LEXSTREET ADVISORS LLP
RBI DIRECTION ON STATUTORY AUDITORS

RBI DIRECTION ON STATUTORY AUDITORS

RBI regulations on auditors put banks in a spot After the RBI issued regulations for auditors, several banks and NBFCs have approached big audit firms, seeking clarity on likely implications of a clause that could bar audit firms accused of irregularities from servicing financial institutions. RBI on June 29 came out with a framework for statutory auditors & what actions could be taken against the audit firms in case of a lapse. In case of violations/lapse identified by any other regulator/enforcement agencies—judicial or government authorities—the RBI would deny audit to such firms. The rule is set to hit one of the biggest Indian audit firms that was named in an ongoing investigation by EOW. Should banks replace auditors in the upcoming AGM or can they replace them by next year is an issue. There are 3 separate regulators trying to regulate auditors. If the RBI circular is interpreted strictly, auditors of companies that were either debarred by state govt or where the promoters have escaped India won’t be able to conduct audits of banks. Similarly auditors of insolvent companies or auditors who have been implicated in other audit-related service misdemeanour could be debarred. That could mean no top firm would be able to audit any bank or NBFC.


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