In a bid to end the appointment of same auditors alternatively after mandatory two years by the private and foreign banks, the Reserve Bank of India (RBI) has extended the rest period to six years.
Prior to this, the earlier guidelines directed an auditor was appointed for a period of four years, followed by a rest period of two years.
Reportedly, the drawback of appointing the same set of auditors alternatively by the banks usually creates a level of comfort between the auditor and the client, this may lead to several discrepancies and boost the compromise in strict adherence to audit principles.
“In certain cases, private and foreign banks appointed the same auditing firm immediately after a gap of 2 years. In other cases, they appointed the immediately preceding auditing firm following completion of the incumbent auditor’s four-year tenure,” said RBI.
The central bank criticized the practice and therefore extended the rest period of the regulators in order to ensure that the audit books are examined properly with a news team in place, enabling the investigation of the issues with a different perspective.