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

The Reserve Bank, considering it necessary in the interest of depositors, issues an order for a special audit of certain loan transactions of Kaveri Capital Ltd, an NBFC, for a specified period. Which statement correctly reflects the position under the RBI Act, 1934?

The Reserve Bank may appoint the special auditor for specified transactions or periods and direct the report to be submitted to it. The remuneration fixed by the Bank is borne by the NBFC audited. Shareholders do not appoint this auditor, and scope is limited to the order.

  1. AThe Bank may appoint the auditor and direct the report to be submitted to it; the remuneration fixed by the Bank is borne by the NBFCCorrect
  2. BThe company's shareholders must appoint the special auditor and the report goes to the Board only
  3. CThe Bank bears the special auditor's remuneration from its own funds
  4. DThe special audit must cover the entire books of account of every year since incorporation

Explanation

Section 45MA(3) lets the Bank order a special audit of specified transactions or periods, appoint the auditor and direct that the report be submitted to it. Under 45MA(4) the remuneration fixed by the Bank is borne by the NBFC. The scope is limited to what the order specifies, so the other options are wrong.

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