The Office of the Comptroller & Auditor General of India (CAG) issued revised directions for statutory auditors of government companies, superseding previous guidance. These directions, effective May 23, 2025, require auditors to assess the fair valuation of all investments for post-retirement employee benefits, including verifying methodologies and compliance with accounting standards like Ind AS. Auditors must also examine whether all accounting transactions are processed through IT systems and report implications of off-system processing. Furthermore, the revised directions mandate verification of proper accounting and utilization of funds (grants/subsidies) received from government entities, including interest earned on such grants. Auditors are required to evaluate the company’s identification of key risk areas and the formulation of a risk management policy, specifically checking if it considers global best practices and if data assets are identified and valued appropriately. Finally, the directions emphasize compliance with various regulatory bodies such as SEBI, RBI, and others, highlighting any deviations. These revised instructions apply to all future assignments, while ongoing audits may continue under previously issued directions.
No. 77/CA-II/Dir-Sub Dir/11-2015Nol II
OFFICE OF THE COMPTROLLER &
AUDITOR GENERAL OF INDIA
9, DEENDAYAL UPADHYAYA MARG,
NEW DELHI – 110 124
DATE: 23/05/2025
(Commercial Audit Wing)
Revision of Directions to be issued to Statutory Auditor under Section 143(5) of Companies Act, 2013
Please refer to Hqrs. letter no. 105/CA-II/Dir-Sub Dir/11-2015Nol II dated 16.02.2021 wherein CAG’s directions to be issued to the Statutory Auditors of Government companies/Government owned/controlled other companies under Section 143(5) of the Companies Act, 2013 were circulated.
2. As per decision taken in Hqrs., the existing directions have been reviewed and it has been decided to replace the same with the following directions:
I. Assess the fair valuation of all the investments, both quoted and unquoted, made directly by the Company or through Trusts, for Post retirement benefits of the employees. This includes verifying valuation methodologies, ensuring consistency with Ind AS and reviewing supporting documentation. The auditor shall provide a brief note on the valuation approach, its reasonability, and compliance with applicable regulations, reporting any material deviations or misstatements.
II. Whether the Company has a system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.
III. Whether funds (grants/ subsidy etc.) received/ receivable for specific schemes from Central/State Government or its agencies were properly accounted for as per the applicable accounting standards or norms and whether the received funds were utilised as per its terms and conditions? Whether accounting of interest earned on grants received has been done as per terms and conditions of the Grant. List the cases of deviation.
IV. Whether the Company has identified the key Risk areas? If yes, whether the Company has formulated any Risk Management Policy to mitigate these risks? If yes, (a) whether the Risk Management Policy has been formulated considering global best practices? (b) whether the Company has identified its data assets and whether it has been valued appropriately?
V. Whether the Company is complying with the Securities and Exchange Board of India (SEBI) (Listing Obligation and Disclosure Requirements) Regulations, 2015, and other applicable rules and regulations of SEBI, Department of Investment and Public Asset Management, Ministry of Corporate Affairs, Department of Public Enterprises, Reserve Bank of India, Telecom Regulatory Authority of India, CERT-IN, Ministry of Electronics and Information Technology and National Payments Corporation of India wherever applicable? If not, the cases of deviation may be highlighted.
3. The above directions will be applicable for compliance by the Statutory Auditors of Government companies/Government owned/controlled other companies from the date of issue of this letter. In case earlier directions have been already issued, the same may continue to be applicable for the specific assignment.
4. This issues with the approval of Deputy CAG (Commercial).
Sd/-
Principal Director (Commercial-II)
1. DAI (F&C)
2. DAI (Defence & LGA)
3. DAI (Railways)
4. DAI (RC)
5. DAI (NR)
6. DAI (CRA & CTO)
7. ADAI (SR)
8. ADAI (NCR)
9. ADAI (WR)
10. ADAI (CR)
11. ADAI (ER)
12. ADAI (NER)
13. PD (Commercial-I)
14. Secretary to DAI (C)
Principal Director (Commercial-II)
