Identification of Non-Performing Assets by the Branch is a very crucial area where the Central Statutory auditors heavily depend upon the Branch Auditors. The Memorandum of Changes (MOCs) issued by the Branch Auditors are closely looked into by the Central Statutory Auditors. Appropriate notes and reports should accompany such MOCs, which will help the Central Statutory Auditors to take up the case appropriately with the management of the Bank for necessary provisions. Branch Auditors should know that there is neither time nor inclination on the part of the Bank Management to go back to the branch or circle or the Branch Auditor for further explanations in this respect. While looking into advances the Branch Auditors should identify weakness in the accounts, see drawing power calculations, non-regularisation of adhoc limit and genuineness of recoveries resulting into up-gradation of accounts. In a nut-shell, the Branch Auditors should be very vigilant where subjective judgment is required. Statutory Branch auditors should read Concurrent Audit Reports, Inspection Reports, Information System Review Reports, etc., to point out major weaknesses in internal controls so as to help Central Statutory Auditors to draft their LFAR. All this requires proper planning of audit and its meticulous execution. The Branch Auditors should always discuss the qualifications in various audit reports (Statutory, Tax, LFAR, Certificates) with the Branch Management so as to take a considered view into account before making such qualifications. However, Central Statutory Auditors expect the Branch Auditors to be completely impartial and not prone to any pressures while reporting their free and frank opinion.
Challenges before Central Statutory Auditors
The challenges before Central Statutory Auditors relating to Branch Audits are many. The first and the foremost is the quarterly limited review being done without any branch audit requirements. At the year end when the branches are under audit, as per the current policy of the RBI, the branch audit is necessary for those branches having advances of? 20 crore and above, only l/5th of the remaining branches
The role of the Branch Auditors is not only to do the
halance sheet audit of the branches allotted to them.
The Branch Auditors should understand the relevant
internal controls in the branch especially software
controls and manual controls.
and the business to be covered is to the extent of 90%. This virtually leaves 60% of the branches un-audited. Another problem faced is the Branch Auditors do not complete their work in time. Some of the Branch Auditors have very casual approach to the audit and therefore, quality of overall financial statements of the bank suffers. It is found in several cases that MOCs issued by the Branch Auditor are not well supported by facts and evidences. The Branch Auditors do not give proper explanations for MOCs given. The Branch Auditors do not write detailed explanation about their qualifications in various parts of reports and certificates. Branch Auditors do complain in private but do not contact their Central Statutory Auditors for difficulties faced by them during audit such as-MOC not allowed to be passed, data not available, no sitting arrangements, key staff on leave, statements not prepared and figures not available for completion of Tax Audit Report and LFAR, etc. ICAI has started the facility of answering online queries within 24 hours during the statutory audit period i.e. from 25th of March to 10th of April every year. However, most of the Branch Auditors do not take advantage of such a support system, thereby struggling in completion of their audit in time. Generally, no discussion is held with the Central Statutory Auditor by the Branch Auditors also for their very serious findings such as frauds. Many auditors do not write their observations in the Statutory Audit Report but state them only in LFAR or Tax Audit Report. The Central Statutory Auditors expects that all these pitfalls need to be avoided by the Statutory Branch Auditors while performing their duties.
There are huge expectations by the Regulator (RBI) from the Auditing Fraternity. The Branch Auditors are expected to work hand in hand with Central Statutory Auditors in completion of the task with the stamp of quality expected of the members of the Institute of Chartered Accountants. Therefore, it is imperative for all the Central Statutory and Branch Auditors to work in tandem for keeping the flag of ICAI flying high. ■
Conducting Bank Branch Audit in CBS Environment
Bank branch audits are one of the significant segments of chartered accountants’ audit practice. The increased technology adoption by the banks during last decades has created both challenges and opportunities for the auditors. While the branch auditor cannot be expected to be an IT’s maestro, ignorance to the existence of IT system cannot be afforded too. To obtain understanding of bank’s IT system and controls, the auditor seeks assistance from system experts and designated bank officials. Then, he is also required to use computer assisted auditing tools to conduct the audit function efficiently. Further, computerised processing, although highly dependable and reliable, cannot be always considered as an assurance to accuracy. Auditor shall have to perform sufficient audit procedures and use his professional judgments for qualitative discharge of his professional duties. As the bank branch audits are approaching soon, the author, through this article aims to provide the reader an insight to the basic understanding of core banking system, the challenges before the auditor and the critical areas of focus while performing audit under CBS environment.
Most of the banks have moved to CBS environment. What was earlier the prerogative of the private sector banks and large public sector banks is filtered down to the large co-operative banks, district level co-operative banks and small co-operative banks. Sometimes mere payment clearing system of the clearing house becomes a trigger move to a CBS environment to ensure that electronic transfer by the clearing house automatically reaches the account holder. All persons exposed to the branch like its depositors, borrowers