concurrent audit of bank

1. Effective Concurrent Audit
CA. UDAY KULKARNI
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2. Concurrent Audit
• It is an examination-
– Contemporaneous with the occurrence of
transactions.
– Shorten the interval between a transaction and its
examination.
– Emphasis on substantive checking rather than test
checking.
– It is a management process.
– integral to the establishment of sound internal
accounting function and effective controls.
– Preclude the incidence of serious errors and
fraudulent manipulation.
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3. Concurrent Audit
• Evaluation of judgment of decision taken- is
beyond the scope.
• To check whether transactions or decisions are
within the policy parameters laid down by HO,
RBI etc.
• In a very large branches- to ensure on an on
going basis that different divisions functions
within the laid down parameters and
procedures.
• Part of banks early warning system to detect
irregularities and frauds.
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4. Responsibility
• Act as a part of Management Process.
• Part of Internal Control System.
• Responsible for detection of lapses in internal
control system and operational areas.
• Responsible for daily checking of operations
and more responsibility of detecting fraud.
• Responsible for omission and commissions in
respect of transactions verified.
• Responsible to plan the audit so as to
reasonably detect frauds or irregularities.
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5. Guidelines--
• Transaction Verification-
– Compliances of various Legal Provisions
– Compliances of various Regulatory Provisions
– Compliances of Bank specific Policies,
Procedures
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6. Guidelines---
• Knowledge of Various Laws.
• RBI Master Directions/ Circulars/Notification.
• FEDAI guidelines/FEMA guidelines.
• Manual on Concurrent Audit of Banks by ICAI.
• Guidance Note on Audit of Banks by ICAI.
• Bank Circulars, Policies etc.
• Concurrent audit manual provided by bank.
• Guidelines issued by Bank with appointment letter. 6

7. Internal Audit Standards
• Preface to the Framework and Standards on Internal Audit
• Framework Governing Internal Audits
• Basic Principles of Internal Audit
• 100 Series: Standards on Key Concepts
– Standard on Internal Audit (SIA) 110, Nature of Assurance
– Standard on Internal Audit (SIA) 120, Internal Controls
• 200 Series: Standards on Internal Audit Management
– Standard on Internal Audit (SIA) 210, Managing the Internal Audit Function
– Standard on Internal Audit (SIA) 220, Conducting Overall Internal Audit Planning
– Standard on Internal Audit (SIA) 230, Objectives of Internal Audit
– Standard on Internal Audit (SIA) 240, Using the Work of an Expert
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8. Internal Audit Standards
– 300–400 Series: Standards on the Conduct of Audit Assignments
– Standard on Internal Audit (SIA) 310, Planning the Internal Audit Assignment
– Standard on Internal Audit (SIA) 320, Internal Audit Evidence
– Standard on Internal Audit (SIA) 330, Internal Audit Documentation
– Standard on Internal Audit (SIA) 350, Review and Supervision of Audit Assignments
– Standard on Internal Audit (SIA) 360, Communication with Management
– Standard on Internal Audit (SIA) 370, Reporting Results
– Standard on Internal Audit (SIA) 390, Monitoring and Reporting of Prior Audit Issues
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9. Internal Audit Standards
• Standards issued up to July 1, 2013
• Standard on Internal Audit (SIA) 5, Sampling
• Standard on Internal Audit (SIA) 6, Analytical Procedures
• Standard on Internal Audit (SIA) 7, Quality Assurance in Internal Audit
• Standard on Internal Audit (SIA) 11, Consideration of Fraud in an Internal Audit
• Standard on Internal Audit (SIA) 13, Enterprise Risk Management
• Standard on Internal Audit (SIA) 14, Internal Audit in an Information Technology Environment
• Standard on Internal Audit (SIA) 17, Consideration of Laws and Regulations in an Internal Audit
• Standard on Internal Audit (SIA) 18, Related Parties
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10. MoF- Master Circular on Audit
Systems
• Circular issued by Department of Financial Services. [ 26th Sept 2012].
• Currently 70% of business of banks is covered under Concurrent Audit System
and yet the irregularities / frauds could not be controlled.
• It is advised that all the Audit qualifications should be rectified within 90 days of
submission of Audit Report and to be closed not later than 120 days.
• Concurrent Audit Focus should be on substantive checking of the High Risk
areas like-
– Credit Risk
– Regulatory/Statutory Compliance Risk
– Fraud Risk
– Revenue Risk
• The Banks should make it mandatory giving feedback to Concurrent Auditors on
the frauds involving the Branch audited by them.
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11. Risk Based Audit--
• Evaluation of adequacy and effectiveness of Risk
Management Process and Internal Controls.
• Development of Risk Based Audit Policy.
• Anticipation of potential risk areas.
• Risk Management Process in the areas covered
under concurrent audit scope.
• Suggestions for Risk Mitigation.
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12. PLANNING CONCURRENT AUDIT
• Consistent with objectives of concurrent audit.
• Consistent with terms of engagement.
• Development of overall Plan for the audit scope and
universe.
• Development of audit program on the basis of
overall plan.
• Deciding nature, timing and extent of audit
procedure.
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13. PLANNING CONCURRENT AUDIT
• Transaction verification aspects-
– Legal & Regulatory
– Technology
– Risk Assessment
– Internal Controls
– Irregularity or Frauds
– Financial Impact
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14. CONCURRENT AUDIT PLAN
• To understand
– Business
– Technology
– Internal Controls
– Business unit profile
• Knowledge of Legal & Regulatory Framework.
• Bank Policies and Procedures
• Bank Risk Management Process.
• Delegation of Authority
• Business unit Head
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15. SCOPE OF CONCURRENT AUDIT
• Cash
• ATM Cash
• Deposits
• Loans & Advances
• Bank Guarantees
• New Customer and Account Opening
• Monitoring Large Borrowers
• Overdue Position & NPA
• Bank Reconciliation
• Verification of Suspense, Sundry Deposit/Creditor accounts.
• Long outstanding entries
• Revenue Leakage
• High Value Transactions
• Clearing Transactions & Cheque/Bills Collections
• Foreign Exchange Transactions
• E- Transactions
• Government Business
• Direct & Indirect Tax transactions
• Submissions of control returns
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16. Documentations
• Documentation of
– Audit Plan
– Audit Programme
– Audit Resources
– Audit Procedure
– Audit Communication/Discussions
– Repetition of irregularities and its non compliance
• Audit Documentation
– Use of Excel Sheet/ Analytical tools
– Use of softcopies of evidences
– Conclusions drawn 16

17. Reports
• Features of good audit report are: Clear, Factual,
Specific, Concise, Unambiguous, Timely.
• Report Facts with Impacts.
• Report about serious irregularities
• Report about Frauds
• Daily Transaction evaluation- reporting-
rectification- Spot Rectification.
• Monthly Report/Quarterly Report
• Risk Based Audit Report
• Compliances of Audit Reports
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18. !! THANK YOU !!
CA. Uday Kulkarni
kulday@rediffmail.com
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