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Banks with assets of more than Rs 15,000 crore must hire two auditors

Posted Date : 22-May-2021 , 12:17:29 pm | Posted By CASANSAAR print Print
Commercial banks and urban commercial banks (UCBs) will have to rope in at least two auditors unaffiliated with each other and have to take prior approval of the Reserve Bank of India (RBI) for appointment or reappointment of statutory auditors on an annual basis, the central bank said on Tuesday.

“For entities with asset size of ₹15,000 crore and above as at the end of previous year, the statutory audit should be conducted under joint audit of a minimum of two audit firms,” RBI said.
 
Any bank with a balance sheet of less than Rs 15,000 crore can have one statutory auditor. However, in all cases, concurrent auditors cannot be appointed as statutory auditors.

“It shall be ensured that joint auditors of the entity do not have any common partners and they are not under the same network of audit firms,” the central bank said in its guidelines on auditors.

The banks will have to decide on the number of auditors based on a board approved policy, taking into account relevant factors such as the “size and spread of assets, accounting and administrative units, complexity of transactions, level of computerisation, availability of other independent audit inputs, identified risks in financial reporting, etc”.

“All other entities can appoint minimum of one auditor firm for conducting statutory audit,” RBI said.

For a balance sheet of up to Rs 5 trillion, there can be a maximum of four auditors, between Rs 5 trillion and Rs 10 trillion six auditors can be appointed, eight auditors can be appointed up to Rs 20 trillion, and above Rs 20 trillion, up to 12 auditors can be appointed.

To protect the independence of the auditors/audit firms, entities will have to appoint the SCAs/SAs for a continuous period of three years, RBI said. Banks, if they have to remove an auditor during that period, can do that with the prior approval of RBI.

“An audit firm would not be eligible for reappointment in the same entity for six years (two tenures) after completion of full or part of one term of the audit tenure. However, audit firms can continue to undertake statutory audit of other entities,” the RBI said.

One audit firm can concurrently take up statutory audit of a maximum of four commercial banks, including not more than one public sector bank or one all India financial institution (Nabard, SIDBI, NHB, EXIM Bank) or RBI, eight UCBs, and eight NBFCs during a particular year, subject to compliance with required eligibility criteria and other conditions for each entity, the central bank said.

The audit firms will have to apply before July 31 of the reference year and the public sector banks (PSBs) shall approach RBI within one month of receipt of list of eligible audit firms from the central bank. #casansaar (Source - Business standard)

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