The traditional audit conducted by the supreme audit institutions (SAI) is known as Regulatory Audit which implies checking upon the legality of an action taken by a public official or a person using public funds and whether the decision or its implementation is according to the law, rules or regulations governing that activity Gradually its dimension was extended to Financial audit and now to Value for Money audit.

Financial Audit basically means audit of financial statement and whether they provide reasonable assurance that they present fairly the financial position, results of operations, and cash flows of an audited entity in accordance with generally accepted accounting principles.

In Financial audit, State auditors do almost the same kind of job which the Chartered Accountants do while auditing a public limited company.

Value for Money or 3E’s Audit: also known as Performance audit is an independent assessment of the performance of an organisation, programme, project or an activity in terms of its goals and objectives- how far expected results have been achieved from the use of available resources of money, men and material. Put it differently an examination is made regarding economy, efficiency and effectiveness of public spending, which has come to be known as 3E’s audit.


1. Economy: minimizing the cost of resources used or required – spending less;

2. Efficiency: the relationship between the output of goods and services and the resources to produce them – spending well;

3. Effectiveness: the relationship between the intended and actual results of public spending – spending wisely.

The concept and technique of audit has undergone a major change during the last fifty years. Before India became independent, the government audit was mostly confined to check against provision of funds, rules and orders and competence of authority concerned to sanction expenditure.


With the launching of the Five Year Plans for economic and social development there has been change in the pattern of government expenditure necessitating shift in the emphasis, concept and practice of audit as scrutiny of individual transactions became inadequate as it tended to mistake woods for the trees.

The Parliament and the public are more interested to know whether various development and welfare programmes are being executed efficiently and whether they were producing the expected results.

This led Audit department to enter in the area of Performance Evaluation and Value for Money Audit. Audit department is now producing a large number of performance reviews every year covering almost every facet of government’s working.

Audit of Revenue: C&AG after some initial resistance on the part of revenue department were able to extend its dimension to audit of revenues which includes audit of tax assessment such as Income tax, Central Excise and Customs, Sales tax etc.


The audit of receipts has helped bringing considerable revenue for the government by pointing out cases of under assessment of tax, and also assisted in better functioning of tax administration machinery by pointing out lacunae or loopholes in the Act/ Rules and deficiencies in the functioning of tax administration.

Audit of Commercial Enterprises: The audit of government companies was brought within the purview of C&AG’s audit at the insistence of the then CAG by introducing a suitable provision in the Companies Act 1956, although there were initial attempts to exclude his jurisdiction. Thus, while Chartered Accountants are required to certify Annual Accounts of government companies, C&AG has been granted right to conduct supplementary audit.