Change of rules of auditor appointment in public sector banks has reduced auditors much below the level of a watchdog, some of the members of the Association of Chartered Accountants said in a Press conference on Saturday.
The blame for the scam engineered allegedly by Nirav Modi and others in Punjab National Bank (PNB) should be laid at the door of the rules of appointing auditors rather than the men and women checking the books of account of the public sector banks, it was stated.
Contending this vice-president, Association of Chartered Accountants, Sudhindra Nath Nag said the root of the malaise lies at the system of the auditors being appointed for a period of four years by the board of directors of the bank rather than the CAG.
The auditors are in no position to rub the bank management the wrong way by posting adverse remarks for a risky advance lest their contract is terminated, Mr Nag said.
How can the financial institution which is being audited, appoint its own auditor, the association vice-president asked. Can examinees appoint their examiners, he further asked.
Earlier, the Reserve Bank of India used to appoint the auditor of a PSU bank, association secretary, Kingshuk Datta said. Moreover, it is the CAG which appoints the auditor of a public sector undertaking and not it its board of directors, he said.
The practice of bank’s board appointing auditors started way back in 2014-15 and it is endangering public money, convenor, Forum of Finance Professionals and Economists, Sunil Kumar Gandhi said.
Moreover, the number of bank branches which are being audited are only those who have made advances to the tune of 20 crores or more, he said.
More dangers lie in store for the funds deposited in banks following a 26 September, 2012 circular of ministry of finance, Mr Gandhi said.
Statutory branch audit has become routine and not much effective post implementation of Core Banking Solutions (CBS) in public sector banks.