Informist, Monday, Oct 25, 2021

--Das: RBI supervision looks at gaps in statutory audit of banks 
--RBI Das: India's audit system fairly robust 
--Engaged with auditors, ICAI to improve quality of audit 
--Auditors must examine related party, fund diversion deals 
--Auditors must identify smart accounting practices at bks 
 

MUMBAI - Reserve Bank of India Governor Shaktikanta Das today said that the banking sector regulator had noted instances where financial institutions had violated norms on dealings with related parties, and called on statutory auditors to scrutinise all such intra-group transactions to prevent their misuse.

"There have been instances of transfer of funds and/or transfer of profits to connected parties through various means, intra group loans on favourable terms, over or under-invoicing of transactions, asset transfers without fair valuation etc," Das said at an event by National Academy of Audit and Accounts.

"Auditors need to identify and thoroughly scrutinise such related or connected party transactions to ensure that there is no undue transfer of income or assets."

Das specifically mentioned that "of late" several such instances of related party transactions without following arm's length principles and established transfer pricing mechanisms had been observed.

The RBI governor's comments come at a time when the central bank has superseded the board of Srei Infrastructure Finance and Srei Equipment Finance. Separately, RBI has also debarred Srei's former auditor Haribhakti & Co LLP from undertaking any type of audit assignments in any of the entities regulated by the central bank for a period of two years from Apr 1.

On Oct 8, Informist exclusively reported that RBI decided to supersede the boards of Srei Infrastructure Finance and its subsidiary Srei Equipment Finance after its supervisory audits detected widespread evergreening of loans and related-party lending.  More