RBI Policy on eligibility, empanelment & selection of Statutory Auditors for 2014-15by CA Sandeep Kanoi |
Department of Financial Services. Ministry of Finance. Government of India vide their letter NO'. F.No.1/14/2004-BOA dated November 25, 2014 has advised us that Government has decided that the work of selection and appointment of Statutory Central Auditors (SCAs) is delegated to individual Public Sector Banks (PSBs) for the year 2014-15 and onwards.
RBI Policy on eligibility, empanelment & selection of Statutory Auditors for 2014-15
RESERVE BANK OF INDIA
www.rbi.org.in
Ref. DBS.ARS No. /08.91.008/2014-15 – Date- February 06. 2015
The President
The Institute of Chartered Accountants of India.
ICAI BHAWAN',
Post Box Number 7100,
Indraprastha Marg,
New Delhi – 110 002.
Dear Sir
Appointment of Statutory Central Auditors for the year 2014-15
Department of Financial Services. Ministry of Finance. Government of India vide their letter NO'. F.No.1/14/2004-BOA dated November 25, 2014 has advised us that Government has decided that the work of selection and appointment of Statutory Central Auditors (SCAs) is delegated to individual Public Sector Banks (PSBs) for the year 2014-15 and onwards. It has also been mentioned therein that RBI will provide the selection criteria for selecting SCAs to PSBs. In this connection, we enclose herewith selection criteria along with norms on eligibility and empanelment at Annex I for your information.
Yours faithfully,
(Prabhakar Jha)
General Manager
Encls: As above
ANNEX 1
Norms on eligibility, empanelment and selection of Statutory Central Auditors in Public Sector Banks
(i) The audit firm shall have a minimum 7 full time chartered accountants, of which at least 5 should be full time partners exclusively associated with the firm. The remaining 2 could be either exclusive partners or CA employees with a continuous association with the firm for a period of one year. These partners should have minimum continuous association with the firm i.e. one each should have continuous association with the firm at least for 15 years and 10 years, two with a minimum of 5 years each and one with a minimum of one year. Four of the partners should be FCAs. Also at least two of the partners should have minimum 15 and 10 years experience in practice. (In case the paid Chartered Accountant available with the firm without any break was admitted as a partner of the said firm at a future date, his association with the firm as a partner will be counted from the date of his joining the firm as a paid Chartered Accountant.)
(ii)The number of professional staff (excluding typists, stenographers, computer operators, secretary/ies and sub-ordinate staff etc.), consisting of audit and articled clerks with the knowledge in book-keeping and accountancy and are engaged in outdoor audit should be 18.
(iii)The standing of the firm should be of at least 15 years which would be reckoned from the date of availability of one full time FCA continuously With the firm.
(iv)The firm should have minimum statutory central audit experience of 15 years of Public Sector Banks (before or after nationalisation) and/ or by way of statutory branch audit thereof or that of statutory audit experience of a private sector bank with deposits resources of not less than Rs,500 crore. (In case any of the partner of an audit firm is nominated / elected for a period of at least 3 years or more on the Board of any public sector bank then his / her such experience for a maximum period of three years will be considered as bank audit experience, provided such experience has not been earned by him/ her concurrently i.e. when his / her firm was assigned statutory audit of any P813. select all India financial Institutions or RBI.)
(v) The firm should have statutory audit experience of 5 years of the Public Sector Undertakings (either Central or State Government undertaking).
(While calculating such experience, more than one assignment given to a firm during a particular year or more than ope year's statutory audit (audits in arrears) assigned to the firm will be reckoned, as one year experience only, for the purpose of counting such experience.)
(vi) At least two partners of the firm or its paid Chartered Accountants must possess CISA / ISA qualification.
Note- C&AG will empanel the Audit Firms based on the above parameters as on January 1 of the relevant year and send the panel to RBI.
PROCEDURE FOR APPOINTMENT OF STATUTORY AUDITORS IN PUBLIC SECTOR BANKS
Statutory Central Auditors (SCAs)
1 The number of SCAs to be appointed in PSB will be as under
i) Category "A" Banks (Large Banks viz. Bank of Baroda, Bank of India, Canara Bank, Punjab National Bank, Central Bank-of India and Union Bank of India) shall not have more than 6 SCAs. However, in case of SBI the number of SCAs shall not be more than 14.
ii) Category "B" Banks (Medium Banks viz. Allahabad Bank, Corporation Bank, Indian Bank, Indian Overseas Bank, Oriental Bank of Commerce. Syndicate Bank and UCO Bank) shall not have more than 5 SCAs, and;
iii) Category "C" Banks (Small Banks viz. Andhra Bank, Bank of Maharashtra, Dena Bank, Punjab & Sind Bank, United Bank of India, Vi)aya Bank, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore) shall not have more than 4 SCAs.
Actual numbers of SCAs to be appointed can be decided by respective boards subject to the above limit.
2. The cooling off period after completing the term of three years as SCA will be of three years.
3. The appointment of SCAs will be made on an annual basis, subject to their fulfilling the eligibility norms prescribed by RBI from time to time and also subject to their suitability
4. The Government has decided that from the financial year 2014-15, selection and appointment of SCAs is delegated to individual Public Sector Banks.
5. The procedure that will be followed for selection of SCAs by the PSBs is as under
a) The eligible list of firms furnished by C&AG every year will be examined by RBI.
b) RBI will verify that the firm has minimum bank audit experience of 15 years from its records.
c) RBI will prepare separate list of rested, continuing and non continuing eligible audit firms after excluding the name of firms who have been denied audit by RBI/C&AG and the firms who have declined the offer of appointment given by Public Sector Banks. The list of non continuing eligible audit firms will be further split up into list of experienced audit firms and new audit firms. Reserve bank will be giving Public Sector Banks i) List of Continuing Firms (i.e. the list of audit Firms who have not completed three years of audit ii) List of firms who are undergoing resticooling iii) List of eligible, non continuing audit firms in two parts viz. experienced audit firms and new audit firms.
d) The audit firms applying for empanelment as SCAs in PSBs will be required to give an undertaking that, in case of selection in PSBs, they would give up the existing assignment, if any, in Private Banks/Foreign Banks/RBI/Financial Institutions such as National Housing Bank, EX1M Bank etc. and they cannot refuse appointment of PSBs once selected.
e) The allotment of vacancies of SCA's shall be in the ratio of 60:40 between 'Experienced ' and New audit firms. As regards ratio of 60:40, banks will round the number to the nearest round number and choose auditors from the 'Experienced' and New firm list. For this purpose, an 'Experienced' firm is one which has a Statutory Central Audit experience of any of the Public Sector Banks and New Firm' is one who does not have such experience.
f) While making final selection, the PSBs will take into consideration the following points:-
i) To the extent possible, at least two audit firms having their Head Office from the same place where the banks' HO/CO is located, to be allocated
ii)Audit firms are not selected if they have retired from the same bank before going under rest
iii) The firms whose partner/s are on the Boards of PSBs are not appointed as auditors for the same PSB.
iv) In case of SBI, only experienced audit firms are considered as SCAs.
v) An audit firm is eligible to be appointed as a Central/ Branch auditor of only one PSB during a particular year.
6. Audit firm(s) selected by the PSBs after obtaining consent in writing from the audit firm will be debarred for a period of 3 years for selection if the firm refuses to accept the appointment without a reasonable ground, that is ground not to the satisfaction of RBE.
7. The above norms will be implemented during the selection process of SCAs for the year 2014-15 and onwards.
8. After selection, as per the statutory requirement, banks, in turn, are required to forward the names of the selected SCAs to RBI for its prior approval before their actual appointment.
9. A feedback on the quality of audit of SCAs may be given by PSBs to RBI after the annual audit of banks
10.Other guidelines
i) In order to protect the independence of the auditors/audit firms, banks will have to make the appointments of SCA for a continuous period of three years subject to the firms satisfying the eligibility norms each year. Banks cannot remove the audit firms during the above period without the prior approval of the Reserve Bank of India.
ii) All PSBs are required to have a Board approved policy for appointment of statutory auditors and the same may be hosted on the bank's web-site. Banks are also required to ensure that the policy framed by the Board in the matter of selection of auditors/audit firms for appointment of auditors is strictly adhered to Further, the list of firms selected for appointment as statutory central auditors may be placed before the ACB for its concurrence before it is forwarded to RBI for final approval.
Note : A full time partner does not include a person who is:
(1) A partner in other firms.
(2) Employed full time/part time elsewhere, practicing in own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2 (2) of the Chartered Accountants Act, 1949.
We submit that on account of certain judicial decisions, some kind of uncertainty coupled with unrest has cropped up amongst a particular class of professionals practising in tax laws by virtue of the licenses / registrations granted in favour of the practitioners by the central / State governments in exercise of the powers under the respective enactments to say Income Tax Act 1961 authorized issuance of license in favaour of Income Tax Practitioners and State Sales Tax law or VAT Acts have provided suitable provision for licensing the Practitioners. |
Necessity for a separate law for all Tax Practitioners in India
Ref: DYP/MVK/51/Gen
Dt.01-02-2015
To
Hon'ble Shri Arun Jaitely,
Union Minister for Finance,
Ministry of Finance, North Block,
Government of India,
NEW DELHI.
Honoured Sir,
Sub:- Tax Practitioners in our country –necessity for a separate code for all Tax Practitioners –preparation and introduction of Tax Practitioners law –requested Reg.
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Apropos the captioned subject, we respectfully submit that AIFTP is a premier apex body of professionals with head quarters at Mumbai in the State of Maharashtra comprising of senior advocates, chartered accountants, company secretaries, cost and management accountants and tax practitioners and it functions through 5 zones in the country. It has always been pioneer in securing, promoting, updating and upgradation of knowledge of law and standards amongst the professionals for which purpose since 4 decades it has been organizing various National Tax Conferences at different places in the country and in a year 4 – 5 such tax conferences would take place and the deliberations will be summed up and suggestions would be made to the respective governments for suitable amendments to the existing laws for the improvement of the economy of the country. Many of our suggestions and proposals submitted every year before annual budget were being accepted by the Government and thus we have been objectively serving the society as well as the revenue, apart from educating the professionals with updated knowledge leading to improvement in the standards.
We submit that on account of certain judicial decisions, some kind of uncertainty coupled with unrest has cropped up amongst a particular class of professionals practising in tax laws by virtue of the licenses / registrations granted in favour of the practitioners by the central / State governments in exercise of the powers under the respective enactments to say Income Tax Act 1961 authorized issuance of license in favaour of Income Tax Practitioners and State Sales Tax law or VAT Acts have provided suitable provision for licensing the Practitioners. It is no doubt true that taxation is one of the most efficacious, complexioned and complicated branch of law which requires not only particular special and skilled craft, legal knowledge but also requires lot of practical knowledge and common sense and the true spirit behind this statement is well known to the Hon'ble Minster who has been a senior counsel in the Supreme Court. As submitted earlier, the apprehension and unrest on account of certain judicial decisions has created a situation amongst the licensed Tax Practitioners that they would be soon out of employment and they will not be allowed to practice any longer. Of course such an impression or apprehension is unfounded.
In this connection, it is respectfully submitted that it is very well known established and repeatedly proven that the very Tax Practitioners either under section 288(2) of Income Tax Act, 1961 or for that matter under various provisions of the Sales Tax law / VAT law have been very honest and sincere in providing themselves as instrumental in protecting as also augmenting the revenue of the State by virtue of educating the tax payers for payment of the legitimate taxes due to the State and the treatment and facility conferred upon them by the statute has been all along very appreciative.
It is therefore submitted that the Income Tax Act identified for authorization of diversified professionals namely Advocates, Chartered Accountants, Cost and Management Accountants, Company Secretaries and Registered Income Tax Practitioners. The role normally assigned to the Tax Practitioners by the respective assessees would be to prepare the returns, draw the financial statements required to be annexed to the return, estimate the advance tax payable every quarter and also assist the assessing authorities in the process of completing assessment proceedings and also to represent the assessees before any adjudicatory authorities namely Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal and the registered Tax Practitioners as such not being advocates were never allowed to appear before the courts and their appearance is, on the converse, restricted to the authorities other than the courts.
It is respectfully submitted that taxation law is also a very essential branch of law and as such one cannot deny that tax practice by a practitioner licensed under the statute, is not a law practice , nevertheless such tax law practice cannot be put on par with other civil law or criminal law or other traditional laws and the Tax Practitioners licensed by the statute do possesses altogether different special and technical qualifications touching upon administration of commercial laws such as Income Tax, Sales Tax, VAT, Central Excise etc., However in a given case if the area oflitigation crosses the barriers of tax law involving applicability of other branches of law, certainly such diversified legal complications would always be handled and dealt with by the legal counsel alone. So long as the registered Tax Practitioners as rightly held by the Hon'ble Supreme Court do not qualify to appear before the courts, their appearance before the tribunals created under the statute will not do any kind of prejudice or loss to the revenue of the State or would not damage any other category of professionals. On the other hand, their practical experience and practical knowledge coupled with knowledge about accounting procedures would definitely assist the authorities under the statute objectively to reach and arrive at proper, correct and calculated decisions in the interest of revenue and as the revenue either from 1922 or thereafter from 1961 had never suffered any adversaries on account of the appearance of the licensed Tax Practitioners.
While the above one is the practical position, the apprehension lingering in the minds of the Practitioners requreis to be dispelled and removed by brining a separate code namely tax law practice and accordingly we All India Federation of Tax Practitioners in the interest of the lives of lakhs of registered Tax Practitioners and also in the interest of Government and State revenue humbly pray the Hon'ble Finance Minister to consider the factual matrix and our representation / suggestion to bring out a unique / unified Tax Practitioners law bill in India in consultation with the Ministry of Law and justice, Government of India so that the interest of the revenue of the Government would be protected as well as to give a quietus to the fears of the tax professionals of India. It may kindly be appreciated that such unified tax practitioners law is prevailing and existing elsewhere in the universe and the proposed legislation will not eliminate any kind of other professionals and as such it is harmless one and on the other hand it would give a kind of lease of life to the practitioners in the country under you regime to make the hands of the Hon'ble Prime Minister very strong to achieve the goals set before the present government. We also support the representation of likeminded professional brothers and associations who have been advocating in this regard.
We sincerely hope that this unique bill would set a trust to all the misgivings, apprehension and fears amongst fellow tax professionals and provide a secured and safe professional life to them and as such there is every necessity to introduce the same at earliest point of time in the present parliament session. We accordingly urge your goodselves for the bill at the earliest possible.
With Respects.
Yours faithfully,
(Dr. M.V.K. MOORTHY)
National Dy President –AIFTP
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