Page 259 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
RBI guidelines.

(CNO-BA.080) Audit of Accounts & Appointment of Auditor
1. Qualification: Sub-section (1) of section 30 of the Banking Regulation Act requires that the balance sheet
and profit and loss account of a banking company should be audited by a person duly qualified under any
law for the time being in force to be an auditor of companies.
2. Authority appointing the Auditors
State Bank of India: Auditors are appointed by the Comptroller and Auditor General in consultation with the
Central Government.
Banking Companies: Auditors are appointed at the annual general meeting of shareholders. (RBI approval
mandatory before appointment)
Nationalised Banks: Auditors are appointed by the bank's Board of Directors. (RBI approval mandatory
before appointment)
Regional Rural Banks: Auditors are appointed by the bank with the Central Government's approval.
3. Joint Audit: Banks appoint multiple firms of chartered accountants as statutory central auditors (SCAs)
based on size and Board decision, following RBI guidelines. For nationalised banks, a statement detailing the
division of work and responsibilities among joint auditors is decided later.
4A. Appointment Letter: The appointment letter includes the period of appointment, details of other and
previous auditors, and procedural requirements for accepting the assignment.
4B. Letter of acceptance: Auditors must provide a letter of acceptance confirming their details, absence of
disqualification, audit methodology, and restrictions on other bank assignments.
5. Special Reports or Certificates: The SCAs' scope includes special reports or certificates in addition to the
main report. For statutory branch auditors (SBAs), the process is similar but conducted by a single firm
without division of work details.

(CNO-BA.100) Conducting an Audit
Stage I: Initial Considerations
Acceptance & Continuance:
Engagement risk assessment is vital in the audit process. It should be done before accepting an audit, as it
impacts the decision to accept and the subsequent planning.
Communication with Previous Auditor:

Clause (8): Clause (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Requirement: A chartered accountant must communicate in writing before accepting a position previously
held by another chartered accountant.

Declaration of Indebtedness:
Indebtedness: before appointing their statutory central//branch auditors, should obtain a declaration of
indebtedness i.e., a written confirmation that auditor/firm/partners/f/family members have not been declared
as wilful defaulters by any bank/financial institution.

Disqualification (Companies Act 2013): Additional declaration under Section 141 about absence of
disqualifications, including borrowing above a stipulated amount.
Internal Assignments in Banks by Statutory Auditors:
RBI Decision: Audit firms shouldn't perform statutory audit if associated with internal assignments in the
same bank within the year.
Terms of Audit Engagements:
SA 210 mandates auditors to agree with the bank on audit terms before significant fieldwork. This agreement,
typically documented in an engagement letter, clarifies roles and responsibilities, ensuring no confusion.

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