Related party deals on the risen auditors must be alert

Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday said auditors must be careful about the rise in innovative accounting and related party transactions and must flag them to the regulator promptly.

His remarks came day after the RBI banned auditing firm Haribhakti and Co for two years from conducting audits on its regulated entities from the next financial year. Without naming any firm Das said the auditors in some cases failed to catch manipulation and misstatements in accounts and clever accounting should be dealt with more strictly.

It is also the job of the auditor to report immediately to the regulator about accounting manipulation, but in some cases those have not been done. The RBI banned Haribhakti & Co, under section 45MA of the RBI Act. The section says an auditor would be penalised and would be duty bound to inquire whether the firm being audited has furnished all the details on its deposits, assets, and liabilities profit and loss account etc. to the RBI that would form the basic of disclosure related instructions or even special audit of the firm.

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