Update on Branch Audit of Public Sector Banks for the Year 2011-12
As you all are aware that based on the recommendation of a Working Group set up by RBI, it was proposed to carry out changes in allotment of bank branch audits of the public sector banks by raising the minimum threshold (advances) limit of branches which will not be subject to audit by statutory auditors. It was mainly proposed that all branches having outstanding advances of Rs.20 crore and above as on March 31, 2012, need to be audited for the year 2011-12. And of the remaining (branches having outstanding less than Rs.20 crore), one fifth branches were proposed to be selected at random in such a way that all the remaining branches are audited at least once in five years. The proposals were based on the perception that there was no need of extensive branch audit in view of implementation of CBS in all public sector banks. In this regard, I am extremely happy to inform you that following our hectic and sustained drive of representations to authorities concerned and meetings with all top quarters of Indian polity and policy makers, we have been finally able to make them see merit in our stand and viewpoint on the move to reduce extensive audits of branches of Public Sector Bank. As such, the Ministry of Finance has now decided that all branches having outstanding advances of Rs.6 crore and above as on March 31, 2012, need to be audited for the year 2011-12. And of the remaining (branches having outstanding less than Rs.6 crore), one-third branches are to be selected at random in such a way that all the remaining branches are audited at least once in three years.
On behalf of the profession, I humbly thank the Government for arriving at this farsighted decision, which will ultimately strengthen the cause of corporate governance and public interest in the banking industry. I am also grateful for the understanding and support of all those whom we approached at various levels of Indian polity, particularly our Rajya Sabha Deputy Chairman CA. K. Rahman Khan, Union Finance Minister Shri Pranab Mukherjee, Union Corporate Affairs Dr. M. Veerappa Moily, Chairman of Parliamentary Standing Committee on Finance Shri Yashwant Sinha, Member of Parliament CA. Piyush Goyal, Secretary, Department of Financial Services, Shri D. K. Mittal and Reserve Bank of India Executive Director Shri Vijaya Bhaskar.
The earlier move was not at all in the long-term interest of the banks and the nation. In case, the said proposal would have been approved, the public sector banks would have got exposed to a higher risk by not covering majority number of branches and advances, thereby leaving scope for undetected material misstatements, including frauds, whereas the saving in cost would have been negligible in the hands of the banks. Further, ICAI as a regulator of the auditing profession, firmly believes that such proposal if implemented would have undermined the fair reporting on the state of affairs in public sector banks.
This favourable decision of the Ministry of Finance is an opportunity for us to prove our worth once again and show the value addition we make through the branch audit to the financial statement of Banks. Let me also inform you that we are also pursuing both the Government and the RBI to see the merit in allowing CAs to carry out branch audits of private sector banks as well. A more detailed update on this whole issue of branch audit has been published immediately after my message.
Source- ICAI Presidents Message for April 2012
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