THE Institute of Chartered Accountants of India (ICAI) has opposed State Bank of India’s (SBI) decision to appoint a single audit firm for its tax audit for the current fiscal, a move which it says could compromise its quality of audit as opposed to the bank’s present practice of getting the work done by multiple firms. The ICAI, which earlier approached SBI’s top management raising its objection on the issue but did not got a favourable response, is now planning to approach the Reserve Bank of India as it fears that the move could see other banks following suit. “We will intensify our efforts to stop SBI from going ahead on the matter,” said Pankaj Jain, member ICAI council looking into the case.
SBI had recently issued a request for proposal (RFP) calling for applications from eligible firms for doing its tax audit for the fiscal 2010-11. While SBI’s decision to appoint a single firm to do its tax audit is aimed at cutting down on its total audit fees, the ICAI feels that the bank’s decision could compromise on the ‘larger public interest’.
Tax audit, which is a specialised activity that looks to find the taxability of an entity and screens through its transactions, is presently done by statutory auditors of banks. SBI has nearly 3,000 branch auditors and 14 statutory auditors. “In the Indian context, the work done by large number of firms has stood the test of time compared to other prevalent international practices,” the ICAI said in its letter to SBI Chairman OP Bhatt, opposing the bank’s move to find a single CA firm to do its tax audit.
Banks have been allocating their tax audit job to their statutory auditors, the fees in respect of which is included as part of their total audit fees. ICAI feels the present practice of getting the tax done by statutory auditors is the best option as such firms by virtue of their work on the banks’ financial audit are better equipped to do the tax audit also.
According to an official, 15% of the fees given to statutory auditors of SBI are towards the tax audit. This portion of the fees could be saved once the bank takes away the work of tax audit from the present lot of statutory auditors.