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Action taken by ICAI on PNB matter- An Update

The ICAI has also set up High Power Group to study the issues in PNB matter and suggest remedial measures and improvements in the banking system. The Group has written to various officials of the bank including the Chairman of the Audit Committee and a member to provide relevant information in the matter so as to help the Group to understand the systemic issues.

Press Release – Action taken by ICAI on PNB matter-An Update – (09-03-2018)

The Institute of Chartered Accountants of India
Press Release

The Institute of Chartered Accountants of India (ICAI) is a statutory body set up by the Parliament of India by enacting the Chartered Accountants Act, 1949 for regulating the profession of Chartered Accountants.

Immediately after the report of major fraud in Punjab National Bank coming out in the various Newspapers, the ICAI has taken suo moto cognizance of media reports and as a proactive step has sought assistance by writing to various investigating arms of Government including Central Bureau of Investigation (CBI), Enforcement Directorate(ED), Security Exchange Board of India, requesting them to provide requisite details of their investigation.

The ICAI has also set up High Power Group to study the issues in PNB matter and suggest remedial measures and improvements in the banking system. The Group has written to various officials of the bank including the Chairman of the Audit Committee and a member to provide relevant information in the matter so as to help the Group to understand the systemic issues. The High Power Group appointed by ICAI is waiting for required documents / information from PNB officials to find out the systemic loopholes and it is worthwhile to note that the Group recommendations are dependent on availability of documents / information.

Ordinarily concurrent audit in bank is carried out by Independent firm of Chartered Accountants. As per current system of appointment of auditors in PNB, Internal and Concurrent Audit was carried out by the PNB officials. Though number of Government Agencies are trying to identify the culprit, yet it seems that prima facie the fraud is done by collusion of many persons, inside and outside the system.

The RBI in November, 2016, in order to strengthen the banking system, instructed all the banks to link their SWIFT System with CBS but due to non-linkage of two systems, PNB fraud remained undetected and LOUs issued and unauthorised LCs beyond sanctioned limit remained outside the books and CBS of PNB and therefore could not be detected by many supervisory layers.

Categories: Fema / RBI

View Comments (4)

  • My suggestion to the Institute to direct its members to revisit their Audit reports to verify whether their Bank clients have PNB's type LUT/other outside books liabilities unreported.

  • The RBI has directed PNB to link CBS and SWIFT systems. The auditor or any supervisor cannot say that the issuing of LOU was not recorded in the books and hence could not be verified .It is duty of the auditor to verify the internal controls secondly if the beneficiary had encashed PNB would have paid that money to the beneficiary bank and that payment would be through the books only and that should have been noticed by the Auditors

  • as i understand in PNB as well as in many other Banks, there is a set questionnaire for concurrent audits and their responsibility must be not more than that as the audit commences from the trial balance of the bank (named differently by each bank) for relevant period

    the issue is how it went unnoticed by various agencies carrying out specific FOREX audit at various levels and what steps authorities have taken to fix their accountability for gross negligence and/or complicity.
    this issue must have been addressed as these agencies very well know or at least ought to know that this type of frauds are easily possible in case of contingent liabilities, if the instrument of creating contingent liabilities is not properly controlled. this is one reason for passing contra entries in banks unlike commecial organisations where it forms part of 'notes to accounts' only

  • ICAI has a useless peer review process over its members

    Thereforre entire blame is on ICAI and its setup at Delhi to come clean on these kind of issues

    Revisit their own peer review audit process ( stop auditee preparing the peer review audit report which then simply signed by auditor CA)
    What is this ??????

    Stop such useless gimmicks which alone can save ICAI lot of trouble

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