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RBI/2017-18/29
DBS.ARS.BC.04/08.91.001/2017-18
July
27, 2017
The Chief Executive Officers
All Indian Private Sector Banks/ All Foreign Banks operating in India
Dear Sir/Madam,
Appointment
of Statutory Central Auditors (SCAs) – modification of rest period
Please refer to
DBS.No.ARS.BC.8/08.91.001/2000-2001 dated January 30, 2001 addressed to
private sector banks in terms of which, inter alia, an audit firm, subject
to its fulfilling the prescribed eligibility norms will be allowed to
continue as the SCA for a particular bank for a period of four years and,
thereafter, the said firm will be compulsorily rested for a period of two
years.
2. It has been observed in a review
of the appointment of statutory auditors in private sector/foreign banks
that, in some cases, the same audit firm was reappointed after a gap of two
years’ rest. In a few other private sector/foreign banks, the immediately
preceding statutory auditor firm was appointed on completion of the four
year tenure of the current statutory auditor. The statutory central audit
responsibility in such banks thus remained confined to two audit firms
which were appointed on a cyclical basis.
3. The Rest and Rotation Policy
in appointment of SCAs for banks has been mandated in order that audit
functions are looked at afresh, as a new team is likely to examine the
issues in a bank from a different perspective. The policy also aims to
deter the auditors and auditee from establishing a comfortable relationship
that may lead to compromise in strict adherence to audit principles.
4. To address the above and
ensure that rest and rotation policy is followed in letter and spirit, it
has been decided that, henceforth, an audit firm, after completing its four
year tenure in a particular private/foreign bank, will not be eligible for
appointment as SCA of the same bank for a period of six years.
5. The above guidelines are also
applicable to foreign banks.
Yours faithfully
(Prabhakar Jha)
General Manager
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