Last updated on: 28th November 2023

• Introduction:

  Si Creva Capital Services Private Limited (“Company” or “Si Creva”) has been attaching the greatest importance to the independence and quality standards of the Statutory Audit (“SA”) function. Apart from being an essential balancing dimension in a corporate organization, it constitutes a statutory and regulatory requirement besides providing the final and omnibus assurance of corporate integrity to all internal and external stakeholders. The Company is committed to fostering and upholding the highest standards of integrity and quality in Governance and corporate reporting.

• Objective:

  The objective of this Policy is to formulate and adopt a Board approved policy for the Company pursuant to the approval and recommendation of the Audit Committee, for the appointment of Statutory Auditors (“SAs”) which would ensure transparency, objectivity, independence of the audit function, and compliance with all statutory and regulatory stipulations. The Policy is framed under the Reserve Bank of India’s (“RBI”) guidelines bearing Ref.No.DoS.CO.ARG/SEC.01/08.91.001/2021-22 dated April 27, 2021 for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs), as may be amended or modified, replaced, or substituted from time to time, read with the FAQs issued on June 11, 2021 (“the RBI Guidelines”) for Appointment of Statutory Auditors (SAs) of NBFCs.

• Purpose:

  To define the policy for appointment of SA in compliance with the extant norms of RBI and Companies Act 2013.

• Applicability

  The policy and procedure so mentioned hereunder, after approval by the Board of Directors of the Company (“Board”), shall be applicable from November 01, 2022.

• Procedure for appointment of Statutory Auditors

  The Company shall shortlist a minimum of 2 audit firms for every vacancy of SAs so that even if firm with 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 of SAs till completion of tenure of continuous term of 3 years, there would not be any requirement of shortlisting multiple audit firms for appointment. The appointment of Statutory Auditors shall be in conformity with the standards laid down in the RBI Directions and other applicable laws.

• Salient Features of the Policy

  • As per RBI Guidelines:

    • The proposed Auditor should comply with the eligibility norms as prescribed under the said RBI guidelines. The same forms part of the policy as Annexure I.
    • Post appointment, the Company will inform to RBI regarding the appointment of SAs every year by way of a certificate in Form A within one month of such appointment.
    • The auditor so appointed would have a maximum tenure of three years. Upon ending of the tenure, the firm shall be eligible to be re-appointed after a period of 6 years.
    • The Company shall not provide any non-audit works (services mentioned at Section 144 of Companies Act, 2013, Internal assignments, special assignments, etc.) to the SAs for a period of at least one year, after its appointment. However, during the tenure as SA, an audit firm may provide such services to the Company which may not normally result in a conflict of interest, and Company may take decision in this regard, in consultation with the Board/ACM.
    • In case of removal, if any, of the Statutory Auditors before the expiry of their term and after obtaining requisite approval from ACM and Board, the Company shall inform concerned Senior Supervisory Manager (SSM)/Regional Office (RO) at RBI along with reasons/justification for the same, within a month of such a decision being taken.
    • The Board/ACM of the Company shall review the performance of SAs on an annual basis. Any serious lapses/negligence in audit responsibilities or conduct issues on part of the SAs 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/ACM, with the full details of the audit firm.
    • The Company 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 Company 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 of the Entities.
    • Board / ACM shall ensure that the independence of auditors is not comprised anytime.

  • As per Companies Act:

    • The audit firms duly qualified under the provisions of Section 141 of Companies Act 2013 and with no adverse remarks/disciplinary proceedings pending/initiated against the firm/any of its partners/proprietor on the records of ICAI would be considered as eligible for appointment as auditors.
    • In addition to the requirements of provisions mentioned in the Companies Act, 2013 in regard to indebtedness, any Audit firm selected for appointment would have to certify that none of the spouse, dependent children and wholly or mainly dependent parents, brothers, sisters or any of them, of any of the partners/proprietors of the firm or the firm/company in which their partners/directors are indebted to the Company.
    • The appointment so made shall be with the approval of the Audit Committee, Board and Shareholders. The approval of shareholders will not be required for the purpose of reappointment of SA during their tenure.
    • SAs shall ensure to abide by the code of conduct for regulating, monitoring and reporting of trading by insiders and code of practices and procedures for fair disclosure of unpublished price sensitive information of the Company.

• Criteria to be considered before Appointment of Statutory Auditors

  The ACB shall consider the following factors before appointment of Statutory Auditors:

  • Provisions of the RBI Guidelines
  • Eligibility criteria of the SAs as prescribed by RBI from time to time based on the asset size of the NBFC
  • Qualification as an auditor as per Section 141 of the Companies Act, 2013.
  • 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 Regulators.
  • The appointment of SAs should be in line with the ICAI’s Code of Ethics/ any other such standards adopted and should not give rise to any conflict of interest.
  • Written consent of the auditor to such appointment and certificate that the appointment, if made, shall be in accordance with the conditions stipulated under the RBI Guidelines and other statutory provisions.
  • The prescribed limit on minimum and maximum number of joint auditors based on asset size of the NBFC and other prescribed factors from time to time including in terms of the RBI Guidelines.
  • Limit on NBFC audits by SAs as prescribed by RBI from time to time.

  • The time gap between any non-audit works (services mentioned at Section 144 of Companies Act, 2013, Internal assignments, special assignments, etc.) by the SAs for the NBFC or any audit/non-audit works for its group entities (as defined under the RBI guidelines) should be at least one year, before or after its appointment as SAs. The look back stipulation of one year shall be applicable from FY 2022-23. During the tenure as SA, an audit firm may provide such services to the NBFC which may not normally result in a conflict of interest, and the NBFC shall decide in this regard, in consultation and approval of the ACB. (A conflict would not normally be created inter alia in the case of the following special assignments (indicative list):

    • Tax audit, tax representation and advice on taxation maters,
    • Audit of interim financial statements.
    • Certificates required to be issued by the statutory auditor in compliance with statutory or regulatory requirements.
    • reporting on financial information or segments thereof)
    • Concurrent auditors of the NBFC should not be considered for appointment as SAs.
    • The restrictions would also apply to an audit firm under the same network of audit firms or any other audit firm having common partners.
    • Any restrictions due to the directorship of a partner of an audit firm in the group entity of the NBFC as defined under these guidelines.
    • Any other applicable regulations for the NBFC from time to time.

• Eligibility criteria for Statutory Auditors

  • SAs should fulfill all eligibility criteria as prescribed by RBI from time to time through various circulars and guidelines.
  • To be eligible for appointment as Statutory Auditors, the audit firm will need to fulfill requirements as explicitly specified in Annexure 1 to the RBI Guidelines in regard to the number of full-time partners, number of full-time partners with FCA accreditation, minimum audit experience of the firm, number of professional staff, number of CISA/ISA qualified partners/paid CAs, etc. as scaled to the asset size of the Company as on March 31 of the previous year.

  b)

  • The partners, paid chartered accountants and professional staff should meet the minimum requirements of continuous association with the audit firm as specified.
  • The audit firm to be appointed as SA for the Company shall be duly qualified for appointment as auditor of a company in terms of Section 141 of the Companies Act, 2013.
  • 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 Regulators.
  • The appointment of SCAs/SAs will be in line with the ICAI’s Code of Ethics/any other such standards adopted and does not give rise to any conflict of interest.
  • The Audit firm should have the capability and experience in deploying Computer Assisted Audit Tools and Techniques (CAATTs) and Generalized Audit Software (GAS), commensurate with the degree and complexity of the computer environment of the Company in order to achieve audit objectives.
  • The audit firm should comply with the eligibility criteria at the time of commencement of the statutory audit and will strive to adhere to the eligibility criteria on a continuous basis. The audit firm will be obliged to inform Company of their continued compliance.

• Independence criteria for Statutory Auditors and issues of conflict of interest

  • The Board after the recommendation of the Audit Committee of the Board, will assess, at the time of appointment and every year thereafter, the eligibility and independence of the auditors and any conflict of interest in terms of relevant regulatory provisions, standards, and prevalent best practices. Any concerns are to be flagged by the Board of the Company and to the Senior Supervisory Manager (SSM)/ Regional office of RBI.
  • The Board and Audit Committee of the Board to consider assignments being done by the SA for Related Party entities, both before and after the appointment of SA, where exposure and value of Related Party transactions are significant.
  • No non-audit assignment as mentioned in section 144 of the Companies Act 2013, which may create a conflict of interest, should be awarded to SAs during the course of their tenure as SAs.
  • The time gap between any non-audit works (services mentioned in Section 144 of the Companies Act, 2013, Internal assignments, special assignments, etc.) by the SAs for the Company or any audit/non-audit works for its group companies (RBI-regulated entities) should be at least one year, before or after its appointment as SAs. However, during the tenure as SA, an audit firm may provide such services to the concerned Entities which may not normally result in a conflict of interest, and Entities may take their own decision in this regard, in consultation with the Board and Audit Committee of the Board. This restriction shall apply to an audit firm under the same network of audit firms or any other audit firm having common partners.

• Adherence to professional standards by Auditors

  • The SAs shall be strictly guided by the relevant professional standards in the discharge of their responsibilities with the highest diligence. Any negligence is to be reported by the Board to RBI after a yearly assessment.
  • In case of any concern with the Management such as non-availability of information/non-cooperation by the Management, which may hamper the audit process, the SCAs/SAs shall approach the Board of the Entity, under intimation to the concerned SSM/RO of RBI.

• Tenure and rotation policy

  • An Audit firm can continue to be appointed as SA for three years subject to the firm satisfying the eligibility criteria for each year. The same audit firm cannot be reappointed by the Company for the next two terms of 3 years each.
  • In the event of the Company needing to remove the SAs before the completion of three years tenure, the Company shall inform concerned SSM/Central Office of RBI, Department of Supervision (NBFCs) about it, along with reasons/justification for the same, within a month of such a decision being taken.
  • 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.

• Remuneration and expenses

  • Section 142 of the Companies Act prescribed that the remuneration of the auditor of a Company shall be fixed in its general meeting or in such manner as may be determined by the Board and Audit Committee of the Board in consultation with the statutory auditor.
  • Remuneration of Auditor includes the expenses, if any, incurred by the auditor in connection with the audit of the Company and any facility extended to him
  • Remuneration of the Auditor does not include any remuneration paid to him for any other services (mentioned in section 144 of the Companies Act) rendered by him at the request of the company.
  • The audit fees for the Statutory Auditor shall be reasonable and commensurate with the scope and coverage of the audit.

  • The Company shall disclose by way of notes, additional information regarding the aggregate expenditure of the following items:-

    Payments to the auditor as

    • Auditor
    • For Taxation matters
    • For Company law matters
    • For other services
    • For Reimbursement of expenses

• Procedure for appointment and reappointment

  • The Board and Audit Committee of the Board shall take into account the relevant factors such as 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. for shortlisting the eligible audit firms.
  • The Company shall place the name of shortlisted audit firms, in order of preference, before the Board and Audit Committee of the Board and the Board and Audit Committee of the Board shall shortlist and recommend a minimum of 2 (two) audit firms for every vacancy for selection of SAs so that even if the 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.
  • The Company shall obtain an eligibility criteria certificate, duly signed and authenticated by the main partner/s of the audit firm who are proposed to be appointed as SA, to the effect that each audit firm complies with all the eligibility norms prescribed by RBI as prescribed in Form B of the guidelines (Annexure 3) and also a confirmation that the audit firm adheres to the prescribed limit of conducting a statutory audit of only a maximum number (as prescribed by RBI) of NBFCs during a particular year, including the Company’s audit.
  • While the overall onus of the audit firm fulfilling eligibility criteria as prescribed by RBI in Annex I or as may be amended from time to time, for audit of the Company as per RBI guidelines rests with the audit firm, the Company shall also verify, through reasonable means, their compliance with the eligibility norms, prescribed by RBI.
  • Upon appointment of SAs, the Company shall inform RBI every year, in prescribed FORM A (Annexure 2), of appointment / confirming eligibility of SAs within such timeframe as may be prescribed.
  • In the event of any extraordinary circumstance after the commencement of the audit, like the death of one or more partners, employees, etc., which makes the firm ineligible with respect to any of the eligibility norms, the Company will promptly seek the approval of the RBI to allow the concerned audit firm to complete the audit, as a special case. In such an event, the Company, subject to the approval of its Board, may also consider the substitution of the Audit firm with another Audit firm that fulfills all eligibility criteria and report the same to the Reserve Bank with justification.

• Review of performance of Statutory Auditors by the Board

  • The Board and Audit Committee of the Board of the Company shall review the performance of SA on an annual basis. The Statutory Auditors continuing to fulfill the eligibility criteria and have not been assessed as negligent will be eligible for continuance subject to policy regarding tenure and rotation. Any serious lapses/negligence in Audit responsibilities or conduct of issues on part of the SAs or any other matter considered relevant shall be reported to RBI within two months from the completion of the annual audit.
  • In concurrence of above, every year during the month of April or May the Board should meet and review the performance of the SAs and give requisite approval, if required, for reporting any serious lapses by SAs to RBI, within the required timeframe which is two months from completion of the audit

• Regulatory Reporting

  • The Company will inform RBI about the appointment of SAs, by way of a certificate in Form A (Annexure 2) as prescribed by RBI, within one month of such appointment and the Board to assess the eligibility of the SA on a yearly basis and to submit a certificate in FORM A to this effect to the RBI within 30 days of the Annual General Meeting of the Company.

• Conflict in Policy:

  In the event of a conflict between this Policy and the extant regulations or laws (as may be amended, replaced, restated, from time to time), the regulations and laws shall prevail.

• Review of the Policy

  The Policy will be reviewed as and when any changes are to be incorporated in the Policy due to change in applicable law or regulation or at yearly intervals or as and when considered necessary by the Board of Directors of the Company.

For Si Creva Capital Services Private Limited

• Eligibility Criteria for SAs

  • Organisation, size and capacity considerations:

    Asset size as on 31st March of previous year	Number of Full time Partners associated with the firm for a period of 3 years	Out of FTP number of FCA partners associated with the firm for a period of 3 years	Number of Full time Partners/ Paid CAs with CISA/ ISA Qualification	Number of years of Audit experience	Number of Professional staff
    Upto Rs 1000 crore	2	1	1	6	8
    Above ₹ 1,000 crore and Up to ₹15,000 crore	3	2	1	8	12
    Above ₹15,000 crore	5	4	2	15	18

    • There should be at least one-year continuous and exclusive association of partners with the firm as on the date of shortlisting for considering them as full time partners. Further, at least two partners of the firm shall have continuous association with the firm for at least 10 years. The definition of ‘exclusive association’ will be based on the following criteria:

      • The full-time partner should not be a partner in other firm/s;
      • The partner should not be employed full time / part time elsewhere;
      • 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, 1949;
      • The income of the partner from the firm/ LLP should be adequate, as per the Board/ ACB’s assessment, for considering them as full-time exclusively associated partners, which will ensure the capability of the firm for the purpose.
    • There should be at least one-year continuous association of Paid CAs with CISA/ISA qualification with the firm as on the date of for considering them as Paid CAs with CISA/ISA qualification for the purpose.
    • Audit experience shall mean experience of the audit firm as Statutory Central Auditor/Branch Auditor of Commercial Banks (excluding RRBs)/ UCBs/NBFCs/ AIFIs. In case of merger and demerger of audit firms, merger effect will be given after 2 years of merger while demerger will be effected immediately for this purpose.
    • 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. There should be at least one-year continuous association of professional staff with the firm as on the date of empanelment/ shortlisting.

Annexure -2 (FORM A)

Information to be submitted by the NBFCs regarding the appointment of SCA/SA

• The company has appointed M/s ______________, Chartered Accountants (Firm Registration Number ________________) as Statutory Central Auditor (SCA)/Statutory Auditor (SA) for the financial year ____ for their 1st/2nd/3rd term.
• The company has obtained eligibility certificate from (name and Firm Registration Number of the audit firm) appointed as SCA/SA of the company for FY ____along with relevant information in the format as prescribed by RBI.
• The firm has no past association/association for ______ years with the company as SCA/SA/SBA.
• The company has verified the said firm’s compliance with all eligibility norms prescribed by RBI for appointment of SCAs/SAs of NBFCs.

Signature

(Name and Designation)

Date:

Annexure -3 (Form B)

Eligibility Certificate form for SAs

• Particulars of the Firm:-

  Asset size as on 31st March of previous year	Number of Full time Partners associated with the firm for a period of 3 years	Out of FTP number of FCA partners associated with the firm for a period of 3 years	Number of Full time Partners/ Paid CAs with CISA/ ISA Qualification	Number of years of Audit experience	Number of Professional staff
  Upto Rs 1000 crore
  Above ₹ 1,000 crore and Up to ₹15,000 crore
  Above ₹15,000 crore (Joint Audit)

• 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 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 mainly dependent on the Chartered Accountants of the firm / company in which I am / they are partners /directors have been declared as wilful 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: