Page 304 - CA Final PARAM Digital Book.

state the reasons for such unfavourable or qualified statement, as the case may
be. Where the auditor is unable to express any opinion on any of the items
referred to in paragraph 3 above, his report shall indicate such fact together with
reasons therefor.
Exception Report
• 2. Obligation of auditor to submit an exception report to the Bank
o (I) Where, in the case of a non-banking financial company, the statement
regarding any of the items referred to in paragraph 3 above, is
unfavourable or qualified, or in the opinion of the auditor the company
has not complied with:
- the provisions of Chapter III B of RBI Act (Act 2 of 1934); or
- Non-Banking Financial Companies Acceptance of Public Deposits
(Reserve Bank) Directions, 2016; or
- Non-Banking Financial Company – Non-Systemically Important
Non-Deposit taking Company (Reserve Bank) Directions, 2016
and Non-Banking Financial Company - Systemically Important
Non-Deposit taking Company and Deposit taking Company
(Reserve Bank) Directions, 2016.

It shall be the obligation of the auditor to make a report containing the details of
such unfavourable or qualified statements and/or about the non-compliance, as
the case may be, in respect of the company to the concerned Regional Office of
the Department of Nonbanking Supervision of the Bank under whose jurisdiction
the registered office of the company is located as per first Schedule to the Non-
Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 2016.

• The duty of the Auditor under sub-paragraph (I) shall be to report only the
contraventions of the provisions of RBI Act, 1934, and Directions, Guidelines,
instructions referred to in sub-paragraph (1) and such report shall not contain any
statement with respect to compliance of any of those provisions

QNO Exception Report Old Course – (N16E, M20M, SM21, M21E, N21M,N22M)
523.000 TITANIUM CNO—NBFC.320 New Course – (SM23)
What are the obligations of auditor to submit Exception Report to RBI in case of nonbanking financial
companies?
OR
Kammo & Co LLP, a firm of Chartered Accountants, was appointed as auditor of an NBFC. The audit work
has been completed. The audit team which was involved in the fieldwork came across various
observations during the course of audit of this NBFC and have also limited understanding about the
exceptions which are required to be reported in the audit report. They would like to understand in detail
regarding the obligations on the part of an auditor in respect of exceptions in his report so that they can
conclude their work. Briefly explain.
Answer Exception Report
Obligation of auditor to submit an exception report to the Bank.
➢ Where, in the case of a non-banking financial company, the statement regarding any of
the items referred to in paragraph 3 above, is unfavourable or qualified, or in the opinion of the
auditor the company has not complied with:
• the provisions of Chapter III B of RBI Act (Act 2 of 1934); or
• Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 2016; or
• Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking
Company (Reserve Bank) Directions, 2016 and Non-Banking Financial Company -
Systemically Important Non-Deposit taking Company and Deposit taking Company
(Reserve Bank) Directions, 2016.

It shall be the obligation of the auditor to make a report containing the details of such
unfavourable or qualified statements and/or about the non-compliance, as the case may be, in
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