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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, in the interest of depositors, orders a special audit of certain transactions of Himalaya Finance Ltd, an NBFC, and appoints Gupta & Associates for it, fixing their remuneration. Who bears the remuneration, and to whom is the report submitted?

The NBFC bears the remuneration fixed by the Reserve Bank, and the special auditors submit their report to the Reserve Bank. Section 45MA(3) and (4) provide that the Bank appoints the auditors and directs the report to it, while the audited company pays the fees.

  1. AReserve Bank bears the cost; report goes to the company's board
  2. BThe NBFC bears the cost; report goes to the Reserve BankCorrect
  3. CThe NBFC bears the cost; report goes to the shareholders at the general meeting
  4. DThe statutory auditor bears the cost; report goes to the Registrar

Explanation

Under Section 45MA(3) the Bank may order a special audit and direct the auditors to submit the report to it. Section 45MA(4) provides that the remuneration fixed by the Bank, having regard to the nature and volume of work and expenses, is borne by the NBFC audited. Options 0 and 2 get the payer or recipient wrong.

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