The Bangladesh Bank has issued the "Bank Company External Auditor Rules 2024" to determine the terms and conditions for the selection of external auditors and outline the areas of financial audits of scheduled banks for the first time.

As per the rules, the external auditor will audit at least 80 percent of the total risk-based assets of a concerned bank, prioritising the highest risk-based branches along with the headquarters of the scheduled banks.

Risk-based assets are a risk management measure, indicating to banks the number of assets they need to hold in relation to their risk.

The central bank issued a circular yesterday to this end.

As per the circular, the new rules will be effective from the audit year 2025–26 for banks whose financial year starts in July.

The rules were formulated in light of Section 120 of the Bank Company Act, 1991, the central bank said.

The primary purpose of the rules is to determine the terms and conditions for the selection of professional and efficient external auditors for financial audits in banks.

The rules will also define the scope of external audits, ensure proper reflection of the bank's financial condition in financial reports, and ensure the quality of external audit services.

The rules will be applicable to all scheduled banks.

All scheduled banks will annually select external auditors at their annual general meetings from a list approved by Bangladesh Bank, it said.

Then, immediately after the selection, the banks will have to apply for no-objection certificates from the central bank regarding the appointment.

The scheduled banks will have to complete all procedures for the appointment of external auditors within the eighth month of the accounting year under audit.

Respective banks will ensure the supply of all necessary information and documents to the external auditor timely and will be responsible for any delay in the commencement or completion of audit activities due to a delay in supplying required documents.

Additionally, under the rules, the same external auditor cannot be appointed in the same bank for more than three consecutive years.

If the condition is violated, that particular external auditor will not be able to participate in external audit activities in the concerned bank for another three years.