Introduction: The Professional Development Committee at The Institute of Chartered Accountants of India brings an important announcement regarding the clarification of guidelines issued by the Reserve Bank of India (RBI) for the appointment of SCAs/SAs in Commercial Banks, UCBs, and NBFCs, including HFCs. The announcement addresses concerns and queries from Chartered Accountants and firms, specifically focusing on the interpretation of point no. 6.4 related to the independence of auditors.
Detailed Analysis: The RBI Circular dated April 27, 2021, outlines “Guidelines for the Appointment of SCAs and SAs of Commercial Banks (Excluding RRBs), UCBs, and NBFCs (including HFCs).” The committee has received communication from the RBI acknowledging the widespread queries from Chartered Accountants and firms seeking clarification regarding the applicability of point no. 6.4.
Point no. 6.4 emphasizes the necessity of a one-year time gap between non-audit works, such as internal assignments and special assignments, performed by SCAs/SAs for the entities or any audit/non-audit works for their group entities. The query specifically pertains to concurrent audit assignments and whether they fall under the purview of point no. 6.4 in terms of assessing and establishing the independence of auditors.
In response, the RBI has clarified that concurrent audit assignments indeed fall within the framework of the mentioned Para 6.4 of the Circular dated April 27, 2021. This clarification holds significant implications for Chartered Accountants and audit firms involved in concurrent audit assignments for entities falling under the specified categories.
Conclusion: Members of The Institute of Chartered Accountants of India are urged to take note of the RBI’s clarification regarding the applicability of Para 6.4 to concurrent audit assignments. It is imperative for members to ensure compliance with the stipulated guidelines in order to maintain the independence of auditors and adhere to the RBI’s framework for SCAs/SAs appointments.
This announcement underscores the commitment of the Professional Development Committee to keep members informed about crucial updates in the regulatory landscape, ensuring that they navigate their professional responsibilities with clarity and adherence to best practices. Stay informed, stay compliant!
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Professional Development Committee
The Institute of Chartered Accountants of India
28th December, 2023
Announcement
Clarification regarding Guidelines issued by RBI for Appointment of SCAs/SAs of Commercial Banks (Excluding RRBs), UCBs and NBFCs (including HFCs)
As members are aware, the RBI has issued a Circular dated April 27, 2021, in respect of “Guidelines for the Appointment of SCAs and SAs of Commercial Banks (Excluding RRBs), UCBs, and NBFCs (including HFCs)”. We have received a communication from RBI wherein it is informed that the RBI and the banks have been receiving queries from the Chartered Accountants/Chartered Accountants firms seeking clarification as to whether concurrent audit assignments would also fall under the framework of point no. 6.4 while assessing and establishing the independence of auditors.
Point no 6.4 states as follows:
6.4 The time gap between any non-audit works (services mentioned at Section 144 of Companies Act, 2013, Internal assignments, special assignments, etc.) by the SCAs/SAs for the Entities or any audit/non-audit works for its group entities should be at least one year, before or after its appointment as SCAs/SAs. However, during the tenure as SCA/SA, an audit firm may provide such services to the concerned Entities which may not normally result in a conflict of interest, and Entities may take their own decision in this regard, in consultation with the Board/ACB/LMC.”
RBI has clarified that the Concurrent audit assignments would also fall under the framework of above-mentioned Para 6.4 of Circular dated April 27, 2021.
Members are requested to kindly note the same and ensure compliance of the same.
