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CA Intermediate · Auditing and Ethics · Audit of Banks

Under the Banking Regulation Act framework, which of the following is the correct statement regarding the statutory central auditor's long form audit report (LFAR) in a bank audit?

The long form audit report is a detailed report on matters prescribed by the RBI, submitted to the bank's management or Board in addition to the audit report on the financial statements. It does not replace that report, is not limited to qualified opinions, and is prepared by the auditor.

  1. AThe LFAR replaces the independent auditor's report and need not be separately issued
  2. BThe LFAR is a detailed report on specific matters, as prescribed by the RBI, submitted to the bank's management or Board, in addition to the audit report on the financial statementsCorrect
  3. CThe LFAR is submitted only if the auditor gives a qualified opinion
  4. DThe LFAR is prepared by the bank's management and merely signed by the auditor

Explanation

RBI requires statutory auditors of banks to submit an LFAR covering specified matters such as advances, investments, internal controls and systems. It is a separate report in addition to the audit report on financial statements and is not conditional on a qualified opinion. The auditor, not management, prepares it.

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