Technical Guide on Audit of Internal Financial Controls in Case of Public Sector Banks (PSBs)
Assessment of internal financial controls over financial reporting is a vital responsibility of the auditor, cast by Standards on Auditing (SAs). Reporting on internal financial controls by auditor is also not a new requirement in India. The Companies Act, 2013 introduced Section 143(3)(i) which requires statutory auditors of companies (other than exempted class of companies) to report on the internal financial controls of companies. The Auditing and Assurance Standards Board of ICAI issued the “Guidance Note on Audit of Internal Financial Controls Over Financial Reporting” in 2015 to provide guidance to auditors on this reporting requirement. The Reserve Bank of India vide its communication to public sector banks in March 2020 (followed by communication in May 2020) has made reporting on internal financial controls in public sector banks mandatory for statutory auditors from the financial year 2020-21 onwards. Therefore, a need was felt for providing appropriate guidance to auditors on this new reporting requirement in case of public sector banks so that they can discharge their reporting obligation with efficacy.
I am happy that the Auditing and Assurance Standards Board of ICAI has brought out this “Technical Guide on Audit of Internal Financial Controls in Case of Public Sector Banks” for the benefit of the members. The objective of bringing out this Technical Guide is to provide a supplementary resource to auditors on the “Guidance Note on Audit of Internal Financial Controls Over Financial Reporting” while carrying out audit of internal financial controls in case of public sector banks. The Technical Guide has been written in easy to understand language.