objection lies with the auditor. Generally, where a transaction needs higher authorization, Audit ...Para 7.1.1The effectiveness of audit depends on its right and duty to report findings to the proper authority so that corrective action can be taken. Depending on th...Para 7.1.16To avoid wasting time on minor cases, Audit Officers at various levels have been given powers to waive recovery of small amounts of irregular expenditure o...Para 7.1.12Vigorous and timely pursuit of audit objections is essential for the CAG's Audit Reports to serve their purpose. The AG has an extensive toolkit: sending a...Para 7.1.3When deciding how to treat audit findings, auditors should follow four key principles: ensure rules are properly applied but do not dictate what rules shou...Para 7.1.5To avoid wasting time on objections involving very small amounts, both Central and State Governments have delegated powers to Audit Officers to waive certa...Para 7.2.12Every individual audit objection must be tracked through official records from the time it is raised until it is finally cleared or withdrawn. The Accounta...Para 7.2.37Instead of maintaining a separate Objection Book, audit offices may choose to replace it with a file of original Objection Statements returned from the tre...Para 7.2.34The Audit Officer must actively monitor all outstanding objections. Any objection that remains unsettled for six months must be entered into a special regi...Para 7.2.36To help the CAG's office assess audit results from both central and local audits, each audit office must send a quarterly follow-up action report to the Of...Para 7.2.26For objections that are purely informational and do not require the Treasury Officer to take any specific action — such as noting excess provident fund ded...Para 7.2.31When an objection is partially resolved, each fragment of the adjustment is recorded progressively in the Objection Book under 'Details of adjustment.' Eve...Para 7.2.6In some cases, it may be impractical to adjust for the statistical exaggeration caused by overlapping objections. In such situations, the entire data for t...Para 7.2.2Audit objections and observations must be communicated to the concerned authorities as quickly as possible. However, before being sent out, they must first...Para 7.2.1This rule introduces Chapter 2, which describes the detailed procedure for communicating audit results to the appropriate executive and controlling authori...Para 7.2.16This rule lists ten specific categories of audit objections whose money value must be quantified and recorded. These include missing vouchers and receipts,...Para 7.2.3When the audit objection relates to a sanction issued by an authority above the disbursing officer (such as a department head or ministry), it must be trac...Para 7.2.10When recording an audit objection in the Objection Book, Objection Statement, or Audit Note, the entry should be detailed and self-contained enough that th...Para 7.2.23The Auditor is responsible for promptly processing the Objection Statement when it is returned from the Treasury Officer. If recovery is ordered, the Audit...Para 7.2.4Detailed instructions for preparing the Audit Report are found in Chapter 3 of this Section of the Manual. The Accountant General has the authority to pres...Para 7.2.18Audit objections should generally be communicated directly to the disbursing or responsible authority through printed audit memoranda and half-margin forms...Para 7.2.30For each item in the Adjustment Register, the method of adjustment (how the objection was resolved — whether by recovery, write-off, receipt of sanction, e...Para 7.2.5When multiple objections arise from a single transaction (for example, both an excess payment and a procedural violation on the same work), each objection ...Para 7.2.21Before Objection Statements are dispatched, each objection must be neatly entered in the Objection Book (Form MSO (Audit)-9) by the Auditor in the Central ...Para 7.2.27Items that have been accounted for under the correct budget head but are not yet fully admitted by Audit are recorded under 'Items adjusted, but awaiting f...Para 7.3.10An Audit Board was established in 1969 under the CAG's supervision to conduct comprehensive performance appraisals of Central Government commercial underta...Para 7.3.11Similar Audit Boards may also be set up at the State level for reviewing State Government commercial undertakings. These are constituted on a selective bas...Para 7.3.13The Union Government's Commercial Audit Report is divided into separate parts for easy reading. Part I provides a brief summary and synoptic statement of a...Para 7.3.14The State Government Commercial Audit Report, when prepared separately, covers the results of audit of State Government Companies and Statutory Corporation...Para 7.3.15Chapter I of the State Commercial Audit Report provides a general overview of all government companies and statutory corporations. It includes statistical ...Para 7.3.19The Union Government Audit Report on Revenue Receipts is typically presented in two volumes — one for Indirect Taxes and one for Direct Taxes. State and Un...Para 7.3.16Chapter II of the State Commercial Audit Report is dedicated to detailed reviews of government companies. All comprehensive appraisals and performance revi...Para 7.3.18Chapter IV covers miscellaneous topics of interest and includes individual audit paragraphs about companies and corporations not selected for full review. ...Para 7.3.21This paragraph provides an exhaustive list of issues to be covered in Chapter I of the Revenue Receipts Audit Report, including: budget vs. actual variatio...Para 7.3.2The CAG's Reports broadly draw attention to: excess expenditure beyond voted grants, expenditure on new services without Parliament's authority, budgeting ...Para 7.3.20Chapter I of the Revenue Receipts Audit Report presents statistical information and reviews of how revenue-collecting departments function. It includes a p...Para 7.3.22After the overview in Chapter I, the Revenue Receipts Report includes a chapter on system appraisals evaluating the adequacy and efficiency of assessment, ...Para 7.3.26The Accountant General generally does not need the CAG's prior approval before including a comment in a draft paragraph sent to the Government for their re...Para 7.3.3CAG Reports serve a dual purpose. For the Government, they show whether subordinate officers are following rules and suggest where rules could be improved....Para 7.3.23Not every under-assessment or procedural defect needs to be individually mentioned in the Audit Report. Only cases involving substantial revenue, important...Para 7.3.27When drafting Audit Reports, it is essential to maintain an objective, detached, and dispassionate tone. The language must be free of any expressions that ...Para 7.3.24The preparation of the Railway Audit Report follows separate instructions contained in the Railway Audit Manual, which is issued under the authority of the...Para 7.3.28The Overview section of the Audit Report, which is printed on distinctly coloured pages, must be especially well-drafted — lucid, accurate, and brief witho...Para 7.3.25While no rigid formula exists for selecting material for Audit Reports, this paragraph provides detailed guidelines. Cases involving statutory violations, ...Para 7.3.29Since Audit Reports are read by parliamentarians, legislators, the press, and the general public, the language must be intelligible to an ordinary citizen....Para 7.3.30Audit Reports must be characterised by accuracy, brevity, clarity, and purposeful focus. Findings should be significant and the writing should favour activ...Para 7.3.32Technical expressions and clichés should rarely be used in Audit Reports. When a technical term is unavoidable, it must be adequately explained so the read...Para 7.3.4Appropriation Accounts cover government expenditure for the financial year ending March 31st. The CAG's Audit Report on these accounts covers transactions ...Para 7.3.34Audit reports should include visual aids like graphs, charts, photographs, and diagrams to make audit findings more impactful and easier to understand. How...Para 7.3.35This group of provisions covers how audit reviews and paragraphs should be structured and written. Reviews must have bold highlights after the introduction...Para 7.3.43Audit reports must prioritize quality over quantity and analysis over mere narration. The Accountant General must personally oversee report preparation, en...Para 7.3.45If the government department does not reply to audit observations sent for their comments, this non-response must be explicitly mentioned in the Audit Repo...Para 7.3.46The Accountant General can discuss the government's replies and remarks on draft audit paragraphs directly with the concerned Administrative Secretaries. I...Para 7.3.47Draft audit paragraphs for the Audit Report should be sent to the CAG's office in triplicate, in convenient batches as they become ready. Paragraphs for th...Para 7.3.48Draft paragraphs sent to CAG headquarters must be neatly typed in double space on good quality paper with a one-third margin. For Union Government reports,...Para 7.3.49After receiving the CAG's comments on the draft paragraphs sent in batches, the AG or Principal Director of Audit prepares a final consolidated draft of th...Para 7.3.5If audit results cannot be included in the regular Audit Report for any reason, they can be published in separate standalone reports. Separate reports may ...Para 7.3.50Three bond copies of the final Audit Report, including overviews, must be prepared on loose A4-size sheets, placed in plastic ring-clip folders, and submit...Para 7.3.54Printing of Audit Reports must be expedited. If state government presses cause undue delays, the reports can be printed through private presses while maint...Para 7.3.51Along with the bond copies of the Audit Report, a brochure summarizing the audit observations from all Central and State reports (Civil, Revenue Receipts, ...Para 7.3.63The separate Audit Reports on statutory corporations and autonomous bodies should cover a wide range of issues including: problems that vitiate the 'true a...Para 7.3.52The Union Government (Civil) Audit Report on Revenue Receipts must follow the instructions in the Revenue Audit Manual, Part I, Section II. These same inst...Para 7.3.56For state and UT reports, five copies must bear original signatures of the authenticating authority; for Union Government reports, seven copies must be sig...Para 7.3.53The detailed instructions for printing Audit Reports are contained in Annexure-3 of the MSO (Audit). This covers formatting, paper size, cost minimization,...Para 7.3.6The Accountants General (Audit) of each state or Union Territory are responsible for preparing the Audit Reports for their jurisdiction. In most states, se...Para 7.3.62Separate Audit Reports for statutory corporations and autonomous bodies should primarily focus on the correctness of accounts and the conclusions that can ...Para 7.3.65If audit has critical opinions or conclusions on important issues — especially those where the organization's management is likely to disagree — those issu...Para 7.3.66Even when a registered society or autonomous body does not have a specific statutory provision for CAG audit, the government may still entrust its audit to...Para 7.3.1Under Article 151 of the Constitution, the CAG's Reports on Union accounts are submitted to the President, who lays them before both Houses of Parliament. ...Para 7.3.31When a table or chart is included in a review or paragraph of the Audit Report, it must be followed by a clear written analysis explaining what the data sh...Para 7.3.12Reviews of Government Companies and Corporations conducted by the Audit Board typically cover key areas such as operational changes, foreign collaborations...Para 7.3.17Chapter III of the State Commercial Audit Report contains all reviews relating to statutory corporations. This chapter presents comprehensive appraisals of...Para 7.3.33When reporting on cases of irregular, excessive, or wasteful expenditure and financial losses, the Audit Report must make every effort to quantify the fina...Para 7.3.8The Audit Report is organized into chapters covering different topics. Annexure-1 provides a general layout for State/UT reports and Union Government (Civi...Para 7.3.7The Union Government Audit Reports are published in multiple separate volumes covering Civil Departments, Posts & Telecommunications, Defence, Railways, Sc...Para 7.3.9The Union Government (Civil) Audit Report and certain state reports do not include observations about Government Companies, Corporations, or Union tax reve...Para 7.3.59No correction slips may be issued after the Audit Reports have been forwarded to the government. If a serious error is discovered after forwarding, it must...Para 7.3.58Any errors found in printed copies must be neatly corrected in the copies sent to the CAG. If errors are numerous enough to require an errata sheet, it sho...Para 7.3.57When an Audit Report is tabled before Parliament or the Legislature, a press brief (essentially a copy of the Report's Overview) must be issued separately ...Para 7.3.64Audit is allowed to include comments about accounts from previous years in the current separate Audit Report, as long as the issues are important and adequ...Para 7.3.55Printed copies of Audit Reports must be submitted to the CAG for countersignature so they can be presented to Parliament or the Legislature as early as pos...Para 7.3.61Separate Audit Reports must be prepared for statutory corporations, autonomous bodies, and similar entities where the relevant Act provides for their accou...Para 7.3.67For all entities whose Audit Reports go before Parliament or the Legislature, the draft report and audit certificate must be shown to the CAG at the draft ...Para 7.3.60Once Audit Reports have been laid before the Legislature, no correction slips can be issued at all. Any errors discovered after tabling must be reported to...Para 7.3.68When forwarding certified annual accounts and the Audit Report to the government for legislative presentation, the AG should request the government to conf...
VI - Revenue Receipts
Para 7.4.1The Finance Accounts and Appropriation Accounts are certified and signed by the CAG, while Audit Reports are signed by the Principal Auditors (DG Audit, AG...Para 7.4.11The AG monitors the action taken by government departments on PAC recommendations. If the government's response is inadequate, the AG can take up the matte...Para 7.4.12Government ministries and departments submit 'Notes' to the Lok Sabha Secretariat for the Central PAC's information. These notes cover: excess expenditure ...Para 7.4.14Before returning vetted draft Notes to the ministry, the Principal Audit Officer must consult the CAG on any substantive remarks or suggestions — especiall...Para 7.4.15In all cases where the Principal Audit Officer handles the vetting of government Notes on their own (without needing CAG consultation), one copy each of th...Para 7.4.10After the Public Accounts Committee (PAC) or Committee on Public Undertakings considers the Audit Reports and presents their findings to the Legislature, t...Para 7.4.4For State Government reports, the Additional Deputy CAG in charge of state reports forwards signed reports to the Finance Department of the relevant state ...Para 7.4.6After Audit Reports for a state or Union Territory are presented to the Legislature, the Accountant General must inform the CAG. If there is an unreasonabl...Para 7.4.13All draft Notes prepared by government ministries for the PAC must be shown to the Principal Audit Officer at the draft stage for vetting. The audit office...Para 7.4.7Parliament and State Legislatures deal with CAG's Audit Reports through procedures laid down under the Constitution (Articles 118 and 208) and the Governme...Para 7.4.9The Accountants General and Principal Directors of Audit are typically invited to attend meetings of the Public Accounts Committee and the Committee on Pub...Para 7.4.5Copies of Finance Accounts, Appropriation Accounts, and Audit Reports may be given to the Finance Ministry or Department after the CAG formally submits the...Para 7.4.18When the Public Accounts Committee needs notes related to evidence given before it, the Lok Sabha Secretariat may ask for advance copies if there might be ...Para 7.4.16When draft notes prepared by a ministry are sent to the Audit Officer who wrote the relevant audit paragraph, that officer can return interim replies direc...Para 7.4.19Some State Governments follow a similar practice of getting their action-taken notes vetted by Audit before sending them to the State Legislature Secretari...Para 7.4.8The Public Accounts Committee and the Public Undertakings Committee are not executive bodies — they cannot issue orders or direct government departments to...Para 7.4.17Audit offices should complete their vetting of draft notes within two weeks (a fortnight). If the vetting requires checking facts with field offices, those...Para 7.4.2After the CAG signs the Audit Reports and Accounts, one copy of each signed document is sent back to the relevant Accountant General (Accounts & Entitlemen...Para 7.4.3Once the CAG signs the Audit Reports and Accounts, the Additional Deputy CAG responsible for Union Government reports forwards all Union Government reports...Para 7.4.20In states where the Legislature discusses the reports of the Public Accounts Committee or Public Undertakings Committee, the Accountant General must review...