Financial Institutions Under Scrutiny: CAG’s Compliance Auditing Guidelines
Introduction
In a bid to ensure accountability of public sector entities, the Comptroller and Auditor General (CAG) has laid down strict guidelines for compliance auditing. The regulations aim to assess whether financial institutions are adhering to the Constitution of India, applicable laws, rules, and regulations.
What is Compliance Auditing?
Compliance auditing is an assessment that examines whether the provisions of the Constitution of India, laws, rules, and regulations made thereunder are being followed. It also involves evaluating the effectiveness of these provisions in achieving their intended objectives. The audit assesses the legality, adequacy, transparency, propriety, and prudence of the rules, regulations, orders, and instructions issued by competent authorities.
Key Elements of Compliance Auditing
- The Auditor: Represents the Indian Audit & Accounts Department.
- Responsible Party: The executive branch of government or its underlying hierarchy of public officials and entities responsible for managing public funds.
- Intended User: Individuals, organizations, or classes thereof who receive the audit report.
Subject Matter and Authorities
The subject matter of compliance auditing can range from specific requirements, such as adherence to environmental laws, to more subjective areas like financial prudence or ethical behavior. Authorities, including the Constitution, Acts, Laws, rules, and regulations, provide the framework for evaluating these subject matters.
Criteria for Evaluation
Compliance audit criteria must be:
- Relevant
- Reliable
- Complete
- Objective
- Understandable
- Comparable
- Acceptable
- Available
The auditor identifies criteria based on relevant authorities to ensure a fair and unbiased evaluation.
Conclusion
The CAG’s Compliance Auditing Guidelines 2016 and Regulations on Audit and Accounts, 2007, aim to promote accountability and transparency in public sector entities. By following these guidelines, financial institutions can ensure that their activities are in compliance with the Constitution of India, applicable laws, rules, and regulations. This will help maintain trust and confidence among stakeholders and promote good governance practices.