Accountability is a sine qua non – an essential condition – to good democratic governance.
The Comptroller and Auditor General of India (CAG), who has been given an independent position under the constitution of India, is the instrument that ensures and promotes accountability of the executive to parliament. This office started functioning from 1858, and the first Auditor General was appointed in 1860.
However, statutory recognition to this institution was given by the Government of India Act of 1935, which provided for appointment of the Auditor General by the King of England, thereby cementing the independence enjoyed by the post in the years to follow. The constitution of free India included four articles (148, 149, 150 and 151) which define the basic structure of the institution of the CAG of India.
These articles provide that the CAG of India is an independent constitutional authority who is neither part of the legislature nor executive, though appointed by the President under his hand and seal and can be removed only through a motion of impeachment. Dr B.R. Ambedkar described the CAG as the most important functionary under the constitution. The CAG is the Supreme Audit Institution or SAI of India.
Audit, if it is not independent, serves no purpose.
Internationally, a resolution adopted by the General Assembly of the United Nations on December 22, 2011, emphasised that SAIs can perform their tasks objectively and efficiently only if they are independent of the audited entity and are protected against outside influence.
It also recognised the important role that SAIs play in promoting efficiency, accountability, effectiveness and transparency of public administration. Thus, appointment of the CAG assumes greater significance. The present CAG of India will be demitting office on August 8, 2020. The government of India must have initiated the process of selecting the next CAG.
Somehow, appointment of a CAG has always been treated in utmost secrecy since Independence.
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In 1996, the then CAG, C.G. Somiah demitted office on March 11, but the next CAG could be appointed only on March 15. For four days, the SAI of India was without a head and no one had any idea as to when the next incumbent would be appointed. Twenty-four years have since passed and we have had four CAGs, but the same secrecy has been maintained in the selection.
The constitution of India protects the independence of the CAG. However, there is no laid down criteria for selection of the CAG.
Independence can be ensured if there is a well laid out criteria for this. Such criteria would include required qualifications which an individual should possess to be appointed as CAG and also a procedure through which selection should be made. The procedure must be transparent.
The current practice adopted for the appointment of the CAG is that the Cabinet Secretary prepares a shortlist for the finance minister who then submits it before the prime minister. The prime minister recommends one name from that list to the president. If the president approves the same, the appointment of the CAG is made by warrant under the hand and seal of the president.
Such a procedure is faulty as there is a conflict of interest. The CAG is an auditor to the government of India, which is headed by the prime minister. If the head of the auditee is to select an individual for auditing his organisation, there is a danger of some ‘pliable’ person becoming the CAG and it may dilute the accountability process.
It may never happen, but independence and objectivity in the selection process must not only be there but also appear to be there. Even in the case of companies, the act provides an auditor to be appointed by the AGM.
Our Constitution provides that the president acts on the aid and advice of the council of ministers. However, by inserting the words that the ‘CAG shall be appointed by the President by warrant under his hand and seal’, the makers of the constitution probably wanted the appointment of the CAG to be made in an independent manner.
The Constitution of India.
Compare the appointment of the CAG with the relevant provisions for appointment of a Supreme Court and High Court Judge will bring some more clarity. Article 124(2) states that every Judge of the Supreme Court shall be appointed by the President by warrant under his hand and seal after consultation with such of the Judges of the Supreme Court and of the High Courts in the States as the President may deem necessary. Similarly, Art. 217 provides for appointment of a High Court Judge by the President by warrant under his hand and seal after consultation with the Chief Justice of India. No such consultation has been provided for the appointment of the CAG and the selection is a matter of choice by the Prime Minister alone.
International practices
Internationally, most countries have enacted laws putting in certain qualifications and also the process of appointment of the head of their SAI, so that he works independently and is not under the influence of the Executive, whose performance he is required to evaluate and provide audit opinion on achievement of the objectives.
The Exchequer and Audit Act of the United Kingdom, as amended in 1983 provides that the CAG will be jointly selected by the Prime Minister and Chairman of the Committee of Public Accounts and thereafter ratified by the House of Commons.
In the USA, under Section 302 of the Budget and Accounting Act, 1921, and the subsequent amendment of the General Accounting Office Act, 1980, the Comptroller General of the United States is appointed by the President on the consent of the Senate. Further, under an amendment carried out through Section 104 of the General Accounting Office Act of 1980, a commission has to advise the President.
Section 3(1) of the Auditor General Act of Canada authorises the Governor in Council to appoint the Auditor General of Canada after consultation with the leader of every recognised party in the Senate and House of Commons and approval of the appointment by resolution of the Senate and the House of Commons.
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The Auditor General Act, 1997 of Australia empowers the governor general to appoint the auditor general only after the Joint Committee of Public Accounts and Audit approve the proposal. The Public Audit Act (2001) of New Zealand provides for the appointment of the CAG by the Governor General on the recommendations of the House of Representatives.
Japan has a Board of Audit with an Audit Commission consisting of three Commissioners and a General Executive Bureau. A Commissioner is appointed with the consent of the both Houses of the Diet by the Cabinet. The President of the Board is to be appointed by the Cabinet according to the result of mutual election among the Commissioners.
The Korean Board of Audit and Inspection Act States that the Chairman of the Board shall be appointed by the President with the consent of the National Assembly. Under the Thailand State Audit Act of 1979, appointment of the Auditor General must receive prior approval of the National Assembly.”
The constitution of Sri Lanka provides that the Auditor-General shall be a qualified Auditor and should be appointed by the President subject to the approval of the Constitutional Council. In Bhutan, the Auditor General is to be appointed by the Druk Gyalpo from a list of eminent persons recommended jointly by the Prime Minister, the Chief Justice of Bhutan, the Speaker, the Chairperson of the National Council and the Leader of the Opposition Party.
In Africa, Constitution of Malawi provides that no person shall be appointed as Auditor General unless that person has formal relevant qualifications and significant experience in audit work.
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From these examples, it is clear that the Executive does not have exclusive discretion in the appointment of the head of the Supreme Audition Institution.
Audit a highly professional job
Audit, today, is a highly professional job. It is governed by Internationally Accepted Auditing Standards for the SAIs (ISSAIs) issued by the International Organisation of the Supreme Audit Institutions (INTOSAI), the second biggest organisation after the United Nation. Head of the Indian SAI, the CAG of India is a member of the United Nations Board of Auditors and is the Chair of United Nations Panel of External Auditors.
He plays an important role in the affairs of INTOSAI as the Chair of the Knowledge Sharing and Knowledge Services Committee, Chair of the Working Group on Information Technology Audit, Chair of the Compliance Audit Subcommittee and as a member of its Governing Board. His other international responsibilities include being a member of the Governing Board of Asian Organization of Supreme Audit Institutions and as Chair of the Board of Editors of its journal.
Current CAG of India Rajiv Mehrishi. Photo: cag.gov.in
This requires a high degree of professionalism in matters relating to Finance, Accounts and Audit in the incumbent for the post of CAG.
Apart from the fact that the person appointed as the CAG should have thorough knowledge of audit and accounts, the appointment of an IAS officer who has held the post of Secretary to the government is very likely to lead to questions of conflict of interest, if appointed he may find himself having to audit decisions taken by him or her earlier in the capacity of Secretary.
Public Accounts Committee
In February 1996, when a new CAG was about to be appointed, Ram Naik, the then chairman of the Public Accounts Committee, took up this matter with the president and the prime minister and suggested that the prime minister and leader of opposition in the Lok Sabha should jointly select the CAG and a criteria for appointment of the CAG be laid down.
Subsequently, in a conference of the Central and State Public Accounts Committees, presided over by Dr Murli Manohar Joshi, the then chairman of the PAC, it was observed that the process of selection needs to be made transparent and the control of the Executive needs to be minimised, if not eliminated altogether.
It was suggested that some sort of a small collegiate or a screening committee may examine the personalities and recommend to the president a panel of three names out of which one can be appointed.
A transparent process
One of the principles of INTOSAI ‘Guidelines and Good Practices’ related to SAI independence provide that the applicable legislation must specify the conditions for appointments, removal and retirement, of the head of SAI by a process that ensures their independence from the Executive.
Suitable qualifications like sound understanding of the complexities of governance, and possessing the requisite experience in the field of financial management, audit and accounting procedures need to be prescribed for appointment as CAG. To bring about transparency and objectivity in the selection process of the CAG, an institutional mechanism needs to be put in place. A list may be prepared of persons possessing such qualifications.
Thereafter, a high-level committee may examine the personalities and recommend to the president a panel of three names out of which one can be appointed. This will be a step forward towards achieving the objective of selecting the most suitable candidate.
Anupam Kulshreshtha retired as deputy CAG of India in 2012. Now an independent consultant, he has also headed the Institute of Public Auditors of India for three years.