Statutory Bank Audit framework
The statutory audit of banks forms an integral and important part of the control mechanism of the banking sector. Statutory Audits of Banks are governed by the Reserve Bank of India and are conducted in accordance with the Banking Regulation Act, 1949, and the guidelines / directions issued by the RBI under the said statutes from time to time. Statutory audit of a bank is compulsory and auditors are appointed by banks with prior approval of RBI, based on the panel prepared by ICAI under Section 30 of the Banking Regulation Act, 1949.
Appointment of Statutory Auditors (Statutory Central Auditors and Statutory Branch Auditors) is being done on the basis of the guidelines issued by the Government of India (GOI) / Reserve Bank of India (RBI) from time to time. ICAI will empanel the audit firms (eligible for Statutory Bank Branch Audit) based on the specified parameters as on January 1st of the relevant year and send the panel to RBI for appointment by banks. The Statutory Branch Audit, at branch level being route-level audit, plays a very crucial role which impacts the Final Audit of the Bank as well. There is extensive reporting requirement at branch levels including Branch Long Form Audit Report (LFAR) as per RBI guidelines.
CAG & the Government Audit framework
The Comptroller and Auditor General of India (CAG), who is the head of the Supreme Audit Institution of India (SAI), derives his duties and powers mainly from Articles 149 to 151 of the Constitution of India and the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971.
Under the provisions of the Constitution of India and the Act, the CAG is the apex auditor of the accounts of the Central (Union) Government and the State Governments. CAG is also responsible for the audit of local bodies (i.e. Panchayati Raj institutions and urban local bodies) under the provisions of some of the State Acts and provides technical and administrative guidance for accounting and audit functions in all States as per orders issued by the Ministry of Finance, Government of India. The reports of the CAG relating to the accounts of the Union and the States are submitted to the President / Governor of the State for being laid before the Parliament / State Legislature.
In respect of audit of Government companies, however, the Companies Act provides a special regime. Pursuant to Section 19(1) of the Comptroller and Auditor-General’s Duties, Powers and Conditions of Service Act, 1971, audit of the accounts of Government companies is conducted by the Comptroller and Auditor General (C&AG) in accordance with the provisions of the Companies Act, 2013. The Auditor (Chartered Accountant) of a Government Company is appointed or re-appointed by the C&AG. It is further stipulated that the C&AG shall have the power to:
- Direct the auditor to conduct the audit in a specified manner.
- Give instructions on any matter relating to the performance of his functions.
- Conduct himself a supplementary or test audit of the company’s accounts.
- Comment upon or supplement the audit report in such manner as he (C&AG) thinks fit.
The comments of C&AG are to be placed before the AGM along with the Auditor’s Report and also forwarded to the concerned Government as the shareholder, in accordance with Section 394 of the Companies Act, 2013.
Why CAG empanelment matters
The CAG, through empanelment with the Office of CAG, appoints Chartered Accountants / Firms of Chartered Accountants for the purpose of:
- Appointment of auditors of Companies as per Sections 139(5) and 139(7) of the Companies Act, 2013.
- Statutory Corporations / Autonomous Bodies as per the provisions of their respective Acts.
- Audit of various Government bodies, Federations, Panchayati Raj Institutions, Urban Local Bodies, etc.
Audit & assurance services we provide
Our firm, with qualified Chartered Accountants and experienced professionals, provides various audit and assurance services to:
- Banks, including Bank Branch Audits, Internal / Concurrent Audits and Stock Audit.
- Government Companies.
- Various Government bodies, Federations, Panchayati Raj Institutions, Urban Local Bodies, Municipal Corporations and Town Municipal Councils, etc.
- Any other body of the Central or State Government through their appointment process.
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