Page 119 - Quick Insights Book 2022

Ann. 2.1 – Policy of Empanelment of CA Firms/LLPs and Selection of Auditors

4. Number of SCAs / SAs and Branch Coverage 20 branches (to be selected strictly in order of the level
of outstanding advances) to SCAs in such a manner as
4.1 For Entities with asset size of ₹15,000 crore and above to cover a minimum of 15% of total gross advances of
as at the end of previous year, the statutory audit should the bank by SCAs. For other Entities (excluding Payment
be conducted under joint audit of a minimum of two audit Banks and Core Investment Companies), SCAs/SAs
firms [Partnership firms/Limited Liability Partnerships shall visit and audit at least the Top 20 branches/Top
(LLPs)]. All other Entities should appoint a minimum of 20% of the branches of the Entities (in case of Entities
one audit firm (Partnership firm/LLPs) for conducting having less than 100 branches), to be selected in order
statutory audit. It shall be ensured that joint auditors of of the level of outstanding advances, in such a manner
the Entity do not have any common partners and they as to cover a minimum of 15% of total gross advances
are not under the same network of audit firms. Further, of the Entities. In addition, the banking companies and
3
the Entity may finalise the work allocation among SCAs/ NBFCs shall ensure adherence to the provisions of
SAs, before the commencement of the statutory audit, Section 143 (8) of the Companies Act, 2013 regarding
in consultation with their SCAs/SAs.
audit of accounts of all branches.
4.2 The Entities should decide on the number of SCAs/
SAs based on a Board/Local Management Committee 5. Eligibility Criteria of Auditors
(LMC) Approved Policy, inter alia, taking into account Each Entity is required to appoint audit firm(s) as its
the relevant factors such as the size and spread of SCA(s)/SA(s) fulfilling the eligibility norms as prescribed
assets, accounting and administrative units, complexity in Annex I.
of transactions, level of computerization, availability of
other independent audit inputs, identified risks in financial
reporting, etc. 6. Independence of Auditors
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6.1 For Commercial Banks (excluding RRBs) and NBFCs ,
Considering the above factors and the requirements the Audit Committee of the Board (ACB)/ LMC shall
of the Entity, the actual number of SCAs/SAs to be monitor and assess the independence of the auditors
appointed shall be decided by the respective Boards/ and conflict of interest position in terms of relevant
LMC, subject to the following limits:
regulatory provisions, standards and best practices.
Sl. Asset Size of the Entity Maximum Any concerns in this regard may be flagged by the
No. number of ACB/LMC to the Board of Directors of the Commercial
SCAs/SAs Bank (excluding RRBs)/NBFC and concerned Senior
Supervisory Manager (SSM)/Regional Office (RO) of
1. Upto ₹5,00,000 crore 4 RBI.
2. Above ₹ 5,00,000 crore and Upto 6
₹ 10,00,000 crore For UCBs/remaining NBFCs, the Board of Directors shall
3. Above ₹ 10,00,000 crore and 8 monitor and assess the independence of the auditors.
Upto ₹ 20,00,000 crore Any concerns in this regard may be flagged by the
4. Above ₹ 20,00,000 crore 12 Board of the UCB/NBFC to the concerned SSM/RO of
RBI.
The above limits have been prescribed to ensure that 6.2 In case of any concern with the Management of the
the number of SCAs/SAs appointed by the Entities are Entities such as non-availability of information/non-
adequate, commensurate with the asset size and extent cooperation by the Management, which may hamper
of operations of the Entities, with a view to ensure that the audit process, the SCAs/SAs shall approach the
audits are conducted in a timely and effective manner. Board /ACB/LMC of the Entity, under intimation to the
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This will be subject to review in future based on the concerned SSM/RO of RBI.
experience.
6.3 Concurrent auditors of the Entity should not be
4.3 In terms of RBI guidelines on ‘Norms on eligibility, considered for appointment as SCAs/SAs of the same
empanelment and selection of Statutory Branch Auditors Entity. The audit of the Entity and any entity with large
in Public Sector Banks (PSBs)’, PSBs shall allot the Top
exposure to the Entity for the same reference year
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3 As defined in Rule 6(3) of the Companies (Audit & Auditors) Rules, 2014
4 For the NBFCs which are required to constitute an Audit Committee of the Board (ACB) in terms of Para 70 (1) of Master Direction - Non-
Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions,
2016 to be read with Section 177 of the Companies Act, 2013.
5 Board shall be directly approached only when ACB is non-existent in the Entity or the auditors notice a matter of concern involving any
member of the ACB.
6 As defined in RBI instructions on ‘Large Exposures Framework’

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