Policy-Appointment of Statutory Auditor

POLICY ON APPOINTMENT/RE-APPOINTMENT OF STATUTORY AUDITORS FOR AUDITING THE BOOKS OF ACCOUNTS OF THE BANK.

General:

Introducing guidelines related to “Policy on Appointment/Re-appointment of Statutory Auditors for Auditing the Books of Accounts” may be called the “ Implementation of the Policy on Appointment/Re-appointment of Statutory Auditors for Auditing the Books of Accounts” of the Bhatkal Urban Co-operative Bank Limited, Bhatkal, framed under the powers vested with the Board of Directors along with the adherence to the circular instructions/Guidelines issued by the Reserve Bank of India from time to time.

The Board of Directors are competent to adopt the guidelines required on seeking prior approval from the Reserve Bank of India for “Appointing, Re-appointing and Removal of Statutory Auditors of the Bank.

The Board of Directors are also competent to amend/add/delete any of these clauses by a resolution passed at the meeting.

Introduction:-

As per the Memorandum of Understanding entered by Government of Karnataka and Reserve Bank of India, every Urban Co-operative having deposits over Rs.25 crore and more to compulsorily get their books of accounts audited by a Chartered Accountant appointed by the Government through Director of Co-operative Audit. Accordingly, the concept of Statutory Audit of the Bank was commenced from the year 2006-07. Reserve Bank vide their circular No.DoS.ARG/SEC.01/08.91.001/2021-22 dated 27.04.2021. have come with new guidelines in accordance with Section 30(1A) of the Banking Regulation Act, 1949, for appointment/re-appointment of statutory auditors for Urban Co-operative Banks. These guidelines supersede all previous guidelines. Hence Bank needs to put in place a policy on Appointment/Re-appointment of Statutory Auditors for Auditing books of accounts of the Bank. In view of the above guidelines, these policy guidelines are prepared and Board is the competent Authority for approving the Policy Guidelines.

Applicability:-

The policy guidelines framed now is applicable to the Bank from the Financial year 2021-22, where it is required to take prior approval of Reserve Bank of India, Department of Supervision, Regional Office, Bengaluru for appointment/ reappointment of Statutory Auditors on an annual basis along with the provisions mentioned in the Serial No.4 of this policy. For the purpose of approval, the proposal should be sent to Regional Office of Reserve Bank of India, Department of Supervision, Bengaluru (as the Head Office of the Bank is located under this jurisdiction) before 31^st July of the reference year.

Norms on the Eligibility Criteria for Appointment of Statutory Auditors:

The eligibility norms in terms of the extant guidelines of Reserve Bank of India in respect of our Bank are as under-

The audit firm shall have a minimum of 2 Full-Time Partners(FTPs) associated with the firm for a period of atleast 3 years, of which at least 1 should be fellow Chartered Accountant (FCA) Partner associated with the firm for a period of at least 3 years.
The audit firm should have atleast one Full Time Partners/ Paid CAs with CISA/ISA Qualification.
The audit firm should have minimum 6 years of Audit Experience and 8 professional staff. The audit experience shall mean experience of the audit firm as Statutory Central/Branch Auditor of Commercial Banks (excluding RRBs)/ UCBs/NBFCs/ AIFIs.
Professional staff of 8 includes audit and article clerks with knowledge of book-keeping and accountancy and who are engaged in on-site audits but excludes typists/stenos/computer operators/ secretaries /subordinate staff, etc.
There should be at least one-year continuous association of professional staff /Partners with the firm as on the date of shortlisting for considering them as professional staff/ full time partners for the purpose.
The audit firm shall be empanelled in the list approved by the Co-operative Audit Department, Bengaluru.

Additional Consideration and continued compliance with basic eligibility criteria:

If any shortlisted audit firm undergoes change in its constitution after the date of shortlisting, the audit firm will take all necessary steps to become eligible within a reasonable time and in any case, audit firm should be complying with above norms before the following events:
Appointment of the audit firm by the Bank as SA. For this, the audit firm while giving consent to the Bank for appointment may ensure that it complies with the norms.
Before commencement of Annual Statutory Audit for Financial Year ending 31st March and till the completion of annual audit. In case any audit firm (after appointment) does not comply with any one of the norms (on account of resignation, death etc. of any partners, employees etc), it may promptly approach the Bank with full details. The Bank in turn will approach RBI.
The firm should have a fair knowledge of the functioning of the cooperative sector and shall preferably have working knowledge of Kannada.
An audit firm would not be eligible for reappointment in the Bank for six years (two tenures) after completion of full or part of one term of the audit tenure. However, audit firm can continue to undertake statutory audit of other Entities
Audit Firm should not have any adverse remarks/ disciplinary actions taken in respect of professional conduct etc on the records of the Institute of Chartered Accountants of India (ICAI) which would make them ineligible for appointment as Statutory Auditor.
Further, the website of the National Financial Reporting Authority (NFRA) should be perused to ascertain if disciplinary action, if any has been taken by them against the audit firm which would make them ineligible for appointment as Statutory Auditor.

Procedure for selection, shortlisting and appointment of Statutory Auditors:

The audit firms have to submit a certificate, along with relevant information as per Form B as per Annexure-I of this Policy to the RBI circular referred to above to the effect that, they comply with all the eligibility norms prescribed by RBI for the purpose. Such certificate should be signed by the main partner/s of the audit firm proposed for appointment of SA of the Bank, under the seal of the audit firm.
Based on the above parameters, Bank will prepare a list of shortlisted audit firms. Willingness/Expression of Interest in writing from the above shortlisted audit firm(s) will be obtained to accept the assignment of Statutory Audit work of the Bank. At the time of obtaining the willingness letters/ letter of Expression of Interest from such shortlisted audit firms, there will be no commitment on the part of our Bank to allot the Statutory Audit work to the auditors and such shortlisted audit firms are free to give similar willingness/ Expression of Interest to multiple banks/UCBs, if approached by them. The list of shortlisted audit firms should be placed before Board. The Board will then approve 2 audit firm(s), in order of preference. The number of audit firms approved should be adequate enough, to take care of the situation, where some firms may not give consent.
On due approval by the Board, our Bank will approach the audit firms to obtain their consent in writing strictly in order of preference. The audit firm should give their consent in writing for consideration of appointment in our bank for the particular financial year subject to their fulfilment of the eligibility criteria prescribed by RBI from time to time and also subject to their suitability. If the approached audit firm does not give consent, the bank will approach the next audit firm in order of preference for obtaining consent till the time the number of audit firms which have given the consent equals to two for the particular year.
The consent letter should clearly state that the selection of the audit firm as Statutory Auditor is subject to approval of RBI and any force majeure events and, in such cases, the audit firms will not have any claim against our Bank and RBI. The appointment of Statutory Auditor is subject to complying with the stipulated norms on eligibility and guidelines issued by RBI from time to time.. The consent given by an audit firm will be treated as irrevocable and request, if any, from audit firms for changing the bank, after giving its consent to our bank will not be entertained.
The list of such selected firms who have given consent for appointment as statutory auditors in our Bank will be placed before the Board for their concurrence before it is forwarded to RBI for final approval.
Audit firm(s) selected by our Bank after obtaining its consent in writing will be debarred for a period of 3 years for selection if the firm refuses to accept the appointment without a reasonable ground that is ground not to the satisfaction of RBI.
While seeking the prior approval for appointment of Statutory Auditors then the Bank shall mention the Total Asset Size as on March 31^st of the previous year (audited figures) if the audited figure is not available, then un-audited figures may be given for asset size in the Form-B in original as mentioned in Annexure-I of this Policy.
True copy of the Board Resolution recommending the Audit Firms for appointment as Statutory Auditor in the order of preference.
Furnishing Form-C in original by the Bank by mentioning the past association and certifying the verification of eligibility criteria of the Statutory Auditors proposed.
After obtention of prior approval of Reserve Bank of India, Bank shall place before the ensuing Annual General Body Meeting in which the appointment shall be ratified and the process for appointment would be complete.

Other Guidelines:

In order to protect the independence of the auditors/audit firms, Bank shall make the appointment of Statutory Auditor for a continuous period of three years subject to the firms satisfying the eligibility norms each year. Bank shall not remove the audit firm during the above period without the prior approval of the Reserve Bank of India.

Undertakings/Declarations to be obtained from firm:

Following declarations /undertakings should be obtained from the audit firm selected

At the time of acceptance of appointment as Statutory Auditor of our Bank, the firm has to relinquish any internal assignment allotted to them in our Bank. Its associate firms or sister concerns are also disqualified for inter audit or for any special assignment of our Bank.
A suitable undertaking from the firm to the effect that the Audit will be carried out by their own staff and they will not subcontract the audit work.
None of the disqualifications under section 141 of the Companies Act, 2013 applies to them and they are qualified for appointment as Statutory Auditors of the Bank.
The audit firm is not under debarment or under the disciplinary action by any Government Agency, National Financial Reporting Authority (NFRA), the Institute of Chartered Accountants of India (ICAI), RBI or Other Financial Regulators.
There are no adverse remarks/ disciplinary proceedings pending/ initiated against the firm / any of its partners/proprietor on the records of ICAI, which would make them ineligible for appointment as auditors.
None of the partners or their spouse, dependent children and wholly or mainly dependent parents, brothers, sisters or any of them or the Firm/ Company in which they are partners/ Directors are not indebted to our Bank. Further, they have not been declared as wilful defaulters by any Bank or financial institution.
Associate firms or sister concerns of statutory audit firm is disqualified for internal assignment where the main firm/partners are allotted Statutory Audit in a particular year.

Number of Assignment:

One audit firm can concurrently take up statutory audit of a maximum of four Commercial Banks [including not more than one PSB or one All India Financial Institution (NABARD, SIDBI, NHB, EXIM Bank) or RBI], eight UCBs and eight NBFCs during a particular year. The limits prescribed for UCBs exclude audit of other co-operative societies by the same audit firm.

Relinquishment of the internal assignments, if any:

In the event of acceptance of the appointment as Statutory Auditor of the Bank, all the internal assignments of the Auditor in our Bank, if any, will stand withdrawn. .

Remuneration:

The Remuneration to the Statutory Auditor for conducting the Audit of the Bank would be paid Rs.3,46,000/- (excluding tax) as per the instructions of Director of Co-operative Audit.

Sl.No.	Particulars	Amount (Rs.) (Exclusive of Tax)
1	Audit Fees/Remuneration including HO and Main Branch	2,50,000.00
2	Audit Fees/Remuneration for other 8 Branches (Rs.12,000/- per Branch)	96,000.00
Total Fees		3,46,000.00

Further, TA/DA and other incidental expenses shall be borne by the Bank at the minimum possible. .

Re-appointment of the Statutory Auditor for the 2^nd and 3^rd year:

Even for re-appointment of Statutory Auditors, prior Approval from Reserve Bank of India should be obtained before re-appointment of Statutory Auditors.
Bank should verify compliance of Statutory Auditors to the eligibility norms prescribed by Reserve Bank of India from time to time.
After the due approval from the Board, prior approval should be obtained from the Reserve Bank of India before 31^st July of the reference Period for the re-appointment of the Statutory Auditor by submitting the following documents by the Bank-
Application by mentioning total asset size(audited figures) of the bank as on March 31^st of the previous year.
Board Resolution recommending name of audit firm for re-appointment as Statutory Auditor for their 2^nd / 3^rd
Confirmation that the Bank has hosted or published the Board Approved Policy for the necessary procedure to be followed for the appointment/re-appointment of Statutory Auditors in its Website/public domain and also submit a true copy of Board Policy to Reserve Bank of India.
Details of Statutory Auditors stating firm name and registration number who had conducted statutory audit of the bank for the last 6 years.
Details of Concurrent Auditors stating firm name and registration number who had conducted concurrent audit of the bank for the last 3 years.
Form-C ( in original) Furnishing Form-C in original by mentioning the past association and certifying the verification of eligibility criteria of the Statutory Auditors proposed as mentioned in Annexure-II of this Policy.
Submission of Form-B in original by the audit firm for complying with all the norms prescribed by Reserve Bank of India as same as sent for fresh appointment.
A true copy of proposed audit firm Constitution Certificate as per Part B(i) Additional Information of Form-B.
A true copy of Firm Constitution Certificate of the Concurrent Audit Firm.
Details of the audit experience and professional staff of the proposed audit firm.
Confirmation regarding audit firm having fair knowledge of the functioning of the co-operative sector and having fair knowledge of language of the State of Karnataka.
Confirmation regarding CISA/ISA qualification of Partners in the audit firm.
Confirmation that the audit firm have been selected from the panel maintained by the Department of Co-operative Audit, Karnataka.
After obtention of prior approval of Reserve Bank of India, Bank shall place before the ensuing Annual General Body Meeting in which the appointment/re-appointment shall be ratified and the process for appointment/re-appointment would be complete.

Removal of Statutory Auditor:

An audit firm appointed as Statutory Auditor may be removed during its tenure with the prior approval of the Reserve Bank of India with the justification for its removal. The Board of Directors of the Bank will be the competent authority to recommend removal of any Statutory Auditor to RBI. The modification/changes, if any, made by RBI in norms/criteria/procedure from time to time shall construe to be part of our policy.

Sd/- Sd/- Sd/- Sd/-

GENERAL MANAGER DIRECTOR DIRECTOR PRESIDENT

Approved in the Board Meeting held on 26^thMarch 2025

GENERAL MANAGER

Annexure-I

FORM B

Eligibility Certificate from (Name and Firm Registration Number of the firm)

Particulars of the firm:

Asset Size of Entity as on 31st March of Previous Year	*Number of Full-Time partners (FTPs) associated with the firm for a period of three (3) years**	Out of total FTPs, Number of FCA Partners associated with the firm for a period of three (3) years	Number of Full Time Partners/ Paid CAs with CISA/ISA Qualification	Number of Years of Audit Experience#	Number of Professional staff

*Exclusively associated in case of all Commercial Banks (excluding RRBs), and UCBs/NBFCs with asset size of more than Rs.1,000 crore #Details may be furnished separately for experience as SCAs/SAs and SBAs

Additional Information:

Copy of Constitution Certificate.
Whether the firm is a member of any network of audit firms or any partner of the firm is a partner in any other audit firm? If yes, details thereof.
Whether the firm has been appointed as SCA/SA by any other Commercial Bank (excluding RRBs) and/or All India Financial Institution (AIFI)/RBI/NBFC/UCB in the present financial year? If yes, details thereof.
Whether the firm has been debarred from taking up audit assignments by any regulator/Government agency? If yes, details thereof.
Details of disciplinary proceedings etc. against firm by any Financial Regulator/Government agency during last three years, both closed and pending.

Declaration from the firm

The firm complies with all eligibility norms prescribed by RBI regarding appointment of SCAs/SAs of Commercial Banks (excluding RRBs)/UCBs/NBFCs (as applicable). It is certified that neither I nor any of our partners / members of my / their families (family will include besides spouse, only children, parents, brothers, sisters or any of them who are wholly or

Note: For the purpose of this declaration, the credit facilities availed by companies where the partner of a firm has been appointed as non-executive director in a professional capacity having no financial interest shall not be included.

Annexure-II

Name of the Firm :

FRN :

Term of Appointment: 1^st (Fresh Appointment)

FORM C

Certificate to be submitted by the Commercial Banks (excluding RRBs) and UCBs regarding eligibility of audit firm proposed to be appointed as SCA/SA

The bank/UCB is desirous of appointing M/s ______________, Chartered Accountants (Firm Registration Number ________________ ) as Statutory Auditor (SA) for the financial year _________ for their 1^st (First) term and therefore has sought the prior approval of RBI as per the section 30(1A) of the Banking Regulation Act, 1949/ Section 10 (1) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980/ Section 41(1) of SBI Act, 1955.

The bank/UCB has obtained eligibility certificate (copy enclosed) from (name and Firm Registration Number of the audit firm) proposed to be appointed as Statutory Auditor of the UCB for FY _____ along with relevant information (copy enclosed), in the format as prescribed by RBI.
The firm has no past association/association for previous 6 (six) years with the UCB as SA.
The UCB has verified the said firm’s compliance with all eligibility norms prescribed by RBI for appointment of SCAs/SAs of Commercial Banks (excluding RRBs)/UCBs.

Signature

(Name and Designation)

Date:

Note: Strike off the non-relevant information

Name of the Firm :

FRN :

Term of Appointment: 2^nd (Re-appointment)

FORM C

Certificate to be submitted by the Commercial Banks (excluding RRBs) and UCBs regarding eligibility of audit firm proposed to be appointed as SCA/SA

The bank/UCB is desirous of appointing M/s ______________, Chartered Accountants (Firm Registration Number ________________ ) as Statutory Auditor (SA) for the financial year _________ for their 2^nd (Second) term and therefore has sought the prior approval of RBI as per the section 30(1A) of the Banking Regulation Act, 1949/ Section 10 (1) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980/ Section 41(1) of SBI Act, 1955.

The UCB has obtained eligibility certificate (copy enclosed) from _______________(name and Firm Registration Number of the audit firm) proposed to be appointed as Statutory Auditor of the UCB for FY _____ along with relevant information (copy enclosed), in the format as prescribed by RBI.
The firm has past association for 1 (One) year with the UCB as SA.
The UCB has verified the said firm’s compliance with all eligibility norms prescribed by RBI for appointment of SCAs/SAs of Commercial Banks (excluding RRBs)/UCBs.

Signature

(Name and Designation)

Date:

Note: Strike off the non-relevant information

Name of the Firm : FRN : Term of Appointment: 3^rd (Re-appointment)

FORM C

Certificate to be submitted by the Commercial Banks (excluding RRBs) and UCBs regarding eligibility of audit firm proposed to be appointed as SCA/SA

The bank/UCB is desirous of appointing M/s ______________, Chartered Accountants (Firm Registration Number ________________ ) as Statutory Auditor (SA) for the financial year _________ for their 3^rd (Third) term and therefore has sought the prior approval of RBI as per the section 30(1A) of the Banking Regulation Act, 1949/ Section 10 (1) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980/ Section 41(1) of SBI Act, 1955.
The UCB has obtained eligibility certificate (copy enclosed) from _______________(name and Firm Registration Number of the audit firm) proposed to be appointed as Statutory Auditor of the UCB for FY _____ along with relevant information (copy enclosed), in the format as prescribed by RBI.
The firm has past association for 2 (Two) years with the UCB as SA.
The UCB has verified the said firm’s compliance with all eligibility norms prescribed by RBI for appointment of SCAs/SAs of Commercial Banks (excluding RRBs)/UCBs.

Signature

(Name and Designation)

Date:

Note: Strike off the non-relevant information

Policy-Appointment of Statutory Auditor

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