22. Amendment of section 39 of the principal enactment

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

Section 39 of the principal enactment is hereby amended as follows:-

(1)

in subsection (1) thereof, -

(a)

by the substitution in paragraph (a), for the words “the accounts balance sheet and profit and loss account” of the words “financial statements”;

(b)

by the substitution in paragraph (b), for the words “the accounts, balance sheet and the profit and loss account” of the words

“financial statements”;

(2)

by the insertion, immediately after subsection (1)

thereof, of the following:-

“(1A) Where there are findings which to the knowledge of the auditor in the performance of his duties under this Act, that-

(a)

losses have been incurred or likely to incur which may materially reduce the capital of any licensed commercial bank;

(b)

irregularities have been occurred in such bank, including the engagement of such bank in unsound or unsafe practices in carrying on of its business which is likely to jeopardize the interests of its depositors and creditors; or

(c)

the obligations to the depositors and creditors of such bank are not sufficiently covered by the assets of such bank, the auditor shall immediately report such findings or any other matter that can materially affect the safety and soundness of the licensed commercial bank to the Director of Bank Supervision.”;

(3)

by the repeal of subsection (2) thereof, and the substitution therefor of the following:-

“(2) Every report specified in subsection (1)

which shall be completed within two months of the end of the financial year, shall contain a statement by the auditor as to whether in his opinion the financial statements contain a true and fair view of the bank’s financial position including the compliance with the provisions relating to issuing of financial statements and making disclosures by a licensed commercial bank and where the auditor has called for an explanation or any information from any officer or agent of such licensed commercial bank whether such explanation or information is satisfactory.”;

(4)

in subsection (3A) thereof, by the substitution for the words “shall be met by the Central Bank.” of the words “shall be met by the respective licensed commercial bank.”;

(5)

by the insertion, immediately after subsection (3A)

thereof, of the following: -

“(3B) Where the Central Bank is of the view that an additional audit is required to be conducted in respect of one or more aspects of the business and affairs of a licensed commercial bank, the Director of Bank Supervision may require such bank to conduct an additional audit on such aspects and the cost of such additional audit shall be met by the respective licensed commercial bank.

(3C)

The provisions of sections 38A and 39 in respect of the appointment, duties and powers, and remuneration of auditors shall mutatis mutandis apply in respect of any auditor employed to conduct an additional audit under this section.”;

(6)

by the insertion, immediately after subsection (7)

thereof, of the following:-

“(7A) The engagement partner of the auditor of a licensed commercial bank shall be a member of the Institute of Chartered Accountants of Sri Lanka and shall not be subject to any disqualification under any written law in Sri Lanka or abroad from being appointed as an auditor.

(7B)

Every licensed commercial bank shall change the auditor of such bank once in every six years and shall change the engagement partner once in every three years.

(7C)

A licensed commercial bank which has already appointed an auditor shall comply with the provisions of this section within a period of two years from the appointed date.”; and

(7)

by the repeal of subsection (8) thereof.

Read on from s 23