ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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CAG and the Audit of Private Firms

The government, as a licensor, is fully empowered to ask the CAG to audit private firms which are licensees.

The ruling by the Delhi High Court last month that the Comptroller and Auditor General (CAG) had the authority to audit the revenue of private telecom companies opens the door to the CAG audit of companies operating in the infrastructure sector that are either in partnership with the government or hold licences to exploit public resources. The complainant, the Association of Unified Telecom Service Providers of India, has since petitioned the Supreme Court against the judgment. The high court had upheld the CAG’s authority to audit the revenue accounts of private telecom companies who are licensees of the Government of India for providing mobile and cellular telephone services in specified areas. What one is looking at here is the CAG, on the directions of the government, eventually taking up audit of companies in a swathe of areas – power, water, roads and more. In recent weeks, the governments of Delhi and Maharashtra have both given notice of an audit of electricity generating/distributing companies.

The CAG’s organisation (the Director General of Audit, Posts and Telecommunications) had asked the licensee telecom companies to submit their accounts for audit for the purpose of checking whether the prescribed revenue-based licence fee had been correctly calculated. This demand was based on Section 16 of the CAG’s Duties, Powers and Conditions of Service Act 1971, which Parliament had enacted under Article 149 of the Constitution, as also Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and Other Documents) Rules, 2002. The companies went to the Delhi High Court challenging the CAG’s authority to audit their accounts, a case, which after the high court’s ruling is now before the Supreme Court.

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