PREFACE

1.    The accounts of Government Companies set up under the provisions of the Companies Act (including Government Insurance Companies and Companies deemed to be Government Companies as per provisions of the Companies Act) are audited by the Comptroller and Auditor General of India (CAG) under the provisions of Section 619 of the Companies Act, 1956. The accounts certified by the Statutory Auditors (Chartered Accountants) appointed by the CAG under the Companies Act are subjected to supplementary or test audit by officers of CAG and CAG gives his comments or supplements the report of the Statutory Auditors. The Companies Act, 1956 empowers CAG to issue directions to the Statutory Auditors on the manner in which the Company's accounts shall be audited.

2.    The statutes governing some Corporations and Authorities require their accounts to be audited by CAG and reports to be given by him. In respect of such Corporations viz. Airports Authority of India, National Highways Authority of India, Inland Waterways Authority of India, Food Corporation of India and Damodar Valley Corporation, relevant statutes designate CAG as their sole auditor. In respect of 1 Corporation viz. Central Warehousing Corporation, CAG has the right to conduct a supplementary or test audit after audit has been conducted by the Chartered Accountants appointed under the statutes governing the Corporation.

3.    Reports in relation to the accounts of a Government Company or Corporation are submitted to the Government by CAG under the provisions of Section 19-A of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971, as amended in 1984.

4.    Three annual reports on the accounts of the Central Government Companies and Corporations are issued by CAG to the Government. These are:

'Report No. 1 - Review of Accounts' gives an overall appreciation of the performance of the Companies and Corporations as revealed by their accounts and information obtained in Audit.

'Report No.2 -Comments on Accounts' contains extracts from the important Comments of CAG on the accounts of the Companies and Corporations and a resume of the reports submitted by the Statutory Auditors (Chartered Accountants) on the Audit of the Companies in pursuance of the directions issued by CAG.

'Report No.3 - Transactions Audit Observations’ contains the observations on individual topics of interest noticed in the course of Audit of the Companies and Corporations and short reviews on aspects of their working. This report also contains results of Audit of transactions of Indian Farmers Fertiliser Cooperative Limited (Co-operative Society) under Section 20(1) of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 amended in 1984.

Audit Boards are set up under the supervision and control of CAG to undertake comprehensive appraisals of the performance of the Companies and Corporations subject to Audit by CAG. Each Audit Board consists of the Chairman (Deputy Comptroller and Auditor General-Commercial), two or three whole-time members of the rank of Principal Director of Audit under CAG and two technical or other experts in the area of performance of the Company or Corporation who are part-time members. The part-time members are appointed by the Government of India (in the respective Ministry or Department controlling the Company or Corporation) with the concurrence of CAG. CAG also reviews certain specific aspects of functioning of some PSUs outside the mechanism of the Audit Board. The reports of CAG based on such performance appraisals by the Audit Board and other reviews are issued to the Government as separate reports in addition to the annual reports mentioned in para 4.

6.    The cases mentioned in this Report are among those which came to notice in the course of audit during 1999-2000 and 2000-2001 as well as those which came to notice in earlier years but could not be covered in previous years.

7.    All references to ‘Government Companies/ Corporations or PSUs’ in this report may be construed to refer to ‘Central Government Companies/ Corporations’ unless the context thereof suggests otherwise.