Page 122 - Quick Insights Book 2022

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

(b) She/He should not be employed full time / part time for Entities, should be duly qualified for appointment as
elsewhere. auditor of a company in terms of Section 141 of the
Companies Act, 2013.
(c) She/He should not be practicing in her/his own name
or engaged in practice otherwise or engaged in other (ii) The audit firm should not be under debarment by
activity which would be deemed to be in practice under any Government Agency, National Financial Reporting
Section 2(2) of the Chartered Accountants Act, 1949. Authority (NFRA), the Institute of Chartered Accountants
of India (ICAI), RBI or Other Financial Regulators.
(d) In case of PSBs, the income of the partner from the firm/
LLP should not be below the threshold limits prescribed (iii) The Entities shall ensure that appointment of SCAs/SAs
by the Office of C&AG for the purpose of consideration is in line with the ICAI’s Code of Ethics/any other such
as full-time partners for appointment as auditors of Public standards adopted and does not give rise to any conflict
Sector Undertakings. For other Entities, the Board/ACB/ of interest.
LMC shall examine and ensure that the income of the
partner from the firm/LLP is adequate for considering (iv) If any partner of a Chartered Accountant firm is a director
them as full-time exclusively associated partners, which in any Public Sector Bank (PSB), the said firm shall not
will ensure the capability of the firm for the purpose. be appointed as SCA/SA of any PSB. Further, if any
partner of a Chartered Accountant firm is a director in
Note 2: CISA/ISA Qualification: any Entity, the said firm shall not be appointed as SCA/
SA of any of the group entities of that Entity.
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For UCBs and NBFCs with asset size upto ₹ 1,000 crore,
there is no minimum requirement in this regard. However, such (v) The auditors for Entities with asset size above ₹1,000
Entities may give priority to firms with full time partners or full crore should preferably have capability and experience in
time CAs having CISA/ISA qualification. There should be at deploying Computer Assisted Audit Tools and Techniques
least one-year continuous association of Paid CAs with CISA/ (CAATTs) and Generalized Audit Software (GAS),
ISA qualification with the firm as on the date of empanelment commensurate with the degree/ complexity of computer
(for PSBs)/ shortlisting (for other Entities) for considering them environment of the Entities where the accounting and
as Paid CAs with CISA/ISA qualification for the purpose. business data reside in order to achieve audit objectives.
Note 3: Audit Experience: (vi) For audit of UCBs, the SA of the firm should have a fair
knowledge of the functioning of the cooperative sector
For Commercial Banks (excluding RRBs), audit experience shall and shall preferably have working knowledge of the
mean experience of the audit firm as Statutory Central/Branch language of the state in which the UCB/branch of the
Auditor of Commercial Banks (excluding RRBs)/ AIFIs. For UCB is located.
UCBs and NBFCs, audit experience shall mean experience of
the audit firm as Statutory Central/Branch Auditor of Commercial C. Continued Compliance with basic eligibility criteria
Banks (excluding RRBs)/ UCBs/NBFCs/ AIFIs. In case of
merger and demerger of audit firms, merger effect will be In case any audit firm (after appointment) does not comply with
given after 2 years of merger while demerger will be effected any of the eligibility norms (on account of resignation, death
immediately for this purpose. etc. of any of the partners, employees, action by Government
Agencies, NFRA, ICAI, RBI, other Financial Regulators, etc.),
Note 4: Professional Staff
it may promptly approach the Entity with full details. Further,
Professional staff includes audit and article clerks with the audit firm shall take all necessary steps to become eligible
knowledge of book-keeping and accountancy and who are within a reasonable time and in any case, the audit firm should
engaged in on-site audits but excludes typists/stenos/computer be complying with the above norms before commencement of
operators/ secretaries/subordinate staff, etc. There should be at Annual Statutory Audit for Financial Year ending 31st March and
least one-year continuous association of professional staff with till the completion of annual audit.
the firm as on the date of empanelment (for PSBs)/ shortlisting In case of any extraordinary circumstance after the
(for other Entities) for considering them as professional staff for commencement of audit, like death of one or more partners,
the purpose.
employees, etc., which makes the firm ineligible with respect to
any of the eligibility norms, RBI will have the discretion to allow
B. Additional Consideration the concerned audit firm to complete the audit, as a special
(i) The audit firm, proposed to be appointed as SCAs/SAs case.

13 For the purpose of this circular, Group entities shall mean two or more entities related to each other through any of the following relationships,
viz. Subsidiary – parent (defined in terms of AS 21), Joint venture (defined in terms of AS 27), Associate (defined in terms of AS 23),
Promoter-promotee [as provided in the SEBI (Acquisition of Shares and Takeover) Regulations, 1997] for listed companies, a related party
(defined in terms of AS 18), Common brand name, and investment in equity shares of 20% and above.

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