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CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Kaveri Bank's statutory auditor finds that the bank's accounts have been prepared for the year ended 31 March. Under the Banking Regulation Act, 1949, who appoints or approves the statutory auditor of a banking company, and what is the role of the auditor's report?

A banking company's statutory auditor is appointed by shareholders at the general meeting only with the Reserve Bank of India's prior approval, and the auditor reports to the members on the financial statements, reflecting RBI's regulatory control over bank audits.

  1. AThe Registrar of Companies appoints the auditor; the report goes to SEBI only
  2. BThe auditor is appointed at the general meeting with the prior approval of the Reserve Bank of India, and reports to shareholdersCorrect
  3. CThe Central Government appoints the auditor; the report goes to Parliament
  4. DThe Board appoints the auditor without any regulatory approval; the report goes to the Board only

Explanation

For banking companies, auditors are appointed by shareholders in general meeting, but only with the RBI's prior approval (for private banks; public sector banks follow RBI-led selection from a panel). The report is addressed to the members. Options A, C and D misstate the appointing authority.

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