Comments
The CA Institute wants the Reserve Bank of India to direct commercial banks to confirm the bank balances of customers to external auditors directly. Banks are refusing to do this citing client confidentiality and the absence of specific directions from the RBI.
“We have requested RBI to issue a circular. The central bank will need to give directions to banks to directly give confirmation (of bank balances) to statutory auditors,” Mr G. Ramaswamy, ICAI President, told Business Line here.
A direct confirmation from an external agency like banks would help statutory auditors to conform to the auditing standards, Mr Ramaswamy said.
A cash confirmation letter is used in just about every audit of financial statements. But the current practice in India is of banks sending the confirmation letter to the customer/company concerned and not directly to the external auditor. The confirmation letter is then handed out to statutory auditors.
This led to instances of forged bank confirmation letters getting passed on to statutory auditors, who did not exercise caution and merely accepted them.
The chartered accountants community in India faced considerable scrutiny and flak following the Satyam Computers' financial fraud and the deficient audits by the company's external auditor. The deficient audits had enabled a massive accounting fraud in Satyam Computers to go undetected for several years, the US Securities Exchange Commission (SEC) said recently.
Meanwhile, Mr Ramaswamy said that RBI should spell out the format in which the commercial banks could give their bank balance confirmations to external auditors directly.
On their part, companies/customers of banks can give a standing instruction to banks that would mention the name, address and email IDs of statutory auditors.
The standing instruction should authorise banks to directly give bank balance confirmation to mentioned statutory auditors without having to inform the customers, the ICAI President said. The Institute of Chartered Accountants of India (ICAI) is the audit profession regulator.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.