The document provides guidance on effective concurrent audits. It discusses that concurrent audits examine transactions contemporaneously, shorten the time between transactions and examination, and emphasize substantive rather than test checking. The goals are to preclude errors and fraud, check compliance with policies, and serve as an early warning system. Concurrent audits are part of management and internal control processes. Auditors are responsible for detecting lapses and reasonably detecting fraud. Guidelines discuss checking compliance with laws and regulations, and standards provide further guidance on the audit process, including planning, risk assessment, documentation, and reporting. The focus should be on high risk areas like credit, regulatory compliance, fraud, and revenue.

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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