Reserve Bank of India may punish statutory auditors for lapses in conducting banks’ statutory audit which includes barring them from taking fresh audit assignment. Decision of punishing the auditors came in to the pictures after significant divergence found in asset classification in almost all leading banks including ICICI Bank and Axis Bank.
RBI further said the quantum of punishment will depend on the magnitude of divergence from the prescribed norms and the auditors would be provided sufficient hearing before action is taken.
The list of divergence includes providing wrong certifications, giving wrong information in the Long Form Audit Report and any other misconduct by auditors in respect of their bank audit assignments.
RBI would not approve the appointments of tainted auditors for undertaking statutory audit in commercial banks for a specified period if auditors whose audit quality or conduct is not found satisfactory.
The impact of the violation would be assessed in terms of impact on a bank’s capital to risk weighted assets ratio (CRAR), and in case of other lapses, the impact would be calculated as the effect on the bank’s business area concerned.