Labour Laws and Practice · Industrial and Labour Laws Audit

Audit under the Code on Social Security, 2020 (Section 116)

Updated 11 October 2026 · Fact-checked

Section 116 of the Code on Social Security, 2020 requires the Comptroller and Auditor-General of India (CAG) to audit the accounts of each Social Security Organisation every year. The CAG has government-audit powers, and the certified accounts with the audit report go to the organisation, which forwards them with its comments to the appropriate Government.

Understand Audit under the Code on Social Security, 2020

Start with what section 116 is not. It does not set up a private audit of an employer's establishment. It deals with the accounts of Social Security Organisations, the bodies created under the Code, such as the boards and organisations that run social security. Many students wrongly read it as an audit of establishments. Say this clearly in your answer.

The rule has three parts. First, the accounts of each Social Security Organisation are audited annually by the Comptroller and Auditor-General of India. The expenditure the CAG incurs on the audit is payable by that organisation to the CAG. Second, the CAG, and any person the CAG appoints for the audit, has the same rights, privileges and authority as the CAG has in auditing Government accounts. This includes the right to demand books, accounts, connected vouchers, documents and papers, and to inspect any office of the organisation.

Third, there is a reporting chain. The accounts, as certified by the CAG or the person appointed by the CAG, together with the audit report, are forwarded to the Social Security Organisation. The organisation then forwards them, along with its own comments on the CAG's audit report, to the appropriate Government. So the organisation does not simply pass the report on. It adds its response.

Why does this matter? These organisations hold public money and workers' contributions. An independent constitutional auditor and a report to Government give accountability. For a Company Secretary, the point is the line between this statutory audit of the organisations and the labour law compliance audit of an employer's establishment, which is a separate practice topic.

Read nearby provisions for context. Section 9 says orders and decisions of a Social Security Organisation are authenticated by specified officers, and that acts are not questioned merely because of a vacancy or a defect in constitution. Section 141 sets up Social Security Funds with separate accounts for each source, and says each is to be spent for its own purpose. These make audit of fund accounts meaningful, but section 116 itself speaks only of the accounts of the organisations.

Key rules to remember

Who audits (s.116(1)): Accounts of each Social Security Organisation → audited annually by the CAG; Audit is yearly. The auditor is the CAG, not a chartered accountant chosen by the organisation.
Cost of audit (s.116(1)): CAG's audit expenditure → payable by the Social Security Organisation to the CAG; The audited body bears the cost.
Powers of auditor (s.116(2)): CAG or person appointed by CAG = same rights, privileges and authority as in audit of Government accounts; Includes demanding books, accounts, connected vouchers, documents and papers, and inspecting any office of the organisation.
Reporting chain (s.116(3)): Certified accounts + audit report → Social Security Organisation → (with its comments) → appropriate Government; The organisation must add its comments on the CAG's report before forwarding.

How to solve Audit under the Code on Social Security, 2020 questions

Use this method for any question on audit under the Code on Social Security, 2020, whether it is a theory question or a short case.

1Identify the body whose accounts are in question. Check whether it is a Social Security Organisation. If the facts speak of an employer's establishment, say section 116 does not apply directly.
2State the rule: annual audit by the CAG, citing section 116(1).
3State who may carry out the audit: the CAG or a person appointed by the CAG, with the same rights, privileges and authority as in Government audit (section 116(2)).
4Apply the facts to powers: demand for books, accounts, vouchers, documents and papers, and inspection of offices.
5Deal with cost: the organisation pays the CAG's expenditure for the audit.
6Trace the report: certified accounts and audit report go to the organisation, which forwards them with its comments to the appropriate Government (section 116(3)).
7Conclude clearly on the question asked, and add a practical point such as keeping records ready and preparing comments on the report.

Quickest way: The 4-point recall for section 116

When to use it: Use when you have little time, such as a 5 to 8 mark short note or a one-line case.

Who: CAG audits each Social Security Organisation.
When: annually.
Powers: same as in Government audit; can demand documents and inspect offices.
Report: certified accounts and report go to the organisation, then to the appropriate Government with the organisation's comments.

Common mistakes in Audit under the Code on Social Security, 2020

Treating section 116 as an audit of an employer's establishment.
The word audit sounds like a compliance audit of the employer, which is what the chapter title suggests.
Fix: Remember that section 116 covers accounts of Social Security Organisations only. Employer-level labour audit is a separate topic.
Saying a chartered accountant or company secretary conducts the audit.
Students carry over the idea of statutory audit under company law.
Fix: Write that the CAG audits, or a person appointed by the CAG for that purpose.
Saying the audit is done once in a while or on demand.
Students forget the word annually.
Fix: State that the audit is annual, under section 116(1).
Writing that the audit report goes straight from the CAG to the Government.
The role of the organisation in the chain is overlooked.
Fix: Write the chain: report to the organisation, which forwards it with its comments to the appropriate Government.
Saying the Government bears the cost of audit.
The CAG is a government office, so students assume it is free.
Fix: The expenditure incurred by the CAG is payable by the respective Social Security Organisation.
Quoting a wrong section such as section 9 or 141 for audit.
Sections on procedure and funds sit close to the audit theme.
Fix: Audit is section 116. Section 9 is procedure and section 141 is the Social Security Fund.

Worked examples

Example 1

The accounts of a Social Security Organisation under the Code on Social Security, 2020 were not audited by anyone for two years. A member argues that audit is needed only when the Government asks for it. Advise with reference to the Code.

Show the solution

Provision: section 116(1) says the accounts of each Social Security Organisation shall be audited annually by the Comptroller and Auditor-General of India.
Analysis: the duty is annual and is not conditional on any request by the Government. The word annually means a fresh audit each year.
Application: no audit for two years means the annual requirement was missed for those years. The member's argument has no support in the text.
Practical point: the organisation should have its accounts ready for the CAG and cooperate with demands for records.

Answer: The member is wrong. Section 116(1) requires annual audit by the CAG for each Social Security Organisation, without waiting for any request. The two missed years are a lapse of the statutory requirement.

Example 2

The CAG's team audits a Social Security Organisation and asks for vouchers and papers and wants to inspect a regional office. The officers refuse, saying the team has no such authority. Examine. Also state what happens to the audit report.

Show the solution

Provision: section 116(2) gives the CAG, and any person appointed by the CAG for the audit, the same rights, privileges and authority as the CAG has in auditing Government accounts.
Specific powers: the right to demand production of books, accounts, connected vouchers, documents and papers, and to inspect any of the offices of the organisation.
Application: the team's demand for vouchers and papers and the inspection of a regional office fall within these powers, provided the team is the CAG or persons appointed by the CAG. The refusal is not justified.
Report: under section 116(3), the accounts as certified, with the audit report, are forwarded to the organisation.
Next stage: the organisation forwards them, along with its comments on the CAG's report, to the appropriate Government.

Answer: The refusal is not justified. The CAG's appointed team can demand books, accounts, vouchers, documents and papers and can inspect offices. The certified accounts and report go to the organisation, which sends them with its comments to the appropriate Government.

Exam tips

Begin every answer with the section number, 116, and the three sub-parts: auditor, powers, reporting.
Always say audit is by the CAG and is annual. These two facts are the most likely marking points.
In a case question, first check whether the body is a Social Security Organisation. If not, say so before applying anything.
Write the reporting chain in order with arrows or short lines. Include the organisation's comments.
Link to practice in one line, such as keeping records ready for inspection and preparing comments on the audit report.

Practice questions from Industrial and Labour Laws Audit

Audit under the Code on Social Security, 2020 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Audit under the Code on Social Security, 2020: frequently asked questions

Who conducts audit under the Code on Social Security, 2020?

Under section 116, the accounts of each Social Security Organisation are audited by the Comptroller and Auditor-General of India. The CAG may also appoint a person for the audit. That person has the same rights, privileges and authority as the CAG has in Government audit.

How often is the audit under section 116 done?

The accounts of each Social Security Organisation are audited annually. The section makes this a yearly duty.

Who pays for the audit under section 116?

The expenditure incurred by the CAG in connection with the audit is payable by the respective Social Security Organisation to the CAG.

Where does the audit report go after the audit?

The certified accounts and the audit report are forwarded to the Social Security Organisation. The organisation then forwards them, with its comments on the CAG's report, to the appropriate Government.

Is section 116 an audit of an employer's compliance with the Code?

No. Section 116 deals with audit of the accounts of Social Security Organisations. Audit of an employer's compliance is a separate labour audit practice topic.