CAG for Extensive Use of Digital Tools in Forensic Audit to Check Fraudulent Cases

Comptroller and Auditor General of India K Sanjay Murthy on Friday said AI and ML have helped in unearthing a large number of fraudulent cases in many states during audit of beneficiary's schemes, as he stressed on extensive use of such digital tools in forensic auditing.

Addressing the Conference of State Finance Secretaries here, the CAG noted that state governments are making advances in the adoption of technology in bringing about greater efficiency in the public financial management framework.

The roll out of critical public finance IT infrastructure will not only strengthen the digital footprint in states but also bring in greater transparency and accountability, thereby aiding the governance, he said.

These include Integrated Financial Management Information System (IFMIS), Works and Accounts Management Information System (WAMIS), Government e-Procurement Platforms (GePNIC), e-voucher Systems, Digital India Land Record Modernisation Programme (DILRMP).

"However, there is a lot of difference in the maturity level of these digital applications," Murthy said citing certain states.

One of the positive outcomes of digitisation and integration is already in clear evidence with respect to finalization of Monthly Civil Accounts of states, he said.

"At present, we are working on priority to fully utilise the various latest technological solutions available for risk assessment and distance/remote auditing," he said, and added the CAG has successfully conducted the remote audit of GST, Stamp and Registration, e-Procurement, Works Audit, DBT schemes in some states.

Now, the target is to roll out this remote audit in all departments across the country wherever departments have digitised their data/records.

"Another key area of remote audit is to find out the tempering of electronic documents. With the help of AI/ML, we found a large number of fraudulent cases in many states while auditing their beneficiary’s schemes," the CAG said.

The AI/ML (artificial intelligence/ machine learning) based forensic audit can save significant financial resources of state government which are presently being fraudulently misused, he said.

"Digitisation of our auditing processes is currently our topmost priority to ensure remote audits with less hassles to Executive; timely audits and to provide greater assurance to stakeholders and, greater coverage, for example, 100% in GST/IT audits of databases," he said.

He further said audit of local government institutions (ULBs and PRIs) is another important area which cannot be ignored, as nearly 15 cities contribute over 50% of the country’s GDP.

Cities like Mumbai, Delhi, Bengaluru, Chennai and Hyderabad contribute about 30% of India’s GDP and these could add 1.5% more annual GDP growth, the CAG said.

On the occasion a publication on State Finances for FY 2022-23, was unveiled by CAG Murthy, Expenditure Secretary Vumlunmang Vualnam and Deputy CAG Jayant Sinha.

Senior officials from the Union Finance Ministry, finance secretaries of state governments, the RBI, and the Controller General of Accounts (CGA) participated in the conference.

Heads of the accounting services of railways, telecommunications, and defence, along with the accountants general representing the CAG’s audit and accounts offices in states, also participated in conference, under the aegis of CAG of India.

About 200 delegates from across the country attended the conference.