Under Rule 8 (ii) of the Rules framed by the Secretary of State for India in Council, under Section 96 D (i) of the Government of India Act 1919, the Auditor General (now designated Comptroller and Auditor General of India) was made responsible for the audit of expenditure in India from the revenues of India. When this Rule was framed under the Reforms of 1919, the question arose regarding the manner in which the Auditor General should discharge his statutory responsibility in respect of expenditure on the Defence Services. It was decided that the Auditor General should have his own inspection staff working in Military (now Defence) Accounts Offices to check the accuracy of the work done in those offices. Accordingly the appointment of a Deputy Auditor General was sanctioned in March 1922. As a result of further experience gained, the Government of India sanctioned in March 1924, as a temporary measure, two more Class I Officers of the General list, also designated Deputy Auditors General, for Test Audit of Military (now Defence) Accounts. While one of them was posted to Army Headquarters, the other two were to work in the Southern, Western, Northern and Eastern Commands. The work of the Deputy Auditors General of Commands consisted of an exhaustive inspection and test audit of the work done in each Command and District Office of the Military (now Defence) Accounts Department. The Deputy Auditor General at Headquarters audited the sanctions of the Government of India in the Army Department and controlled and watched the progress of audit in the Commands.
In May 1924, it was decided to follow as closely as Indian circumstances permitted, the system of audit applied by the Comptroller and Auditor General of the United Kingdom to the expenditure of the Army. Proposals were accordingly submitted to the Secretary of State, inter alia, to convert the class I post of the rank of the Deputy Auditor General at the Army Headquarters into a post of the rank of an Accountant General, designated Director of Army Audit (later, Director of Audit, Defence Services and presently designated as Director General of Audit, Defence Services). The new scheme was approved by the Secretary of State in January 1925 and was sanctioned permanently with effect from 1st March 1928.
With the introduction of the Government of India Act 1935, an order in Council viz., the Government of India (Audit and Accounts) Order 1936 was issued on 18th December 1936, under which the Auditor General was made responsible for keeping the accounts of the Dominion and of each Province, other than the accounts relating to the Defence, Railways and the accounts relating to transactions in the United Kingdom.
The Comptroller and Auditor General of India today derives his authority from the Constitution of India which lays down his duties and functions. The Comptroller and Auditor General is neither an officer of Parliament nor a functionary of Government. He is appointed by the President by a warrant under his hand and seal. Articles 148 to 151 of the Constitution and the subsequent Comptroller and Auditor General's (Duties, Powers and Condition of Service) Act 1971, lay down the duties and powers of the Comptroller and Auditor General.
The Statutory duties of the Comptroller and Auditor General of India include audit of:
(a) receipts and expenditure from the Consolidated Funds of India and of the States and Union Territories;
(b) transactions relating to Contingency Funds and Public Accounts;
(c) trading, manufacturing, Profit and Loss accounts and balance sheets and other subsidiary accounts kept in any Government Department of the Union or of a State;
(d) accounts of stores and stock kept in Government offices and departments;
(e) government companies set up under the Indian Companies Act, 1956;
(f) Union Government Corporations which have statutory provision for audit by Comptroller and Auditor General;
(g) authorities and bodies substantially financed from the Consolidated Funds as per norms prescribed from time to time;
(h) any body or authority even though not substantially financed, either at the request of the President/Governor or on Comptroller and Auditor General's own initiative;
(i) accounts of bodies and authorities relating to grants and loans given by Government for specific purposes.
To enable him to discharge his duties effectively the Comptroller and Auditor General is empowered under Section 18 of the Act to:
(a) 1. inspect any office of the organisations subject to his audit;
2. call for any books of accounts and other relevant documents that are required during audit;
3. put queries or make such observations as may be considered necessary and to call for such information as may be required for preparation of any account or report.
(b) The person in charge of any office or department, the accounts of which have to be inspected and audited by the Comptroller and Auditor General, shall afford all facilities for such inspection and comply with requests for information, in as complete a form as possible with all reasonable expedition.