ICAI president M. Devaraja Reddy says only 20 per cent of branches are being audited and most advances are not scrutinised.-Photo: NAGARA GOPAL
ICAI president cites ‘improper’ appointment by public sector banks, decline inquality of auditing as reasons
Autonomy given to public sector banks by the Reserve Bank of India in appointment of statutory auditors and their ‘improper’ appointment is one of several reasons for increasing non-performing assets (NPAs), said president of the Institute of Chartered Accountants of India (ICAI), M. Devaraja Reddy.
Asked to expand on the observation and the extent of impact, he said the quality of auditing had visibly come down. NPAs could be brought down by 30 to 40 per cent if there were more transparency and if the the ICAI was being kept in the loop when it came to appointing statutory auditors. He pointed out that banks now were managing with just one or two auditors to take up statutory audits against a number between six and eight auditors earlier, reducing the element of collective wisdom.
“Unlike the Bar Council and Medical Council, the ICAI is a body that gives education, awards degrees and also regulate our members,” said the 64{+t}{+h}President of ICAI and a man who has the distinction of being the first from the Hyderabad branch to ascend the office. The one other person of Telugu origin who occupied the president’s chair is Brahmaiah, of Brahmaiah & Co.
Mr. Devaraja Reddy charged bank managements with appointing auditors who would be ‘favourable’ to them, while also faulting the process of bank branch auditing. “Only 20 per cent of branches are being audited and most advances are not scrutinised,” he claimed, adding that banks were taking cover under core banking solutions when asked, at the first press conference that he addressed in his home town, on Wednesday.
Replying to a question, he expressed displeasure over the RBI apparently ‘not acting’ on ICAI’s requests of going back to the old system of the Institute appointing statutory auditors for banks. “We have even met RBI Governor Raghuram Rajan and he only said he would ‘look into the matter’. As per the autonomy in question, banks were empowered by the Government to appoint their own statutory auditors in the fiscal 2008-09.
“Ours is a proven system,” Mr. Reddy emphatically stated, recalling that when most other economies in the world were struggling, the Indian economy had proven its robustness.- THE HINDU
