With a view to bringing in more transparency and accountability in their financial dealings, the Comptroller and Auditor General of India (CAG) could be asked to appoint independent auditors for accounting financial details of political parties.
The Institute of Chartered Accountants

 
of India (ICAI), in its report that has been submitted to the Election Commission of India, has suggested that auditors for the job must be directly appointed by the CAG.
We have suggested that the CAG be given the responsibility of appointing independent auditors for auditing the political parties, though in case of companies, they have the freedom to appoint their auditors. The move (CAG appointing auditors) would ensure complete transparency, said SB Zaware, central council member of the ICAI and a convener of the report Uniform Accounting and Auditing Framework of Political Parties.

The Election Commission is soon expected to notify the official guidelines to political parties besides the income-tax department and the enforcement directorate (ED).

Political parties would also be mandated to disclose names, addresses and permanent account numbers of all donors who contribute more than Rs. 20,000 to them.

The accounting of financial details of political parties would be undertaken on accrual basis and not on the basis of cash inflow and outflow.

In the accrual basis of accounting, income is reported in the fiscal period it is earned, regardless of when it is received, and expenses are deducted even if they are planned whether they are paid or not. It depends on the invoicing.

In cash basis of accounting, revenues are registered as and when cash is actually received and expenses are recorded when they are actually paid no matter when they were invoiced.

Amarjit Chopra, former president, ICAI said that it is critical to have an accounting mechanism for all political parties to promote transparency in the system.
There should be rotation of auditors too for political parties as envisaged for companies in the new Companies Bill.The move would ensure independence of auditors, Chopra said.

The ICAI, in its report, has also underlined the need for all political parties to prepare their financial reports by September 30. In case of a national party, the audited report would have to be published in a national newspaper and for a regional party, the report would have to be published in the local media.

After the guidelines are notified, the ICAI will issue guidelines on standard accounting norms to its member chartered accountants across the country.