Effective Concurrent Audit-2020.pptx

concurrent audit of bank

1. Effective Concurrent Audit CA. UDAY KULKARNI 1

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. 2

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. 3

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 . 4

5. Guidelines-- Transaction Verification- Compliances of various Legal Provisions Compliances of various Regulatory Provisions Compliances of Bank specific Policies, Procedures 5

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 7

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 8

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 9

10. MoF - Master Circular on Audit Systems Circular issued by Department of Financial Services. [ 26 th 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. 10

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. 11

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. 12

13. PLANNING CONCURRENT AUDIT Transaction verification aspects- Legal & Regulatory Technology Risk Assessment Internal Controls Irregularity or Frauds Financial Impact 13

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 14

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 15

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 17

18. !! THANK YOU !! CA. Uday Kulkarni [email protected] 18