This article is in respect to ‘Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)’ issued by RBI vide DoS.CO.ARG/SEC.01/08.91.001/2021-22 dated 27/04/2021
The guidelines are issued for appointment/reappointment Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of
However, this article only focuses on NBFCs.
1. What shall be the applicability?
2. What shall be the transactional period / last date to follow the guidelines?
3. Whether prior approval of RBI is required for Appointment of SCAs/SAs?
4. How many minimum audit firms to be appointed?
|Entities with asset size of > 15,000 crore and above in P.Y.||Minimum Two Audit Firms (Any of the firm should not have same partner or should be not of same network)|
|Entities with asset size Bellow > 15,000 crore in P.Y.||Minimum One Audit Firm|
Here, audit firm shall mean Partnership firm and LLPs.
5. What shall be maximum number of audit firms to be appointed?
|Asset Size of the Entity||Maximum number|
|Upto >5,00,000 crore||4|
|Above > 5,00,000 crore and Upto > 10,00,000 crore||6|
|Above >10,00,000 crore and Upto > 20,00,000 crore||8|
|Above > 20,00,000 crore||12|
6. What shall be eligibility criteria for Audit Firms?
|Asset Size of Entity as on 31st March of Previous Year||Minimum No. of Full-Time partners (FTPs) associated with the firm for a period of at least three (3) years||Out of total FTPs, Minimum No. of Fellow Chartered Accountant (FCA) Partners associated with the firm for a period of at least three (3) years||Minimum No. of Full Time Partners/ Paid CAs with CISA/ISA Qualifica tion (Not Applicable to NBFCs asset size upto > 1,000 crore)||Minim um No. of years of Audit Experie nce of the firm||Minim um No. of Professio nal staff|
|Above >15,000 crore||5||4||2||15||18|
|Above > 1,000 crore and Up to >15,000 crore||3||2||1||8||12|
|Upto >1,000 crore||2||1||0||6||8|
The definition of ‘FTP or exclusive association’ will be based on the following criteria:
There should be at least one-year continuous association of Paid CAs with CISA/ISA qualification with the firm as on the date of shortlisting for considering them as Paid CAs with CISA/ISA qualification for the purpose.
Audit experience shall mean experience of the audit firm as Statutory Central/Branch Auditor of Commercial Banks (excluding RRBs)/ UCBs/NBFCs/ AIFIs. In case of merger and demerger of audit firms, merger effect will be given after 2 years of merger while demerger will be affected immediately for this purpose.
Professional staff includes audit and article clerks with knowledge of book-keeping and accountancy and who are engaged in on-site audits but excludes typists/stenos/computer operators/ secretaries/subordinate staff, etc. There should be at least one-year continuous association of professional staff with the firm as on the date of shortlisting for considering them as professional staff for the purpose.
7. What shall be the procedure of appointment of SCAs/SAs?
8. Who shall monitor and assess the independence of auditor and conflict of interest position in terms of relevant regulatory provisions, standards and best practices?
9. Whether Concurrent auditors of the Entity can be considered for appointment as SCAs/SAs?
10. What shall be the time gap or colling period for appointment as SCAs/ SAs id he is conducting non audit works as per Section 144 of Companies Act, 2013 as well as work which normally result in conflict of interest?
11. Whether Concurrent auditors of the Entity can be considered for appointment as SCAs/SAs?
Information to be submitted by the NBFCs regarding appointment of SCA/SA
1. The company has appointed M/s ______________, Chartered Accountants (Firm Registration Number ________________) as Statutory Central Auditor (SCA)/Statutory Auditor (SA) for the financial year ____ for their 1st/2nd/3rd term.
2. The company has obtained eligibility certificate from (name and Firm Registration Number of the audit firm) appointed as SCA/SA of the company for FY ____along with relevant information in the format as prescribed by RBI.
3. The firm has no past association/association for ______ years with the company as SCA/SA/SBA.
4. The company has verified the said firm’s compliance with all eligibility norms prescribed by RBI for appointment of SCAs/SAs of NBFCs.
(Name and Designation)
Eligibility Certificate from (Name and Firm Registration Number of the firm)
A. Particulars of the firm:
|Asset Size of Entity as on 31st March of Previous Year||Number of Full-Time partners (FTPs) associated* with the firm for a period of three (3) years||Out of total FTPs, Number of FCA Partners associated with the firm for a period of three (3) years||Number of Full Time Partners/ Paid CAs with CISA/ISA Qualification||Number of Years of Audit Experi ence#||Number of Profes sional staff|
B. Additional Information:
(i) Copy of Constitution Certificate.
(ii) Whether the firm is a member of any network of audit firms or any partner of the firm is a partner in any other audit firm? If yes, details thereof.
(iii) Whether the firm has been appointed as SCA/SA by any other Commercial Bank (excluding RRBs) and/or All India Financial Institution (AIFI)/RBI/NBFC/UCB in the present financial year? If yes, details thereof.
(iv) Whether the firm has been debarred from taking up audit assignments by any regulator/Government agency? If yes, details thereof.
(v) Details of disciplinary proceedings etc. against firm by any Financial Regulator/Government agency during last three years, both closed and pending.
C. Declaration from the firm
The firm complies with all eligibility norms prescribed by RBI regarding appointment of SCAs/SAs of Commercial Banks (excluding RRBs)/UCBs/NBFCs (as applicable). It is certified that neither I nor any of our partners / members of my / their families (family will include besides spouse, only children, parents, brothers, sisters or any of them who are wholly or mainly dependent on the Chartered Accountants) or the firm / company in which I am / they are partners / directors have been declared as willful defaulter by any bank / financial institution.
It is confirmed that the information provided above is true and correct.
Signature of the Partner
(Name of the Partner)