1.0 Categorization norms for the empanelment of audit firms to be appointed as Statutory Branch Auditors

Transcription

1 Policy for Appointment of Statutory Branch Auditors (SBAs) Annexure -1 With regard to the appointment of Statutory Branch Auditors, the guidelines issued by Reserve Bank of India will form a basis, Bank shall follow the guidelines issued by Ministry of Finance, Government of India / Reserve Bank of India from time to time for the appointment of Statutory Branch Auditors, The policy to be followed is mentioned here below, 1.0 Categorization norms for the empanelment of audit firms to be appointed as Statutory Branch Auditors Audit firms shall be classified into different categories as per the following norms, as per norms issued by Reserve Bank of India, Category No. of CAs No. of Professional Bank Audit Standing exclusively partners staff experience of the associated exclusively Audit with the firm associated firm [Full with time] the firm [Full time] [out of 2] (1 ) (2) (3) (4) (5) (6) The firm or at least one 8 Years of the partners should have a minimum of 8 I years experience of branch audit of a nationalized bank and/or of a private sector bank. 6 years The firm or at least one (for the of the partners should firm or at have preferably least one II conducted branch audit partner) of a nationalized bank or of a private sector bank for atleast 5 years 4

2 Category No. of CAs No. of Professional Bank Audit Standing exclusively partners staff experience of the associated exclusively Audit with the firm associated firm [Full with time] the firm [Full time] [out of 2] (1 ) (2) (3) (4) (5) (6) The firm or at least one 5 years of the CAs should have (for the preferably conducted firm or at branch audit of a least one III nationalized bank or of partner) a private sector bank for at least 3 years. IV Not necessary 3 years Even proprietorship concern without bank audit experience may be considered as hitherto. (The proprietary concerns of Chartered Accountants with 1 paid CA, 2 professional staff and not having any statutory branch audit experience of a nationalised bank or of a Private sector bank will be treated at par with the partnership firm after deducting their 3 years seniority from the date of their establishment). 2.0 General norms applicable for SBAs: 2.1 The audit must be carried out by the firm's own staff and they should not subcontract work in any manner whatsoever. A suitable undertaking shall be submitted by the audit firm to that effect. 2.2 A declaration should be submitted by the auditors/audit firms that: None of the disqualification under section 141 sub section 3 of the Companies Act, 2013, applies to them and they are qualified for appointment as statutory auditors of the Bank. 5

3 2.2.3 In addition to the requirements of Section 141(3)(d) of the Companies Act 2013, in regard to indebtedness, the spouse, dependent children and wholly or mainly dependant parents, brothers, sisters or any of them, of any of the partners/proprietors of the firm or the firm/company in which they are partners/directors are not indebted to the Bank None of the partners/proprietor of the audit firm or their spouse, dependent children and wholly or mainly dependent parents, brothers, sisters or any of them, of any of the partners/proprietors of the firm or the firm/company in which they are partners/directors have been declared as willful defaulters by any bank/financial institution. 2.3 Audit firms cannot undertake statutory audit assignment while they are associated with internal assignment in the bank during the same year. In case the firms are associated with internal assignments, they should relinquish the internal assignments before accepting the statutory audit assignment during the year. 2.4 Associate firms or sister concerns of statutory audit firm are disqualified for internal audit or for any special assignment when the main firm/partners are allotted Statutory Audit in a particular year. 2.5 The concept of one audit firm for one PSB will continue. One audit firm will take up audit assignment in one PSB only. 2.6 The Statutory Branch Auditors will be appointed on annual basis subject to maximum tenure of four years depending upon their fulfilling the eligibility norms as prescribed by RBI from time to time. 2.7 The maximum no. of branches to be audited by a firm will be restricted to three. 2.8 With regard to the removal of the Auditor before the completion of the tenure of four years, prior permission of Reserve Bank of India will be obtained. 2.9 The firms whose partner/s are on the Boards of PSBs are not to be appointed as auditors of the same PSB. The eligibility criteria and general norms listed herein above are in line with RBI guidelines. 3.0 Process of selection of Statutory Branch Auditors: 3.1 A Committee headed by General Manager (Central Accounts Department) called as "Statutory Branch Auditors Selection Committee" comprising of the following members shall be formed. (i) Deputy/Assistant General Manager (Central Accounts Department) (ii) Deputy/Assistant General Manager (Inspection & Audit Department) (iii) Deputy/Assistant General Manager (Credit Monitoring and Review Department) (iv) Deputy/Assistant General Manager (Department of Information Technology) Chief Manager/Senior Manager, Central Accounts Department will act as the convener of the committee. The aforesaid Committee will shortlist the names of the Chartered Accountants firms from out of the list received from Reserve Bank of India. The Committee, in the process of short listing, shall, amongst other factors, duly consider the geographic location of the Audit Firms, their past experience, past association with our bank (if any), strength of the firm etc. 6

4 The following criteria will be adopted in selection of audit firms for Statutory Branch Audit. (a) As far as possible, the office of Audit firms to be preferably in or around the branches to be audited so as to keep close liaison and for expeditious completion of audit and to keep the expenditure on TA/DA at minimum level. In case the local auditors are not available, auditors from the nearby districts within the respective State/adjoining State/other places will be considered. (b) The selected firms of Chartered Accountants shall be sought with their willingness for appointment as Statutory Branch Auditors of the Bank. (c) It should be the endeavor to have suitable mix of various categories of Auditors/Audit Firms keeping in view the size of the branches to be subjected to audit. After the finalization of list by the Committee, the same will be placed before Managing Director & CEO or in his absence Executive Director for his consideration and opinion. After the internal process of finalization of firms' names is over, the following process will be undertaken:- a. The bank will make reasonable efforts to ensure that the proposed firm of Chartered Accountant is taking up the audit assignment with one bank only. b. The list of the firms selected for appointment as Statutory Branch Auditors will be placed before the Audit Committee of Board for its concurrence, before seeking approval of Reserve Bank of India. c. After the selection of the Firms of Chartered Accountants, Bank will recommend the name of both continuing branch auditors and selected firms to Reserve Bank of India for seeking its prior approval before their actual appointment, as per statutory requirement. 3.2 Irrevocable consent: Irrevocable consent will be obtained from the Audit firm in writing for consideration of appointment as SBA for the particular year and for the subsequent continuing years. The consent given by an audit firm will be treated as irrevocable and request, if any, from Audit Firms for changing the Bank, after having given its consent is not to be entertained. 3.3 Tenure: A SBA firm will have maximum tenure of 4 years. The appointment of SBAs will be made on an annual basis, subject to their fulfilling the eligibility norms prescribed by RBI from time to time and also subject to their suitability. 4.0 Allocation of branches 4.1 The norms for selection of branches of the Bank for Statutory Audit will be based on the extant guidelines issued by Reserve Bank of India from time to time, which at present are as under Statutory branch audit of PSBs may be carried out for all branches with advances of RS.20 crore ~==:::~ & above and 1/5th of the remaining branches covering a representative cross section of rural / semi-urban / urban and metropolitan branches, predominantly including branches which are not subjected to concurrent audit, so as to cover 90% of advances of a bank. CPUs I LPUs land other centralized hubs by whatever nomenclature called would be included in the one fifth of the remaining branches every year. 7

5 4.1.2 In respect of branches below the cut-off point, which are subject to concurrent audit by chartered accountants, henceforth, LFARs and other certifications done earlier by SBAs will now be submitted by the concurrent auditors to the Managing Director & CEO of the bank and such branches may not generally be subject to statutory audit. The banks, in turn, will consolidate / compile all such LFARs and other certifications submitted by the Concurrent Auditors and submit to Statutory Central Auditors as an internal document of the bank Progressively, the threshold level of advances may be increased so that the number of branches to be taken up statutory audit is phased down over a period of time. 4.2 No distinction will be made between the continuing auditors and the fresh auditors. 4.3 Bank will allot branches, to the extent possible, to the audit firms keeping in view the category of the firm. 4.4 Local auditors will be preferred for branch audit. Among local auditors preference will be given categorywise. In case, local auditors are not available, auditors from the nearby districts with the State/adjoining States/other states will be considered for allocation of branches. 4.5 Bank will give assignment to all the auditors approved/considered for appointment. 4.6 Bank should carry out the audit in such a way that SCAs should audit the top 20 branches (with a maximum of 5 branches to any individual SCA) to cover a minimum of 15% of the gross advances of the bank by SCAs. 4.7 Statutory Branch Auditor Selection Committee shall propose the allocation of branches to the selected firms and same shall be referred to Managing Director & CEO or in his absence to the Executive Director for his consideration and approval. 5.0 Maximum No. of branches to be audited No audit firm shall be allotted more than 3 (three) branches irrespective of size 6.0 Deviations Any deviations from the Policy shall be duly placed to Audit Committee of the Board for approval. The said policy shall be in force till any new guidelines are issued by Reserve Bank of India/ other regulatory authorities. The policy shall be reviewed on annual basis. 7.0 Change in the Policy Guidelines: Managing Director &CEO or Executive Director in his absence may approve the changes in the approved policy guidelines in line with guidelines issued by Reserve Bank of India from time to time. 8.0 Redressal of Grievances General Manager (Central Accounts Department) will dispose of grievances/complaints (if any) with regard to selection of Statutory Branch Auditors and allocation of branches. 8

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