......The finance ministry is expected to issue a directive on the issue soon. "We are in consultation with key players. We expect to issue the directives in the next few days," the official said. The issue of public sector banks selecting auditors on their own had earlier been flagged by the Institute of Chartered Accountants of India (ICAI), which said the appointments should be done by an independent regulator, such as the Reserve Bank of India.......
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2 comments:
Auditors should strain very nerve to remain independent, should familiarise themselves thoroughly with the RBI regulations relating to income recognition, provisioning and calculation of Capital adequacy.They should not get overawed by the CMD and other top execuitves of the bank. In order that they perform their function properly, RBI would also have to blacklist them when they find subsequently, either on the basis of their Annual Inspection or otherwise, that there are serious omissions and the profit is accordingly significantly overstated.Depending on the RBI's findings, even the RBI's Nominee Director on the Board of the bank would have to be asked to give his comments and where necessary he should also face adverse observations and other action such as removal from the Board for failing to perform his role properly.Only these steps would prove that we mean business in the matter of the accounts reflecting the real financial state of affairs of the bank.
A. Chandramouliswaran.
It is not very clear when the shift from involving RBI in selection of auditors of PSBs (suggestion by ICAI) to ‘appointment of auditors’ by GOI happened. However, the temptation of finance ministry to centralize ownership, administration and decision of auditor in one place may not be consistent with the spirit of ICAI suggestion. Perhaps, RBI and CAG could be asked to provide a shortlist of ‘approved’ auditors for four or five zones from which PSBs could make appointments.
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