The bank branch statutory audit is a yearly task and has a vital importance due to following reasons.
1. Time for completion of audit is very limited and the audit had to be completed on or before specific date.
2. Increase in instances and new techniques of frauds.
3. Increase and expansion of banking activity to wider area like core banking, inter-connectivity, E-commerce banking.
4. Wider dependence on computerization, and almost all activities are carried out by the computer programmes.
5. Use of various software from different vendors by the same bank for a set of branches and software having specific set of features available in particular branch.
6. Use of hardware of various types and features.
7. Stringent and changing norms of provisioning and income recognisation.
8. Wide range of circulars , issued by various controlling authorities on various matters like interest rates, credit rating norms , and so on.
To cope with the uncertainties as mentioned above and for the efficient and professional way of completion of the audit assignment my views on the basic techniques which helps in forming opinion and judgment are enumerated as follows.
A. COLLECTION OF INFORMATION:
There are various types of audits and specific assignments carried out by various authorities within the bank as well as by outside agencies. The brief list and purpose of the same are as under.
|Sr. No. / Type of Audit/Assignment||Purpose/Object.|
|1. Internal inspection by Audit dept.||Checking of all aspects of the branch like house-keeping, Advances, Operations etc.|
|2. Risk Based Audit||Risk attached to a particular advance , and other items.|
|3. Stock Audit of large borrower a/cs.||To ascertain the position and adequacy of the securities available.|
|4. Internal inspection of large borrower||To ascertain the position of accounts. documents w.r.t. adequacy of stamp duty paid, enforceability of the same,valution and mortgage formalities of collateral securities. Credit rating etc.|
|5. Con-current audit||For online rectification of the irregularities observed in all the aspects of the branch.|
|6. Information system audit ,||To ascertain whether the computer audit information given by the systems are correct. And the hardware/software are giving the expected results.|
|7. Revenue Audit||For verification of whether the revenue is charged and recovered as per the circulars.|
|8. RBI Audit||In case of large branches inspection/audit carryout by RBI.|
|9. Limited review audit||Limited review carried out by the auditors/internal inspectors on quarterly basis for returns to be submitted on Qty, Hly, and yearly basis.|
Though the list is indicative there are possibilities of some specific audits, assignments, investigation may be carried out in a particular branch for particular area, or particular borrower or other account.
The statutory auditor has to prepare a checklist of all such audits carried out in a particular branch and obtained the reports of such audits as the same will serve to have an idea of the branch under audit. The particular audit report is to be seen with the specific object for which the said audit is carried out.
Some of the points which are to be looked in to the specific audit reports are enumerated as follows.
|Sr. No. / Type of Audit/Assignment||Area/ points for verification.|
|1. Internal inspection by Audit dept.||Major Irregularities. Of documentation, internal working of the branch.|
|2. Risk Based Audit||High risk items.|
|3. Stock Audit of large borrower a/cs.||Securities available, age of stocks, receivables, adquate for drawing power.|
|4. Internal inspection of large borrower||all aspects like operations in accounts. the accounts, financial discipline, vetting of documents.|
|5. Con-current audit||persistent and unretified irregularities.|
|6. Information system audit ,||negative replies on hardware computer audit and systems reports, backups, security of systems.|
|7. Revenue Audit||major area of leakage, non- recovery of leakage.|
|8. RBI Audit||Area of investigation, major irregularities.|
|9. Limited review audit||MOC given for quarterly, Half-yearly basis.|
The auditor has to prepare a check-list and see that all the reports are available to him. In case any of such audit/assignments is not applicable or carried out by the particular branch, It is advisable that he should specifically mentioned in Long form audit report the fact that the said audit/assignment is not carried out during the year under audit, wherever applicable.
This information and reports will definitely make the task of the auditor is easy and definitely help in better understanding of the activities of a particular branch under audit.
B. FOREIGN EXCHANGE TRANSACTIONS:
There are various activities undertaken by the branches dealing in foreign exchange like dealing room activities , buying & selling, forward booking transactions, collection of bills like FCBRD, FDBP, FUDBP,PCL as well as PCFC ETC. It is very important to look in to the terms of sanctions, period for which the same was sanctioned and booking contracts in detail. The various circulars issued by the Reserve Bank of India will serve as guidance for verification of such transactions.
C. COMPARISON AND OVERALL COMPARATIVE ANALYSIS :
The comparison and comparative analysis of various statements forwarded by the branch starting with the previous year audited statements and returns with each quarter ending, half year ending, and year ending statements are vital as any major variation in classification of accounts, security value , and provisions etc . Will be easily noticed through such analysis.
D. OVERVIEW OF IMPORTANT CONTROL RETURNS:
The branches forward various control returns to the RBI and its own controlling authorities, some of them like limit excess & T.O.D., Balancing of Books , Security and stationary verification etc are of vital importance and it is advisable to have at least overall observation of such type of important control returns.
E. PERSON BEHIND THE WORK:
It will be very helpful for auditor to have job rotation records to be seen with a view to see the man behind the work in critical areas like advances, computer back up as well as day-end and day-open activities. And a limited review will be taken to find out that the work was carried out as expected whenever a particular staff handled a particular work.
F. DISCUSSIONS ARE VITAL FOR AUDIT:
It will be very helpful to have discussions with the staff, auditors , who are present and carried out any audit/assignment for the branch. The discussions are help in both ways, in one way it creates confidence in the audit tee as well as auditor and in other way it helps in reducing tensions of auditor and audit tee as both are operating in various uncertainness. It will be of great help if specific points are listed before the actual discussion to make them fruitful and objective.
G. BE OBJECTIVE AND TARGET ORIENTED:
Last but not least: It is necessary to understand that you are a watchdog and not a detective as such be object oriented as a very limited object is assigned to you. If you wonder around without specificity in mind about this assignment, the task will be very difficult and more time consuming.
I think my views will definitely help the auditors to carryout the assignment of bank branch audit and will make the their task some more easy.
CA Satish C. Badve.
B.Com.F.C.A.D.C.M.D.I.S.A.( ICA )
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