The Reserve Bank of India (RBI) is all set design a framework to put a check on any lapses by banks’ Statutory Auditors (SAs) during audit process.
The move comes in the wake of Non-Performing Assets (NPAs) and frauds that are troubling the banking and financial sector in a big way.
The regulator said that this initiative has been taken to improve the level of audit and formulating a transparent mechanism for examining accountability of SAs in a consistent manner.
As per RBI, the framework would be comprising instances of divergence identified in asset classification and provisioning during the RBI inspection vis-à-vis the audited financial statements of banks.
The lapses on account of SAs that would be considered for raising the enforcement framework would include lapses in carrying out audit assignments resulting in misstatement of a bank’s financial statements; wrong certifications submitted by the auditors with respect to list of certifications as advised by the RBI to banks; incorrect information quoted in the Long Form Audit Report; issues pertaining to misconduct by auditors in respect of their bank audit assignments.
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