Tag: Guidelines Statutory Auditors appointed

18 Auditors Penalized and Debarred for Audit Lapses

The National Financial Reporting Authority (NFRA) has imposed penalties on 18 auditors and also debarred them for varying periods for lapses with respect to audits of various branches of housing finance company DHFL.

Penalties totalling Rs 18 lakh or Rs 1 lakh each has been imposed on the auditors for their professional misconduct, according to 18 separate orders passed by the regulator.

Also, they have been debarred for a period of six months to one year from “being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate”.

Out of the 18 auditors, 4 have been debarred for 6 months and the remaining 14 auditors have been restrained for 1 year.

Following media reports of alleged siphoning of public money of around Rs 31,000 crore and the Enforcement Directorate’s reported action in April 2020 on an alleged banking fraud of about Rs 3,700 crore by the promoter/ directors of DHFL, the regulator suo-motu initiated an Audit Quality Review (AQR), as per the orders.

The review was to probe into the role of the Statutory Auditors of DHFL for FY 2017-18, the year in which the alleged fraud was primarily stated to have occurred, as per the NFRA orders dated September 29.

The NFRA’s probe found that there were violations by these auditors in their roles as Engagement Partner (EP) in the audit of DHFL branches.

During the AQR, the watchdog also found that 33 EPs or branch auditors had signed the independent branch auditors report for nearly 250 branches of DHFL but none of the appointments of these EPs were approved at the company’s annual general meeting.

AI’s Impact on Auditors and Accountants: A Finance Secretary’s Perspective

Union Finance Secretary and senior IAS officer T.V. Somanathan on Saturday said Artificial Intelligence (AI) can replace the work being done by auditors and accountants.

He was delivering the CA S. Hariharan memorial lecture here.

Somanathan said that AI has specific implication for the economy and added that automation for business process can be much more potent with Artificial intelligence than it was without it.

He said that this can quite a bit replace the work that was being done by auditors and accountants.

The finance secretary also said that he can foresee an expansion of credit lending in the Indian economy.

T.V. Somanathan said, “In India credit to the private sector is approximately 55 per cent of the GDP while in China it is above 180 per cent. I would not say the Chinese level is healthy or desirable .. it is not. This is not a goal we should see, but one can argue that India’s level is too low. It has

to rise to 100-120 per cent of the GDP which will accelerate investment and growth.”

He said, “Projects that would not start will start if they get enough credit. But the challenge is to expand the volume of credit without bad debts which we politely call as NPA’s. This expansion of credit will expand demand for accountants.

The Union finance secretary also said that in the future to come the number of Income tax payers in India will increase continuously for many years to come. He said that he could see an annual expansion of 6-7 per cent in the number of Income tax payers and this would increase the demand for good accountants.

RBI Issues Guidelines for Appointment of Statutory Central Auditors (SCAs)/ Statutory Auditors (SAs) of Banks

Issue of Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including Housing Finance Companies)

The Reserve Bank of India had announced in the ‘Statement on Developmental and Regulatory Policies’ issued as part of the Monetary Policy Statement dated December 4, 2020 that with a view to improve the quality of financial reporting of Supervised Entities (SEs), harmonised guidelines on appointment of Statutory Auditors of Commercial Banks (excluding RRBs), Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Finance Companies (NBFCs) will be issued.

2. Accordingly, a Circular on ‘Guidelines for Appointment of Statutory Central Auditors (SCAs)/ Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)’ has been issued today. These Guidelines provide necessary instructions for appointment of SCAs/SAs, the number of auditors, their eligibility criteria, tenure and rotation, etc. while ensuring the independence of auditors. The Guidelines shall become applicable from FY 2021-22 and onwards. However, UCBs and NBFCs shall have the flexibility to adopt these guidelines from H2 of FY 2021-22 so that there is no disruption.

3. The revised Guidelines being issued will ensure that Statutory Auditors are appointed in a timely, transparent and effective manner. This is expected to improve the quality of financial reporting by the aforesaid Entities and also improve the audit quality.

(Yogesh Dayal)     
Chief General Manager

CLICK HERE TO DOWNLOAD PDF