Monday, January 3, 2011

Internal Bank Auditor or Statutory Bank Auditor

Before taking up a Statutory Bank Branch Audit, the question which usually CA firms have to face is

"Can we take up the assignment when we are already working in the capacity of Internal Auditor of the same Branch ?"

The above question has been resolved by ICAI as under:

As per the directions of RBI, firms associated with internal assignment in the bank have to relinquish the internal assignment before accepting the statutory audit assignment during the year.

In this regard, we would like to invite your attention to the Code of Ethics Section 290 " Independence - Assurance Engagements":

" A statutory auditor of an entity can not be it's internal auditor as it will not be possible for him to give an independent and objective opinion (Para 173)".

Specifically, attention is also drawn to Para 3-4-9 of the Guidance Note on Independence of Auditors-

“A member must take care to see that he does not get into situations where there could be a conflict of interest and duty. ………….Attention of the members is drawn to the audit assignments where appointment is done by the Comptroller & Auditor General of India (C&AG), Reserve Bank of India (RBI) and such other authorities. In addition to ensuring independence during the assignment, it is also essential to avoid any situation in near future which may be interpreted as a threat to independence, as for example, he or any other partner of his firm should not accept any other assignment such as internal audit, system audit and management consultancy service within one year from the completion of audit assignment”.

Therefore if you accept the statutory audit of the bank in which you ware an Internal Auditor in the same financial year, you would be violating the Code of Ethics.

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