Whenever any defalcation or loss in money or stores of local authority is discovered the fact shall be promptly reported by the Executive Authority to the Director and to the Controlling authority or the Government, as the case may be, giving in detail the circumstances which led to such defalcation or loss.
Explanation: - (1) In this sub-section Controlling Authority means the Head of the Department concerned or the Officer empowered to countersign the Grant-in-aid Bill.
(2) On receipt of a report under sub-section (1), the Director shall immediately conduct or cause to be conducted a special audit of the accounts of that Local Authority:
Provided that nothing in this section shall prevent the Local Authority from taking criminal proceedings against any person suspected of, involved in, any defalcation or loss of money or stores, where such a course is considered expedient.
Explanation: - (1) In this sub-section Controlling Authority means the Head of the Department concerned or the Officer empowered to countersign the Grant-in-aid Bill.
(2) On receipt of a report under sub-section (1), the Director shall immediately conduct or cause to be conducted a special audit of the accounts of that Local Authority:
Provided that nothing in this section shall prevent the Local Authority from taking criminal proceedings against any person suspected of, involved in, any defalcation or loss of money or stores, where such a course is considered expedient.
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More sections of this act
Section 1 · Short title,extent and commencementSection 2 · DefinitionsSection 3 · Appointment of DirectorSection 4 · Audit of AccountsSection 5 · Power of audit of accounts of certain authorities, bodies, institutions or funds not included in the Schedule.Section 6 · Audit of accounts of stock/ stores and verification of cash balance.Section 7 · Manner in which Audit is to be conducted.Section 8 · Auditor to be deemed to be public servant.India Code, Government of India. Text fetched 12 Oct 2026. Check the linked official text and subsequent notifications when applying a provision.