CALCUTTA, Nov 16: Chartered accountant firms entrusted with the task of inspecting and undertaking a special audit of non-banking finance companies (NBFCs) are being told to maintain confidentiality regarding the contents of the inspection manual.
According to an internal note written by a senior executive of department of supervision (DoS) in the Reserve Bank of India (RBI), Mumbai, the copies of the manual will be issued to each of the firm of CAs who have been entrusted with the on-site inspection job. The note states, "The copies of the manual should be taken back when the auditors submit their report….." and, "an undertaking should be taken from the chartered accountants that the contents of the manual will not be disclosed to anyone and the manual will be returned to the RBI along with the special audit report". The RBI has entrusted the task of inspecting NBFCs with an asset base of Rs 50 crore and above to external auditors on a one-time basis. According to information the audit exercise has already commenced on Saturday.
The plan is that subsequent inspections on an on-going basis will be undertaken by RBI inspection officials themselves. The external auditors who will so undertake the present inspection have been selected by a panel consisting of senior executives of the RBI and M N Chitale, the president of the Institute of Chartered Accountants of India.
The format of the inspection manual was adopted at a conference held on July 19 this year. In order to maintain secrecy and prevent leakage the apex bank has made very few copies of the manual. A senior official of the bank here said that the manual was being treated like a "highly confidential document". He said, "Once it goes to the auditors’ offices, the manual is as good as a public document. How can we prevent them from making copies of it ?"
However the RBI authorities are taking no chances. One copy each will be given to the officers in the department of non-banking supervision and a record will be kept of it. The officer to whom it is issued, "should be advised to keep it under his/her personal custody….". Further, "when an officer to whom a copy of the manual has been issued is transferred to another department/office or retires or resigns, the manual should be taken back from him/her for issue to another officer". Significantly, the RBI top brass has reacted to criticism about handing over inspection to private auditors and indications have been given that more people may be recruited to handle the work. There are around 150 NBFCs with asset base of over Rs 50 crore and 900 with an asset base between Rs 5 crore and Rs 50 crores.