## Bank Audit — Reports, Financial Statements, Appointment & Powers

### Types of Audit Reports by Statutory Central Auditors (SCAs)

In addition to the main audit report, SCAs must furnish:

#	Report
1	Report on adequacy and operating effectiveness of Internal Controls over Financial Reporting (Annexure to main report; applicable to banks registered as companies — S.143(3)(i), Companies Act, 2013)
2	Long Form Audit Report (LFAR)
3	Report on compliance with SLR (Statutory Liquidity Ratio) requirements
4	Report on treasury operations (compliance with RBI instructions)
5	Report on income recognition, asset classification and provisioning (as per RBI guidelines)
6	Report on any serious irregularity requiring immediate attention
7	Report on compliance with recommendations of Ghosh Committee (frauds/malpractices) and Jilani Committee (internal control/inspection/credit system)
8	Report on adverse credit-deposit ratio in rural areas

### Form and Content of Financial Statements [S.29, BRA 1949]

S.29(1) & (2) of Banking Regulation Act, 1949: Every banking company must prepare Balance Sheet and P&L Account in forms set out in Third Schedule to the Act
Form A = Balance Sheet
Form B = Profit and Loss Account
Must also comply with disclosure requirements under Accounting Standards [S.133 of Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2014]

### Audit of Accounts [S.30, BRA 1949]

S.30(1): The Balance Sheet and P&L Account must be audited by a person duly qualified under any law to be an auditor of companies.

### Eligibility, Qualifications and Disqualifications

Same as applicable to a Company Auditor under the Companies Act, 2013.

### Appointment of Auditor

Entity	Appointed By	Approval Required
Banking Company	At the Annual General Meeting of shareholders	—
Nationalised Bank	Bank's Board of Directors	RBI approval required
Regional Rural Bank (RRB)	Bank concerned	Central Government approval

### Remuneration of Auditor

Entity	Who Fixes Remuneration
Banking Company	As per S.142 of Companies Act (by company in general meeting or as determined by it)
Nationalised Banks / State Bank of India	Fixed by RBI in consultation with Central Government

### Powers of Auditor

The auditor of a banking company, nationalised bank, SBI, or RRB has the same powers as a company auditor — including access to:

Books of account
Accounts
Documents
Vouchers

Worked example

### Example 1

Exam question: Who appoints the auditor of a Regional Rural Bank? Answer: The bank concerned appoints the auditor, with the approval of the Central Government (not RBI, which is required for nationalised banks).

### Example 2

Exam question: Who fixes the remuneration of the auditor of the State Bank of India? Answer: The RBI, in consultation with the Central Government — not the shareholders or the general meeting.

### Example 3

Scenario: A CA firm is appointed as Statutory Central Auditor of a nationalised bank. List any four additional reports (other than the main audit report) they must submit. Answer: (1) Long Form Audit Report (LFAR), (2) Report on SLR compliance, (3) Report on income recognition, asset classification and provisioning, (4) Report on treasury operations.

### Example 4

Distinguish: Main audit report vs Long Form Audit Report (LFAR). Answer: The main audit report is the statutory opinion on the financial statements. The LFAR is a detailed report covering specific areas of bank operations (advances, deposits, internal controls, etc.) submitted separately to management/RBI — it is more detailed and covers operational aspects beyond just financial statements.

⚠️ Common exam mistakes

Confusing appointment rules — for RRBs, the approval is from the Central Government, not RBI. For nationalised banks, RBI approval is required. Students frequently mix these up.
Stating that remuneration of all bank auditors is fixed by the general meeting — this is true only for banking companies. For nationalised banks and SBI, it is fixed by RBI in consultation with Central Government.
Missing the LFAR as a separate report — students often think the main audit report is the only deliverable; there are 8 additional reports that SCAs must furnish.
Thinking that bank auditors have special/enhanced powers compared to company auditors — the powers are the same as a company auditor (access to books, accounts, documents, vouchers).
Confusing Form A and Form B of the Third Schedule — Form A is the Balance Sheet, Form B is the Profit and Loss Account under the Banking Regulation Act, 1949.

Bare-Act text Section 30(1) · Banking Regulation Act, 1949 · click to expand

Every balance-sheet and profit and loss account required to be prepared under section 29 shall be audited by a person duly qualified under any law for the time being in force to be an auditor of companies.

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Bank Audit Reports, Financial Statements, Appointment, Remuneration and Powers of Auditor

Worked example

⚠️ Common exam mistakes