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Audit Firm Responsibilities and Procedures
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Audit Firm Responsibilities and Procedures

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@VerifiableMermaid

Questions and Answers

What is a requirement regarding subcontracting audit work by the firm?

  • Subcontracting is allowed only with prior bank approval.
  • The firm can subcontract to qualified chartered accountants.
  • The firm must not subcontract the audit work assigned. (correct)
  • Subcontracting is encouraged for efficiency.

    • What must the firm declare regarding credit facilities?

  • All credit facilities have turned into performing assets.
  • No credit facilities have been availed at all.
  • All credit facilities availed are compliant with RBI norms.
  • Credit facilities have not become non-performing assets. (correct)

    • What happens if the declaration by the firm about credit facilities is found incorrect?

  • The auditing firm will receive a warning.
  • The firm will be required to pay a fine.
  • The assignment will be terminated, and the firm may face liabilities. (correct)
  • The bank will not reassign the audit to another firm.

    • Under what condition does the tenure of the concurrent auditor automatically terminate?

    <p>If the branch under concurrent audit is closed or merged.</p> Signup and view all the answers

    Who else can be empanelled in addition to the qualified audit firms?

    <p>Retired officials of the bank and officers from other banks with CBS platform experience.</p> Signup and view all the answers

    Which entity's approval is required for Chartered Accountants applying for concurrent auditor positions?

    <p>The Reserve Bank of India.</p> Signup and view all the answers

    How is the appointment of concurrent auditors for various audit assignments determined?

    <p>Based on the size of the branch.</p> Signup and view all the answers

    What is the consequence of a complaint against a concurrent auditor?

    <p>The assignment may be terminated if the complaint is valid.</p> Signup and view all the answers

    What is the initial tenure of a concurrent audit assignment?

    <p>One year</p> Signup and view all the answers

    What factors are considered for the approval of audit firms and retired officials?

    <p>Experience and exposure</p> Signup and view all the answers

    What is the cooling period for a firm to become eligible for reappointment in the same audit unit?

    <p>Two years</p> Signup and view all the answers

    What is the maximum number of audit assignments awarded to a single firm at one time?

    <p>One</p> Signup and view all the answers

    Which of the following is a requirement for concurrent auditors as per the Companies Act 2013?

    <p>Self-declaration submission</p> Signup and view all the answers

    Which committee is responsible for the approval of the auditor firms?

    <p>Internal Audit Committee</p> Signup and view all the answers

    What criteria can lead to the extension of the concurrent audit beyond the initial year?

    <p>Performance of the auditor</p> Signup and view all the answers

    Under what condition might multiple branches be allotted to a single firm?

    <p>If the firm has sufficient manpower</p> Signup and view all the answers

    What is the annual timeframe in which audit assignments and renewals for Concurrent Auditors are given?

    <p>September/October</p> Signup and view all the answers

    How is the fee for Concurrent Auditors determined?

    <p>Based on the total business volume of the branch as of the previous year</p> Signup and view all the answers

    What happens to the fee for Concurrent Auditors if the total business volume of the branch increases during the audit tenure?

    <p>The fee remains the same throughout the tenure</p> Signup and view all the answers

    What is the maximum fee charged for branches with a total business volume exceeding 250 crore?

    <p>Rs. 12,000</p> Signup and view all the answers

    In what scenario can the fixed fee for Concurrent Auditors be revised?

    <p>As determined by the Board when warranted</p> Signup and view all the answers

    Which of the following is NOT a reason for the removal or delisting of Concurrent Auditors?

    <p>Negative client reviews</p> Signup and view all the answers

    What is the fee for branches with a total business volume between 50 crore and 100 crore?

    <p>Rs. 9,000</p> Signup and view all the answers

    Which additional cost must be considered alongside the fees for Concurrent Auditors?

    <p>GST</p> Signup and view all the answers

    Who has the authority to make changes or revisions to the policy?

    <p>The Board</p> Signup and view all the answers

    What is the role of the nodal officer in the audit process?

    <p>To coordinate the concurrent audit work</p> Signup and view all the answers

    What must audit units ensure regarding deficiencies identified in concurrent audits?

    <p>They should rectify them without any delay</p> Signup and view all the answers

    What type of support should the bank provide to concurrent auditors?

    <p>Initial induction and MIS support from the CBS system</p> Signup and view all the answers

    Who is responsible for ensuring follow-up on the concurrent audit reports?

    <p>Regional Officers (ROs)</p> Signup and view all the answers

    What should be noted about pending issues from previous audit reports?

    <p>They should be mentioned as persistent irregularities</p> Signup and view all the answers

    What is the purpose of providing a detailed checklist and operating guidelines to auditors?

    <p>To ensure compliance with established protocols</p> Signup and view all the answers

    What should happen once the concurrent audit assignment begins?

    <p>Auditors must be informed of changes and updates immediately</p> Signup and view all the answers

    What should an auditor do if they suspect any element of fraud during an audit?

    <p>Report the matter immediately.</p> Signup and view all the answers

    How long should an auditor avoid any professional or commercial relationship with the borrowers of the institution they are auditing?

    <p>For a period of three years.</p> Signup and view all the answers

    Which action is considered a 'don't' for auditors during an audit?

    <p>Taking advantage of their role as a concurrent auditor.</p> Signup and view all the answers

    What should an auditor refrain from doing regarding the sharing of audit observations?

    <p>Share observations only with the concerned parties in the bank.</p> Signup and view all the answers

    What is an auditor's responsibility regarding the submission of audit reports?

    <p>They must ensure that the report is submitted without unnecessary delays.</p> Signup and view all the answers

    What must an auditor not do in relation to the auditee's personnel?

    <p>Issue orders directly to the auditee's employees.</p> Signup and view all the answers

    Which of the following actions is appropriate for auditors while conducting an audit?

    <p>Maintain courtesy and professionalism.</p> Signup and view all the answers

    What behavior is unacceptable for auditors in relation to their audits?

    <p>Discussing audit findings with unauthorized persons.</p> Signup and view all the answers

    Study Notes

    Audit Firm Responsibilities

    • Audit work must not be subcontracted to outside firms or individuals, regardless of their qualifications.
    • Firms must declare any credit facilities availed by themselves or their partners that could be non-performing according to RBI norms; false declarations will lead to termination of assignments.
    • Complaints regarding concurrent auditors' referral of credit proposals for personal gain are not tolerated.

    Termination Conditions

    • Termination of concurrent auditor assignments occurs if the branch is closed, merged, or removed from concurrent audit responsibilities.
    • No obligation for the bank to provide alternate branches for terminated auditors.

    Appointment of Concurrent Auditors

    • CA firms must be on the RBI-approved panel and assignments are based on branch size.
    • Internal Audit Committee approves auditor appointments based on experience, resource availability, and location.
    • Monthly fees are determined by the Board.

    Tenure and Reappointment

    • Initial tenure of concurrent audits lasts one year, extendable by two more years based on performance.
    • A two-year cooling period applies for firms seeking reappointment in the same audit unit.
    • Only one audit assignment per firm can be awarded at a time, though multiple branches may be combined under one assignment if resources permit.

    Fee Structure

    • Fees based on branch total business volume range from ₹7,000 to ₹12,000.
    • Fees remain fixed throughout the audit tenure unless there is a complete business transfer.

    Policy Review and Changes

    • Fees for concurrent auditors will be reviewed as needed by the Board.
    • The policy is subject to review based on regulatory changes and operational experiences.

    Standard Operating Procedure

    • Each audit unit needs a nodal officer for coordination and prompt resolution of deficiencies.
    • Auditors receive checklists and guidelines to stay updated with relevant changes.
    • Support is given through initial induction and management information systems (MIS) from the CBS platform.

    Reporting Responsibilities

    • Pending issues should persist in reports until resolved; any suspected fraud or negligence must be immediately reported.
    • Auditors must maintain confidentiality regarding audit findings.

    Professional Conduct and Restrictions

    • Auditors must avoid any commercial ties with borrowers for at least three years.
    • Prohibitions exist against using auditor status to solicit clients or customers of the bank.
    • Auditors cannot represent clients post-audit term for a minimum period of three years.
    • Sharing audit observations outside authorized personnel is forbidden, and auditors must maintain professionalism during audits.

    Submission and Timeliness

    • Timely submission of audit reports is critical, and delays are not acceptable.

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    Description

    Explore the critical responsibilities of audit firms, including their duty to avoid subcontracting and the consequences of false declarations. Understand the conditions for termination and the appointment process of concurrent auditors according to RBI norms.

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