Comptroller & Auditor General appointed Saha & Associates, a Chartered Accountant firm, to conduct Performance audit of herbal Ltd., a…

In the provided scenario, Saha & Associates, a Chartered Accountant firm, was appointed by the Comptroller and Auditor General (C&AG) to conduct a Performance Audit of Herbal Ltd., a Public Sector Undertaking (PSU) of the Government of India. The audit, however, primarily focused on verifying that all expenses of the unit were in conformity with public interest and publicly accepted customs, which does not align with the essence of a Performance Audit. A Performance Audit is characterized as an impartial and systematic examination of evidence aimed at providing an independent assessment of the performance of a government organization, program, activity, or function. The ultimate goal is to furnish information that enhances public accountability and aids decision-making by entities responsible for oversight or corrective action. In the context of PSUs, Performance Audits are conducted by the C&AG, specifically through various subordinate offices of the Indian Audit and Accounts Department (IAAD). The auditing process adheres to manuals and standards set by the C&AG, guiding subordinate offices in evaluating the economy, efficiency, and effectiveness of policies, programs, organizations, and management. The objectives of Performance Auditing encompass promoting accountability by aiding governance and oversight bodies in enhancing performance and fostering transparency by providing insights into the management and outcomes of diverse government activities. The focus is on areas where adding value holds the greatest potential for development, thereby encouraging responsible parties to take appropriate actions. The Regulations on Audit and Accounts issued by C&AG outline that the responsibility for developing measurable objectives, performance indicators, and measurement systems rests with Government departments or Heads of entities. They are further required to define intermediate and final outputs and outcomes in measurable and monitorable terms, standardize unit delivery costs, and benchmark the quality of outputs and outcomes. Therefore, the rejection of the audit report submitted by Saha & Associates by the C&AG is warranted. This is because the audit conducted by the firm, which primarily aimed at checking the conformity of expenses to public interest and accepted customs, does not align with the comprehensive nature of Performance Audits, which evaluate various aspects of economy, efficiency, and effectiveness.