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The Reserve Bank of India has accepted the
recommendations of the Working Group constituted by RBI for revision of norms
for empanelment of audit firms for being considered for appointment as
statutory auditors of public sector banks/select all India Financial
Institutions and RBI with certain minor changes. The contents of letter No.
DBS.ARS.No.393/08.91.008/2003-04 dated 8th December, 2003 received from Shri
R.M. Thakkar, General Manger, Reserve Bank of India, regarding implementation
of revised empanelment norms for appointment of statutory auditors (both
central and branch) of public sector banks, select all India Financial
Institutions and RBI is reproduced hereunder : |
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Implementation of revised empanelment norms for
appointment of statutory auditors of public sector banks, select all India
financial institutions and RBI.
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1.
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As you are aware, the recommendations of the Working Group
constituted by RBI with members from RBI, MOF, C&AG, IBA, ICAI and select
public sector banks for revision of norms for empanelment of audit firms for
being considered for appointment as statutory auditors of public sector
banks/select all India Financial Institutions and RBI have been accepted by
the RBI with certain minor changes.
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2.
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It has been decided to implement these recommendations
with effect from the year 2004-05. Details of revised empanelment norms for
being considered for appointment of statutory central auditors in public
sector banks/select all India Financial Institutions and RBI, are given in
Annexure I. Revised norms for categorization of audit firms for their
empanelment as statutory branch auditors and nature of branches of 27 Public
Sector Banks for which they are eligible are also furnished in the said
Annexure.
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3.
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With a view to ensuring continuity in statutory central
audit of PSBs, select all India Financial Institutions and RBI, without any
hindrance, it has been decided that the audit firms which have not completed
their four years' term as statutory central auditor by 2003-04 will be
required to comply with the existing empanelment norms. In other words they
will be exempted from complying with the revised norms till they complete
their prescribed term of 4 years. Other important recommendations which will
be implemented from 2004-05 are given in the Annexure II.
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4.
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As indicated at item No. 7 in Annexure II it has been
decided that branch auditors panel (Part A and B) for PSBs will now be
prepared once in two years from the year 2004-05 and onwards. It will be the
base panel which will be continued for 2005-06 also. The audit firms would
require to advise public sector banks about change in the constitution of the
firm, if any, on yearly basis.
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5.
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We shall be glad if you will please arrange to take
necessary steps so as to inform your members about the above changes that are
being effected from 2004-05.
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6.
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The branch audit panel for the year 2004-05 prepared in
accordance with the revised norms may be forwarded to us well on time.
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7.
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Please acknowledge receipt.
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Annexure I
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I. Revised empanelment norms for appointment
of statutory central auditors of PSBs, select all India Financial Institutions and
RBI.
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- For the purpose of
empanelment of statutory central auditors for 27 PSBs, select all India
Financial Institutions and RBI following norms will come in force from
the year 2004-05 (existing norms will continue to apply to those audit
firms which have not completed their four year terms with the respective
PSBs, select all India Financial Institutions or RBI).
As on 1 January of the relative year
- the firm should have
minimum 7 full time Chartered Accountants, of which at least 5 should
be full time partners exclusively associated with the firm. These
partners should have minimum continuous association with the firm i.e.
one each should have continuous association with the firm at least for
15 years and 10 years, two with a minimum of 5 years each and one with
a minimum of one year. Four of the partners should be FCAs. Also at
least two of the partners should have minimum 15 and 10 years
experience in practice. In case the paid Chartered Accountant available
with the firm without any break was admitted as a partner of the said
firm at a future date, his association with the firm as a partner will
be counted from the date of his joining the firm as a paid Chartered
Accountant.
- the number of
professional staff (excluding typists, stenographers, computer
operators, secretary/ies and sub-ordinate staff etc.), consisting of
audit and articled clerks with the knowledge in book-keeping and
accountancy and are engaged in outdoor audit should be 18.
- the standing of the
firm should be of at least 15 years which would be reckoned from the
date of its constitution and availability of one full time FCA
continuously with the firm.
- the firm should have
minimum statutory central audit experience of 15 years of a public
sector bank (before or after nationalization) and/or by way of
statutory branch audit thereof or that of statutory audit experience of
a private sector bank with deposits resources of not less than Rs.500 crore.
In case any of the partner of an audit firm is nominated/elected for a
period of atleast 3 years or more on the Board of any public sector
bank then his/her such experience for a maximum period of three years
will be considered as bank audit experience, provided such experience
has not been earned by him/her concurrently i.e. when his/her firm was
assigned statutory audit of any PSBs, select all India Financial
Institutions or RBI.
- the firm should have
statutory audit experience of 5 years of the public sector undertakings
(either Central or State Government undertaking). While calculating
such experience, more than one assignment given to a firm during a
particular year or more than one year's statutory audit (audits in
arrears) assigned to the firm will be reckoned, as one year experience
only, for the purpose of counting such experience.
- atleast one partner
of the firm or its paid Chartered Accountant must possess CISA/ISA or
any other equivalent qualification
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II (a). Revised norms for categorization of
audit firms for their empanelment as branch auditors for public sector banks
and branch allocation to different categories of audit firms.
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Category
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No. of CAs exclusively associated with the firm
(full-time)
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No. of partners exclusively associated with the firm
(full time) (Out of 2)
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Professional staff
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Bank audit experience
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Standing of the audit firm
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(1)
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(2)
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(3)
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(4)
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(5)
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(6)
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I.
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5
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3
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8
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The firm or at least one of the partners should have a
minimum of 8 years experience of branch audit of a nationalized bank and/or
of a private sector bank with deposits of not less than Rs.500 crore.
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8 years
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II.
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3
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2
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6
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The firm or at least one of the partners should have
preferably conducted branch audit of nationalized bank or of a private
sector bank with deposits not less than Rs.500 crore for at least 5 years.
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6 years (for the firm or at least one partner)
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III.
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2
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1
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4
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The firm or at least one of the CAs should have
preferably conducted branch audit of a nationalized bank or of a private
sector bank with deposits not less than Rs.500 crore for at least 3 years.
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5 years (for the firm or at least one partner)
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IV.
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2 2
Even proprietorship concern without bank audit experience may be considered
as hitherto. (The proprietary concerns of Chartered Accountants with 1 paid
CA, 2 professional staff and not having any statutory branch audit
experience of a nationalized bank or of a private sector bank with deposits
not less than Rs.500 crore will be treated at par with the partnership firm
after deducting their 3 years seniority from the date of their establishment).
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2
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Not necessary
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3 years
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II (b). Criteria fixed for allocation of branches of
PSBs for the purpose of statutory branch audit among different categories
of audit firms.
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Category
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Branches, to the extent possible, to be allotted
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Part 'C'
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Branches with an outstanding advances of Rs.50 crore and
above.
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I
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Branches with an outstanding advances of Rs.10 crore and
above.
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II
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Branches with an outstanding advances of more than
Rs.150 lakh but less than Rs.10 crore and not located at rural centres.
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III & IV
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Branches with an outstanding advances of less than
Rs.150 lakh or those located at rural centres irrespective of the quantum
of advances.
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Annexure II
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Other important recommendation of the working group
which will be implemented from RBI from the year 2004-05.
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1.
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For determining inter-se seniority of experienced as
well as new audit firms a detailed marking system has been introduced.
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2.
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Experience of statutory central audit of Jammu &
Kashmir Bank Ltd. will be reckoned as public sector bank audit experience (and
not that of public sector undertaking as has been reckoned presently) with
effect from the year 2003-04 subject to certain conditions.
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3.
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For each public sector bank a team of 4, 5 or 6 audit
firms will be appointed as Statutory Central Auditors (SCAs) depending on
their assets and liabilities of previous year (audited figures) i.e. upto
Rs.50,000 crore, above Rs.50,000 crore and upto Rs.1 lakh crore and above
Rs.1 lakh crore respectively. In case of SBI the present practice of
appointing one audit firm for each of its 14 circles will continue. There
will be no change in the number of audit firms that are presently allotted
to IDBI, NABARD, EXIM Bank, NHB, SIDBI and RBI.
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4.
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With a view to help preparing second line of defense as also
infusing young blood in bank audit with effect from 2004-05 and onwards,
the available vacancies of SCAs will be filled in, in the ratio of 8:2
instead of 9:1 as is being done presently. This ratio will be subject to
revision after 3 years by RBI in the light of experience gained.
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5.
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The system of giving preference to experienced
unallotted audit firms carried over from the previous year will be
discontinued effective from the year 2004-05 and they will now be ranked
along with the other experienced firms becoming eligible during the year
subject to usual norms.
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6.
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The policy of rotation and resting for statutory branch
auditors which is presently applicable to 17 centres viz., Mumbai, Kolapur,
Pune, Solapur, Thane, Kolkata, Chennai, Coimbatore, Delhi/New Delhi, Ajmer,
Bikaner, Jaipur, Kota, Udaipur, Ahmedabad, Vadodara, and Surat has been
continued and other 16 centres viz. Hyderabad, Chandigarh, Raipur,
Faridabad, Gurgaon, Panchkula, Panipat, Sonipat, Bangalore, Ernakulam,
Indore, Nagpur, Ludhiana, Jodhpur, Bhilwara and Ghaziabad have been
included in the list of resting centres thereby raising the total of such
centres to 33 effective from 2004-05.
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7.
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Effective from 2004-05, a panel of statutory branch auditors
(Part A and B) will be prepared by the ICAI and RBI once in two years,
instead of annually, as is being done now.
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