RBI for greater role of CAs in ensuring solvency of banks
January, 10th 2012
Seeking to enhance role of auditors in ensuring solvency of banks, the Reserve Bank of India wants chartered accountants to ask pointed questions concerning risk assessment and capital adequacy of lenders.
"Auditors will need to move beyond narrow transactions audit consideration to look at the larger picture. They will need to ask pointed and relevant questions (from banks)", RBI Deputy Governor K C Chakrabarty said while addressing a conference of ICAI on banking sector audit in Chennai recently.
In view of the problems being faced by the banking sector the world over, he said, "it is important ...that the auditors ask probing questions about the adequacy of banks' provisions and capital...there remains scope for more rigorous attention to the issues of adequacy of capital and provisions by auditors".
The annual financial inspection of banks by the RBI reveals auditing "gaps" which are needed to be bridged, he said. "The auditors need to concentrate on the audit of head office of banks as against audit of branches given the emergence of core banking, centralised record keeping and even centralised risk management".
Chakrabarty said the auditors should ask questions like "Do decisions in the bank take adequate cognisance of risk considerations?...Do banks adequately understand the risk reward characteristics of product/market/business they are entering into?"
The review of banks by auditors, he said, should transcend the ordinary to enable them to critically analyse the operations of banks they audit and recommend improvements to the internal control framework.