Monday, Jun 3, 2019

-RBI: ICAI informed on 1-year bar on S.R. Batliboi handling bank audits

MUMBAI - In a first ever move of its kind aimed at tackling lapses in bank audits, the Reserve Bank of India has barred S.R. Batliboi & Co. LLP for a year starting Apr 1, 2019, from carrying out statutory audit assignments in commercial banks.

RBI said that the enforcement action was done after spotting lapses in a statutory audit assignment carried out by the firm, but did not mention which bank the lapses were identified at and the financial year for which action had been taken. The central bank said it has communicated the action taken to the Institute of Chartered Accountants of India.

Some of the large banks that S.R. Batliboi has been associated with are Axis Bank and YES Bank, which have faced issues with large divergences in bad loan recognition and provisioning, detected in regulatory audits by the RBI.

In August 2014, Cogencis had first reported that the RBI was increasingly concerned about the manner in which bank books were being audited, especially with respect to recognising non-performing assets. The subsequent Asset Quality Review by the RBI in late 2015 led to unearthing large divergences in bad loans across the industry, prompting changes in norms on appointments and tenures of auditors. RBI had also changed the norms to make banks publicly disclose the divergences spotted by the central bank in regulatory audits.

On Jun 29, RBI had put in place an enforcement framework that take action against statutory auditors for lapses in audit of banks. The framework covers instances of divergence in asset classification and provisioning during RBI inspection compared with the audited financial statements of banks. In case of serious lapses, where the auditor is found culpable, Reserve Bank of India would bar such audit firms from taking up assignments at banks.

The action against S.R. Batliboi today indicates that as per the framework, RBI found the lapses to be serious enough to deny fresh assignments to the firm for a year long period.  End

Reported by T. Bijoy Idicheriah

Edited by Akul Nishant Akhoury

Cogencis Tel +91 (22) 6619-0000

Send comments to feedback@cogencis.com

.