bank audit –planning & documentation bank audits...
TRANSCRIPT
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Bank Audit – Planning &
Documentation
Bank Audits – Raising the Bar
Pune Branch of WIRC, ICAIPune Branch of WIRC, ICAI
March 18, 2014 March 18, 2014
Presented by :-
Anagha Thatte
Partner, M P Chitale & Co.
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Disclaimers
� These are my personal views and can not be construed
to be the views of M/s.M. P. Chitale & Co., Chartered
Accountants
� ICAI has no responsibility for its contents
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� These views do not and shall not be considered as a
professional advice.
� This presentation should not be reproduced in part or in
whole, in any manner or form, without my written
permission.
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A Classic Hierarchy
HeadCircle Zonal Regional
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Head
officeCircle
officeZonal
officeRegional
office
Branch
office
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Functions at Head Office
�� ConsolidationConsolidation ofof financialfinancial statementsstatements
�� ConsiderationConsideration ofof auditors’auditors’ reportsreports
�� ConsolidationConsolidation ofof LFARLFAR
�� OverallOverall projectproject managementmanagement ofof auditaudit
AuditAudit ofof centralcentral functionsfunctions suchsuch asas treasurytreasury operations,operations,
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�� AuditAudit ofof centralcentral functionsfunctions suchsuch asas treasurytreasury operations,operations,fixedfixed assets,assets, internationalinternational division,division, CentralCentral AccountsAccountsDivision,Division, StationeryStationery division,division, Provisioning,Provisioning,ReconciliationReconciliation ofof InterInter branchbranch accountsaccounts
�� CoordinationCoordination withwith managementmanagement andand otherother auditorsauditors
�� FinalFinal decisiondecision onon disclosures,disclosures, accountingaccounting policies,policies, auditauditandand accountingaccounting mattersmatters
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Contents of a Bank’s financial statements
Balance sheet
Assets
• Advances
• Investments
Profit & Loss account
Income
• Interest income
• Fees & commission
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• Cash & bank balances
• Other assets
Liabilities
• Deposits
• Other liabilities
• Other income
Expenses
• Interest expenses
• Provision for doubtful debts
• Administrative expenses
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Bank products
Liabilities
• Savings account
• Current account
• Fixed deposits
• Foreign Currency Accounts –NRE, NRO,
Assets
• Collaterized Loans
• Overdrafts/ Cash credit against hyp. of stock/ book debts
• Personal loans
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Accounts –NRE, NRO, FCNR, EEFC, RFC
• Other services such as investment services, draft payments, balance sweeping, cash management, debit cards, ATMs, phone banking
• Personal loans
• Long term project loans
• Bills discounting
• Trade finance
• Auto finance
• Home finance
• Credit cards
• Non funded facilities
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Audit assertions
•Completeness
•Existence
•Accuracy
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•Accuracy
•Validations
•Ownership
•Presentation
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Life Cycle of Branch Audit
Plan &Communicate
Meet Branch manager
Report
Debrief
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HighLevelcontrols
Test of controlsAnalytic
review
Compliance review
Report to Head Office
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Pre Audit Activities
�� CommunicationCommunication relating to Appointment
� Work out proposed time budget
� Planning and Risk Analysis
� Identify key RBI circulars, as applicable
� Team briefing
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� Team briefing
� Identify critical audit areas
� Communicate to branch manager/ other key personnelmentioned in appointment letter
� Communicate list of requirements, agree upon dates &responsibility
� Identify the Deliverables for designing the Audit Program
� Design Audit Program
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� Meeting with the Branch Head
� Inquire into branchbranch performanceperformance
� Get an update on status of “list of requirements” & HOinstructions/ notifications on year end financial closingrequirements
Pre Audit Activities…
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requirements
� Inquire into any past inspections / special audits andobtain reports
� Inquire into presence of internal controls and their extentof operation
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� CBS and Change management process
� Independent Applications used by the Branch, if any
�� GetGet entireentire listlist ofof reportsreports generatedgenerated fromfrom CBSCBS
�� GetGet listlist ofof reportsreports usedused byby thethe ConcurrentConcurrent AuditorsAuditors
Test of Controls - in and around CBS
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�� GetGet listlist ofof reportsreports usedused byby thethe ConcurrentConcurrent AuditorsAuditorsandand InternalInternal AuditorsAuditors
�� StudyStudy “Exception“Exception Reports”Reports” andand “Action“Action TakenTaken report”report”
�� RequestRequest toto getget “A“A readread only”only” accessaccess toto CBSCBS
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Documentation
� Document matters which are important in providing evidencethat audit was carried out in accordance with basic principlesgoverning an audit
� Obtain No objection certificate from previous auditor
� Issue Engagement Letter in response to the Appointment Letter
Communicate for inquiring readiness of financial statements &
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� Communicate for inquiring readiness of financial statements &other statements and records requiring authentication as well asfor carrying out certain year–end procedures
� Address letters seeking information on matters where auditordesires to strengthen procedures and substantiate audit work
� In case of nonnon––readiness/readiness/ partialpartial readinessreadiness of branch records,non–co–operation of branch management, etc. communicate andplace facts on record
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Documentation…
� Document ‘Study and Evaluation’ of Internal Control Systemsand its effectiveness
� Obtain copies of documents which have been relied upon, likeinternal/ concurrent/ revenue auditor’s report, branch’s RBIinspection report, etc
� Document Extent of Check applied in all areas and names of
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� Document Extent of Check applied in all areas and names ofpersons who covered these areas
� Prepare minutes of important discussions held with branchmanagement on critical issues and how were they resolved
� Queries and responses should be also well–documented
� Obtain a Management Representation Letter on critical areas ofbranch operations
� Issuance of Audit Report, LFAR, Tax Audit reports, certificates
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Thank You Thank You Thank You Thank You
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Anagha Thatte