Bank audit points

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Acceptance of deposits: Acceptance of deposits is a core function of banks. The deposits are of varied nature depending on the holder and purpose of the account. Nevertheless, the process of acceptance of deposits can be summed up as follows:- Collection of details – KYC and AML norms compliance – Creation of account in Core Banking System (CBS)

Loans and advances:The lending of funds is the other core function of the bank. The bank accepts deposits at a certain rate and lends at a higher rate. The margin is the bank’s profit. Lending function ranks higher on the risk factor as there is a possibility of the debt not being recovered. Hence there is a great significance and need for proper documentation.There are several loans and advances that a bank offers. However, the process for disbursement remains more or less the same

Cash management:Since the bank earns interest on the rupee it lends, maintaining a high cash balance can result in interest losses. However, banks need to hold enough to fund the ATMs. Hence the bank must achieve a balance.

Safety lockers:Banks also hold valuables of the customers in lockers

Forex:For forex operations of a bank, the auditor must ensure the following checks: – Rate of foreign exchange on the transaction date and correct entry in books – Adherence to RBI norms relating to forex. – Correct valuation of forex held in hand at the time of the audit.

Bill payments:This is an add on service offered by banks; wherein a customer can make payments towards public utilities through the bank. The auditor will have to verify: – If standing instructions have been received from customers, then ensure that the same has been noted in the CBS to generate an auto payment. – Ensure proper reconciliations of the utility accounts.

Income leakage:For an auditor to ensure completeness of audit it is imperative to check that all charges are collected, interest rates are inputted accurately in the CBS. The auditor must generate MIS to analyze the various charges and interest computations. Also, there has to be a documented process for changing the rates in the system, and the same must be strictly monitored.The concurrent audit aims at reducing the gap between the occurrence of a transaction and its examination. A concurrent audit report covers all transactions and hence is the second line of defense for a bank.