Audit Policy

1.Introduction
1.1. Sunita Finlease Limited (“SFL”) is an RBI-registered Non-Banking Financial Company (“NBFC”) under the Master Direction – Reserve Bank of India (Non-Banking Financial Company– Scale Based Regulation) Directions, 2023 dated October 19, 2023 (“SBR”), categorized as a Base Layer (“NBFC-BL”), Non-Deposit Taking (“NBFC-ND”), and Investment Credit Company (“NBFC-ICC”).

2. Objective
2.1. In line with provisions of the Companies Act, 2013, the guidelines issued by the Reserve Bank of India (“RBI”) from time to time and good corporate governance practices to ensure independence of auditors, this Audit Policy (“Policy”) has been formulated to outline broad parameters including qualification, eligibility and tenor, to be considered for appointment and continuation of Statutory Auditors and Internal Auditors of the Company as well as the scope of internal and external audits to be conducted on the Company.

2.2. This Policy also lays down the criteria to be considered by the Audit Committee of the Board (“ACB”) of SFL before appointment of Statutory Auditor(s) (“SAs”).  The Policy is framed pursuant to RBI circular 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  (“RBI Guidelines”) for Appointment of SAs of  NBFCs and to the extent applicable to SFL. The Policy shall be read along with the applicable provisions of Companies Act, 2013 and the rules thereunder. 

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3. Appointment Of Statutory Auditor

3.1. Number of Statutory Auditors 

Considering the size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, availability of other independent audit inputs, statutory audit of the Company shall be conducted by one SA till asset size reaches INR 15,000 crore. 

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3.2. Process and Eligibility

a) The Company shall shortlist minimum of 2 audit firms for every vacancy of SA so that even if a 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 SA does not get delayed. 

b) SA shall comply with eligibility criteria prescribed under provisions of the Companies Act, 2013 and RBI Guidelines as amended from time to time. 

c) Concurrent auditors (if any) of SFL should not be considered for appointment as SA of SFL.  

d) The audit of SFL and any entity with large exposure, to SFL for the same reference year should also be explicitly factored in while assessing independence of the auditor. 

e) 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.

f) SFL shall obtain a certificate, along with relevant information as prescribed by RBI from the audit firm(s) proposed to be appointed as Statutory Auditors 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 as Statutory Auditors, under the seal of the said audit firm.

g) RBI will be informed about the SA’s appointment as per the prescribed format within one month of such appointment.
 

3.3. Independence

a) ACB shall monitor and assess the independence of the auditors and conflict of interest position in terms of relevant regulatory provisions, standards and best practices. Any concerns in this regard shall be flagged by the ACB to the Board of Directors of SFL and concerned Senior Supervisory Manager (SSM)/Regional Office (RO) of RBI.

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b) In case of any concern with the management of SFL such as non-availability of information/non-cooperation by the management, which may hamper the audit process, the SA shall approach the Board or ACB of SFL, under intimation to the concerned SSM/RO of RBI.

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c)The time gap between any non-audit works (services mentioned at Section 144 of Companies Act, 2013, internal assignments, special assignments, etc.) by the SA for SFL or any audit/non-audit works for group entities should be at least one year, before or after its appointment as SA. However, during the tenure as SA, the firm may provide such services to SFL which may not normally result in a conflict of interest, which are also approved by the ACB. A conflict would not normally be created in the case of the following special assignments (indicative list): (i) tax audit, tax representation and advice on taxation maters,  (ii) audit of interim financial statements, (iii) certificates required to be issued by the SA in compliance with statutory or regulatory requirements, (iv) reporting on financial information or segments thereof.
 

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3.4. Professional Standards

a) The SAs shall be strictly guided by the relevant professional standards in discharge of their audit responsibilities with highest diligence. 

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b) ACB shall monitor and assess the independence of the SAs on various parameters including audit of any entity with large exposure to the Company by the SAs and conflict of interest position in terms of relevant regulatory provisions, standards, and best practices. 

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c) The ACB 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 within two months from completion of the annual audit. Such reports should be sent with the approval/recommendation of the ACB, with the full details of the audit firm.

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d) In the event of lapses in carrying out audit assignments resulting in misstatement of SFL’s financial statements, and any violations/lapses vis-à-vis the RBI’s directions/guidelines regarding the role and responsibilities of the SA, the SA would be liable to be dealt with suitably under the relevant statutory/regulatory framework.
 

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3.5. Tenure and Rotation

a) In order to protect the independence of the SA, SFL shall appoint Statutory Auditors for a continuous period of three years, subject to the auditor satisfying the eligibility norms each year.

b) In case SFL removes its SA before completion of three years tenure, it shall inform concerned SSM/RO at RBI along with reasons/justification for the same, within a month of such a decision being taken. This restriction shall also apply to an audit firm under the same network of audit firms or any other audit firm having common partners. SA would not be eligible for reappointment by SFL for six years (two tenures) after completion of full or part of one term of the audit tenure.  
 

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3.6. Audit Fees and Expenses

a) The audit fees for SA shall be decided by the Board, the ACB and persons authorised by the ACB.

b) Audit fees for SAs shall be in terms of applicable regulatory provisions and shall be reasonable and commensurate with their respective scope and coverage of audit, size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, identified risks in financial reporting, etc. 

4. Internal Audits

4.1. Audit Plan

The ACB may  prepare and approve an audit plan at the start of the year. The scope, functioning, periodicity and methodology for conducting the internal audit as well as the frequency of internal audits of an activity/function shall be determined based on the risk perception. 

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4.1. Audit Report

The internal auditor shall prepare an audit report after the conclusion of each audit. The report will be finalized after a discussion with the ACB. The Report shall include a time-frame for the completion of actions to be taken for irregularities found in the internal Audit. The internal auditor shall report to the ACB as per the frequency laid down by the Board. 

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4.3. Scope of the Internal Audit

The following is an indicative scope of the internal audits to be conducted by SFL, subject to the audit plan approved by the ACB:

• Review of the reliability of financial and operating information.

• Assessment of compliance with policies, plans, and procedures.

• Assessment of compliance with applicable laws and regulations.

• Verification of quality of assets.

• Review of the efficiency with which resources such as IT Resources are employed.

• Evaluation of the effectiveness of the company’s operational risk management.

• Assessment of the adequacy of internal controls for all new or slightly modified information systems.

Review of specific operations, programs, functions or activities at the request of the ACB, the Board or management of SFL.

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5. Amendments

5.1. Any subsequent amendment/ modification in the Companies Act, RBI Guidelines and/or other applicable laws in this regard shall automatically apply to this policy

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6. Review

6.1. This Policy shall be reviewed annually and submitted for approval to the Board. Any amendments to the policy required as a result of amendment/modifications to the Companies Act, 2013/ RBI guidelines shall be presented to the Board of Directors for its approval.  

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