The Comptroller & Auditor General of India (CAG) empanelment process represents a significant opportunity for Chartered Accountant firms and Limited Liability Partnerships across India. This comprehensive guide explores everything CA firms need to know about securing empanelment and understanding the CAG selection criteria for government audit assignments. This post is based on draft CAG Policy for 2026-27, which may be subjected to further change(s) by CAG. This post will be later updated accordingly in due course.
What is CAG Empanelment?
Under the Companies Act 2013, sections 139(5) and 139(7) empower the Comptroller & Auditor General of India to appoint auditors for Government Companies and Deemed Government Companies. The empanelment process serves as the gateway for CA firms to become eligible for these prestigious audit assignments.
CA firms and LLPs with at least one full-time Fellow Chartered Accountant (FCA) partner or FCA sole proprietor can apply online for empanelment. The selection process uses a sophisticated point-based system that evaluates firms across quantitative parameters, qualitative credentials, and professional track records.
Understanding the Point-Based Evaluation System
The CAG empanelment framework awards points based on multiple parameters, creating a comprehensive assessment of each firm’s capabilities and qualifications.
Quantitative Parameters: Building Your Foundation
Full-Time CA Partners and Sole Proprietors
The empanelment system recognizes the strength of having experienced chartered accountants on your team. Full-time FCA partners earn 3 points each, while ACA partners receive 2 points each. The system evaluates up to 20 full-time CA partners, with the first 10 receiving full points and the remaining 10 receiving half points.
For firms with aggregation arrangements where only the parent LLP applies, CA partners from partner LLPs receive one-quarter of the allowable points, ensuring transparency in network relationships.
Experience and Longevity Matter
Association length demonstrates commitment and stability. CA partners or sole proprietors with 5-10 years of association with the same firm receive 0.5 points, while those with over 10 years earn 1 point. This reward for longevity encourages stable professional relationships and continuity in audit quality.
Full-Time CA Employees
Recognizing that strong teams extend beyond partners, the system awards points for full-time CA employees. The first 10 employees earn 1 point each, with the next 10 receiving 0.5 points each, up to a maximum of 20 employees.
Firm Experience
Established firms receive recognition through experience points. Firms earn 1 point for every calendar year of existence, calculated from either the firm’s constitution date with one full-time FCA or the joining date of the longest-associated existing partner, whichever comes later. The maximum allocation stands at 20 points.
Turnover from Audit Services
Financial performance matters. The system awards up to 10 points based on audit service turnover, with different thresholds for firms headquartered in major metropolitan areas versus other locations. For instance, firms in Mumbai, Delhi, Chennai, Kolkata, Bangalore, Hyderabad, Pune, and Ahmedabad need turnover above Rs. 100 crore to earn maximum points, while firms elsewhere achieve this at Rs. 60 crore.
Qualitative Parameters: Demonstrating Excellence
Peer Review Certification
A valid peer review certificate from the Institute of Chartered Accountants of India (ICAI) carries substantial weight, with up to 15 points available. The recency of your peer review matters, with certificates from the current year earning 3 points, gradually decreasing for older certifications.
Audit Quality Maturity Model (AQMM)
Firms participating in AQMM can earn up to 10 points based on their score level, ranging from 2.5 points for level 1 to 10 points for level 4.
Audit Experience
Practical experience in various audit categories earns up to 40 points maximum, the single largest allocation in the system. Points vary based on audit type and entity size. Corporate statutory audits are categorized by turnover ranges:
- Turnover above Rs. 10 crore but up to Rs. 100 crore: 1 point per assignment (max 4 points in category)
- Turnover above Rs. 100 crore but up to Rs. 500 crore: 2 points per assignment (max 4 points in category)
- Turnover above Rs. 500 crore but up to Rs. 1,000 crore: 3 points per assignment (max 6 points in category)
- Turnover above Rs. 1,000 crore: 4 points per assignment (no limit)
Similarly, branch audits range from 1-4 points based on turnover, internal audits of entities with turnover above Rs. 40 crore earn 2 points (max 5 points), government scheme audits with expenditure above Rs. 40 crore earn 2 points (max 5 points), and completion of autonomous body audits earns 5 points (max 5 points).
The maximum points across all audit experience categories is capped at 20 points total (not 40 points per category).
For the 2026-27 empanelment cycle, points are awarded based on UDINs generated during 2020-21, 2021-22, 2022-23, 2023-24, and 2024-25, eventually scaling to a consistent 5-year rolling period.
Additional Qualifications and Continuous Learning
Professional development receives strong recognition with up to 25 points for partners and 20 points for employees who pursue additional qualifications.
Premium certifications like DISA from ICAI, CISA from ISACA USA, CPA from AICPA USA, CIA from IIA USA, CFE from ACFE USA, and diplomas in Insurance and Risk Management (DIRM) and Forensic Investigation (DFI) earn partners 1 point for the first qualification and 0.5 points for a second. Up to 20 partners can earn these points.
For employees, similar qualifications including DISA, CISA, CPA, CIA, CFE, DIARM (Diploma in Insurance and Risk Management), and DFI earn 0.8 points for the first qualification and 0.4 points for the second. Up to 20 employees can be awarded these points.
Certificate courses in specialized areas including IND AS, Forensic Accounting, Public Finance & Government Accounting, Concurrent Audit of Banks, Anti-Money Laundering Law, Forex and Treasury Management, GST, BRSR, and Artificial Intelligence earn 0.5 points each for the first qualification and 0.25 for the second.
Professional Track Record: Maintaining Standards
The empanelment system includes several mechanisms to ensure professional integrity and performance quality.
Professional Misconduct Consequences
Firms face serious consequences when partners are found guilty of professional misconduct under the Chartered Accountants Act 1949. The firm’s total point score reduces by 10 percent for each guilty partner, and that partner’s contributions to the firm’s points are completely eliminated.
Performance-Based Adjustments
Consistent underperformance triggers escalating consequences. If grading falls below 50 percent or performance reports prove unsatisfactory, firms face 10 percent point reduction in the first year, 20 percent in the second year, and complete disqualification from allotment in the third year.
Audit Refusal Penalties
Refusing CAG-assigned audits damages your empanelment standing. The first refusal reduces points by 10 percent, the second by 20 percent, and the third results in no allotment for the following year. These penalties only apply when refusal reasons fall outside legitimate disqualification grounds.
Regulatory Actions
Reprimands from the Quality Review Board result in 10 percent point reduction. Actions by the National Financial Reporting Authority carry varying consequences: advisories, cautions, or monetary penalties trigger 10 percent deductions, while debarment leads to non-empanelment for the debarment period.
Debarment by any regulator or government authority similarly prevents empanelment during the debarment period.
Criminal Proceedings and Legal Considerations
The empanelment policy includes detailed provisions addressing criminal proceedings involving law enforcement agencies like CBI, ED, SFIO, and other authorities.
FIR Without Charge-Sheet
When only an FIR exists without a filed charge-sheet, firms may achieve empanelment but receive no audit work allotments during the FIR’s subsistence.
Charge-Sheet Filed or Prosecution Pending
Firms become ineligible for empanelment when charge-sheets are filed against the firm or any partner by enforcement agencies.
Conviction
Conviction of a firm or any partner in criminal cases filed by enforcement agencies renders the firm completely ineligible for empanelment.
Judicial Relief
Courts staying charge-sheet operations, discharging accused, quashing proceedings, or granting acquittals restore empanelment eligibility upon submission of certified court order copies.
If an accused or convicted partner leaves the firm, and no charges exist against the firm itself, empanelment eligibility returns.
Aggregation of Firms: Network Arrangements
The policy includes comprehensive provisions for firm aggregation, allowing parent LLPs to include partner LLPs in their empanelment applications.
When only the parent LLP applies for empanelment, it can include one partner LLP. Points for partner LLP resources typically receive one-quarter of normal allocations, maintaining fairness in the evaluation process.
Aggregation affects various parameters differently, with specific provisions for turnover calculations, professional misconduct impacts, performance penalties, and criminal proceeding consequences detailed throughout the policy.
Special Provisions and Exceptions
GIFT City Arrangements
Firms in non-GIFT City locations forming partnerships with GIFT City firms don’t lose empanelment eligibility, provided both firms don’t simultaneously apply for empanelment. Similarly, establishing identical LLPs in GIFT City areas under IFSC provisions doesn’t jeopardize existing empanelment.
Merger Provisions
Updated provisions for mergers now state that proprietors and CA partners from merging firms will be assigned points after one calendar year of merger. The previous requirement for a five-year waiting period to recognize the earlier association of merging partners has been simplified.
Allotment Process: From Empanelment to Assignment
Achieving empanelment represents only the first step toward securing audit assignments.
Small Audits (Up to Rs. 5 Lakh Fee)
Software-based selection correlates vacancy stations, firm point scores, and auditee unit audit fees to make systematic assignments.
Major Audits (Above Rs. 5 Lakh Fee)
Major audit allotments require meeting stringent eligibility criteria:
- At least 6 full-time CAs (minimum 5 full-time CA partners plus 1 full-time paid CA employee)
- At least one full-time CA partner with 10+ years firm association
- At least 3 full-time CA partners with 5+ years firm association
- Remaining two full-time CA partners with minimum 1-year association
- Firm existence of 10+ years
- At least one full-time CA partner holding CISA or DISA qualification
- Five years of CAG-assigned audit experience
Beyond point scores, major audit selection considers audit experience, capability for handling large assignments, past performance, audit-specific eligibility, and branch office locations. Branch offices qualify for consideration when at least 50 percent of full-time partners or two full-time partners (whichever is less) are stationed there.
Audit Rotation and Cooling Periods
The policy mandates rotation to ensure fresh perspectives and prevent overly comfortable auditor-auditee relationships.
Standard appointments cover one financial year unless circumstances warrant longer periods. Firms may receive re-appointment on a yearly basis, but total appointment periods typically shouldn’t exceed three financial years.
Re-appointment becomes impossible when firms become ineligible, point scores drop by more than 25 percent from the previous year, debarments occur, or other legitimate concerns arise.
Maharatna Company Provisions
Special rules govern Maharatna company audits. Firms retiring or surrendering from Maharatna audits face three-year prohibitions from any Maharatna assignments. Following this cooling period, another three-year restriction prevents assignment to the same company.
For aggregated firms where parent LLPs handle Maharatna audits, cooling periods apply to the entire network when applying together, but individually when applying separately.
Full-Time CA Partner Definition and Income Requirements
Understanding what constitutes a “full-time” CA partner or employee proves crucial for accurate empanelment applications.
Exclusions from Full-Time Status
Full-time CA partners or sole proprietors cannot be:
- Partners in other firms/LLPs or separate sole proprietors
- Employed full-time or part-time elsewhere
- Practicing in their own name or engaged in practice otherwise
- Engaged in activities deemed “in practice” under Chartered Accountants Act 1949, Section 2(2)
Minimum Income Requirements
Full-time status requires meeting minimum income thresholds that vary by location and designation, with progressive increases planned for future empanelment years.
2026-27 Requirements:
- FCAs in major cities: Rs. 9.00 lakh annually
- FCAs in other locations: Rs. 5.40 lakh annually
- ACAs in major cities: Rs. 5.40 lakh annually
- ACAs in other locations: Rs. 3.60 lakh annually
2027-28 Requirements:
- FCAs in major cities: Rs. 12.00 lakh annually
- FCAs in other locations: Rs. 7.20 lakh annually
- ACAs in major cities: Rs. 7.20 lakh annually
- ACAs in other locations: Rs. 4.80 lakh annually
2028-29 Requirements:
- FCAs in major cities: Rs. 15.00 lakh annually
- FCAs in other locations: Rs. 9.00 lakh annually
- ACAs in major cities: Rs. 9.00 lakh annually
- ACAs in other locations: Rs. 6.00 lakh annually
Income calculations include share of profit, remuneration, and interest on capital from the firm/LLP. For partners joining mid-year, income extrapolates to represent a complete financial year.
Minimum Percentage Share Requirements
Partners must also maintain minimum percentage shares in total firm income, varying by firm size:
- Firms with more than 14 partners: 1% minimum
- Firms with 10-14 partners: 3% minimum
- Firms with 5-9 partners: 5% minimum
- Firms with fewer than 5 partners: 8% minimum
Professional Income Limitations
Full-time status requires that professional income from sources outside the firm/LLP (except ICAI-permitted sources) not exceed income from the firm/LLP itself.
Strategic Considerations for Empanelment Success
Successful empanelment requires strategic planning across multiple dimensions.
Investing in Team Development
Encouraging partners and employees to pursue additional qualifications yields substantial point advantages. With up to 45 combined points available for partner and employee qualifications, focused professional development creates meaningful competitive advantages.
Prioritize high-value certifications like CISA, DISA, and specialized ICAI courses in IND AS, Forensic Accounting, and emerging areas like Artificial Intelligence.
Maintaining Peer Review Currency
Ensure your peer review certificate remains current. The 3-point difference between current and oldest acceptable certificates can significantly impact competitive positioning, especially in tight allotment scenarios.
Building Diverse Audit Experience
Strategic audit portfolio development maximizes experience points. While high-value corporate audits offer unlimited point potential, don’t neglect branch audits, internal audits, and government scheme work that contribute to the 40-point experience maximum.
Focus on generating and maintaining proper UDIN documentation for all audit assignments to ensure proper credit during empanelment evaluation.
Performance Excellence
Maintaining consistently strong performance ratings prevents the cascading penalties that can quickly erode competitive position. A single year below 50 percent grading triggers consequences extending across multiple years.
Risk Management
Carefully evaluate audit assignments before acceptance. The escalating penalties for refusal make each declined assignment progressively more costly to your empanelment standing.
Maintain robust compliance systems to prevent professional misconduct findings and regulatory actions that trigger significant point deductions or complete disqualification.
Conclusion: Positioning for Success
CAG empanelment offers chartered accountant firms and LLPs access to prestigious government audit assignments while contributing to public sector accountability and transparency. The comprehensive point-based evaluation system rewards experience, qualifications, performance, and professional integrity.
Success requires understanding the nuanced criteria across quantitative parameters, qualitative credentials, and track record considerations. Strategic investments in team development, maintaining regulatory compliance, building diverse experience, and consistent performance excellence position firms advantageously in this competitive landscape.
As income requirements progressively increase through 2028-29 and the system continues evolving, firms must remain proactive in strengthening their empanelment profiles. Those who strategically align their development with empanelment criteria while maintaining the highest professional standards will find themselves well-positioned for valuable government audit opportunities.
The path to empanelment success begins with comprehensive understanding, continues through strategic capability development, and sustains through unwavering commitment to professional excellence and regulatory compliance.