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 Reserve Bank of India and are conducted in accordance with Banking Regulation Act, 1949, and the guidelines/ directions issued by the RBI under the said statutes, from time to time. Statutory Audit of Bank is compulsory and auditors are appointed by RBI, in co-ordinating with ICAI.
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. C&AG will empanel the Audit Firms based on the specified parameters as on January 1st of the relevant year and send the panel to RBI. The Statutory Branch Audit, at branch level being route level audit, it plays a very crucial role and which impact 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.
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 sole 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 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, Companies Act provide a special regime. Pursuant to Section 19(1) of 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 C&AG shall have the power to (a) direct the auditor to conduct the audit in a specified manner, (b) give instructions on any matter relating to the performance of his functions, (c) conduct himself a supplementary or test audit of the company’s accounts and (d) 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 AGM along with Auditor’s Report.
The CAG through empanelment with the Office of CAG appoints Chartered Accountants/ Firm of Chartered Accountants for the purpose of:
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