HOW TO IMPROVE BANK AUDIT APPOINTMENT SYSTEM?: BY CA NITESH MORE

HOW TO IMPROVE BANK AUDIT APPOINTMENT SYSTEM?: BY CA NITESH MORE

DRAFT SUGGESTIONS TO ICAI TO DISTRIBUTE EQUALLY: BY CA NITESH MORE

EMAIL YOUR COMMENTS TO BANKAUDITPROBLEM@GMAIL.COM

PRESENT APPOINTMENT SYSTEM:

A)  Every year, ICAI forward the Bank Branch Auditors’ Panel to Reserve Bank of India. The said panel was classified into following three lists by RBI:-

i. List of auditors stationed at cooling period (applicable to 33 centres viz., Mumbai, Kolapur, Pune, Solapur, Thane, Kolkata, Chennai, Coimbatore, Delhi/New Delhi, Ajmer, Bikaner, Jaipur, Kota, Udaipur, Ahmedabad, Vadodara, Surat, Hyderabad, Chandigarh, Raipur, Faridabad, Gurgaon, Panchkula, Panipat, Sonipat, Bangalore, Ernakulam, Indore, Nagpur, Ludhiana, Jodhpur, Bhilwara and Ghaziabad.) of two years after completion of their cycle of 4 years of branch statutory audit – this list was not forwarded to any of the banks.

ii. List of continuing auditors who have yet to complete their cycle of 4 years of allotment of bank branch statutory audit – this list was forwarded by RBI to respective banks.

iii. List containing balance names has been forwarded to all the Public Sector  Banks to select their branch statutory auditors.  This implies that such applicants have got an equal chance of selection as branch statutory auditor with all the 25 public sector banks.

B). RBI forward these list to every Banks.

C) The   statutory branch auditors are selected by the respective banks.

PROBLEMS IN PRESENT SYSTEM & THEIR SOLUTIONS

A) PROBLEM: Category IV) CA firms gets very less proportion of bank audit. Many CATEGORY II) / III) Firms are not getting appointments even after 4-5 years. Many Firms are not getting appointments even after 6-7 years.

SOLUTION:  i) Bank Branch audit can be equally allotted on the basis of principal of “One Firm, One Bank Branch Audit based on size of bank branch & size of firm” or other similar principal (As discussed below under head “suggestions by CA Nitesh More” point 1 to 5) or

ii) BANKS SHOULD BE GIVEN SMALL LIST as discussed in point 6 below under head “suggestions by CA Nitesh More”.

 B) PROBLEM: There is communication from members that GANGS take considerations for getting appointments (without proof). There is communication from members that Bank staffs take considerations for getting appointments (without proof). (Kindly note that I do not certify this problem. I do not take any responsibility for communication of this problem. Kindly further investigate the problem).
SOLUTION: BANKS SHOULD BE GIVEN SMALL LIST as discussed in point 6 below.If bank is given list of CAs according to their requirements, than Bank staffs will have to appoint the auditor in that list. This will automatically reduce the chances of corruption prevailing in the system, if any.
C) PROBLEM: Practically auditors have comparatively less time to audit, say 7-8 days. Large distance of auditor & bank branch results loss of valuable time of auditor as well as loss of money of bank in transportation. More than 20 to 100 Croers of rupees are expended in transportation cost by bank which has no value, neither to auditor nor to banks. In some cases, CAs are being alleged for not able to identify NPAs, which arises due to less time given for Bank Branch Audit.
SOLUTIONS: APPOINTMENTS BY TAKING “MAPPING TECHNOLOGY” as discussed in point 7 below.

SUGGESTIONS BY CA NITESH MORE

1)      NO OF BANK BRANCHES & CA FIRMS: There are about 25,400 eligible CA Firms for Bank branch audit (Total no of CA Firms: 31000, out of which about 5,600 are not eligible) & there are about 32,000 bank branch, which require audit.

2)      DIVISION OF BRANCHES ON THE BASIS OF SIZE: All branches should be divided into category I, II, III & IV on the basis of sizes.

3)      ALLOTMENT OF AUDIT ON THE BASIS OF SIZES: Audit for Category l branch should be allotted to Category I CA firm & so on. Under existing system, category IV CA Firm has less chance to get bank audit.

4)      NO COOLING PERIOD: There should not be cooling period on the basis of place, as many firm shift to non cooling place during cooling period.

5)      PRINCIPAL OF ALLOTMENTS: Bank Branch audit can be equally divided among all firms so that all firms get bank audit, may be on the basis of principal of “One Firm, One Bank Branch Audit on the basis of size of bank branch & CA Firm” or other similar principal.

6)      BANKS SHOULD BE GIVEN SMALL LIST: Banks should be sent list on the basis of its requirements. Suppose, if a Bank has 100 total branches which require audit: CATEGORY I BRANCH: 30, CATEGORY II BRANCH: 20, CATEGORY III BRANCH: 10, & CATEGORY IV BRANCH: 40. Such bank should not be sent whole list, but a small list, say list of 100 Firms according to size of CA Firms & branch size. This will reduce the discretion of Bank to allot audit. This discretion has created so many problems under existing system, WHICH CAN BE CONTROLLED BY IMPLEMENTING THIS SINGLE SUGGESTIONS.

7)      APPOINTMENTS BY TAKING “MAPPING TECHNOLOGY”:  IT Technology can be used to appoint auditors. MAPPING COCEPT CAN BE USED TO SAVE THE TRANSPORTATION COST AS WELL AS TIME OF AUDITOR. By using mapping technology, the auditor who is near to the branch, can be appointed as branch auditor. Distance can be known in terms of km. easily & with less cost. With expenditure of even 1 Lakh, 20 to 100 crores of rupees expended by bank can be saved.    

EMAIL YOUR COMMENTS TO BANKAUDITPROBLEM@GMAIL.COM

Warm Regards 

 CA.Nitesh  More |  FCA, |