Bank audit


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Bank audit

  1. 1. Challenges in Bank Branch Audit CA.K.Raghu Central Council Member
  2. 2. 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.
  3. 3. 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
  4. 4. Audit Planning contd. The basis audit activity can be divided into three segments namely Off Site Preparations On Site and Audit Executions.
  5. 5. Pre- commencement activities
  6. 6. 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
  7. 7. Off site activities contd. Receipt of appointment letter Audit Engagement letter Send acceptance letter
  8. 8. 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 
  9. 9. 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
  10. 10. 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
  11. 11. Audit Programme
  12. 12. 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
  13. 13. 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.
  14. 14. 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.
  15. 15. 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
  16. 16. Q&A