New auditors: RBI clarifies on tenure, eligibility norms

Amidst both support to as well as calls for a review of its new norms for appointing auditors by financial institutions, the Reserve Bank has stuck to its stance but has clarified certain doubts in the industry on the tenure and eligibility criteria among others. The central bank on April 27, 2021, had issued a circular on ‘Guidelines for appointment of statutory central auditors (SCAs)/statutory auditors (SAs) of commercial banks (excluding RRBs), UCBs and NBFCs (including HFCs)’. While the circular has been lapped by domestic audit firms, including their apex regulatory body ICAI, industry lobbies have called for a review saying it will increase cost and also doubting the ability of domestic audit firms to handle large accounts. Significantly, the big four–KPMG, Deloitte, EY and PwC which are all foreign entities–have been conspicuously silent so far, in spite of the fact that the new norms will hit their business hard. The RBI has reiterated that the April 27 circular was issued “with the basic objectives of putting in place ownership-neutral regulatory norms, ensuring independence of auditors, avoiding conflict of interest in their appointments, and to improve the overall quality and standards of audit in RBI-regulated entities. “These guidelines will also help streamline the procedures to appoint statutory auditors across all its regulated entities and also ensure that appointments are made in a timely, transparent and effective manner,” the central bank has reiterated in its clarifications, issued over the weekend, as a set of frequently asked questions.