Frequently Asked Question (FAQs)

PROCEDURE FOR APPOINTMENT OF BRANCH STATUTORY AUDITORS IN PUBLIC

SECTOR BANKS (PSBs) FOR THE YEAR 2009-10

Que1: What is the Procedure for Appointment of Branch Statutory Auditors (SBAs) in Public
Sector Banks for the year 2009-10?

Ans: As per the road map given by RBI, this year i.e. for the year 2009-10, 15 Public Sector
Banks namely State Bank of India, Allahabad Bank, Bank of India, Bank of Baroda, Canara
Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Syndicate
Bank, Punjab National Bank, UCO Bank and Union Bank of India, Andhra Bank, Punjab & Sind
Bank and Bank of Maharashtra have opted autonomy in the matter of appointment of SBAs.

For guidelines for Appointment of Statutory Auditors in Public Sector Banks, pl visit the link
http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=946

Que 2: What about the other public Sector banks who have not opted to exercise autonomy in
the matter of appointment of SBAs?

Ans: For the remaining PSBs, the existing practice of RBI providing the list of audit firms by RBI
would continue during the year 2009-10.

Que 3: For how many years I should continue as an auditor of a particular bank?

Ans: Branch auditors appointed till financial year 2005-06 will be allowed to complete their
cycle of five years as branch auditors while auditors appointed from the financial year 2006-07
onwards will be allowed to continue for a period of four years.

Que 4: I have received offer from two banks of asking my willingness to take up the audit of
branches for the year ending 31st March 2009. Can I accept offer from both banks?

Ans: No, you can accept only one audit at your discretion. The consent once given by an audit
firm will be treated as irrevocable. The concept of one audit firm for one PSB will continue.

Que 5: In which cities’ cooling is applicable?

Ans: Following 33 centers are subject to the compulsory rest (cooling) for two years.

Mumbai, Kolhapur, Pune, Solapur, Thane, Kolkata, Chennai, Coimbatore, Delhi/ New Delhi,
Ajmer, Bikaner, Jaipur, Kota, Udaipur, Ahmedabad, Vadodara, Surat, Hyderabad, Chandigarh,
Raipur, Faridabad, Gurgaon, Panchkula, Panipat, Sonipat, Bangalore, Ernakulam, Indore,
Nagpur, Ludhiana, Jodhpur, Bhilwara, and Ghaziabad.
Que 6: Can I give my consent for conducting bank audit to a bank to which I am indebted?

Ans: You may be approached by the bank to which you are indebted but you should not give
your consent for conducting its audit as this will attract one of the disqualifications
(Indebtedness) of auditors as mentioned under section 226 [3(d)] of the Companies Act, 1956.

Que 7: Can I give my consent for conducting bank audit to a bank in which I am an Internal
Auditor?

Ans: As per the directions of RBI, firms associated with internal assignment in the bank have to
relinquish the internal assignment before accepting the statutory audit assignment during the
year.

In this regard, we would like to invite your attention to the Code of Ethics Section 290
“Independence – Assurance Engagements” :
“A statutory auditor of an entity can not be it’s internal auditor as it will not be possible for
him to give an independent and objective opinion (Para 173)”

Specifically, attention is also drawn to Para 3.4.9 of the Guidance Note on Independence
of Auditors –
“A member must take care to see that he does not get into situations where there could be a
conflict of interest and duty. ………….Attention of the members is drawn to the audit
assignments where appointment is done by the Comptroller & Auditor General of India (C&AG),
Reserve Bank of India (RBI) and such other authorities. In addition to ensuring independence
during the assignment, it is also essential to avoid any situation in near future which may be
interpreted as a threat to independence, as for example, he or any other partner of his firm should
not accept any other assignment such as internal audit, system audit and management
consultancy service within one year from the completion of audit assignment”.
Therefore if you accept the statutory audit of the bank in which you ware an Internal Auditor
in the same financial year, you would be violating the Code of Ethics.

The issue is already under consideration with RBI.

P.S. : In case you have further query, pl mail us at pdc@icai.in