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Public sector bank boards can choose statutory auditors

Written By Admin on Monday, 1 December 2014 | Monday, December 01, 2014

New Delhi, November 30:  

Public sector bank (PSB) boards will now have a say in the selection and appointment of statutory central auditors.

In a policy change, the Finance Ministry has delegated the work of selection and appointment of statutory central auditors to individual public sector banks this year (2014-15) onwards. This move is seen as providing autonomy to the bank boards.

Hitherto, bank boards had virtually no say and were required to accept the name of the chartered accountancy firm suggested by a panel set up by the Department of Financial Services (DFS) in the Finance Ministry.

The panel comprised, among others, representative of DFS and the Chairman of Indian Banks’ Association.

Under the new framework, the Reserve Bank of India will provide to the banks the criteria for selecting the statutory central auditors.

The office of Comptroller and Auditor General (CAG) will provide the list of eligible auditors available with them and public sector banks can make the selection out of the list with prior RBI approval.

The move to allow banks to select its statutory auditor is seen as victory of sorts for bankers, many of whom were keen to get such an authority.

But, not all are happy, with some even wondering what prompted the policy change when the earlier system worked well.

“This is a surprise move, as nobody seemed to have demanded this change. The earlier system of the Finance Ministry panel deciding on the auditor was a better one,” Sunil Goyal, former CA Institute President, said.

Will hurt independence

Amarjit Chopra, Chairman of National Advisory Committee on Accounting Standards, said the latest Government move will "impair" the independence of auditors.

No statutory auditor will be bold enough to look for NPAs (non-performing assets) if his appointment squarely hinges on the senior management of the bank, Chopra said.

"I feel the earlier system of Finance Ministry-appointed panel deciding on the statutory auditor is better. It is always better to have a third party appointing the statutory auditor,” he said.

Chopra, who is a former CA Institute president, expressed concern over “hidden NPAs” not coming out in the open in the latest system.

(This article was published in the Business Line print edition dated December 1, 2014)
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