New Delhi, April 3, 2018

CA Institute’s High Power Group on PNB scam to make this policy recommendation

The CA Institute’s High Power Group to study the “systemic issues” in the Nirav Modi fraud on PNB is set to recommend that only external firms of CAs — and not bank’s own employees — be appointed as concurrent auditors at branches of public sector banks.

“Our view is that if any concurrent audit should be done at a branch level of a public sector bank, then it should not be an employee of the bank but an external auditor (a firm of CAs) should be doing this audit,” Naveen Gupta, President, Institute of Chartered Accountants of India (ICAI), said here on Tuesday.

In a first-of-its-kind workshop for mediapersons, Gupta also said that the High Power Group, set up on February 16, was still firming up its report, which is likely to be submitted to the government in the coming days.

“It is for the government to take a final decision on whether this recommendation should be accepted or not,” Gupta said.

Ordinarily, concurrent audit in a bank is carried out by an independent firm of chartered accountants.

As per the current system of appointment of auditors in PNB, both internal and concurrent audits were carried out by PNB officials, including the concurrent audit at the scam-hit Brady House branch at Mumbai.

SB Zaware, Convenor of the High Power Group, said that letters were written to the PNB’s Audit Committee Chairman as well as the Managing Director and CEO of the bank seeking information. However, the bank had turned down the request stating that the High Power Group had no statutory or legal obligation to undertake this exercise and seek information.

Zaware also said that the Group is likely to recommend that auditor appointments in banks should happen earlier than is the case now. In the case of central statutory auditor, the appointment should be done in the first quarter of the relevant financial year of audit.

Disciplinary mechanism

Meanwhile, Gupta said that proactive steps are being taken by the CA Institute to strengthen the disciplinary mechanism this year.

The government had recently given its nod for one additional Bench of the Board of Discipline and two additional Benches of the Disciplinary Committee (of which one specific bench would be for public interest cases).

“These new Benches have already started functioning,” Gupta told BusinessLine.

Gupta also asserted that the CA Institute should not be seen as a self-regulatory organisation but one functioning as an accountancy regulator with elaborate public interest oversight from both the government and Parliamentary committees.

“This kind of model (institution created by an Act of Parliament) under which the ICAI functions does not exist anywhere in the world,” Gupta said.

[The Hindu Business Line]