ATTTUDES OF AUDIT . . . ENVIRONMENT OF AUDIT . . . QUALITY OF AUDIT . . . Here's the last one of a set of three essays I wrote long ago on the character of Government audit practices in India -- (please see the preceding posts for the other two)..
By the way, these were by no means the last words on the topic! There were several other articles exploring those concepts directly or indirectly, in my column India of C-A-G (1994-99) in the prestigious Indian newspaper, THE HINDU.
Glossary & annotations
CAG (pronounced C-A-G) -- Comptroller & Auditor-General of India, an independent audit authority, under the Constitution of India.
Ahmedabad/Gujarat -- Ahmedabad is the largest city in Gujarat, a major State on India's West coast.
Indian Civil Service -- In the colonial era, the top bureaucrats of the administration originally were British citizens belonging to the Indian Civil Service. Progressively a few Indians were also enlisted in the ICS, conferring a glamorous status on them both in official and social circles.
The Capital -- New Delhi, in North India.
HQ -- Headquarters.
7 February 1996
The quality of audit
Quality is a relative term. Expressions like 'good', 'bad', 'better' and 'worse' all mean different things to different people, at different times or in different situations, whether it concerns the quality of a product, service or performance. It all depends on the standards by which one judges at any given time and place. Obviously, the quality of the standards themselves is a relative thing, depending on who specifies them and how. Thus, quality is always subject to different interpretations by different persons at different times and in different contexts.
Nevertheless, over a long period it is possible to evolve certain fundamental and widely-accepted norms by which to judge quality and to discern trends of improvement or deterioration, although it must be noted that even when quality shows a distinct improvement in the long run, there are bound to be ups and downs in the relative excellence in the short run.
Quality and constraints
This rule is universally valid, and the performance of the Comptroller & Auditor-General of India is no exception. The quality of his audit of government transactions has shown a progressive and remarkable improvement during the past three decades, well matching the spectacular expansion in the activities of various departments and organizations of the Union and State Governments.
The CAG's Audit Reports have been increasingly concerned with impartially critical evaluations of overall performance -- and, wherever possible, even of policy -- although they do mention many irregularities in isolation. Successive CAGs have always been conscious of the need to achieve better results all the time, as can be seen from their observations not only in internal forums within their own organizations but in international audit conferences as well.
The preparation of the CAG's Audit Reports is an elaborate process which tends to take considerable time. Major audit investigations often confront stubborn resistance from government officials in the field and in the Secretariat, and overcoming such resistance and gaining access to all relevant information is usually a time-consuming process.
Further, it is an axiom in the Audit Code that the point of view of the Executive must be ascertained and considered earnestly before any comment is made in the Audit Report -- unless, of course, the other side refuses to respond to the auditors' queries and overtures (which is often the case in the States). Usually much time needs to be allowed for these efforts also, even if there is eventually no response. In any case the CAG has to line up indisputable evidence before he includes any information in his Reports.
The CAG's audit is naturally a retrospective exercise, always covering past events and transactions. Obviously, with the procedures and safeguards also taking their toll in terms of time, the Audit Reports do often tend to raise issues which appear to be rather old.
Successive CAGs and their officers in the field have always been conscious of this inherent problem, and have constantly tried to expedite the whole exercise. And in that process, they have often had to sacrifice quality. Let me give you an interesting example from my own experience as a former officer of the Indian Audit & Accounts Service.
Speed vs. substance
In the mid-Sixties I was working in Ahmedabad as a Deputy Accountant-General in charge of administration in the office of the Accountant-General, Gujarat. The AG, Mr. P.Y. Godbole, was a dynamic and impatient officer who wanted to get everything done fast. We used to refer to him as 'Mr. Speedbole' behind his back : and I believe he knew it and liked it.
Those days the consolidated material relating to the State Audit Reports pertaining to a particular financial year (April-March) used to be sent to the CAG's office in the Capital after a whole year or even later. Thus the first draft of an Audit Report for say 1962-63 would reach the HQ only some time in 1964. Editing by the HQ and getting the report printed by the Government press would take their own time, and it would be presented to the Legislative Assembly in late 1964 or even in 1965.
Now, Mr. Godbole resolved to accelerate the whole process in such a way that the material for the Gujarat Report for 1965-66 (April-March) would reach the HQ before the end of December 1966. If he succeeded, he would be the first AG ever to do so, and he was determined to achieve the distinction.
As I was looking after the administration, I was not directly concerned with the actual field work and the scrutiny of the results in the main office. But I was a constant and captive witness to the extraordinary degree of pressure which the AG imposed on the officers conducting audit inspections, and on the Reports section in the office which was directly supervised by him.
It so happened that he did accomplish the mission, and the Draft Audit Report was ready for dispatch to the CAG's office on December 30. As it would reach the HQ only in the New Year if sent by post, the AG issued an unprecedented sanction for the Audit Officer (Reports) to fly to New Delhi and deliver the goods in time. So emotionally involved was Mr. Godbole with this adventure that he even took the astonishing step of going to the airport to see the AO (Reports) off!
But what was the quality of that Audit Report? It was a different story altogether. Some of the material was incredibly trivial -- for example, there was a paragraph accusing the State Government of not salvaging the welcome banners used for decorating the streets during the visit of a high foreign dignitary to the State!
Mr. Godbole was subsequently transferred to Bombay, and was succeeded by a level-headed officer called K.C. Jain. Next year Mr. Jain had to be absent on leave on the days the Public Accounts Committee of the State Legislature was meeting to consider the last Audit Report processed by his predecessor; so he nominated me to represent him in that forum. giving me full freedom to depend on my own judgement.
I recall agreeing to drop nearly all the audit objections which were discussed in the meeting -- which attracted a grateful compliment from the Chief Secretary of the State Government (Mr. Gidwani of the Indian Civil Service) who was present! And when I told the AG about what I had done, he was greatly concerned and tightened up the quality controls.
Quality and logic
To be sure, the above example did constitute an extreme case, and I mention it only because it is so amusing. But many less hilarious instances can be cited where the auditors' attempts to adopt short-cuts in their anxiety to expedite things had led to very insubstantial issues being raised.
But over a period, many useful procedures have been devised by the CAG to accelerate the pace of audit without sacrificing quality.
For instance, it is now a standard practice for the field offices to send a continuous stream of draft material to the HQ in small batches at short intervals throughout the year, to be consolidated in the end -- usually well before the following December.
Admittedly some Audit Reports do still get delayed, especially at the stage of printing by the State Governments.
But the main challenge faced by the CAG in recent years has not been posed by the risk of featuring dated material in the Audit Reports, but the need to ensure absolute logic in the conclusions drawn by him from the extremely massive information gathered in the course of audit inspections and investigations.
So voluminous is the audit activity today that the officers in the field do sometimes tend to feel overwhelmed, and the consequent tension often leads to logical flaws in the material processed.
The HQ has to be ever vigilant and must guard against this, and there has been a conscious effort to enforce superior standards of logic and presentation. The CAG's quest for excellence, apparently, is a never-ending exercise!
It is necessary that Audit Reports continue to mention many routine points, so that minor irregularities do not go unnoticed and snowball into major losses ; but the accent today is clearly on performance reviews.
Either way, what Audit is vitally concerned with is the overall quality of the Executive's functioning. In the CAG's scheme of things, one might say, the quality of audit is ultimately a question of the audit of quality.
Clever but not clear!
Either way, what Audit is vitally concerned with is the overall quality of the Executive's functioning. In the CAG's scheme of things, one might say, effective audit of quality invariably calls for excellent quality of audit.