DEFENCE AUDIT CODE

2022

Issued by the authority of

DEFENCE ACCOUNTS DEPARTMENT HEADQUARTERS

 PREFACE

“Well done is better than well said”- what we do is often more important than we may
say. Our actions never lie. They speak for themselves. The New Defence Audit Code 2022 is
culmination of massive exercise done on Business Process Re-engineering for the last year or so.
As we had embarked on laying foundation for IT automation projects covering every possible
facets of DAD, it was a natural corollary for us to do simultaneous review of our existing
policies, procedures and processes. New Defence Audit Code reflects our new look at the
important vertical related to Internal Audit.

Simplicity has been the key in rewriting new Audit Code. Not only flow of chapters has
been made smoother, redundant and archaic material has been removed and the entire material is
written in plain and simple English. We have been guided by the maxim that many problems of
focusing are best resolved by defining what to ignore. Latest trends in Internal Audit like Risk-
Based Analysis, IT-enabled Audit, etc. have been incorporated giving it a form of new Avatar.

We in DAD HQrs had a big vision, and we had fire in our belly to do something new. But
we would never have gotten anywhere without the active cooperation and stupendous efforts
of our Field Offices across the country. I am honoured, humbled and grateful to be a part of this
landmark re-engineering exercise and eager to see the change we can enact together in coming
years with fresh outlook on our core areas.

(Rajnish Kumar)

20th June 2022 Controller General of Defence Accounts

 INDEX
SL.NO. CHAPTER PARA PAGE
1. INTRODUCTION 1-4 1
2. PRINCIPLES OF INTERNAL AUDIT IN DEFENCE 5 2
3. SCOPE OF DEFENCE INTERNAL AUDIT 6-9 3
4. RULES AND REGULATIONS GOVERNING AUDIT 10 4
5. TYPES OF INTERNAL AUDIT 11-15 5-8
6. INSTITUTIONAL MECHANISMS 16-19 9-10
7. COMPUTER ASSISTED AUDIT TOOLS 20-23 11-12
8. SYSTEM AUDIT 24 13
9. APPROPRIATION AUDIT 25 14
10. SALIENT FEATURES IN AUDIT OF 26-32 15-16
PROCUREMENT CASES
11. AUDIT OF PROCUREMENT OF DOMESTIC 33-34 17-18
STORES & SERVICES
12. AUDIT OF PROCUREMENT OF IMPORTED 35-38 19
STORES & SERVICES
13. AUDIT OF WORKS CASES 39-41 20-23
14. AUDIT OF PROCUREMENT OF SERVICES 42 24
/WORKS/GOODS FROM PUBLIC SECTOR
UNDERTAKINGS
15. AUDIT OF NON-PROCUREMENT CASES 43-47 25-26
16. AUDIT OF PAY & ALLOWANCES 48-49 27
17. AUDIT OF PERSONAL CLAIMS AND 50-52 28
ALLOWANCES
18. AUDIT OF PENSION CASES 53-55 29
19. AUDIT OF IMPREST ACCOUNTS 56 30
20. AUDIT OF PROVISIONAL PAYMENT 57-58 31
21. AUDIT OF RECEIPTS AND RECOVERIES 59 32
22. AUDIT AT UNIT/FORMATION LEVEL 60-63 33
23. REPORTING & ESCALATION PROCESS 64-84 34-39
 INTRODUCTION

1. Internal Audit is an independent, objective assurance and consulting activity, designed to

add value to and improve an Organization’s operations. An internal auditor provides the
management with their objective assessment of the internal controls, processes and accounts
of the organization.

2. Internal Controls are safeguards that ensure the accuracy and reliability of the activities of an
Organization. Internal Audit tests and reports the extent to which the activities are reliable
and accurate. The external audit is defined by statute and it provides an objective for
independent examination to verify that accounts are true & fair reflection in accordance to
the accounting standards.

3. In the context of Defence Expenditure, the internal controls are exercised by the Executives
of Services, DRDO, Border Road Organization, Indian Coast Guards and other
Organizations’, paid out of Defence Estimates, while dealing with financial transactions
within their inherent powers or with consultation of Integrated Financial Advisors. The
Defence Accounts Department which works concurrently with the Services, DRDO, Border
Road Organization, Indian Coast Guards etc. performs the Internal Audit to assure the extent
of reliability and accuracy of the Internal Control. The external audit of Defence
Expenditure, a statutory audit, is conducted by Director General of Audit Defence Services
(DGADS) based on various Themes/Performance/Compliance parameters.

4. The audit mandate of the Defence Accounts Department essentially flows from the General
Financial Rules and Financial Regulations for Defence Services and the charter for rendering
an Audit Certificate annually by the Controller General of Defence Accounts, as the
Principal Accounts Officer of the Ministry of Defence, certifying the correctness of
accounts. Based on this certification, Secretary Defence Finance /Financial Advisor
(Defence Services) prepares Appropriation Accounts of Defence Services and Defence
Secretary endorses the certificate on Annual Appropriation Accounts. C&AG of India,
through its office of DGADS, carries out test checks (statutory audit) on the Annual
Appropriation Accounts, prepared by the Ministry and certifies the accounts before its
submission to the Parliament.

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 PRINCIPLES OF INTERNAL AUDIT IN DEFENCE

5. Independent auditing enhances accountability and transparency in matters related to public

expenditure. Defence Accounts Department is mandated to provide independent and reliable
findings during the course of audit based on adequate and appropriate facts cum evidences.
Five Fundamental principles or 5Ts, based on which Defence Audit will be carried out, are
Thorough, Timely, Transparent, Technology driven and Trustworthy.

a. Thorough Audit: Defence Accounts Department ensures that detailed and systematic
audit exercises have been carried out. Thorough audit helps in minimizing audit risks.

b. Timely Audit: Audit at right time is the motto of Defence Accounts Department.
Conducting audit at appropriate time will enable the Department to render timely
financial advice to Executive Authorities. Thus procedural incorrectness or non-
compliance to prescribed rules & regulations, if any, will be identified and corrective
measures will be taken to mitigate the identified risks.

c. Transparent Audit: Transparency is the hall mark of any independent auditing agency.
Defence Accounts Department, being a public institution itself and auditing agency,
maintains transparency in the entire process of audit. This enhances credibility of the
Department in providing audit assurances and enhances the confidence of the
Executives.

d. Technology Driven Audit: Technology driven and system based audit will enable
faster, accurate and timely audit, especially, as both the Defence Accounts Department
and the Executives are functioning on different online and system based applications.

e. Trustworthy Audit: The auditing exercise needs to be trustworthy so that the

trustworthiness will be maintained and acceptability can be ensured.

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 SCOPE OF DEFENCE INTERNAL AUDIT

6. Audit of all sanctions and orders affecting the Defence Services, issued by authorities lower
than the Government of India.

7. Carrying out its duties as part of regulatory & compliance function and also in aiding the
Executive Authorities in the decision making.

8. To verify the accuracy and correctness of receipts and expenditure and to confirm that:
a. All receipts are brought to account under the Proper Heads of Expenditure.
b. All expenditures and disbursements are authorized, vouched and correctly classified.
c. The final account represents a complete and true statement of the financial transactions
it purports to exhibit.

9. To fulfill the audit responsibility, as stated above, through the following activities:
a. Audit of Sanctions and Orders affecting financial transactions of following categories
i. Rules and general orders
ii. Grants and appropriations
iii. Sanctions to expenditure
b. Audit of transactions arising out of the sanctions issued as above.
c. Audit of Store Accounts and Audit/Inspection of Cash Accounts of the Units and
Formations of Defence Services and other entities that come under the purview of
internal audit by Defence Accounts Department.
d. Appraisal, monitoring and evaluation of projects wherever applicable.
e. Assessment of adequacy and effectiveness of internal controls in financial activities,
accounting and reporting system.
f. Identification and monitoring of risk factors associated with the achievement of
outcomes, set forth by the Organizations.
g. Critical assessment of economy, efficiency and effectiveness of procurement and
inventory management to ensure value for money. and
h. Offering an effective monitoring system to facilitate mid-course corrections.

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 RULES AND REGULATIONS GOVERNING AUDIT

10. Audit by the Defence Accounts Department is conducted with reference to the Statutory
Provisions, CVC guidelines, General Financial Rules, Defence Acquisition Procedures
(DAP), Defence Procurement Manual (DPM), Delegation of Financial Powers for the
Defence Services, Financial and other Regulations, provisions of Defence Audit Code,
provisions of Defence Accounts Code, orders issued by the Government and other
Competent Authorities from time to time, having relevance to Defence Expenditures.

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 TYPES OF INTERNAL AUDIT

11. Compliance Audit: Compliance Audit examines transactions relating to Expenditures,

Receipts, Asset Management and Dealing of Liabilities of the Government. This is done to
see whether these activities have been carried out as per extant Rules and Regulations, Orders
and Instructions, issued by the Competent Authorities.

a. Audit against provision of funds: To ascertain whether the expenditure has been
incurred for authorized purposes.
b. Audit against rules and regulations: To ensure that the expenditure incurred is in
conformity with rules and orders.
c. Audit of Sanctions: To see that every item of expenditure from Government Exchequer
has been incurred with the approval of the Competent Authority in the Government
following laid down rules and procedures.
d. Propriety Audit: This extends beyond scrutinizing the mere formality of expenditure to
the wisdom and economy. It is an essential and inherent function of Audit to bring to
light every matter which, in the judgment of auditors, appears to involve improper
expenditure or waste of public money or stores, even though the accounts themselves
may be in order and no apparent irregularity has been committed.

12. Performance Audit: Performance Audit is also called Efficiency-cum- Performance Audit
(ECPA) or Value for Money (VFM) audit. It is a comprehensive review of the projects,
analysis of life cycle cost, programmes, schemes etc., in terms of their goals and objectives.
Its aim is to ascertain the extent to which the expected outcomes have been achieved with the
use of available resources and manpower.

a. Performance Audit will ascertain the performance of Organization, programme or

scheme in conformity with five R’s- ‘Right Quality’, ‘Right Quantity’, ‘Right Price’,
‘Right Time and Place’ and ‘Right Source’.
b. While conducting Performance Audit, the concept of Thematic Audit will also be taken
into consideration to ensure compliance of the adopted process and procedures as per
laid down rules and regulations. The purpose of such audit is to focus meticulously on a

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 particular audit objective out of various objectives. In addition to the general
performance evaluation, comprehensive and in-depth performance analysis may also be
carried out on a particular theme.

13. Risk Based Audit: Risk Based Internal Audit (RBIA) by the Defence Accounts Department
will be Compliance and/or Performance based audit on the ‘Risk’ areas identified/involved in
procurement, inventory management processes, etc. of the Services. The Department shall
also facilitate appropriate risk mitigation measures by rendering advisories and audit
consultation services.

a. These risks, with regard to Financial Management System of the

Units/Formations/Organizations, may be broadly categorized into Financial Risk,
Operational Risk, Hazard Risk, and Strategic Risk. Following are some of the general
categories of risks that may be observed during internal audit of Defence Expenditure.
This identified list of risks is not exhaustive and may evolve from time to time.
Principal Controllers/Controllers may identify additional specific risk areas in their
domain of audit based on circumstances and during the course of their internal audit.

Type of Risk Mitigation Areas/Activities/Tasks

Financial Risk i. Compliance to tendering procedure for award of Contracts.
ii. Price reasonability of procurement undertaken on manual mode
or as well as through system.
iii. Performance of the procurement portal.
iv. Conditions of contracts for ensuring performance.
v. Risks that arise from effect of market forces, changes in prices of
inputs, interest rates etc.
vi. Credit Rating of Banks issuing Bank Guarantee.
vii. Overpayments by Units/Formations.
viii. Outstanding advances.
ix. Non-recovery of dues/revenue.
x. Blockage of Government Funds/Parking of Funds.
xi. Project delays, cost overruns, and inadequate quality standards.

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 xii. Violation of GFRs/DPM/DAP etc.
xiii. Deviation from laid down procedures.
xiv. Fraud Cases- Travel and pay claims.
xv. Unauthorised sanction/splitting of sanction.
xvi. Flaws in the process of intimation regarding fund allotment and
budget management.
xvii. Less deposit of Employees/Employers contribution to Provident
Fund.
xviii. Less deposit of contribution to ESI.
Operational i. Risks emanating from Procedures, Practices, Controls,
Risk Equipment, Technology, People.
ii. Manpower issues- recruitment/ training/ promotions/
performance management.
iii. IT risks, Management oversight .
iv. Loss to State due to – Inefficient/Poor Planning and Irregular
procedures.
v. Inadequate contingency plans to maintain continuity of service
delivery.
vi. Inadequate skills or resources to deliver services as required.
vii. Loss or misappropriation of funds through fraud or impropriety.
viii. Non/Poor utilization of Stores.
ix. Non-reporting of service receipt.
x. Failure of sellers or other agencies to provide services as
required.
xi. Delayed or failed introduction of new technology.
xii. Disruption from industrial action, protest, or failure of transport
or IT infrastructure.
xiii. Inconsistent programme objectives resulting in unwanted
outcomes.
xiv. Creation of situations like vendor lock-in or technology lock-in.
xv. Lack of provision for verification of the credentials of the hired
manpower or contractors’ labourers.

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 Strategic Risk i. Global supply chain, international trade, barriers, trends in
economy.
ii. Diversification of supply chain.
iii. Avoidance of monopolistic situations.
Hazard Risk i. Lack of credential verifications of outsourced persons.
ii. Property loss, Monetary loss, Personnel risk.

b. The identified risks may have more than one risk profiles. These risks shall be identified
as high risk, moderate risk and low risk based on factors such as:
i. Frequency of occurrences
ii. Financial implications including magnitude of loss
iii. Coverage of the risks--whether localized, regional or national
iv. Extent of procedural deviations
v. Security implications
vi. Others

14. Internal Audit methods like ‘Compliance Audit’ and ‘Performance Audit’ including such
audits on ‘Risk’ areas (Risk-Based Audit) will NOT be mutually exclusive and may be
carried out concurrently.

15. Compliance Audit and Performance Audit will be guided by detailed SOPs including Risk-
Analysis Framework issued by Controller General of Defence Accounts in line with the
principles laid down in this code.

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 INSTITUTIONAL MECHANISMS

16. Audit Committees: Audit Committees, with representatives from the Executive Authorities
and the Audit Authorities will be set up at Service Headquarters (or equivalent level) and
Command Headquarters (or equivalent level), with the approval of the Ministry of Defence,
Government of India. The Committee will interact with the stakeholders on regular intervals.

Following activities will be performed by the Audit Committees to facilitate the

Units/Formations/Organizations in Performance Management and Risk Mitigation.

a. Facilitating information sharing between the Executive Authorities and the

Audit Authorities.
b. Nomination of link officers at every level for co-ordination with the Audit
Authorities.
c. Discussion on Performance and Risk Audit Reports rendered by Audit
Authorities and recommendations of necessary corrective actions.
d. Ensuring expeditious Compliance to the advisories issued during internal audit.
e. Holding Half-yearly meetings of Audit Committee.

17. Local Audit Conference: Principal Controllers /Controllers shall hold Annual Local Audit
Conference to identify specific areas to be audited at Units/Formations/Organizations based
on the following parameters:
a. Findings of detailed audit of sanction.
b. Analysis of the findings of Performance and Risk Based Audit.
c. Inputs from the Local Audit Authorities.
d. Audit findings by Statutory/Test Audit.

These specific areas to be audited will be in addition to the regular audit as mandated to be
carried out by the Local Audit Authorities. These issues will be discussed in the Local Audit
Conferences, conducted by the Principal Controllers /Controllers. The Conference will be
scheduled before the finalization of the Annual Audit Plan.

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18. Internal Audit Team: Service-wise Internal Audit Team (IAT) is constituted by Controller
General of Defence Accounts in the DAD Headquarters. Internal Audit Team undertakes
examination and evaluation of the adequacy and effectiveness of procurement process, risk
management process, internal controls structure, based on inputs pertaining to compliance,
Performance and Risk audit received from the Principal Controllers/ Controllers. IAT also
examines the quality of audit carried out by the Principal Controllers/Controllers.

19. Controller General of Defence Accounts, based on the functional and administrative
necessity, may establish additional institutional mechanism for facilitating audit.

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 COMPUTER ASSISTED AUDIT TOOLS

20. Internal audit by the Defence Accounts Department will leverage use of Information
Technology with the following objectives:

a. Quicker processing of bills/claims with inbuilt audit checks.

b. Real Time MIS generation by facilitating real time data extraction and data analysis.
c. Simplification of Intra-Defence Accounts Department transactions/correspondences.
d. Simplification of Inter Defence Accounts Departments and Services/Organizations
reporting/correspondences, e.g. through a common portal.
e. Evidence based documentations.
f. Aid to Risk Assessment and Risk Mitigation.
g. Aid to Performance Evaluation.
h. Developing pan India profile of suppliers.
i. Utilization of manpower for higher audit (Performance Audit, Risk Based Audit).
j. Any other field where use of Information Technology will enhance the performance of
the Defence Accounts Department.

21. By virtue of being the audit and payment authority for variety of transactions such as pay and
allowances, pension, procurement, etc. in respect of all the Organizations under MoD, which
involves sizable quantum of budget allocation, the Defence Accounts Department holds huge
data and information. The bulk of the data pertaining to Defence Expenditure is generated
and processed through IT based applications. This big data can suitably be utilized for aiding
the Services and Ministry in policy formulation, in evaluating policy effectiveness and best
utilization of public money. As payment and Audit Authorities, the Principal
Controllers/Controller offices work on different risk areas. With manual audit, many risk
areas may go undetected in internal audit. Computer or System Assisted Tools with
appropriate data validation help in converting the data held in electronic form into actionable
inputs and provide useful information from audit point of view. Computer Assisted Audit
Tools with integration of Artificial intelligence-AI and Data Analytics further enhance the
effectiveness of internal audit.

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22. Suppliers’ bills and personal claims, processed through IT Systems, will be audited with the
help of IT Assisted Audit Tools at different stages, at the source and during processing,
depending of bills/applications, depending on the services deliverables and level of
computerization in respect of the activities.

23. Store audit will be conducted either manually and/or through IT systems, in a
centralized/decentralized/regional basis, wherever implemented by the
Services/Organizations with the association of Defence Accounts Department.

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 SYSTEM AUDIT

24. Apart from computer or system assisted audits, ‘System Audit’ may also be conducted by
Defence Accounts Department along with the respective Service organizations on the IT
based applications /systems implemented by the Services containing auditable
data/information etc. in regular intervals as may be decided by the Controller General of
Defence Accounts from time to time. The ‘System Audit’ shall ensure that the IT based
applications /systems implemented by the Services are audit compliant and that all required
fields/information in the systems are accessible to the audit authorities at all times. The
‘System Audit’ carried out by the Defence Accounts Department will not extend to security
audit of the Systems.

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 APPROPRIATION AUDIT

25. Appropriation Audit will be exercised for all the appropriations in respect of which the
expenditures are compliable to locally controlled heads.

a. Audit of Sanction and Audit of Expenditures have been explicated in the relevant
chapters of Audit of Payment and Audit of Sanction of this code.

b. The audit will ensure whether the amounts appropriated (including through re-
appropriation), through IT system or otherwise have been made by the appropriate
authorities at the appropriate level from the Appropriation of the Financial Year.

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 SALIENT FEATURES IN AUDIT OF PROCUREMENT CASES

26. Supply Orders/Contract Agreements/Work Orders are legally binding documents. Hence,
audit of bills carried out by the Defence Accounts Department will primarily be governed by
the compliance to the provisions laid down in these documents.

27. Once the contractual obligations have been fulfilled by the vendor, payment shall not be
delayed /withheld. Cases of financial impropriety should be reported to the CFA through /by
the PCDA/CDA for such action as CFA may consider necessary.

28. “e-Bills” are either generated by the system or pushed through the system by the
Units/Formations/Organizations.

29. Detailed audit to be carried out either concurrently with the Compliance Audit or otherwise
shall be done in compliance to the mandate of the Defence Accounts Department for
assessment of a complete procurement cycle to the extent feasible.

30. Though audit of sanction will be carried out on all the procurement cases, the Controller
General of Defence Accounts may consider proposing a threshold value for carrying out
detailed audit. However, Audit Authorities shall be at their liberty to carry out detailed audit
of sanctions, pertaining to any Unit/Formation/Organization or any procurement case,
irrespective of the threshold value, after assessing the risk profile of the concerned
Unit/Formation/Organization.

31. Rules 39, 40 & 41 of the GFRs-2017 or amendments thereof shall be duly considered for
detailed audit.

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32. Risks identified during audit of sanction will be categorized and Principal
Controllers/Controllers will take the following actions:
a. Low Risk- Risk areas, identified during the course of audit process, shall be
communicated to the Executive Authorities for taking suitable corrective
measures.
b. Moderate Risk- Principal Controllers/Controllers may, carry out detailed audit
of sanction of at least 50% of the subsequent cases, which are equal to or less
than the threshold value, for the remaining portion of the Financial Year. They
may identify the cases through the process of Random Probability Sampling/
Random Stratified Sampling or through a system based probability sampling.
This will be in addition to the usual detailed audit of cases above the threshold
value.
c. High Risk- Principal Controllers/Controllers shall carry out detailed audit of
sanction of all subsequent contracts pertaining to those
Units/Formations/Organizations, irrespective of the threshold, for the remaining
portion of the Financial Year.

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 AUDIT OF PROCUREMENT OF DOMESTIC STORES AND SERVICES

AUDIT DURING PAYMENT

33. Payment is to be delinked from Audit to ensure faster payment action. Audit during payment
with respect to Third Party Bills will be carried out by ascertaining that the following
mandatory documents (ink signed/electronic) have been submitted /uploaded and necessary
funds are made available.
a. Copies of Sanction Order of the Competent Financial Authority-CFA.
b. Contract/Supply Order/ Accepted Tender (AT) Note.
c. Certified Receipt Voucher-CRV/Certificate regarding stores supplied/services
rendered/milestone (as per Contract Agreement) achieved.
d. Contingent Bill/Invoice reflecting all mandatory details.

Respective PCsDA/CsDA may also seek few more mandatory documents as per terms and
conditions stipulated in the particular contract.

AUDIT OF SANCTION

34. Detailed audit along with Audit of sanction in respect of procurements made by the
Units/Formations/Organizations shall be conducted in the Principal Controllers/Controllers’
offices and Sub-Offices on the basis of documents submitted by
Units/Formations/organizations as mentioned in DAD Manual issued by the Controller
General of Defence Accounts. Audit of sanction will mainly be carried out from the
perspective of Compliance Audit, Performance Audit and Risk Based Audit.

a. COMPLIANCE AUDIT- Following will be seen during Compliance Audit:

i. Purpose, Need, Quality, Quantity of the stores or services required are well
defined in measurable terms in the proposal for procurement. The concept of
Right Time, Right Place, Right Quality and Right Quantity has been followed in
the proposal.
ii. The Tender Enquiry has been floated as per applicable Rules, Regulations,
Instructions and Orders.

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 iii. The Contract Agreement, after a proper Tender Enquiry and fulfilling all the
provisions thereof, has been concluded at Right Price with the Right source.
iv. Right Quality and Right Quantity of stores or services have been supplied or
rendered at the Right place and at the Right time as per the contract provisions.
v. Stores supplied have correctly been taken on charge and the services rendered
have appropriately been certified and recorded. Accounting of stores will be
verified based on the vouchers scheduled to Local Audit Authorities or available
with the units either through the IT based system or manually.
In addition to the above points, proprietary audit will also be carried out from
the perspective of compliance to the canons of financial propriety as enumerated
in the General Financial Rules.

b. PERFORMANCE AUDIT
i. Performance Audit is carried out to ascertain whether economy in the financial
transactions and efficiency in the procurement processes have been achieved.
In order to ascertain the efficiency in the procurement process, inputs, if
required, will be obtained from the Local Audit Authorities. The complete
procurement cycle will be taken into consideration during Performance Audit
for assessing the exact performance of particular projects, equipment, services.
ii. Special emphasis will be given to see how the value for money, expected to be
achieved (in measurable terms), has actually been achieved. For this activity
inputs from the Local Audit Authorities, if required, will be obtained.
iii. It will also be seen the extent to which the Project Timeframe, as defined in
the project schedule, viz, Project Initiation, Project Planning, Tender Action,
Project Execution, Project Monitoring and Controlling and Project Closing,
has been adhered to.

c. RISK BASED AUDIT - Risk Based Audit or Audit on Risk Areas will be carried out
by the Principal Controllers/Controllers concurrently with Compliance Audit and/or
Performance Audit. An in-exhaustive list of risks involved with procurement and
inventory management process has been enumerated at Para 13(a) of this code.

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 AUDIT OF PROCUREMENT OF IMPORTED STORES AND SERVICES

35. Audit of bills pertaining to imported stores and services in Principal Controllers/Controllers
office shall be guided by the provisions of the Contract Agreement, Supplementary Contract
Agreement , Inter-Governmental Agreement (IGA), Letter of Agreement (LOA),
INCOTERMS (International Commercial Terms), RBI guidelines, sanction issued and any
other specific instructions/orders issued by the Competent Authorities in the Government of
India.

36. Domain of audit will extend to the compliance to the mandated terms and conditions by the
banks with regard to the Defence Expenditure.

37. The audit of sanction of Imported Stores and Services shall be carried out in the same way as
in the case of Domestic Stores and Services. Special emphasis shall be given during audit to
the following areas:
a. Issuance of Bank Guarantees with contents as per the provisions of the
Contracts/Agreements.
b. Financial health of banks issuing Bank Guarantees, as a risk area.
c. Clarity with regard to the liabilities of the buyers and sellers pertaining to various
banking instruments.
d. Audit of receipt and expenditure statement issued by appropriate authorities/parties to
the contract/agreement.

38. Following risk areas will be duly considered by the Audit Authorities:
a. Original Foreign Invoice has not been received from Service HQrs/Bank, although the
stores along with the returnable copy of Foreign Invoice have been received at
consignee end.
b. Discrepancy Report (wherever required) prepared at either Embarkment HQrs at the
end of Consignee or both.
c. Delayed or non-receipt of Foreign Invoices against the stores already received.

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 AUDIT OF WORKS CASES

39. Audit of works shall be carried out keeping into consideration the involvement of the
following authorities and their corresponding roles in the Works Projects:

a. Executives: For getting a project included in the Annual Works Plan and issuing Adm
Approval.
b. Engineer Authorities: For Conclusion of Contracts and Execution of the projects.
c. Vendors: For supplying stores and providing services.
d. Audit Authorities: For Scrutiny of Contract Agreement and related documents and
payment and accounting thereof.

40. Audit of payments: Audit will be primarily from the following perspectives:

a. There is a provision of necessary funds for the expenditure duly authorized by a

Competent Authority.
b. That the expenditure is in accordance with a contract properly concluded and is incurred
by an officer competent to incur it.
c. Quantities of stores supplied/services rendered have been noted/digitally recorded in the
concerned measurement books.
d. The vendor has submitted an Interim/Final bill in respect of the stores supplied/services
rendered.
e. For interim payments, in respect of the value of the stores supplied /services rendered,
necessary retention amounts and other recoveries have been deducted.
f. Escalation charges, where applicable, have been properly computed.

41. Audit of sanction:

a. Compliance Audit- Audit will be carried primarily based on the following:

i. Preliminary project report has stated unambiguously whether the items/services
to be procured are authorized or are special items/services as per extant rules
and orders.

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 ii. Preliminary project report has included project justification and the project need
has been defined therein with specific mission and vision.
iii. Preliminary project report has included Detailed Scope of the Project from both
qualitative and quantitative angle.
iv. Preliminary project report has stated clearly whether land and auxiliary services,
if required, are available or not.
v. The project has been included in the approved Annual Works Plan or in the
Annual Maintenance Plan by the Competent Authorities.
vi. Administrative Approval (wherever required) has been issued by the Competent
Financial Authorities as per concerned schedule of Delegation of Financial
Powers.
vii. Payment reconciliation has been done to ensure that there is no liability
outstanding against the contractor.
viii. Provision has been made in the Contract Agreement for Performance Security
Deposit (wherever necessary) and Liquidated Damage (LD) for delay in
performance of the contract on the part of the contractor.
ix. Warranty Clause/Defect Liability Clause has been incorporated in the contract.

In addition to the above, Proprietary Audit will also be conducted from the perspective of
compliance to the canons of financial propriety as enumerated in the General Financial Rules.

b. Performance Audit: Performance Audit on specific projects will be carried out by the
Principal Controllers/Controllers or their subordinate offices, as and when assigned by
the Principal Controllers/Controllers, to ascertain whether:
i. Five “R”,viz, Right Quality, Right Quantity, Right Price, Right Time& Place
and Right Source have been achieved through the project.
ii. During all stages of tender enquiry ‘Independence’, ‘Impartiality’,
‘Confidentiality’ and ‘No Conflict of Interest’ have been maintained.
iii. For Extension of Time, if necessitated, the Engineers, after due consultation
with the procuring entity and the contractor, has promptly determined the length
of such extension and notified the same accordingly within the delivery period.

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 iv. The Executive Authorities have confirmed that all works, ordered in the
contract, have been taken over in Right Quality, Right Quantity at the Right
Place on Right Time.

c. Risk Based Audit: From the perspective of Risk Based Audit and Risk Mitigation,
following aspects will be considered:
i. Audit Authorities will monitor the expenditures made on a specific
building/structure under ‘Special Repairs’ and ‘Addition/Alteration’ over a
specific period of time. This will ensure that no abnormally high expenditure is
incurred on a particular building or structure within a short span of time.
ii. Audit Authorities, will maintain and update data base in respect of station wise
furniture authorized and furniture procured under Special Repairs/Replacement
over the years.
iii. Audit Authorities will reconcile the quarterly rates of Market Variations for
Military Stations, published by Engineer Authorities, with the specific
data/information/figures on the basis of which these variations have been
determined.
iv. Audit Authorities will help the Services by reconciling the scope of works
mentioned at various stages of a project, up to the payment stage. This will aid
the Services in getting the exact assets/services for which a project is initiated
and thus achieving the value for money.
v. It will also be seen during the course of Risk Based Audit that:
a. A system of project monitoring and quality assurance has been created to
periodically monitor the progress and quality of the project.
b. Deadlines and Contractual Milestones have been set up and tabulated to
facilitate project monitoring.
c. Terms of contract are precise, definite and without any ambiguity. The
terms have not involved any uncertain or indefinite liability.
d. There is a mechanism to control the quality of works. The contract
should reserve the right of the Government to reject goods which do not
conform to the specifications.

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e. An explicit dispute resolution mechanism has been specified in the
bidding documents and Contract agreement to resolve disputes, if any,
between the procuring entity and the contractor.
f. In case of failure of the dispute resolution mechanism, recourse has been
taken to settle the disputes through arbitration as per relevant provisions
of the Arbitration and Conciliation Act.

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 AUDIT OF PROCUREMENT OF SERVICES/WORKS/GOODS
FROM PUBLIC SECTOR UNDERTAKINGS

42. Audit undertaken by the Defence Accounts Department in respect of Compliance

/Performance Audit will be primarily from the following perspectives:

a. The guidelines issued by Ministry of Defence, Department of Public Enterprises have

been followed.
b. All types of works or repair works carried out by the Public Sector Undertakings have
been authorized by specific sanction accorded/contracts concluded/ Firm Tasks placed
by the appropriate authorities.
c. The specific milestone, as defined in the sanction/contract/Firm Tasks, has been
achieved by the Seller & the requisite certificate to this effect has been issued by the
authorized inspecting authority of the Buyer.
d. For release of advance to the PSUs, audit will examine that advances released have not
resulted in parking of funds, with no commensurate progress in work and deliverables.
e. In respect of Deferred Revenue Expenditure (DRE) claims, requisite sanction of the
Competent Authority exists for incurrence of DRE and the expenditure has actually
been incurred. Proof of incurrence is to be insisted in audit.
f. Payment on ‘Cost-plus’ basis has been made only in the cases where these are
stipulated, to be paid, as per the Contract.

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 AUDIT OF NON-PROCUREMENT CASES

CASE OF LOSSES

43. In case of loss, Audit Authorities shall examine the following issues:
a. No Loss has been written off without the specific approval of the Competent Financial
Authority.
b. A prompt investigation has been made to ascertain the quantum (approximate value),
nature (whether loss of stores or loss of Public Money) and category (whether "Due to
Theft, Fraud, Gross Neglect" or "Not Due to Theft, Fraud, Gross Neglect”) of the loss,
if any.
c. A Court of Inquiry has been convened, where it is required to be done. Further, a Court
of Inquiry has invariably been convened to investigate a loss which requires the
sanction of the Government of India to write off.
d. There has absolutely been no delay in the investigation of any loss involving fraud,
negligence or financial irregularity.
e. Responsibility for loss has explicitly been fixed by the investigating authorities and
accepted by the Executive Authorities.
f. There is a clear-cut recommendation/direction by the investigating authorities
regarding regularization action/imposition of penalty/further course of action to
regularize the loss.
g. Remedial measures planned/undertaken to avoid recurring losses have been mentioned
in the case file.
h. The Loss Statement has been prepared in the proper format.
i. A Statement of Case has been prepared stating all the facts in a sequential manner and
supported by requisite evidences.
j. Copies of orders/proofs on disciplinary action or whatever action was reasonable have
been attached with the Statement of Case.
k. Pricing/Price Checking of the Loss Statement has been made by the appropriate
authorities.
l. CFA has been determined after the loss was appropriately categorized and the Loss
Statement was correctly priced.

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44. Preliminary Audit Report by LAO and Final Audit Report by Principal
Controllers/Controllers/Local Audit Officers will be rendered after taking into consideration
all the prerequisites mentioned above.

45. Final Audit Report will have definite Comments/Remarks for fulfillment before obtaining
CFA sanction. Receipt of copy of CFA sanction will be watched by the concerned Audit
Authority, who has rendered Final Audit Report in respect of a specific Loss Statement. On
receipt of copy of CFA Sanction by the concerned Audit Authority, the degree, to which the
remarks/ comments made in the Audit Report have been addressed to, will be ascertained.

46. Risk Audit: As an aid to the Executives in limiting the probable risks, Audit Authorities will,
from time to time, analyze following risk areas in addition to the in-exhaustive list of risk
mentioned in Para 13(a) of this code.
a. Operational risks with regard to (a) professionalism in the procurement of stores and
services, (b) professionalism in the management of stores and services and (c) technical
inspection of the goods and services.
b. Operational risk with regard to the quality management in general and the quality
control system of the projects and inventory management in specific.
c. Financial risk related to the financial transactions and accounting systems.

CASES OF DISPOSAL OF STORES

47. While carrying out audit of disposal of stores, Audit Authorities will consider the following:
a. An item has been declared surplus or obsolete or unserviceable by a duly constituted
Committee and accepted by the Competent Authority.
b. Proper mode of disposal and proper bidding/auction process have been adopted.
c. The book values, guiding prices and reserved prices, which are required to be taken into
account, for disposal of the surplus goods, have correctly been worked out.
d. CFA has been decided on the basis of estimated value of the goods to be disposed off.
e. A sale account, duly signed by the officer who has supervised the sale or auction, has
been prepared to account for the amount realized through disposal action.

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 AUDIT OF PAY AND ALLOWANCES

48. The principle of 5 R’s. i.e, Right Rules, Right Procedure, Right Amount, Right Time and
Right Payee shall be followed during audit of pay and allowances, irrespective of whether the
documents are made available to the Audit Authorities through IT System or manual system
or in a hybrid system.

49. In IT based, Comprehensive Pay System (CPS), the Compliance Audit checks and payment
will be performed by the automated system. The following audit checks will be exercised
with the objectives of risk mitigation:
a. There is a bonafide order appointing an official to the post or cadre he/she belongs to.
b. All the details affecting initial Pay and Allowances in respect of the official have
accurately been fed in the system.
c. All the subsequent events/causalities affecting Promotions and Pay & Allowances in
respect of the official have correctly been published through Part-II Orders.
d. All the events/causalities published through Part-II Orders and affecting Promotions and
Pay & Allowances in respect of the official have correctly been fed in the system.

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 AUDIT OF PERSONAL CLAIMS AND ALLOWANCES

50. The same principles, as enumerated in Para 48 above, will be adopted during audit of
Personal Claims and Allowances.

51. In IT based Centralized Defence Travel System (DTS), claims submitted online will be
processed and paid by the system with the help of data already or concurrently fed into the
system. Activities like calculation, processing and payment of Transportation Allowance and
Daily Allowance claims will be carried out by the DTS. The responsibility of the audit will
be to verify the correctness of the data fed into the system at various stages.

52. Risk Based Audit will be carried out primarily on the authenticity and validity of the
authority (Part-II OO or any other order) sanctioning move or authorizing a certain allowance
in respect of an Officer/PBOR/ Defence Civilian.

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 AUDIT OF PENSION CASES

53. The principle of 5 R’s. i.e, Right Rules, Right Procedure, Right Pension, Right Time and
Right Pensioner shall be followed during audit of pension cases.

54. In processing of pension cases through computerized system, SPARSH[System for Pension
Administration (RAKSHA)] , the activity wise role are as under:

Element of Nature of action To be carried Activities

Jobs out by
Part-II Order Initiation Executives Uploading and Verification of Part-II
Verification Orders notifying superannuation
Service Initiation Executives Uploading and Verification of service
Verification details of the prospective retiree on the
system
Pay Initiation PAO Uploading and Verification of pay
Verification details of the prospective retiree on the
system
Audit Initiation Audit Authorities Audit of Services and Pay details of the
Verification prospective retiree on the system
Sanction Sanction of Pension Sanction of Pension and Issue of PPO
Pension Sanctioning
Agency
Disbursement Disbursement of PDA(SPARSH) Disbursement of lump-sum as well as
& Pension & monthly pension, revision of pension,
Accounting Accounting of compilation of expenditure disbursed
Expenditure through SPARSH.

55. Though most of the tasks and operations are taken care of by the system, there are certain
areas of potential risk, where Risk Based Audit is required to be done to eliminate any scope
of errors. Basically Risk Based Audit will be carried on the correctness of inputs (e.g, Service
and Pay details) fed into the system. This will be carried out during initiation and verification
of ‘Audit’ by the Audit Authorities.

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 AUDIT OF IMPREST ACCOUNTS

56. Following audit checks will be exercised on requisitions of advance for the Imprest and
subsequent payment and accounting thereof.

a. The imprest account has been sanctioned and allotted by the appropriate authorities.
b. The Ceiling Monetary Limit (CML), wherever applicable, has been fixed by the
appropriate authorities.
c. Requisition of advance for the Imprest has been made on the basis of Ceiling
Monetary Limit, if applicable, and approximate requirement for the month for
which the advance is drawn.
d. The imprest account has been closed monthly and sent to the concerned Audit
Authorities with all the requisite documents in support of the expenditures from the
imprest.

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 AUDIT OF PROVISIONAL PAYMENT

57. In exceptional circumstances, in anticipation of the receipt of the sanction of the appropriate
authorities or allotment of funds or receipt of necessary particulars in support of the
payments, provisional payments may be made under the personal order of the Principal
Controller/Controller, if she/he can satisfy herself/himself, with due sense of own
responsibility, that her/his authorization is justifiable. Settlement of provisional payments
thus made will subsequently be watched by the concerned Principal Controllers/Controllers.

58. Principal Controllers/Controllers may make provisional payments at the direction of Ministry
of Defence (or Branches at Service HQrs, with the concurrence of Ministry of Defence
(Finance), when the Ministry of Defence has empowered them to sanction the expenditure).
In all such cases final adjustment and settlement of payments will rest with the Ministry of
Defence or the Branches at Service HQrs.

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 AUDIT OF RECEIPTS AND RECOVERIES

59. Audit of Receipts and Recoveries will ensure that

a. All the amounts due to the Government have been recovered.

b. The correct amounts have been recovered without delay.
c. The mode of recovery is as per laid down provisions.
d. The amount received/recovered has promptly been credited to the correct head of
accounts.
e. The amounts have been credited to the concerned receipt heads only after they have
been actually received.

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 AUDIT AT UNIT/FORMATION LEVEL

60. Local Audit Authorities shall carry out Audit of auditable documents and records, maintained
in the units and formations, as per orders on the subject issued by the DAD HQrs, procedures
incorporated in Audit Manuals and other subsidiary instructions and/or as per the Annual
Audit Plan.

61. Compliance Audit: During audit of stores performed manually or through Computer Aided
Tools, following broad guidelines shall be followed:
a. Inventory Management of stores has been carried out as per prescribed rules and
procedures. The stores have been accounted for within reasonable time and issued as
per authorization/requirement taking into consideration their remaining shelf-life.
b. Details like date of procurement, technical specifications, cost and expected serviceable
life of equipment and its subsequent maintenance details and cost, performance
measurement have been correctly recorded.
c. Items procured have not been kept idle for long time.
d. Stores have been charged off from the ledger on the basis of valid authority.

62. Performance Audit: Under Performance Audit, the complete procurement cycle will be
looked into from the economy, efficiency and effectiveness angle. The following aspects will
be seen during the course of Performance Audit. The list of activities is, however, not
exhaustive.
a. Intended objectives, for which the resources/services were procured, have been served.
b. The quantities of resources accumulated have not exceeded the laid down scales, if
there is any.
c. Specific themes, decided by Principal Controllers/Controllers, have been covered.

63. Risk Based Audit: Local Audit Authorities shall normally be guided by the Annual Audit
Plan. Specific areas of risk, incorporated in the Annual Audit Plan, will be studied to
ascertain the efficiency of Risk Management System of the Units/Formations and to provide
the Principal Controllers/Controllers with the desired inputs on various risk areas.

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 REPORTING AND ESCALATION PROCESS

REPORTING OF COMPLIANCE AUDIT, PERFORMANCE AUDIT AND RISK BASED

AUDIT

64. Audit Authorities will ensure that reporting of audit findings is standardized to bring
uniformity in the pattern of reporting.

AUDIT ADVISORIES

65. As an outcome of internal audit conducted at Units/Formations/Organizations and at Audit

Sections/Offices, necessary advisories, which will contain details of the
irregularities/observations and necessary recommendations, will be issued to the concerned
Unit /Formation/Organization.

66. Escalation 1 - Action taken reports/regularization action thereof will be watched by the Audit
Authorities. If the replies/action taken reports are not adequate, then the matters will be
escalated to Principal Controllers/Controllers.

67. Escalation II-

a. The matters involving compliance related issues, if felt necessary, will be taken up to
the higher Formation HQrs by the Principal Controllers/Controllers.
b. If the action taken report is still not adequate, the audit findings will be considered by
the Principal Controllers/Controllers for inclusion in the Quarterly Audit Report.

QUARTERLY AUDIT REPORT

68. Important issues, raised during internal audit, from the compliance angle, which in the
opinion of Principal Controllers/Controllers need to be brought to the notice of Executive
Authorities at Command HQrs or Equivalent level, will be included in a quarterly report, viz,
Quarterly Audit Report. This report will be rendered by the Principal Controllers/Controllers
as per format given in Defence Accounts Department Manual. The copies of the reports will
be addressed to Controller General of Defence Accounts.

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69. Controller General of Defence Accounts, if felt necessary, may bring important issues,
incorporated in Quarterly Audit Report or received through any other means, to the notice of
authorities at Service HQrs and the Ministry of Defence for information and their
consideration.

REPORT ON PERFORMANCE AND RISK BASED AUDIT

70. Findings of Performance Audit will be communicated by the Principal

Controllers/Controllers to the respective unit/formation/organization, with copy to the next
higher authority. Replies/Action taken reports will be watched by the Principal
Controllers/Controllers.

71. On identification of risk areas, after analysis of the findings of the Internal Audit, Principal
Controllers/Controllers will undertake the following course of actions:
a. For Low Risk cases necessary advisories will be issued to the Units/Formations.
b. For Medium Risk cases necessary advisories will be issued to the Units/Formations
with a copy to the next higher authorities.
c. For High Risk cases necessary advisories will be issued to the Units/Formations with
copies endorsed to the next higher authorities and to Command or equivalent
formations. If the formation is Corps HQrs/Area HQrs (or equivalent level), then the
copy will be endorsed only to the next higher Authorities.
d. Risk cases pertaining to Command HQrs (or Equivalent level), irrespective of the level
of risks, will be communicated by the Principal Controllers/Controllers to the
authorities at Command HQrs (or Equivalent level).
These issues shall be discussed and reviewed within the Audit Committees at the
Command HQrs (or Equivalent level).
e. Principal Controllers/Controllers will communicate these issues to the Service HQrs or
Directorates and also to the Audit Committees at Service HQrs or Directorates through
DAD HQrs.

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72. All the findings of Risk Based Audit and Performance Audit, referred to the Audit
Committees either by the Principal Controllers/Controllers and/or by the Executives, shall be
discussed by the Audit Committees.

a. Decisions/recommendations of the Audit Committees shall be communicated to the

concerned stakeholders.
b. For Audit Committees at Command HQrs (or equivalent Level), if there are findings
having wider relevance, then the same shall be forwarded to the Services HQrs/HQrs of
the organizations and to the DAD HQrs, recommending issuance of appropriate orders
to all concerned.
c. For Audit Committees at Service HQrs (or Equivalent Level), if there are findings
having wider relevance, the same will be communicated to the Controller General of
Defence Accounts.

73. Principal Controllers/Controllers, after systematic and methodical analysis of the findings of
the Performance and Risk Based Audit will undertake following actions:

a. They will decide on the cases or subjects, which need better Performance Management,
(i.e, Performance Review, Performance Recognition, Performance Enhancement, etc.)
or Risk Mitigation Process, (i.e, Identifying Risk, Avoiding Risk, Controlling Risk and
Monitoring Risk).
b. These cases, along with inputs received from Audit Committees, wherever applicable
and available, will be reported to DAD HQrs by the Principal Controllers/Controllers.
The report titled, Report on Performance and Risk Based Audit (RPRBA), will be
generated half-yearly.
c. Subject/case wise definite ways and means for enhancement of performance and
mitigation of Risks will be suggested in the report.
d. DAD HQrs, after due deliberation through IAT on the inputs received from the
Principal Controllers/Controllers, will submit an Annual Report to the Service
Headquarters/Headquarters of the organizations titled ‘Annual Report on Performance
and Risk Based Audit’.

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 e. Controller General of Defence Accounts, if felt necessary, may bring important
Performance and Risk Based Audit issues to the notice of authorities at Service HQrs
and the Ministry of Defence for information and their consideration.
f. If considered necessary, DAD HQrs may propose for necessary amendments to the
orders on the subjects to MoD, after due consultation with the Services/Organizations.

REPORTING OF LOSS
74. Cases involving major deviations from prescribed procedures for dealing with cases of loss
shall be brought to the notice of Secretary Defence Finance/Financial Adviser Defence
Services (FADS) and the Chief Accounting Authority of the Ministry of Defence.

75. In addition, when an investigation into a case of loss due to theft, fraud or gross neglect
discloses a defect of procedure or system and when irrecoverable debts of units are
attributable to that cause, a report shall be made to Ministry of Defence through the proper
channel together with a recommendation for rectifying the defect.

INTERNAL AUDIT REPORT (IAR)

76. This report, containing unsatisfactory features observed during Internal Audit (as per format
given in Defence Accounts Department Manual) is prepared by DAD HQrs, based on similar
reports rendered by the Principal Controllers/Controllers and based on findings of the
Internal Audit Team of DAD Headquarters. The report is classified under three headings, viz.
(i) Pay (including loans and advances, interest), Pension & Personal entitlements. (ii)
Stores/Procurement. and (iii) Works, with financial value/implication of each case of at least
Rs. 7 lakh.

77. The report is circulated to Defence Secretary, Secretary (Defence/ Finance)/FA (DS),
Additional Secretaries/Joint Secretaries in MoD, Vice Chiefs and PSO’s in Service HQrs,
Principal Controllers/Controllers. This report besides the case details will also bring out the
associated risk profiles based on the principles laid down in this code.

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ANNUAL REVIEW OF WORKS EXPENDITURE

78. The Annual Review of Works Expenditure is a set of statements (as per format given in
Defence Accounts Department Manual) reflecting deviations noticed during the scrutiny of
Works Contracts.

79. With reference to the statements furnished by the Principal Controllers/Controllers,

Controller General of Defence Accounts prepares consolidated Annual Review of Works
Expenditure for submission to the Secretary (Defence/Finance) / Financial Adviser, Ministry
of Defence (Finance).

ANNUAL AUDIT CERTIFICATE (AAC)

80. The Controller General of Defence Accounts furnishes annually a Draft Certificate (as per
format given in Defence Accounts Department Manual) to the Secretary (Defence/Finance) /
Financial Adviser, Ministry of Defence (Finance) by the due date as intimated by MOD
(Finance) each year, that to the best of his knowledge and belief, no part of the expenditure
contained in the Appropriation Accounts for the year has been incurred without the sanction
of the Competent Financial Authority (position as on 30th June), where such is required by
regulations or other orders, with the exception of items where necessary sanction is awaited.
Particulars of such items exceeding Rs. 5, 00,000 in each case are furnished in the statement
attached to the certificate.

81. This certificate is prepared based on similar certificates furnished by the Principal
Controllers/Controllers. Principal Controllers/Controllers prepare the certificates based on
records maintained in their offices and inputs given by Local Audit Authorities and Accounts
Offices dealing with Works cases.

82. Follow up AACs (quarterly progress report), will be submitted at the end of subsequent
quarters. ‘Annual Audit Certificate’ forms a part of the Annual Appropriation Accounts,
submitted to Secretary (Def/Fin)/FADS.

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DRAFT PARA

83. Draft Paragraphs are prepared for inclusion in the report of the Comptroller and Auditor
General of India, Union Government (Defence Services). When Draft Paras are received by
the Principal Controllers/Controllers from the authorities of the DGADS, audit will be carried
out with regard to the verification of facts and also to ascertain whether any failure to detect
the irregularity, or to take proper and prompt action after detection, can be attributed to the
Defence Accounts Department.

84. The contents of the Draft Para will be brought to the notice of the Command Headquarters or
equivalent level and copies thereof will be sent to the local administrative authorities
concerned by the Principal Controllers/Controllers. Local Administrative Authorities will be
advised to furnish their replies to the Principal Controllers/Controllers through Local Audit
Authorities. Once the replies to the contents of the Draft Para, along with comments of the
Local Audit Authorities, are received, the Principal Controllers/Controllers will verify the
facts mentioned in the Draft Para with the substantiations furnished by the Administrative
Authorities. Verified Draft Para will then be sent to the local representatives of the DGADS.

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