RBI on 27.04.2021 vide notification RBI/2021-22/25 Ref.No.DoS.CO.ARG/SEC.01/08.91.001/2021-22 has issued guidelines for appointment of Statutory Central Auditors (SCA)/ Statutory Auditor (SA) of commercial banks (excluding RRB), Urban cooperative banks (UCBs) and Non-Banking Financial Companies(NBFCs) including Housing Finance Companies. Notification clarifies applicability, approval, number of auditors (i.e. maximum and minimum), eligibility, independence, tenure and rotation of SCA/SA.
I. Applicability of notification
- Non deposit taking NBFC having assets size below Rs. 1,000 crore may follow earlier policy.
II. RBI’s Prior approval of RBI is required for appointing SCAs/SAs as follows :-
- Commercial Banks (excluding RRB) and UCBs – before 31st July of reference year.
- Public Sector Bank – approach RBI within 1 month of receipt of list of eligible audit firms.
- NBFC – don’t need approval rather they need to inform RBI within one month of appointment.
III. Number of SCAs/SAs
- Joint auditors should not have common partners and they are not under same network of audit firms.
- Aside Board/Local Management Committee (LMC) may increase no. of SCA/SA depending upon asset size of entity. Following are limits for appointment of maximum no. of SCAs/SAs
- PSB shall allot Top 20 branches to SCAs as to cover a minimum of 15% of total gross advances.
- For other entities SCAs/SAs shall visit and audit at least Top 20 branches or Top 20% branches so as to cover a minimum of 15% of total gross advances.
IV. Eligibility criteria of Auditors
Basic Eligibility
|
Asset Size of Entity as on 31st March of Previous Year |
Minimum No. of Full-Time partners (FTPs) associated with the firm for a period of at least three (3) years |
Out of total FTPs, Minimum No. of Fellow Chartered Accountant (FCA) Partners associated with the firm for a period of at least three (3) years |
Minimum No. of Full Time Partners/ Paid CAs with CISA/ISA Qualification |
Minimum No. of years of Audit Experience of the firm |
Minimum No. of Professional staff |
|
Note 1 |
Note 2 |
Note 3 |
Note 4 |
||
|
Above Rs 15,000 crore |
5 |
4 |
2 |
15 |
18 |
|
Above Rs 1,000 crore and Up to Rs 15,000 crore |
3 |
2 |
1 |
8 |
12 |
|
Upto Rs 1,000 crore |
2 |
1 |
1* |
6 |
8 |
|
* Not mandatory for UCBs/NBFCs with asset size of upto Rs 1,000 crore. |
|||||
(* Notes are attached for detail reference)
V. Independence of Auditors
- For Commercial Banks (exclu. RRB) and NBFC – Audit Committee/LMC shall monitor and access independence of auditor.
- For UCB/remaining NBFC - Board shall monitor and access independence of auditor.
- Any concern regarding independence shall be reported to RBI.
- Any concern with management of the entity regarding non availability of information or non-cooperation shall be intimated to RBI.
- Concurrent auditor of Entity shall be ineligible to appoint as SCA/SA of same entity.
- Time gap between non audit work and acceptance of audit should be of one year.
VI. Professional Standard
- SCA/SA should follow relevant professional standard.
- Board/Audit committee/LMC of entity shall annually review performance of SCA/SA. Any lapses in audit responsibilities by SCA/SA shall be reported within 2 months of completion of annual audit.
VII. Tenure and Rotation
- SCA/SA shall be appointed for continuous period of 3 years unless they not satisfy any eligibility criteria.
- Cooling period of 6 years applied after completing one term of 3 year (in full or part)
- One audit firm can take statutory audit of maximum 4 commercial bank (including not more than 1 PSB)
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