"The Comptroller and Auditor General (CAG) is fully withinits rights to look into the efficiency and economy in respect of revenues accruing to the Consolidated Fund of India," an official in CAG's office said.
Reliance has argued that its contract with the government allows only financial audit and not a performance audit.
"CAG does not conduct performance audit of private operators, but in the case of Reliance Industries Ltd's (RIL) contract the company's performance in relation to the contract obligation automatically comes under review," said the CAG official.
The CAG has objected to the government's move to narrow the scope of audit. It said the provisions of the CAG Act gives it "unfettered right of access to all records required for such audit and would override any conditions sought to be imposed on the audit process".
Earlier, an "entry meeting" between CAG, the oil ministry and RIL scheduled for Oct 31 in order to begin the audit process was postponed by the ministry.
"RIL has raised certain apprehensions regarding this audit and expressed their desire to discuss the issue further. The issues are likely to be finalised in the next few weeks," the petroleum ministry had said after new minister M Veerappy Moily took over.
Last year, the CAG, in its audit report, questioned several RIL practices in developing the block.