CAG’s Tender to Private Firms Sparks Constitutional Debate—ICAI Responds

On May 27, 2025, the Comptroller and Auditor General (CAG) issued a tender inviting private Chartered Accountant firms to assist in conducting audits of central autonomous bodies. This move, described as an effort to expand audit reach and improve coverage, was the first such public step in involving external professional firms in field-level audit activities under the supervision of CAG’s officials.

Following the issuance of this tender, concerns were formally raised by a Member of Parliament representing a Tamil Nadu constituency, who addressed a letter to the President of India on June 3, 2025. The letter characterised the CAG’s decision as “dangerous” and “unconstitutional,” arguing that such engagement of private entities could compromise the institution’s constitutional mandate and potentially allow “confidential and sensitive information” to fall into private hands. The letter urged the President to intervene and direct the withdrawal of the tender.

In a strong rebuttal to these objections, the Institute of Chartered Accountants of India (ICAI) publicly supported the CAG’s initiative. The institute clarified that the involvement of private firms is not a delegation of constitutional responsibilities but rather a facilitative step to enhance audit capacity. It was specifically stated that such engagement “will not in any way compromise the independence of the auditors or the sanctity of the audit process.” The ICAI emphasised that the firms would function strictly under the supervision of designated audit officers and would operate within the existing legal and regulatory framework. The institute further highlighted the benefits of this collaboration, including the ability to bring in domain-specific expertise, improve audit quality, and ensure timely execution of audits.

Several voices from the auditing profession echoed this rationale. Industry representatives clarified that the private firms would neither be authorised to finalise audit findings nor issue reports on behalf of the CAG. One senior official explained that this model is “not outsourcing but engagement for support services,” with functions such as fieldwork, verification of records, and preliminary analysis being conducted under strict oversight. Additionally, the safeguards of confidentiality agreements, as well as mandatory compliance with CAG’s audit methodology and standards, were cited as reasons why the independence and credibility of the national audit institution would remain intact. These views were framed as aligned with global practices, where audit institutions in several countries have adopted similar hybrid models to address resource and domain constraints without compromising oversight.

Sources – The Economic Times, The News Minute, Financial Express

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