The Institute of Chartered Accountants of India (ICAI) has approached the Finance Ministry and the Reserve Bank of India (RBI), seeking a reversal of their decision to liberalise the system for appointment of statutory branch auditors by public sector banks (PSBs).
Until three years ago, RBI allotted such branch auditors, based on a panel of firms submitted by the ICAI. But, since then, it has liberalised the norms and has allowed banks to select their own auditors. Over 20,000 audit firms are involved in the exercise.
Till now, there were only three banks who opted for the new liberalised system, which only requires PSBs to seek an RBI permission after the auditors’ names are finalised. But, as of this financial year, as many as 14 banks have decided to exercise managerial autonomy and select their own branch auditors.
Of this, there are a dozen banks with a balance sheet size of over Rs 100,000 crore – State Bank of India, Allahabad Bank, Bank of India, Bank of Baroda, Canara Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Syndicate Bank, Punjab National Bank, UCO Bank and Union Bank of India. Additionally, Andhra Bank and Punjab & Sind Bank have also opted to exercise autonomy.
According to the guidelines, a panel of auditors is still sent by ICAI, which is then circulated by RBI among the public sector banks. But, unlike earlier times when the central bank appointed branch auditors, banks now have to choose from these lists. While the first list deals with existing auditors who have to be appointed for four years, the second is a list from which the banks can choose themselves. One chartered accountant’s firm can, at best, be allowed to audit one bank branch.
So far, the government is unrelenting and intends to go ahead with the decision. But fearing that the remaining banks would also exercise managerial autonomy, ICAI has sought a review of the decision and has even cited the recent fraud at Satyam Computer Services to argue its case.
“The auditors should be appointed by the regulator or the shareholders, since the management presents the accounts and is an interest party,” said a senior ICAI functionary.
Asked why ICAI is seeking to bringing back the earlier norms for PSBs when there were no such rules for private players, another ICAI council member said that, in this case, tax-payers were depositors as well as shareholders, since the government was the majority shareholder.
The rules which leads the banks to choose its own bank auditor is likily to give it a liberty to bank so that its financial affairs will manage in according to its norms. its really a create a competitive enviroment to chartered accountants to dont the best job in bank audit ..keep it up yar
In fact even for listed companies the auditor must be appointed by the regulator to avoid satyam like frauds.
Instead the goverment has chosen to give liberty to public sector banks to encourage satyam like frauds
ca.martin
chennai
CA S L GUPTA 9810770711
When the listed co. availing all benefits,tax exemp.& public money etc.can appoint their own auditors then why not banks.If the system to be changed, first change the appointment of auditors of all public listed co.SEZ co. & co. availing huge bank finance/institutional money etc.
Posted by: anuj
April 17 , 2010, 15:26 IST
are u mad ? have u ever done the bank audit? i think you dont know the procedure for bank audit.
CASethuraman.T.J The Banks are owned by the Government,on behalf of it RBI took the task of appointment of Statutory Auditors of HO and Branches. The Banks on their own discretion can not and should not select auditor, as the Management of Bank does not constitute aseneral Body.9440990114
Posted by: CASANJAYKUMARAGARWAL
March 10 , 2009, 20:35 IST
I am also of the view that this process will lead to lot of compromise on quality
Option to select auditors by the auditee himself may result in to compromise in quality. Better it should be regulated by RBI only.
CA Sanjay Agarwal 9825045937
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