Auditor Policy

APPOINTMENT OF STATUTORY AUDITOR POLICY

INTEGRAL URBAN CO-OPERATIVE BANK LTD.

HEAD OFFICE SODALA

POLICY GUIDELINES FOR APPOINTMENT OF

STATUTORY AUDITORS

The Policy and guidelines for appointment of Statutory Auditor is framed and placed before the Board of Director and approved in its meeting dated 31^st July 2021. Reserve Bank of India has issued guidelines under Section 30(1A) of the Banking Regulation Act, 1949, and circular No.DoS.ARG/Sec.01/08.91.001/21-22 dated 27^th April 2021. The policy has been reviewed and approved for the year in Board Meeting held on 3rd September 2022.

• Applicability:

These guidelines would be applicable and adopted by the bank for Financial Year 2021-22 and onwards in respect of appointment/reappointment of Statutory Auditors of the Bank. As RBI guidelines regarding appointment of Statutory Auditors have been implemented for the first time for Urban Co-operative Banks from FY 2021-22, they shall have the flexibility to adopt these guidelines from H2 (second half) of FY 2021-22 in order to ensure that there is no disruption.

• Prior Approval of RBI:

Bank would take prior approval of RBI (Department of Supervision) for appointment/ reappointment of Statutory Auditors, on an annual basis in terms of the above mentioned statutory provisions. For the purpose, bank shall apply to Department of Supervision, RBI before 31st July of the reference year. For the purpose, our bank shall approach the concerned Regional Office of RBI (Department of Supervision),Jaipur where our Head Office is located. Our bank would have to take prior approval of R.B.I. for appointment of Statutory Auditors for each year by way of collecting information and certificate in Form A within one month of such appointment.

• Number of Statutory Auditors

The bank would appoint minimum of one audit firm (Partnership firm/LLPs) for conducting statutory audit. It shall be ensured that joint auditors of the bank do not have any common partners and they are not under the same network of audit firms. Further, the bank may finalize the work and allocate among Statutory Auditors, before the commencement of the statutory audit, in consultation with their Statutory Audit.

The Board of Directors would decide on the number of Statutory Auditors, inter alia, taking into account the relevant factors such as the size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, availability of other independent audit inputs, identified risks in financial reporting, etc.

Considering the above factors and the requirements of the bank the Board of Director shall shortlist and prepare a panel of two Statutory Auditors who fulfills the eligibility criteria. The bank shall indicate the preference for appointment and shall submit the proposal to the Reserve Bank of India for the  financial year 2021-22  for approval within the stipulated time period.

The bank shall ensure that audits are conducted in a timely and effective manner. The performance would be subject to review in future based on quality of reports and professional qualification.

• Eligibility Criteria of Auditors

The bank would appoint audit firm(s) as its Statutory Auditors fulfilling the eligibility norms as prescribed by the Reserve Bank of india circular( Annexure-I ) and/or as may be decided by the Board from time to time.

• Independence of Auditors

The Board of Directors shall monitor and assess the independence of the auditors. Any concerns in this regard may be flagged by the Board of directors or Audit Committee to the Regional Office of R.B.I. In case of any concern with the Management of the banks such as non-availability of information/non-cooperation by the Management, which may hamper the audit process, the Statutory Auditors shall be at liberty to approach the Board/ACB of the bank, under intimation to the concerned Regional Office of RBI. Concurrent auditors of the Bank would not be considered for appointment as Statutory Auditor of the same bank. The time gap between any non-audit works (services mentioned at Section 144 of Companies Act, 2013, Internal assignments, special assignments, etc.) by the Statutory Auditors for the bank or any audit/non-audit works for its group entities would be at least one year, before or after its appointment as Statutory Auditor. However, during the tenure as Statutory Auditor, an audit firm may provide such services to the bank which may not normally result in a conflict of interest and bank shall take its own decision in this regard, in consultation with the Board/Audit Committee of Board.

• Professional Standards of Statutory Auditors

The Statutory Auditors shall be strictly guided by the relevant professional standards in discharge of their audit responsibilities with highest diligence. The Board/ACB of the bank shall review the performance of Statutory Auditors on an annual basis. Any serious lapses/negligence in audit responsibilities or conduct issues on part of the Statutory Auditors or any other matter considered as relevant shall be reported to RBI within two months from completion of the annual audit. Such reports should be sent with the approval/recommendation of the Board/ACB with the full details of the audit firm.

In the event of lapses in carrying out audit assignments resulting in misstatement of the bank’s financial statements, and any violations/lapses vis-à-vis the RBI’s directions/guidelines regarding the role and responsibilities of the Statutory Auditors in relation to Entities, the Statutory Auditor would be liable to be dealt with suitably under the relevant statutory/regulatory framework.

• Tenure and Rotation

8.1. In order to protect the independence of the auditors/audit firms, Bank could appoint the Statutory Auditors for a continuous period of three years, subject to the firms satisfying the eligibility norms each year. Further, the Bank can remove the audit firms during the above period.

8.2 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 firms can continue to undertake statutory audit of other Entities.

8.3. 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, subject to compliance with required eligibility criteria and other conditions for each Entity and with in overall ceiling prescribed by any other statutes or rules. For clarity, the limits prescribed for banks exclude audit of other co-operative societies by the same audit firm. For the purpose of this circular, a group of audit firms having common partners and/or under the same network, will be considered as one entity and they will be considered for allotment of SA accordingly. Shared/Sub-contracted audit by any other/associate audit firm under the same network of audit firms is not permissible. The incoming audit firm shall not be eligible if such audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms.

Procedure for Appointment of Statutory Auditors

• The bank shall shortlist minimum of 2 audit firms for every vacancy of SAs so that even if firm at first preference is found to be ineligible/refuses appointment, the firm at second preference can be appointed and the process of appointment of SCAs/SAs does not get delayed. However, in case of reappointment by bank till completion of tenure of continuous term of 3 years, there would not be any requirement of shortlisting and sending names of multiple audit firms to RBI while seeking approval to

• The bank shall obtain a certificate, along with relevant information as per Form B, from the audit firm(s) proposed to be appointed as SAs by the bank to the effect that the audit firm(s) complies 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 SAs under the seal of the said audit

• While approaching the RBI for its prior approval for appointment of SAs, bank shall indicate its total asset size as on March 31st of the previous year (audited figures), forward a copy of Board/ACB Resolution recommending names of audit firms for appointment as SAs in the order of preference and also furnish information as per Form B and Form C as mentioned above, to facilitate expeditious approval of appointment/re-appointment of the concerned audit

• Audit Fees and Expenses

The audit fees for Statutory Auditors of the bank shall be decided by the Board keeping in view the relevant statutory/regulatory instructions. The audit fees for SAs of all the Entities shall be reasonable and commensurate with the scope and coverage of audit, size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, identified risks in financial reporting, etc. The Board/ACB of bank shall decide and finalize the audit fees of Statutory Auditor.

• Statutory Audit Policy and Appointment Procedure

The bank has adopted the guidelines prescribed in the Reserve Bank Circular and accordingly formulated and approved the policy guidelines. Apart from conforming to all relevant statutory/regulatory requirements in addition to these instructions bank would ensure necessary transparency and objectivity for most key aspects of this important assurance function. The performance of the Statutory Auditor would be reviewed taking into account quality and contents of the report, timely submission and analysis of data provided during the course of inspection. The bank would also examine the credential and antecedents of the auditing firm and ensure that they are not placed in the list or not any adverse remarks appear and not penalized by  ICAI/NFR/GOI or RBI  during the year.

ANNEX I

Eligibility Criteria for Appointment as Statutory Auditor

• Basic Eligibility

Note 1: There should be at least one-year continuous association of partners with the firm as on the date of empanelment.

• The full-time partner should not be a partner in other firm/s.
• She/He should not be employed full time / part time
• She/He should not be practicing in her/his own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2(2) of the Chartered Accountants Act,

Note : Professional Staff

Professional staff 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..

• Additional Consideration
• The audit firm, proposed to be appointed as Statutory Auditor for bank, should be duly qualified for appointment as auditor of a company in terms of Section 141 of the Companies Act,
• The audit firm should not be under debarment by any Government Agency, National Financial Reporting Authority (NFRA), the Institute of Chartered Accountants of India (ICAI), RBI or Other Financial

• The bank shall ensure that appointment of Statutory Auditor is in line with the ICAI’s Code of Ethics/any other such standards adopted and does not give rise to any conflict of

• For audit of bank the Statutory Auditor of the firm should have a fair knowledge of the functioning of the cooperative sector and shall preferably have working knowledge of the language of the state in which the UCB/branch of the UCB is

• Continued Compliance with basic eligibility criteria

In case any audit firm (after appointment) does not comply with any of the eligibility norms (on account of resignation, death etc. of any of the partners, employees, action by Government Agencies, NFRA, ICAI, RBI, other Financial Regulators, etc.), it may promptly approach the bank with full details. Further, the audit firm shall take all necessary steps to become eligible within a reasonable time and in any case, the audit firm should be complying with the above norms before commencement of Annual Statutory Audit for Financial Year ending 31st March and till the completion of annual audit.

In case of any extraordinary circumstance after the commencement of audit, like death of one or more partners, employees, etc., which makes the firm ineligible with respect to any of the eligibility norms, RBI will have the discretion to allow the concerned audit firm to complete the audit, as a special case.

ANNEX II

• The bank shall shortlist minimum of 2 audit firms for every vacancy of SAs so that even if firm at first preference is found to be ineligible/refuses appointment, the firm at second preference can be appointed and the process of appointment of SAs does not get delayed. However, in case of reappointment by bank till completion of tenure of continuous term of 3 years, there would not be any requirement of shortlisting and sending names of multiple audit firms to RBI while seeking approval to

• The bank shall obtain a certificate, along with relevant information as per Form B, from the audit firm(s) proposed to be appointed as SAs by the bank to the effect that the audit firm(s) complies 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 SAs under the seal of the said audit

• While approaching the RBI for its prior approval for appointment of SAs, bank shall indicate its total asset size as on March 31st of the previous year (audited figures), forward a copy of Board/ACB Resolution recommending names of audit firms for appointment as SAs in the order of preference and also furnish information as per Form B and Form C prescribed in the circular, to facilitate expeditious approval of appointment/re-appointment of the concerned audit

FORM B

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

• Particulars of the firm:

*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
• 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
• 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
• Whether the firm has been debarred from taking up audit assignments by any regulator/Government agency? If yes, details
• Details of disciplinary proceedings etc. against firm by any Financial Regulator/Government agency during last three years, both closed and
• 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

mainly dependent on the Chartered Accountants) or the firm / company in which I am / they are partners / directors15 have been declared as willful defaulter by any bank / financial institution.

It is confirmed that the information provided above is true and correct.

Signature of the Partner (Name of the Partner) Date:

FORM C

Certificate to be submitted regarding eligibility of audit firm proposed to be appointed as Statutory Auditor

The Integral Urban Co-operative Bank Ltd. is desirous of appointing M/sGupta Naresh &Company, Chartered Accountant, Firm Registration Number 003253 as Statutory  Auditor  for the financial year 2022-23 for 2nd 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 Central Auditor

(SCA)/Statutory Auditor of the bank/UCB for FY enclosed), in the format as prescribed by RBI.

• The firm has no past association/association for SA.
• The bank has verified the said firm’s compliance with all eligibility norms prescribed by RBI for appointment of SAs alongwith relevant information (copy

Signature

(Name and Designation) Date: