ICAI unhappy with relaxation of audit norms

Last updated: 15 March 2007

The Institute of Chartered Accountants of India has taken up cudgels with the Reserve Bank of India after the banking regulator relaxed norms and spared bank branches with less than Rs 5 crore business from compulsory audit.

The RBI move has huge ramifications for accounting and audit firms in India and adversely affects their business. “Almost 35-40% of CA firms, especially the smaller ones, will be hit by the RBI directive,” said the ICAI president Sunil H Talati.

Consider this: there are as many as 70,000 bank branches in India. Of this, less than 2,000 branches account for two-thirds of the total business. And as many as 35,000-40,000 branches have a business of less than Rs 5 crore, which would mean a hit of nearly Rs 400 crore to CA professionals, considering that the average cost for audit per such brand was around Rs 1,00,000.

“It leaves the banking system open to malpractices and frauds. This is a dangerous situation,” Talati said. He rued the RBI did not even consult the institute, which regulates the audit function in India. While the ICAI has already written to the banking regulator about its arbitrary decision and its adverse fallout on the banking industry, he said the matter was also being discussed at the institute’s ongoing central council meeting.

The RBI had recently informed public sector banks that branches with advances of up to Rs 5 crore and more need not be audited as against the earlier threshold of Rs 1 crore. “Branch audits ensure that there is a check on interest expenditure, a control over cash, cheque books, etc,” Talati said.

He said it would be “improper” if the audit exemption was carried forward. “The concept is incorrect as in many branches, the advances are less but deposits are substantially more. What control and audit would you have in such situations,” he questioned.

The relaxation has, however, been welcomed by bankers, who said it would lead to faster finalisation of accounts and help in controlling costs. “It is a welcome step and will help banks finalise their accounts within a reasonable time-frame,” United Bank of India CMD P K Gupta said.

He added that it would increase the efficiency of the banking system.

Category Audit Report

Comment Share

7719 Views

Comments

ICAI unhappy with relaxation of audit norms

Recent News :

Popular News

Trending Online Classes

Browse by Category