What changed
RBI issued a confidential circular on June 6, 2007, revising the remuneration structure for statutory central and branch auditors of public sector banks, effective from the financial year 2006-07. The revision updated the fee slabs for central audit work based on total asset size of the bank and for branch audit work based on the quantum of advances. It also introduced specific fees for Long Form Audit Report (LFAR) at 25% of basic central audit fees (excluding fees for scrutiny and incorporation of branch returns) and 10% of basic branch audit fees.
What it means for you
Public sector banks must now pay higher statutory auditor fees under the new slabs, which will increase audit costs. The fee structure is more granular, with central audit fees varying by asset size and branch audit fees by advances portfolio. Banks need to ensure compliance with the revised rates and adjust their budgeting for audit expenses accordingly.
What you must do
- Adopt the revised fee slabs for statutory central and branch auditors from FY 2006-07 as per the circular.
- Calculate central audit fees based on total asset size and branch audit fees based on advances, using the provided rate tables.
- For branches with no advances (e.g., service branches, NPA recovery branches), propose fees to RBI on a case-by-case basis in consultation with the Audit Committee.
- Ensure LFAR fees are paid at 25% of basic central audit fee (excluding fees for scrutiny and incorporation of branch returns) and 10% of basic branch audit fee, with no separate TA/HA for LFAR.
- Update internal audit policies and communicate the revised remuneration to all relevant stakeholders.
Who it affects
All nationalised banks, Associate banks of State Bank of India, Statutory central auditors, Statutory branch auditors, Audit committees of public sector banks
Is separate TA/HA payable for LFAR or tax audit of head/controlling offices?
No, the circular states that no separate TA/HA shall be payable for LFAR or tax audit of head/controlling offices.