RBI cautions against related-party deals

Reserve Bank of India governor Shaktikanta Das cautioned auditors about the rise in related party transaction and innovative accounting practices, barely a fortnight after banning Haribhakti & Co. from auditing RBI-regulated entities for two years. Speaking at the National Academy of Audit and Accounts, Das said that auditors need to keep a close vigil on manipulation of financial statements.

“Such undesirable practices and structures should draw the attention of the auditors. Since RBI, as the supervisor of the financial system, relies and leverages on the work done by auditors, the audit professionals are being sensitized through various fora to improve the quality of their reporting. We are constantly engaged with individual auditors, audit firms and the Institute of Chartered Accountants of India (ICAI) to improve the quality and depth of audit. A lot of work has been done in this area, but a lot more needs to be done,” he said.

Das also said that statutory auditors have a responsibility to report directly if they see any concern.