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

While auditing Deccan Capital Ltd, an NBFC, the auditor finds that the company did not furnish the required deposit statements to the Reserve Bank. The auditor makes a report to the Bank giving the aggregate deposits held. How should the auditor deal with this in the audit report on the financial statements?

The auditor must include the contents of the report made, or intended to be made, to the Reserve Bank in the audit report on the financial statements. Section 45MA(2) imposes this duty, and Section 45NB's confidentiality rules bind the Bank, not this inclusion.

  1. AOmit it, since the report to the Bank is confidential under Section 45NB
  2. BInclude the contents of the report made or intended to be made to the Bank in the audit reportCorrect
  3. CDisclose it only in the management representation letter
  4. DSend a copy to the Bank's depositors directly

Explanation

Section 45MA(2) states that where the auditor has made, or intends to make, a report to the Bank under sub-section (1), the auditor shall include its contents in the audit report. Section 45NB deals with the Bank's confidentiality of information it obtains and does not allow omission. Hence option 0 is wrong.

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