RKS & Associates, Chartered Accountants, were appointed as statutory auditors of National Prosperity Bank Ltd. for the financial year ended 31st…

RKS & Associates, Chartered Accountants, were appointed as statutory auditors of National Prosperity Bank Ltd. for the financial year ended 31st March, 2026. The auditors were also appointed as the statutory auditors of Shiksha Jyoti Educational Society, one of the bank's major institutional borrowers. During branch audit of the bank, the audit team examined a cash credit facility of ₹40 crore sanctioned to Sunrise Industries Ltd. against hypothecation of raw materials, finished goods and trade receivables. As additional comfort, the bank had also obtained an equitable mortgage over the company's factory land and building, together with the personal guarantee of the Managing Director. While reviewing the loan account, the audit team observed that the account had remained irregular for almost three months. However, three days before the balance sheet date, the borrower deposited ₹ 8 crore, making the account appear regular. On verification of transactions immediately after the year-end, the auditors noticed that almost the entire amount had been withdrawn through fresh drawings and transferred to another group company. Similar year-end transactions had also occurred in the previous financial year. The engagement partner directed the audit team to perform additional audit procedures to determine whether the apparent regularisation represented genuine recovery or merely an arrangement to avoid classification of the account as a Non-Performing Asset (NPA). During the audit of Shiksha Jyoti Educational Society, the auditors observed that income tax had been deducted at source from interest earned on Government securities and fixed deposits. Although the Society was eligible for exemption under the Income-tax provisions, no refund claim had been filed. The auditors also noticed that separate statements of account had not been prepared for the Hostel Fund, Games Fund and Staff Provident Fund, all these transactions having been merged with the general accounts. When the audit team insisted on extending audit procedures in both assignments, the Executive Director of the bank stated that if the auditors continued questioning the asset classification or insisted on additional audit work, the bank would recommend another audit firm next year, substantially reduce future professional fees and consider initiating legal proceedings for delaying the audit report. The engagement partner refused to modify the audit approach under such pressure, documented the matter, consulted the firm's Ethics Partner and instructed the audit team to continue performing all audit procedures necessary to obtain sufficient appropriate audit evidence before expressing an opinion.