CALM | Central Archival Library of Indian Audit & Accounts Department

The audit is a rational and intellectual exercise and the Indian Audit and Accounts Department (IA&AD) is an intellectual tradition engaged in promoting good governance and accountability as enjoined by the Constitution.

Upto the middle of eighteenth century the Company had established three foot holds in India at Calcutta, Bombay and Madras and there with their adjoining company territories were known as ‘Presidencies’. These Presidencies were independent of one another and were only subordinate to the Directors in England and separate accounts were rendered by them to the Board of Directors in England. The Act of 1813 and 1833 finally divested the Company of its commercial character and the Company becomes a purely administrative body holding the territories of India on behalf of King of England.

Gradually the country was divided into districts for administrative purposes with a Collector at the head who was responsible for all receipts and expenditure of money and had to account for all such transactions. During this period the Accounts were kept on Commercial system. Each Department had a separate Profit and Loss Account and there was annual stock taking of money and as well as of all Government Buildings and Government Assets in the Country. The accounts were not regularly published and whatever audit was carried out was primarily meant for an internal check.

It is also pertinent to mention that prior to 1835, the transactions were recorded in Persian language but from that year English was declared as the official language in India.

Just before the year of Mutiny in 1857, a General Department of Accounts under the Government of India was established by Lord Canning’s Government with the sanction of the Court of Directors and Board of Control in December 1857 in substitution for the system of separate independent Accounts Offices for each Presidency. This was the evolution of Audit and with the span of time it reached different aspects of governance like revenue audit, Public Sector Undertakings/Statutory Corporations, local self-Government institutions and developed new techniques and tools for audit like performance audit, audit of information technology, etc.

The Department started surfacing way back on 4th December 1857, when the Court of Directors, Government of India issued orders for formation of General Department of Account including the offices of Audit, Pay and Account in the several presidencies as well as in the Punjab under the Government of India, to which all nominations was to be made by the Government General in Council.

The Governor General in Council was of opinion that it was necessary that the prospect of remuneration would be somewhat better than in the general line of the service, and that the salaries would be so graduated as to give a fair average of promotion, so as to ensure as far as possible that those entering the Department would continue in it. His Lordship in Council resolves that no officer would be permitted to enter the General Department of Account under five years’ standing, when a young officer may be expected to have gained sufficient experience for the purposes of the Department, to have gained sufficient experience for the purposes of the Department.

Junior Civil Servants would be allowed to register their application for employment in General Department of Account, after the above mentioned period of service as vacancies occur, when the applicants would be subjected to an examination in book-keeping, working of the revenue system of the Presidency to which they belong, management of District Treasuries and examination papers together with reports from the Local Governments on the general aptitude for business of the several candidates, would be forwarded for consideration of the Governor General in Council, on the understanding that the officer who appears best qualified for the duties of the Department would, as a rule, be selected.

Promotions would be regulated with due regard to seniority and merit, mere seniority not being in any case held to given a title to promotion (Resolution, dated 26 March 1858).

The Financial Resolutions was issued on 26th March 1858 detailing scale of salaries of the Department as under:

Post designated	Proposed Salaries
Accountant General to the Government of India	Rs.3500
Accountant General to the Government of Bombay	Rs.3000
Accountant General to the Government of Madras	Rs.3000

His Lordship in Council has attached the largest salary to the appointment of Accountant General to the Government of India, because it is by far the most important of the whole. These arrangements were to have effect from 1 May 1858.

The foundation for a real and true method of imperial audit was laid when the system of Annual Budget of Imperial Income and Expenditure for sanction by Supreme Government of India adopted partially from 1860-61 and wholly from 1861-62. However, in the year 1862, the Department was reorganized. The Financial Secretary became the head of Financial Department, which included the Departments of Account and Audit. The Auditor and Accountant General to the Government of India became the head of those Departments. The designation of Auditor General of India and Accountant General to the Government of India was re-designated to Comptroller General of Accounts in the year 1866.

The scope of the Department was engorged further in the year 1881, when Office and Accounts of the Controllers of Military Accounts, Examiners of Public Works Accounts and Comptroller to the Post Office was opened to the inspection of the Comptroller General of Accounts and his Inspecting Officers. In the year 1884, Governor General in Council appointed the Controller General and re-designated as Comptroller and Auditor General. It was also directed that each Accountant General included in the term; the Military and Public Works Accountants General and each head of a Separate Audit Department should prepare each year the appropriation audit report of the provinces or department of which he compiled the accounts and forward to the Comptroller and Auditor General (CAG). In addition to the inspection of accounts and offices; CAG was empowered to make a test audit of so much of the accounts of any office as he may consider necessary.

Montagu-Chelmsford Reforms (1919) envisaged an ‘Independent’ Auditor General on a statutory basis. The Government of India Act 1919 was a landmark in the history of the Audit Department as the Auditor General statutorily recognized and his independence and status increased several folds and his title was changed to Auditor General in India.

"Government of India Act 1919 Clause 96(D) says that “An Auditor General in India shall be appointed by the Secretary of State in Council, and shall hold office during His Majesty’s pleasure. The Secretary of State in Council shall, by rules, make provision for his pay, powers, duties and conditions of employments or for the discharge of his duties in the case of a temporary vacancy or absence from duty”.

Other side the Government of India Act of 1919, that gave effect to the Montagu-Chelmsford Reforms, established a bicameral Legislature at the Centre. The Indian Legislature consisted of the Governor-General and the two Houses – the Council of State and the Legislative Assembly. Assembly was inaugurated on 9th February 1921 and the Public Accounts Committee (PAC) was also constituted in the Indian Parliament System.

The Appropriation Accounts and Audit Report for the year 1921-22 were the first to be examined by the PAC. The Audit Reports placed before PAC by Auditor General were grouped in two sets; Audit Reports and Appropriation Reports. Each set consist of a number of reports by three Accountants General (Central Revenues, Railways and P&T) who solely deal with the revenue and expenditure of the Government of India.

The Auditor General Rules were first made by the Secretary of State in Council on 4 January 1921, which laid down the conditions of employment of the Auditor General; duties and powers as regards Audit and Accounts and also his administrative powers. These Rules was superseded by a fresh set of rules made by the Secretary of the State in Council on 13th April 1926.

First time in 1925, separation of accounts from audit was started in Indian Railways. As per the resolution passed by assembly, the Auditor General is responsible for audit alone. He should no longer be required to maintain the accounts of the Railways. An experimental system was introduced in the East Indian Railway from 1st December 1925. The scheme was introduced on permanent basis from the 1st April 1929 and order was also made by the Secretary of State in Council. The Accountant General, Railways, ceased to exist as such with effect from the 1st April 1929. The audit side of the work was taken over by the Director of Railway Audit.

Government of India Act 1935 (Section 166 to 171 dealt with audit and Accounts) further raises the status of the Auditor General of India. He would be appointed by his majesty and only be removed from office in like manner and on the like grounds as a judge of Federal Court. Other important provisions in the 1935 Act was to ensure its independence and that neither the salary nor his rights in respect of leave, pension or age of retirement could be very to his disadvantage after his appointment and that the salary allowances and pension payable in respect of an Auditor General would be charged on the revenue of the Federation. The provisions of Auditor General Rules 1926 that the Auditor General on vacating office could not hold any other post under the crown in India were also incorporated under section 166(2) of the Government of India Act 1935. Also the title of the Auditor General in India was changed as Auditor General of India. Government of India (Audit and Accounts) order was issued in 1936. Rules were made by his majesty in council on the 18 December 1936 laying down the conditions of service of the Auditor General and his duties and powers in relation to the accounts of the federation.

Augmentation of the Institution in post-independence era (after 1947)

Comptroller and Auditor General granted constitutional states in the Constitution of India. The importance of the Department was sighted therein and Hon’ble Dr. B. R. Ambedkar while replying to the amendment proposed in the Constituent Assembly on 30 May 1949 stated that “I am of opinion that this dignitary of officer is probably the most important officer in the Constitution of India. He is the one man who is going to see that the expenses voted by Parliament are not exceeded, or varied from what has been laid down by Parliament in which is called the Appropriation Act. If this functionary is to carry out the duties and the duties, I submit, are far more important than the duties even of the judiciary – he should have been certainly as independent as the Judiciary. But, comparing the articles about the Supreme Court and the articles relating to the Auditor General, I cannot help saying that we have not given him the same independence which we have given to the Judiciary, although I personally feel that he ought to have far greater independence than the Judiciary itself.”

Partition of India brought changes in the Audit department and after independence about 30 officers of the Indian Audit and Accounts Service out of a total strength of 140 opted for Pakistan.

There were 11 Civil Audit Offices in 1947; i.e., nine offices of AG and two controllers. CAG became the Accounting and Audit Authority after the Federal Financial Integration which expanded to 27 States. After the reorganization of states in 1956 it was reduced to 20 States including 6 Union Territories. Total manpower of the Department in 1948 was 15600. The Auditor General performed the Accounting and Audit functions of the Federal Government and Eleven Provincial Governments.

In 1947, the Auditor General presented 28 Finance Accounts, Appropriation accounts and Audit reports thereon. Six Audit Reports on Government of India to the Governor General of India, which laid before the Central Legislative Assembly and 22 to the Governors of Provinces to be laid before the Provincial Legislature.

Shri V Narahari Rao

who was secretary to the Government of India, Finance Department, became the first Indian Auditor General of the free Dominion of India on 15th August 1948.

Constitutional status to Comptroller and Auditor General came through promulgation of the Indian Constitution in 1950. He wouold be appointed by the President of India by warrant under his hand and seal and can only be removed from office in like manner and on the like grounds as a judge of the Supreme Court. Rules relating to the conditions of service of persons serving in the Indian Audit and Accounts Department and his administrative powers would be made by the President only after consultation with him. Comptroller and Auditor General (Conditions of Service) Act, 1953 passed by the Parliament and fixed the tenure of CAG as six years. Accordingly, tenure of Shri V. Narhari Rao was extended upto 14th August 1954.

The foundation stone for the office complex of the CAG of India at 10 Bahadur Shah Zafar Marg, New Delhi was laid by Dr. Rajendra Prasad, first President of India, on 21st July 1954. The office of CAG shifted to the new complex in 1955.

Dr. Rajendra Prasad

While laying down the foundation stone of the CAG office building, Hon’ble President of India Dr. Rajendra Prasad said, “At the present moment when the Government is incurring a huge expenditure on so many welfare projects, it is essential that every rupee that we spend is properly accounted for. This important task, I am afraid, a task not always very pleasant – devolves upon the Comptroller and Auditor General and his office. In accordance with the powers vested in him, he has to carry on these functions without fear or favour in the larger interest of the nation”.

Shri Sarvepalli Radhakrishnan

At a function in Madras in 1954, Hon’ble Vice President Shri Sarvepalli Radhakrishnan stated “Ours is a poor country, its resources are limited and we cannot afford to risk any kind of waste and the Audit Accounts Department will have to look upon their functions as the functions of the greatest public utility. He also asserted, if I have one advice to give and if I am presumptuous enough to give any advice to the officers of the audit and accounts, it is this Do not shrink from the truth for fear of offending men in high places.

The jurisdiction of CAG was extended to Jammu & Kashmir in the year 1958.

In a major development with the promulgation of The Indian Companies Act 1956, the authority for supplementary audit of the Government Companies was conferred to CAG and empowered him to advise Government on appointment of auditor to Government Companies. A new dimension in Commercial Audit of Government Companies and Corporations was added after system of Appraisal by the Audit Board was introduced by Government on the recommendations of the Administrative Reforms Commission in 1969.

Shri A.K. Roy (1960 – 1966), C&AG of India, in its tenure introduced the concept of the top-level evaluation of the operations of the Governments by suggesting to the Accountant General to conduct efficiency audit of important schemes implemented by the Government. He described performance audit as a facet of the discretionary audit that the Department used in earlier years.

In the year 1962, CAG issued MSO (Technical) in two volumes integrating the audit principles and instructions. CAG also introduced the audit of revenue receipts of the Government of India in accordance with the Memorandum of Understanding reached by him as a Finance Secretary and the predecessor CAG. Director of Revenue Audit was appointed in Headquarters office in 1962. CAG also introduced a quarterly Audit bulletin incorporating information on matters of common interest and decision on technical matters, administrative orders issued by the Government of India, State Governments and the CAG.

The Comptroller & Auditor General’s (Duties, Power and Conditions of Service) Act 1971 gave a new dimension to audit of autonomous bodies and institutions which received substantial grants-in-aid. The Audit of Receipts taken up by CAG since 1960 based on interpretation of Article 151 of the Constitution but not supported by Audit & Accounts Order of 1936, as adapted by the Constitutional order issued later, gained necessary statutory backing by these provisions. The duties and powers vested by Companies Act 1956 were incorporated in the CAG’s (DPC) Act. CAG was empowered to delegate any power exercisable by him under the provisions of the Act to any officer of the Department as may be authorized by him in his behalf. The CAG was authorized to make regulations for carrying into effect the provisions of the Act in so far they are related to the scope and extent of Audit. The Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act 1971 became effective from 15 December 1971.

There were voices in the Parliament for Departmentalization of Accounts. Accordingly, a group of Ministers on Administration set up by Government of India recommended separation of Accounts on 14th August, 1973. The Cabinet Committee on Administration had approved Departmentalized Accounting System in its meeting held on 28 June 1975. The Act was amended in 1976 to relieve CAG of the duties and functions relating to maintenance of accounts of Government of India which ended the long practice of keeping the account of Government of India by IA&AD. Transfer of over 12000 Personnel from this organization to the various Departments of the Government of India was one of the largest migrations from one Department to several Departments of Government of India. Consequent upon the departmentalization of Accounts of Ministries and Departments of Central Government, an organization of Controller General of Accounts under the Department of Expenditure of Ministry of Finance was entrusted with the responsibility for establishing and maintaining an Accounting system in the departmentalized accounts offices. However, General financial statement incorporating a summary of the accounts of the Union and of the state for the last preceding year and particulars of balance as outstanding liabilities known as the Combined Finance and Revenue Accounts was prepared by the Auditor General's office and submitted to Government of India since 1936. Work of preparation of Combined Finance and Revenue Account was retained with the CAG even after the separation of Accounts (1976) in Government of India. Auditor General was empowered to frame rules and to give directions in all matters pertaining to the audit of Expenditure and to the audit of such transactions and accounts as he required to audit.

In another major event, when the Ministry of Finance issued revised instructions regarding production of record to audit on 25 September 1976, without consulting the CAG, that the confidential files, Cabinet notes and the decisions in the course of formulation of policies are not covered by the instructions issued earlier and need not be shown to audit. The then CAG of India, Shri A. Baksi, vigorously pursued the matter which forced the Government to withdraw such restrictions on 23 September 1978.

Re-organization of Civil Audit Offices and Accounts Offices was also done in March 1984. Formation of separate offices for Accounting and Entitlement functions virtually bifurcated the arrangements for audit and accounting and separate Accountants General was made responsible for performance of these functions. In all 22 A&E offices came into existence.

The foundation stone of New Office Complex of C&AG of India was laid by the President of India, Dr. A.P.J. Abdul Kalam on 19 October 2006 and the New Complex was inaugurated by Smt. Pratibha Devi Singh Patil, President of India on 14 October 2008.

Shri Girish Chandra Murmu assumed office as the Comptroller and Auditor General of India on 8 August 2020.