The Reserve Bank has come out with a revised long format audit report (LFAR) norms with a view to improve the efficacy of internal audit and risk management systems prevalent in banks.
LFAR applies to statutory central auditors (SCA) and branch auditors of banks, and it has been updated considering the large scale of changes in the size, complexities, business model and risks in the banking operations.
The revised LFAR format will be put into operation for the period covering 2020-21 and onwards, the central bank has said.
The overall objective of the LFAR is to identify and assess the gaps and vulnerable areas in the business operations, risk management, compliance and the efficacy of internal audit and provide an independent opinion of the same to the Board of the bank and provide their observations. RBI asked the banks to ensure timely receipt of the LFAR from auditors. The LFAR must be placed before the Audit Committee of Board and Local Advisory Board of the bank indicating the action taken or proposed to be taken for rectification of the irregularities.