Download - Bank audit
Challenges in Bank Branch Audit
CA.K.RaghuCA.K.Raghu
Central Council Member Central Council Member
Peculiarity of Bank Audit
Peculiar nature of banks and need for special audit considerations owing to risks associated with the transactions- custody of large volumes of monetary items,
which needs to be stored and transferred, they are vulnerable to misappropriation and fraud
Scale of operations large number of branches –inland and overseas large volume and variety of transaction in both numbers and value
extensive dependence on IT to process transactions as operates through wide network of branches requiring decentralization of authority and
delegation of power. Wide range of services offered such as ATM, net/phone banking, etc.
Statutory and regulatory requirements Increasing number of new services and banking options Large number of branches requiring decentralization of authority and delegation of
power.
Audit Planning
Time is short as Banks desire adoption of audited accounts within a few
weeks of the year end Many a times appointments of auditors are delayed There is a limited time available for familiarisation of
systems & processes Time available does not match the scope and risk Computerisation has increased the banking activity
manifold . This makes off site preparation and pre-
commencement work essential
Audit Planning contd.
The basis audit activity can be divided into three segments namely
Off Site Preparations On Site and Audit Executions.
Pre- commencement activities
Off site activities
Get information on Bank profile, Staff, etc. Study thoroughly
Previous report of Branch Auditors Concurrent Audit report of the branche Revenue Audit report (if any) System Audit report Unit/stock Inspection reports Diligence reports RBI inspection reports Bank internal management report
Relevant laws/ regulations /RBI circulars Knowledge of banking business
Off site activities contd.
Receipt of appointment letter Audit Engagement letter Send acceptance letter
HR allocation and skills
Plan for the requisite staff Number Adequate knowledge and experience
Obtain updated information on changes RBI circulars Change in related laws
Corporate laws Foreign policy
Other pre-commencement activities
Knowledge of business Banking Industry and the Bank Organisational structure of the Bank Products of Bank Banking terminology and schemes
AAS relevant in understanding business of branch A reading of Guidance note on audit of banks by
ICAI would provide valuable guidance. Review accounting policies and auditors report of
the bank for the preceding year. Ratio analysis with previous years figures
Coordination
Co-ordination with management for effective and efficient audit Availability of books, personnel and equipment Travel to unit visits chosen by you – especially
outstation Discussion of serious pending issues
Audit Programme
Audit programme
Scope of audit Expected assessment of inherent and control risk Delegation of work to audit team Nature, timing and extent of audit procedure Going concern assumption Materiality thresholds Time schedule Flexibility to accommodate change in programme to
focus on weak areas Remember , Audit planning is a continuous exercise
Compliance aspects
Compliance with RBI/ICAI Guidelines Compliance with Banks internal
guidelines/manual of instructions Compliance with terms of appointment Compliance with Accounting Standards Compliance with Auditing and Assurance
Standards.
Peer Review
ICAI has introduced Peer Review in 2007 Assessing the quality of attestation service
engagements performed by practise units. Ensuring that the practise unit has maintained
adequate documentation Peer Reviewers appointed by Peer Review Board Records for immediately preceding three completed
financial years are verified by the Peer Reviewer.
Peer Review for Branch Auditors
All Central Statutory Auditors of Public Sector, Private Sector Banks and ForeignBanks are covered by Peer Review in Stage 1
Peer Review ensures that the practise units comply with the professional and ethical standards
Practise units have adequate training programmes and systems and procedures for conducting audit
Q & A