Challenges in Bank Branch Audit CA.K.Raghu 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.
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-commencementactivities 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 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 BranchAuditors AllCentral 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