Statutory Central Auditors :
1.02 Most banks, especially those in public sector, appoint four or more(depending upon their size and Board decision, as per RBI guidelines) firms of chartered accountants to act jointly as statutory central auditors (SCAs).
1.03 The appointment letter sent by banks in connection with the appointment of SCAs typically contains the following:
Period of appointment.
Particulars of other central auditors.
Particulars of previous auditors.
Procedural requirements to be complied with in accepting the assignment,
e.g., letter of acceptance (the letter usually contains, inter alia, averment as to absence of disqualification for appointment, way in which the audit has to be conducted and confirmation of present name, constitution and address of the auditor), declaration of fidelity and secrecy, restriction on accepting other assignments from the bank, etc.
A statement of division of work and review and reporting responsibilities amongst joint auditors (Generally this is decided at a later stage)
Scope of assignment which includes any special reports or certificates to be given by the SCAs in addition to the main report. Presently, the SCAs have to furnish the following reports/certificates in addition to their main report:
a) Report on adequacy and operating effectiveness of Internal Controls over Financial Reporting in case of banks which are registered as
companies under the Companies Act in terms of Section 143(3)(i) of the Companies Act, 2013 which is normally to be given as an Annexure to
the main audit report as per the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the ICAI.
b) Long form audit report.
c) Report on compliance with SLR requirements.
d) Report on whether the treasury operations of the bank have been conducted in accordance with the instructions issued by the RBI from
time to time.
e) Certificate on reconciliation of securities by the bank (both on its own investment account as well as PMS Banks’ account).
f) Certificate on compliance by the bank in key areas of prudential and other guidelines relating to such transactions issued by the RBI.
g) Report on whether the income recognition, asset classification and provisioning have been made as per the guidelines issued by the RBI
from time to time.
h) Report on whether any serious irregularity was noticed in the working of the bank which requires immediate attention.
i) Certificate in respect of custody of unused Bank Receipt forms and their utilisation.
j) Authentication of capital adequacy ratio, including disclosure requirements and other ratios reported in the notes on accounts.
k) Certificate in respect of DICGC claims.
l) Report on status of the compliance by the bank with regard to the implementation of recommendations of the Ghosh Committee relating to
frauds and malpractices and of the recommendations of Jilani Committee on internal control and inspection/credit system.
m) Report on instances of adverse credit-deposit ratio in the rural areas.
n) Asset liability management.
o) Certificate on Corporate Governance in case of banks listed on Stock Exchange. In some banks this certification may not be got done by the central auditors.
p) Certification on claim of various interest subsidies and interest subvention.
Basis of computation of audit fee and scale of travel and related allowances and conveyance charges and other expense reimbursement entitlements, if any.