(1) On receipt of the audit report under section 8, the Chief Executive Officer shall remedy any defect or irregularity which may have been pointed out in the report and shall place the audit report, together with a statement of action taken or proposed to be taken thereon and an explanation in regard thereto before a meeting of the concerned local authority or other authority specially convened for the purpose within a period of two months from the date of receipt of the audit report. He shall also within one month of the said meeting, send to the Director a report of his having remedied the defects or irregularities, if any pointed out in the audit report or shall, within the said period, supply the Director any further explanation in regard to such defects or irregularities as the local authority or other authority may wish to give.
(2) On receipt of such intimation or explanation, the Director may, in respect of all or any of the matters referred to in his report:-
(a) accept the explanation given by the Chief Executive Officer;
(b) direct that the matter be further investigated at the next audit or at any earlier date;
(c) hold that the defects or irregularities pointed out in the audit report or any of them have not been removed or remedied;
(d) condone any objection, the compliance of which is not possible due to loss of records connected with its disposal due to any natural calamity.
(3) Nothing in this section or in section 8 shall preclude the Director at any time from bringing to the notice of the Government for such action as he may consider necessary any information which appears to him to support a presumption of criminal misappropriation or fraud or which in his opinion deserves special attention or immediate investigation.