India's central bank on Wednesday tightened rules on banks' statutory auditors saying it reserved the right to not approve appointments of such auditors for a specified period if their audit quality was not found satisfactory.
The Reserve Bank of India (RBI) said it will take action against statutory auditors of banks in case of any lapses in their auditing process including instances such as misstatement of a bank's financial statement or wrong information in audit report.
The banking regulator came out with these guidelines after a recent $2 billion fraud at state-run Punjab National Bank revealed several lapses in the auditing process in banks.
“The framework would cover, inter alia, instances of divergence identified in asset classification and provisioning during the RBI inspection vis-à-vis the audited financial statements of banks,” said RBI in a statement.
