With Commonwealth Games, 2G and the Coalgate, the role of Audit and the CAG of India has been thrown on to the centre stage of Indian thought process and its psyche. What more the organization can do to stem the rot? Are some sectors completely uncovered? Is performance audit enough to gauge the financial health of the nation, or is there a need for a combination of audits? What is the role of the private sector in the misuse of governments funds and should they also come under the scanner? And added to that the final question shrouds around the veracity of the private sector audit. Can complete audit of the nation not become a state function as in case of lot many other tasks so efficiently being performed by the Government.
Undeniably, last few years have proved the great thought gone in, in creating this institution by the framers of our constitution and its worth, utility and the capability to initiate transformational change in the governance of this country is a matter of a hot debate in the public domain now. I hope it would bring about path breaking changes which the nation has been waiting for years. Suffice to say, at the present moment, that CAG relies on the performance audit and that too sample based which might not be as effective and as intensive and intense as these monumental changes would demand. As they say, the beauty lies in the details! The scale of performance audit ought to be extended to all departments and all sectors where government funds are expended.
Finality is the issue. Findings cannot be value based. It has to be irrefutable facts. Instead of clearing the dust and the heat it cannot afford to be marred in one. The right synthesis of financial, performance and physical audit seems to the panacea to the ills plaguing the audit scenario in this country. Complete objectivity based on empirical facts has to the final touch point. The finality issue can also be sorted out by uniformity of application of standardized mandatory guidelines across the length and breadth of all departments, undertakings, institutions, organizations, public limited companies in this country. The ghost of relativity should not loom large over this issue.
CAG Audit Coverage
With the government and NGO’s being fully covered by CAG audit in relation to the government funds, there is still large quantum of the economy which remains uncovered by the CAG auditing scope and yet pertains to the public money invested in public limited companies. From the Harshad Mehta case to the current day Satyam, the saga continues, the Welfare State and its citizens cannot find solace in existing auditing norms, practices and the transparency made available to the investors and the country. When IPOs are public knowledge to the minutest details, why not the health of the company based on financial and performance audit conducted by a third party constitutional authority which functions on the final touchstone of finality in its findings. The Supreme Court of India does not go wrong and the same sanctity goes for the CAG created under the same constitutional mechanism for the larger good of the maximum number of the citizens.
Private Sector Audit
There are umpteen instances of the havoc the citizens are meted with because of bad business practices, stock market scams and lack of transparency in the public limited companies. It is not my case to comment on their functioning but there is certainly a strong case to bring them under the ambit of common audit as it serves the principles of economic well being of the citizens and the state in a much better manner and that the state is comfortable with the functioning of these companies. A Reliance can change the life of lakhs of its shareholders and innumerable others in the manner it affects them directly and indirectly. Not that such companies are created just like that, they are jewels of the nation and have to be maintained in that manner. A positive monitoring and supervisory mechanism certainly helps in this process. The role of the Government has been commendable in the manner Satyam was resurrected to its early glory and the company functioned once again as it should have been despite the major tragedy that hit it. Nobody is denying the vagaries of the stock markets or monumental shifts in the international business, all I am trying to say is that it would add to the health of the company, citizens of this country and the country itself.
The discussion in the preceding paragraphs sets final agenda for improving, reforming and enhancing the effectiveness of audit in this country. What stands established is that in totality, audit is a measure and an indicator of the economic well being of the nation, the CAG probably is the most important officer of the Govt. of India and the veracity of the private sector audit is not beyond doubt. What the country needs for a transformational audit and financial regime is firstly the CAG audit should have a scope to audit every single penny spent by the governments with no exceptions whatsoever, either organizations or heads of account. Secondly, it should be both comprehensive and intensive and under no circumstance sample in nature. Thirdly, the synthesis of financial, performance and the physical audit holds the key to the auditing success/excellence. Fourthly, finality of findings should be touchstone. Fifthly, whole of private should come under its ambit to the tune of investment of people’s money and summing up all the above, finally, CAG, should be the only and the final auditing authority in the country. The logistics for this mammoth exercise on a yearly basis should be put in place simultaneously with the expansion of the scope of audit of the CAG.
The state should be the only auditing authority in the country and should work on prescribed auditing standard operating procedures. The uniformity and objectivity of this audit would improve the quality of expenditure in the governmental and the private sector and we would be in the striking distance of achieving the goal of maximum good for the maximum citizens out of the public funds of the nation.