PD/A-111A/2010, Dated: 18th February, 2010
As Chairman, Professional Development Committee, I am receiving a lot of queries/inquiries from not only the members but also the Council Members of the Institute; I felt it expedient to apprise you of the procedure being adopted this year for allotment of branch statutory auditors of public sector banks for the year 2009-10.
Out of the 26 public sector banks, 15 banks have opted for managerial autonomy in the matter of appointment of auditors i.e. they will be appointing the auditors on their own, directly from the panel received from Reserve Bank of India. The name of these 15 banks is as follows:
After allotment by these banks, RBI will allocate auditors to balance 11 public sector banks which have not exercised managerial autonomy in the matter of appointment of auditors; the list of which is as follows:
This entire process is expected to be completed by 1st week of March, 2010.
Moreover, I would like to bring to your kind attention that this year, offer letters have also been sent to those chartered accountants firms who are already associated with the same bank as internal auditor for appointment as statutory auditors. As per the directions of RBI, firms associated with internal assignment in the bank have to relinquish the internal assignment before accepting the statutory audit assignment during the year.
In this regard, I may invite your attention to the Code of Ethics Section 290 “Independence – Assurance Engagements”:
“A statutory auditor of an entity can not be it’s internal auditor as it will not be possible for him to give an independent and objective opinion (Para 173)”
Specifically, attention is also drawn to Para 3.4.9 of the Guidance Note on Independence of Auditors –
“A member must take care to see that he does not get into situations where there could be a conflict of interest and duty. ………….Attention of the members is drawn to the audit assignments where appointment is done by the Comptroller & Auditor General of India (C&AG), Reserve Bank of India (RBI) and such other authorities. In addition to ensuring independence during the assignment, it is also essential to avoid any situation in near future which may be interpreted as a threat to independence, as for example, he or any other partner of his firm should not accept any other assignment such as internal audit, system audit and management consultancy service within one year from the completion of audit assignment”.
Therefore, if a member accepts the statutory audit of the bank in which he was an Internal Auditor in the same financial year, he would be violating the Code of Ethics.
The issue is already under consideration with RBI.
Apart from above, I may inform that the attached FAQs also being hosted on the ICAI website for the ready reference of the members at large. Further, I may state that the abovesaid procedure is only in respect of branch statutory audits; as far as central statutory audits are concerned, all banks are already exercising autonomy for the purpose.
With warm regards,
Professional Development Committee