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

The RBI orders a special audit of specified transactions of Vindhya Finance Ltd, an NBFC, in the public interest, and appoints Mr. Rao, a chartered accountant, as the special auditor. Which statement correctly reflects Section 45MA(3) and (4)?

Mr. Rao reports to the RBI, and the RBI fixes his remuneration, which the NBFC must bear. Section 45MA(3) and (4) let the Bank order a special audit of specified transactions or periods, appoint the auditor and direct submission of the report to itself.

  1. AMr. Rao must submit his report to the Bank, and his remuneration is fixed by the Bank and borne by the NBFCCorrect
  2. BMr. Rao must submit his report to the company's shareholders, and the Bank pays his fee
  3. CMr. Rao's remuneration is fixed by the NBFC's Board and the report goes to the Audit Committee
  4. DThe special audit must cover all transactions of the company for the entire year

Explanation

Under Section 45MA(3), the Bank may order a special audit relating to specified transactions, classes of transactions or periods, appoint the auditor and direct that the report be submitted to it. Under 45MA(4), the Bank fixes the remuneration having regard to the work and expenses, and the NBFC bears it. The scope is as specified in the order, not necessarily all transactions.

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