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

The RBI is concerned about the accuracy of the books of Vishwas Housing Finance Ltd, an NBFC. In the public interest and the interest of depositors, it orders a special audit of the company's accounts relating to a specified class of transactions for a specified period and appoints CA Firm Narang & Co. for it. The company's board objects to bearing the cost. Which statement is correct under the RBI Act, 1934?

The RBI may order the special audit, appoint the auditor and direct the report to be submitted to it, and the remuneration fixed by the RBI must be borne by the NBFC. Neither shareholder approval nor RBI payment is required under section 45MA(3) and (4).

  1. AThe RBI may direct the special audit, appoint the auditor and direct the report to be submitted to it; the remuneration fixed by RBI is borne by the NBFCCorrect
  2. BThe special audit is valid only if the shareholders approve the auditor in a general meeting
  3. CThe RBI itself must pay the remuneration as it ordered the audit
  4. DThe report of the special audit must be submitted to the NBFC board, not to the RBI

Explanation

Section 45MA(3) lets the Bank order a special audit for specified transactions or periods, appoint the auditors and direct them to report to it. Under 45MA(4) the remuneration fixed by the Bank, having regard to the work and expenses, is borne by the NBFC. Shareholder approval is not needed, and the report goes to RBI.

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