The ‘improper’ appointment of statutory auditors by public sector banks is one of the reasons for the mounting non-performing assets (NPAs), according to M Devaraja Reddy, President of the Institute of Chartered Accountants of India (ICAI).

“The quality of auditing in banks has come down and NPAs could have been lesser by 30 to 40 per cent, if there had been transparency,” Reddy, who took over as the 64th president of ICAI recently, said at a press conference here. Taking exception to the autonomy given to banks by the RBI in appointment of statutory auditors, he said banks were managing with only one or two auditors for statutory purposes, compared to the earlier practice of having six to eight auditors. “This is bringing down the element of collective wisdom,” he said.

Alleging that bank managements were appointing auditors who will be ‘favourable’ to them, he also faulted the process of bank branch auditing. “Only 20 per cent of branches are being audited and most of the advances are not scrutinised,” he claimed, adding that banks were taking cover under core banking solutions when questioned.

Reddy also expressed his displeasure over RBI ‘not listening’ to requests to revert to the old system of the ICAI appointing statutory auditors for banks. “We even met Governor Raghuram Rajan, who only said he would look into the matter.”

Under the autonomy package to banks, they were empowered by the Centre to appoint their own statutory auditors, beginning 2008-09.

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