The Reserve Bank of India (RBI) on Tuesday issued guidelines for appointment of statutory central auditors (SCAs) and statutory auditors (SAs) of commercial banks (excluding regional rural banks), urban co-operative banks (UCBs) and NBFCs (including Housing Finance Companies) with a view to improve the quality of financial reporting of supervised entities and to harmonise guidelines on appointment of their SAs.
This was as per the announcement made in the Statement on Developmental and Regulatory Policies issued on December 4, 2020.
“These guidelines provide necessary instructions for appointment of SCAs/SAs, the number of auditors, their eligibility criteria, tenure and rotation while ensuring the independence of auditors,” RBI said in a circular.
“The guidelines shall become applicable from FY 2021-22 and onwards. However, UCBs and NBFCs shall have the flexibility to adopt these guidelines from [the second half] of FY 2021-22 so that there is no disruption,” it said.
The revised guidelines will ensure that statutory auditors are appointed in a timely, transparent and effective manner. This is expected to improve the quality of financial reporting by the entities and also improve the audit quality, RBI said.