Skip to content

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

The RBI, considering it necessary in the interest of depositors, issues a direction under Section 45MA(1A) to the auditors of NBFCs about disclosure of liabilities in the books of account. The auditor of Himalaya Credit Ltd, an NBFC, argues that only the company, and not the auditor, is bound by such directions. Which conclusion is correct?

The auditor's argument fails. Section 45MA(1A) empowers the RBI to issue directions to NBFCs or to their auditors about the balance sheet, profit and loss account and disclosure of liabilities, so auditors are bound. Listing status or ICAI's role does not change this.

  1. AThe argument is wrong, because the RBI may issue directions to NBFCs or to their auditors relating to the balance sheet, profit and loss account and disclosure of liabilitiesCorrect
  2. BThe argument is right, because RBI directions bind only the Board
  3. CThe argument is right, because only ICAI can issue directions to auditors
  4. DThe argument is wrong, but only if the NBFC is listed

Explanation

Section 45MA(1A) allows the Bank, where necessary in the public interest, depositors' interest or for proper assessment of the books, to issue directions to NBFCs or to the auditors of such companies on matters relating to the balance sheet, profit and loss account and disclosure of liabilities. Listing is irrelevant and the auditor is covered.

Did you get it right without looking?

One question tells you little. A timed set on Special Features of Audit of Banks & Non-Banking Financial Companies shows your real accuracy, how long you take and where you lose marks.

Practise Special Features of Audit of Banks & Non-Banking Financial CompaniesFree diagnostic mock

More Special Features of Audit of Banks & Non-Banking Financial Companies questions