Gov’t Planning to Change Audit System
May 7 – The Indian government is planning to change to a new accounting system for its annual financial statements in five years time to accrual-based accounting for transparency.
The new system will allow the government to record transactions although cash will change hands later on. This will be more effective in showing the government’s financial health through showing ‘hidden’ assets and liabilities.
“The Comptroller and Auditor General of India (CAG) plans to move from cash to accrual basis accounting in government within a five-year time frame,” according to an official release.
The Institute of Chartered Accountants of India agrees that using the accrual method for government accounting was better suited to its needs.
Some departments in Andhra Pradesh, Madhya Pradesh, Haryana and West Bengal have begun pilot studies supported by the World Bank using the accounting method based on accruals.
“The accrual-based financial statements are expected to provide a more appropriate presentation of the financial performance and position of the government,” the Centre told The Economic Times.