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Appointment of statutory auditors in Public Sector Banks

Appointment of statutory auditors in Public Sector Banks

Appointment of statutory auditors in Public Sector Banks

Norms on eligibility, empanelment and selection of
Statutory Central Auditors in Public Sector Banks

1 (i) The audit firm shall have a minimum 7 full time chartered accountants, of which at least 5 should be full time partners exclusively associated with the firm. The remaining 2 could be either exclusive partners or CA employees with a continuous association with the firm for a period of one year. These partners should have minimum continuous association with the firm i.e. one each should have continuous association with the firm

at least for 15 years and 10 years,
two with a minimum of 5 years each and
one with a minimum of one year.
Four of the partners should be FCAs.

Appointment of statutory auditors in Public Sector Banks

Also at least two of the partners should have minimum 15 and 10 years experience in practice. (In case the paid Chartered Accountant available with the firm without any break was admitted as a partner of the said firm at a future date, his association with the firm as a partner will be counted from the date of his joining the firm as a paid Chartered Accountant.) Appointment of statutory auditors in Public Sector Banks

(ii) The number of professional staff (excluding typists, stenographers, computer operators, secretary/ies and sub-ordinate staff etc.), consisting of audit and articled clerks with the knowledge in book-keeping and accountancy and are engaged in outdoor audit should be 18. Appointment of statutory auditors in Public Sector Banks

(iii) The standing of the firm should be of at least 15 years which would be reckoned from the date of availability of one full time FCA continuously with the firm.

(iv) The firm should have minimum statutory central audit experience of 15 years of Public Sector Banks (before or after nationalisation) and/ or by way of statutory branch audit thereof or that of statutory audit experience of a private sector bank with deposits resources of not less than Rs.500 crore. (In case any of the partner of an audit firm is nominated / elected for a period of at least 3 years or more on the Board of any public sector bank then his / her such experience for a maximum period of three years will be considered as bank audit experience, provided such experience has not been earned by him/ her concurrently i.e. when his / her firm was assigned statutory audit of any PSB, select all India financial Institutions or RBI.)

(v) The firm should have statutory audit experience of 5 years of the Public Sector Undertakings (either Central or State Government undertaking).

(While calculating such experience, more than one assignment given to a firm during a particular year or more than one year’s statutory audit (audits in arrears) assigned to the firm will be reckoned, as one year experience only, for the purpose of counting such experience.)

(vi) At least two partners of the firm or its paid Chartered Accountants must possess CISA / ISA qualification.

Note- C&AG will empanel the Audit Firms based on the above parameters as on January 1 of the relevant year and send the panel to RBI.


PROCEDURE FOR APPOINTMENT OF
STATUTORY AUDITORS IN PUBLIC SECTOR BANKS

Statutory Central Auditors (SCAs)

1. The number of SCAs to be appointed in PSB will be as under:

i) Category “A” Banks (Large Banks viz. Bank of Baroda, Bank of India, Canara Bank, Punjab National Bank, Central Bank of India and Union Bank of India) shall not have more than 6 SCAs. However, in case of SBI the number of SCAs shall not be more than 14.

ii) Category “B” Banks (Medium Banks viz. Allahabad Bank, Corporation Bank, Indian Bank, Indian Overseas Bank, Oriental Bank of Commerce, Syndicate Bank and UCO Bank) shall not have more than 5 SCAs, and;

iii) Category “C” Banks (Small Banks viz. Andhra Bank, Bank of Maharashtra, Dena Bank, Punjab & Sind Bank, United Bank of India, Vijaya Bank, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore) shall not have more than 4 SCAs.Appointment of statutory auditors in Public Sector Banks

Actual numbers of SCAs to be appointed can be decided by respective boards subject to the above limit.

2. The cooling off period after completing the term of three years as SCA will be of three years.

3. The appointment of SCAs will be made on an annual basis, subject to their fulfilling the eligibility norms prescribed by RBI from time to time and also subject to their suitability.

4. The Government has decided that from the financial year 2014-15, selection and appointment of SCAs is delegated to individual Public Sector Banks.

5. The procedure that will be followed for selection of SCAs by the PSBs is as under :

a) The eligible list of firms furnished by C&AG every year will be examined by RBI.

b) RBI will verify that the firm has minimum bank audit experience of 15 years from its records.

c) RBI will prepare separate list of rested, continuing and non continuing eligible audit firms after excluding the name of firms who have been denied audit by RBI/C&AG and the firms who have declined the offer of appointment given by Public Sector Banks. The list of non continuing eligible audit firms will be further split up into list of experienced audit firms and new audit firms. Reserve bank will be giving Public Sector Banks i) List of Continuing Firms (i.e. the list of audit Firms who have not completed three years of audit ii) List of firms who are undergoing rest/cooling iii) List of eligible, non continuing audit firms in two parts viz. experienced audit firms and new audit firms. Appointment of statutory auditors in Public Sector Banks

d) The audit firms applying for empanelment as SCAs in PSBs will be required to give an undertaking that, in case of selection in PSBs, they would give up the existing assignment, if any, in Private Banks/Foreign Banks/RBI/Financial Institutions such as National Housing Bank, EXIM Bank etc. and they cannot refuse appointment of PSBs once selected.

e) The allotment of vacancies of SCA’s shall be in the ratio of 60:40 between ‘Experienced ‘ and ‘New’ audit firms. As regards ratio of 60:40, banks will round the number to the nearest round number and choose auditors from the ‘Experienced’ and ‘New’ firm list. For this purpose, an ‘Experienced’ firm is one which has a Statutory Central Audit experience of any of the Public Sector Banks and ‘New Firm’ is one who does not have such experience.

f) While making final selection, the PSBs will take into consideration the following points:-

i.            To the extent possible, at least two audit firms having their Head Office from the same place where the banks’ HO/CO is located, to be allocated.

ii.            Audit firms are not selected if they have retired from the same bank before going under rest.

iii.            The firms whose partner/s are on the Boards of PSBs are not appointed as auditors for the same PSB.

iv.            In case of SBI, only experienced audit firms are considered as SCAs.

v.            An audit firm is eligible to be appointed as a Central/ Branch auditor of only one PSB during a particular year.

6. Audit firm(s) selected by the PSBs after obtaining consent in writing from the audit firm will be debarred for a period of 3 years for selection if the firm refuses to accept the appointment without a reasonable ground, that is ground not to the satisfaction of RBI. Appointment of statutory auditors in Public Sector Banks

7. The above norms will be implemented during the selection process of SCAs for the year 2014-15 and onwards.

8. After selection, as per the statutory requirement, banks, in turn, are required to forward the names of the selected SCAs to RBI for its prior approval before their actual appointment.

9. A feedback on the quality of audit of SCAs may be given by PSBs to RBI after the annual audit of banks.

10. Other guidelines

i) In order to protect the independence of the auditors/audit firms, banks will have to make the appointments of SCA for a continuous period of three years subject to the firms satisfying the eligibility norms each year. Banks cannot remove the audit firms during the above period without the prior approval of the Reserve Bank of India.

ii) All PSBs are required to have a Board approved policy for appointment of statutory auditors and the same may be hosted on the bank’s web-site. Banks are also required to ensure that the policy framed by the Board in the matter of selection of auditors/audit firms for appointment of auditors is strictly adhered to. Further, the list of firms selected for appointment as statutory central auditors may be placed before the ACB for its concurrence before it is forwarded to RBI for final approval.

Note : A full time partner does not include a person who is:

(1) A partner in other firms.

(2) Employed full time/part time elsewhere, practicing in own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2 (2) of the Chartered Accountants Act, 1949


Annex-II

A. Norms for the empanelment of audit firms to be appointed as statutory branch auditors for public sector banks (2013-14)

Category

No. of CAs exclusively associated with the firm (Full time)

No. of partners exclusively associated with the firm (full time) (Out of 2)

Professional
staff

Bank audit experience

Standing of the audit firm

(1)

(2)

(3)

(4)

(5)

(6)

I.

5

3

8

The firm or at least one of the partners should have a minimum of 8 years experience of branch audit of a nationalised bank and/ or of a private sector bank .8 years

II.

3

 

 

 

 

 

 

 

2

6

 

The firm or at least one of the partners should have preferably conducted branch audit of a nationalised bank or of a private sector bank.6 years
(for the firm or at least one partner)

III.

2

1

4

The firm or at least one of the CAs should have preferably conducted branch audit of a nationalised bank or of a private sector bank for at least 3 years5 years
(for the firm or at least one partner)

IV.

2

2

2

Not necessary

 Appointment of statutory auditors in Public Sector Banks

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