{"id":6956,"date":"2021-07-19T06:54:45","date_gmt":"2021-07-19T06:54:45","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=6956"},"modified":"2021-07-19T06:54:48","modified_gmt":"2021-07-19T06:54:48","slug":"appointment-of-statutory-auditors-of-nbfcs","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/appointment-of-statutory-auditors-of-nbfcs\/","title":{"rendered":"RBI Notification for Appointment of Statutory Auditors of NBFCs &#038; Banks"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Reserve Bank of India has recently announced the notification for the appointment of statutory auditors of NBFCs and banks. The guidelines for the selection of statutory auditors of commercial banks, UCBs (Urban Corporative Banks) and NBFCs (Comprising <strong><a href=\"https:\/\/swaritadvisors.com\/housing-finance-company-registration\" class=\"text-primary\">Housing Finance Companies<\/a><\/strong>) would be appropriate for the Financial Year 2021-22 and onwards. Scroll down to check more information regarding the RBI notification for the appointment of statutory auditors of NBFCs (<strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\">Non-Banking Financial Companies<\/a><\/strong>) and banks.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a4e4f4101785\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a4e4f4101785\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/appointment-of-statutory-auditors-of-nbfcs\/#Applicability_of_the_Notification\" title=\"Applicability\nof the Notification\">Applicability\nof the Notification<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/appointment-of-statutory-auditors-of-nbfcs\/#RBIs_Prior_Consent\" title=\"RBI\u2019s Prior\nConsent\">RBI\u2019s Prior\nConsent<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/appointment-of-statutory-auditors-of-nbfcs\/#What_are_the_Criteria_for_the_Appointment_of_Statutory_Auditors_or_Statutory_Central_Auditors\" title=\"What are the Criteria for the Appointment of Statutory Auditors or Statutory Central Auditors?\">What are the Criteria for the Appointment of Statutory Auditors or Statutory Central Auditors?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/appointment-of-statutory-auditors-of-nbfcs\/#Auditors_Independence\" title=\"Auditors\u2019\nIndependence\">Auditors\u2019\nIndependence<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/appointment-of-statutory-auditors-of-nbfcs\/#Procedure_for_Appointment_of_Statutory_Central_Auditors_or_Statutory_Auditors\" title=\"Procedure for Appointment of Statutory Central Auditors or Statutory Auditors\">Procedure for Appointment of Statutory Central Auditors or Statutory Auditors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/appointment-of-statutory-auditors-of-nbfcs\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Applicability_of_the_Notification\"><\/span>Applicability\nof the Notification<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nguidelines of the RBI (Reserve Bank of India) relating to the appointment of\nstatutory auditors should have to apply to the commercial or traditional banks\n(excluding RRBs), UCBs and NBFCs (including HFCs) for the financial year\n2021-22 and onwards. But, non-deposit taking Non-Banking Financial Companies\nwith a size of the asset below Rs. 100 crores can continue with their present\nprocedure.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"RBIs_Prior_Consent\"><\/span>RBI\u2019s Prior\nConsent<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>UCBs\n(Urban Corporative Banks) and commercial banks (excluding RRBs) will have to\ntake prior consent of the RBI (Reserve Bank of India) for the appointment of\nstatutory auditors or statutory central auditors; however, they should notify\nthe Reserve Bank regarding the appointment of SAs or statutory central auditors\nfor each year via a certificate in Form A in one month of such appointment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Criteria_for_the_Appointment_of_Statutory_Auditors_or_Statutory_Central_Auditors\"><\/span>What are the Criteria for the Appointment of Statutory Auditors or Statutory Central Auditors?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You\ncan check the eligibility criteria for Appointment of Statutory Auditors or\nStatutory Central Auditors below:<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  Company\u2019s Asset Size on March\n  31 of Last Year\n  <\/td><td>\n  Minimum Number of FTPs (Full\n  Time Partners) linked with the Company for at least three years\n  <\/td><td>\n  Out of total Full Time Partners,\n  Min. No. Of CA partners linked with the Company for at least three years\n  <\/td><td>\n  Minimum number of Paid CAs or\n  FTPs with ISA or CISA Qualification\n  <\/td><td>\n  Minimum Number of Years of\n  Company\u2019s Audit Experience\n  <\/td><td>\n  Minimum Number of\n  Professional Staff\n  <\/td><\/tr><tr><td>\n  Above Rs. 15000 crore\n  <\/td><td>\n  5\n  <\/td><td>\n  4\n  <\/td><td>\n  2\n  <\/td><td>\n  15\n  <\/td><td>\n  18\n  <\/td><\/tr><tr><td>\n  Above Rs. 1000 crore and up\n  to Rs. 15000 crore\n  <\/td><td>\n  3\n  <\/td><td>\n  2\n  <\/td><td>\n  1\n  <\/td><td>\n  8\n  <\/td><td>\n  12\n  <\/td><\/tr><tr><td>\n  Up to Rs. 1000 crore\n  <\/td><td>\n  2\n  <\/td><td>\n  1\n  <\/td><td>\n  1\n  <\/td><td>\n  6\n  <\/td><td>\n  8\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong>Additional Consideration<\/strong><\/p>\n\n\n\n<ul><li>The companies should make sure that the appointment of Statutory Auditors (SA) or Statutory Central Auditors (SCAs) is in line with the ICAIs code of ethics or any other benchmarks adopted and doesn&#8217;t give increase to any conflict of interest;<\/li><li>For the audit of Urban Corporative Banks, the Statutory Auditors of the firm should have a fair knowledge of the working of the co-operative sector and should have knowledge of the language of the state where the Urban Corporative Banks or its branch is located;<\/li><li>Such an audit firm shouldn\u2019t be under debarment by any governmental agency, ICAI, <strong>NFRA<\/strong><sup><a href=\"https:\/\/nfra.gov.in\/\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup>, RBI or other financial regulators;<\/li><li>In the case where any partner of CA firm is a director in any PSB, such firm will not be assigned as SAs or SCAs of any PSB. In case any partner of a CA firm is a director in any company, then such firm will not be assigned as SAs or SCAs of any of the group companies of that Company;<\/li><li>The auditors for companies with an asset size of Rs. 1000 crores should have the capability &amp; experience in deploying computer-supported audit tolls and techniques and generalised audit software. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Auditors_Independence\"><\/span>Auditors\u2019\nIndependence<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nRBI (Reserve Bank of India) said that the board&#8217;s audit committee should\nexamine and assess the auditors&#8217; independence and conflict of interest\npositions in terms of significant regulatory provisions, standards, and best\npractices for commercial banks and Non-Banking Financial Companies.<\/p>\n\n\n\n<p>In\ncase of any concern with the entities\u2019 management, like non-availability of\ninformation or non-co-operation by the management, the Statutory Central\nAuditors or Statutory Auditors can approach the entity&#8217;s board\/LMC\/ACB under\nintimation to RO\/SSM concerned of the Reserve Bank of India.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_for_Appointment_of_Statutory_Central_Auditors_or_Statutory_Auditors\"><\/span>Procedure for Appointment of Statutory Central Auditors or Statutory Auditors<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li>The companies would select at\nleast two audit firms for every vacancy of Statutory Auditors or Statutory Central\nAuditors so that even if the firm at 1<sup>st<\/sup> preference is found\ndeclines or ineligible appointment, the firm at second preference could be\nassigned, and the process of appointment does not get delayed. But, in case of\nreappointment by Urban Corporative Banks or commercial banks until completion\nof tenure of continuous terms of three years and send the name of multiple\naudit firms to the Reserve Bank of India.<\/li><li>Banking entities should\ncontinue to follow existing procedures followed by them for choosing SAs or\nSCAs. In order of preference, they will place selected audit firms&#8217; names\nbefore their ACB or LMC for selection as SAs or SCAs. On selection of SCAs or\nSAs by bank in discussion with their LMC or ACB and after examining their\ncompliance with the eligibility necessities offered by the Reserve Bank of\nIndia, the bank will seek the prior consent of RBI for SAs or SCAs appointment.<\/li><li>The Urban Corporative Banks\nwill place the name of the selected audit firms before their board for\nselection as Statutory Auditors or Statutory Central Auditors. On selection of\nSCAs or SAs by Urban Corporative Banks in discussion with their board and after\nexamining their compliance with the eligibility necessities offered by the\nReserve Bank of India, the UCBs will take the prior consent of RBI for SAs or\nSCAs appointment.<\/li><li>The companies will get a\ncertificate with significant information from the audit firms that are\nconcerned to be assigned as SAs or SCAs by the Company to the effect that the\naudit firm complies with the norms of RBI. The certificate should be signed by\nthe audit firm&#8217;s primary partners that are concerned to be assigned as SCAs or\nSAs by the Company.<\/li><li>The banks (excluding RRBs) or UCBs\n(Urban Corporative Banks) should examine the audit firms&#8217; compliance to the\neligibility norms of the Reserve Bank of India and, once being content with the\neligibility, recommend the names with a certificate mentioning that the audit\nfirm proposed to be assigned as SA or SCA complies with all eligibility\nnecessities.<\/li><li>During approaching the RBI for\nprior consent, commercial banks (excluding RRBs) or UCBs (Urban Corporative\nBanks) should specify their total asset size; forward a copy of ACB or Board\nresolution suggesting names of audit firms for the appointment of SCAs or SAs\nin the order of preference.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The guidelines of the RBI concerning the appointment of Statutory Auditors has also specified that to safeguard the independence of audit firms or auditors, companies must appoint SAs or SCAs for the continuous-time of three years, subject to the firms satisfying the legibility necessities each year. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/rbi-provides-the-risk-based-internal-audit-rules-to-hfcs\/\">RBI Provides the Risk Based Internal Audit Rules to HFCs<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Reserve Bank of India has recently announced the notification for the appointment of statutory auditors of NBFCs and banks. The guidelines for the selection of statutory auditors of commercial banks, UCBs (Urban Corporative Banks) and NBFCs (Comprising Housing Finance Companies) would be appropriate for the Financial Year 2021-22 and onwards. Scroll down to check [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":6957,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[58,56],"tags":[760],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/6956"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=6956"}],"version-history":[{"count":7,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/6956\/revisions"}],"predecessor-version":[{"id":6965,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/6956\/revisions\/6965"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/6957"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=6956"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=6956"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=6956"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}