NEW DELHI: The banking and the non-banking fraternity is not in favour of the new Reserve Bank norms on hiring statutory auditors mid-way in the financial year as it could throw up enormous operational challenges. Industry bodies are up in arms against the central bank diktat, which in its current form, requires mid-term resignation of auditors already appointed for this year and replace them with new firms.
“A significant policy measure such as this should not be applied retrospectively and a reasonable transition period for better understanding, planning and compliance is needed,” the CII said in its 13-page recommendation to the central bank, seeking deferment of the implementation of its auditor norms by at least two years.
A cool-off period of one year before the appointment (of auditors) for their independence is not practical to implement, the chamber has said. Also, the concept of joint audits should not be mandatory for NBFCs with assets of over Rs 15,000 crore. Industry body Finance Industry Development Council (FIDC) has already written to the RBI stating that the guidelines, which included a cooling period for the same auditor appointment, rotation, was inconsistent with the Companies Act, 2013.
“Besides, the implementation of the guidelines would also put constraints on management’s bandwidth
due to disruption caused of ongoing COVID-19 pandemic,” FIDC had argued in its letter. The industry body was against the joint audit system, and had said the limit on audit firms, at just 8, would put huge constraint on finding suitable auditors as there were several NBFCs having asset size more than Rs 1,000 crore.
RBI must appoint auditor
The CA Institute is keen that the appointment of statutory central auditors (SCAs) of public sector banks should be done by the Reserve Bank of India and not by the bank managements. This is one of its several suggestions on the RBI’s April 27 circular.