Audit and Auditors of Banking Company

April 1, 2020
Audit and Auditors of banking company
SEBI Grade A Test Series

The balance-sheet and profit and loss account of a banking company have to be audited by a person duly qualified under any law to be an auditor of companies as per provisions of Section 30 of Banking Regulation Act. The audit and auditors forms an important part for maintaining stability of banking system.

Every banking company has to obtain prior approval of RBI before appointing re-appointing or removing any auditor or auditors.

Special audit of Banking Company

As per provisions of Section 30 (1B) of BR Act, RBI can order special audit of the banking company’s accounts if it is of opinion that it is necessary in the public interest or in the interest of the banking company or its depositors by a person duly qualified under any law to be an auditor of companies. ┬áThe auditor has to submit the special audit report to RBI and forward a copy to the banking company concerned. Any expenses incidental to the special audit have to be borne by the banking company

Powers and Functions of Audit and Auditors

The auditors drive its powers and functions, discharge the duties and subject to the liabilities and penalties as defined in section 227 of the Companies Act, 1956. The auditors have to prepare the audit report in a manner as specified in Companies Act. The banking company incorporated in India, the auditor is required to state additional information as stated below:

  • whether or not the information and explanation required by him have been found to be satisfactory
  • whether or not the transactions of the banking company which have come to his notice have been within the powers of the banking company
  • whether or not the returns received from branch offices of the banking company have been found adequate for the purposes of his audit
  • whether the profit and loss account shows a true balance of profit or loss for the period covered
  • any other matter which he considers should be brought to the notice of the shareholders of the company

Read Next: Submission of Returns

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