The Hindu Business Line : CA institute wants RBI to appoint bank auditors

New Delhi, March 11 The Institute of Chartered Accountants of India (ICAI) has once again made a case for appointment of auditors for public sector banks to be centralised with the Reserve Bank of India .

Mr Uttam Prakash Agarwal, President of the accounting professionals’ body, stated this while addressing a national workshop for statutory central auditors of banks.

The suggestion effectively amounts to a plea for withdrawing the autonomy granted to public sector bank managements by the present UPA government. In Mr Agarwal’s view, the present system has the potential to undermine audit independence. He called for going back to the earlier system of centralised appointment of auditors.

For more than two decades, he said, the RBI had been doing the allocation of bank audits. He noted that this procedure had been working quite satisfactorily but now, granting managerial autonomy to banks had a direct impact on the independence of auditors Stressing the need for strengthening the mechanism for promoting such independence, he said that the Government and the RBI should take notice of this and not experiment with a tried and tested method in the name of liberalisation.

Mr Agarwal was clearly alluding to the changed ownership character of the public sector banks from one of total or near total Government ownership of public sector banks following the nationalisation, in successive doses, of banks that were until then, privately owned.

Post-1991, these banks saw fresh capital infusion/divestment of Government stake as part of restructuring of these entities with a view to enabling them take on increased private and foreign competition in the banking sector. The Government ownership is many cases is now just barely above the 51 per cent mark. It would appear that the denial of a role for private shareholders in a matter (audit appointment) does not affect materially the interests of private shareholders.

In the case of public sector undertakings, where Government holds controlling stake, the statutory auditors are selected through empanelment by the Office of the Comptroller and Auditor General of India. ICAI has no major role in the empanelment process.

On role of auditors in the wake of Satyam fiasco, Mr Agarwal said that auditors express an opinion that the financial statements made available to them by the managements, as being ‘true and fair’ and not certify them to be ‘true and correct’.

Meanwhile, the central council of ICAI has recently approved two more auditing standards under the clarity project of International Auditing & Assurance Standards Board (IAASB).

The two auditing standards were on ‘Audit Evidence’ (revised) and a new standard on “Auditors Responsibilities in relation to other information contained in Audited Financial Statements”.

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