NBFCs
Audit and Inspection in Non-Banking Financial Companies (NBFCs)
Audit and inspection in Non-Banking Financial Companies (NBFCs) in India are crucial to ensure compliance with the regulatory framework, safeguard financial stability, and maintain stakeholder confidence. Here’s a breakdown of the key aspects of audits and inspections in NBFCs
Types of Audit in NBFCs
Statutory Audit
Objective
Ensure financial statements present a true and fair view of the company's financial position.
Scope
Verification of books of accounts as per the Companies Act, 2013.
Compliance with accounting standards (Ind AS).
Assessment of provisions for Non-Performing Assets (NPAs) and compliance with RBI guidelines.
Frequency
Annually, as mandated by law.
Internal Audit
Objective
Evaluate the adequacy and effectiveness of internal controls.
Scope
Monitoring operational efficiency and compliance with internal policies.
Fraud detection and prevention.
Assessment of risk management frameworks.
Frequency
Continuous or periodic, based on company policy.
sector lending).
Concurrent Audit
Objective
Conduct real-time checks to ensure compliance with processes and regulatory guidelines.
Scope
Verification of loan disbursements, documentation, and repayments.
KYC and Anti-Money Laundering (AML) compliance.
Frequency
Monthly or quarterly.
Regulatory Audit
Objective
Compliance with specific directives issued by the Reserve Bank of India (RBI).
Scope
Adherence to NBFC Prudential Norms.
Capital Adequacy Ratio (CAR) checks.
Verification of statutory returns submitted to RBI.
Frequency
As per RBI requirements.
Tax Audit
Objective
Ensure compliance with the Income Tax Act, 1961.
Scope
Verification of tax provi
sions, TDS deductions, and GST compliance.
Frequency
Annually
By maintaining a proactive approach to audits and inspections, NBFCs can ensure regulatory compliance, mitigate risks, and enhance trust among stakeholders.
The Finakon team will help you with a detailed checklist or templates related to NBFC audits!
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