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CA Final · Advanced Auditing, Assurance and Professional Ethics · Special Features of Audit of Banks & Non-Banking Financial Companies

During the statutory audit of Meru Housing Finance Ltd, an NBFC, a partner of the audit firm is asked by a friend working at a competitor NBFC to share the Reserve Bank's inspection findings on Meru, which the firm obtained while discussing the inspection report with management. Section 45NB treats information obtained through audit or inspection by the Bank as confidential. What is the correct conclusion for the auditor?

The auditor should decline. Information obtained through the Reserve Bank's audit or inspection is confidential under Section 45NB, and none of the listed exceptions, such as disclosure with the Bank's previous permission or as required by law, applies to an informal request from a friend.

  1. ADecline to disclose; the information is confidential and none of the permitted exceptions, such as disclosure with the Bank's permission, applyCorrect
  2. BDisclose it, because the competitor is also an NBFC and all NBFCs may freely share inspection findings
  3. CDisclose it if the friend promises to keep it private
  4. DDisclose it, as it relates to a public company

Explanation

Section 45NB(1) makes information obtained through audit or inspection by the Bank confidential. The exceptions in 45NB(2) cover disclosure with the Bank's previous permission, anonymised consolidated publication by the Bank, and disclosure among NBFCs in accordance with customary practice or as required by law. A personal request does not fall in any of these, and the Code of Ethics duty of confidentiality also applies.

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