concurrent audit seminar

7/27/2019 Concurrent Audit Seminar

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CONCURRENT AUDIT OFBANKS

BY CA KUMAR [email protected]/9350514064


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Appointment Letter

What the appointing authority expectsfrom us, say for example some of thebanks like Bank of Maharashtra doesnt

expect the Concurrent Auditors to performUnit Visit while most of the other banksrequire the same.

Composition of the Audit Team

Days of Attendance of the Audit team Minimum visits of the Partners

Report to be submitted to whom and when


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Other Compliances

Peer Review Board compliance: Whatthe Institute expects from us consideringPeer Review for performing Attest

functions and compliance with Standardson Auditing while performing Audit.

Documents which needs to be kept inWorking Paper File.

Compliance with RBIs Master Circularsand Circulars/Notifications issuedotherwise


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Know Your Branch

Whether Branch is doing Forexbusiness, Government Business?

Power of Branch Head in terms of

Lending (Fund Based/Non FundBased), Granting TOD/Excess,Expenses

Targets of the Branch in terms ofAdvances, Deposits, NPA Recovery,Priority Sector Lending etc.


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One of the major Focal Point ofRBI: KYC

Why the KYC: RBI (principal Regulator) isfocusing heavily on KYC compliance as it isrequired to be complied with and is in

consonance with Prevention of MoneyLaundering Act2002 and Anti MoneyLaundering measures.

RBI Policy requirements: Customer Acceptance Policy

Customer Identification Procedures

Monitoring of Transactions

Risk Management


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Banks Policy with KYC

Latest Photograph ID Proof Address Proof PAN/Form 60

Account Opening Form properly authorized Risk Classification Fixing Threshold limit for new accounts as per

Risk classification and feeding the same intosystem

Monitoring of Transactions as per RBIGuidelines like ` 10 Lacs cash transaction limit,breach of threshold limit or series oftransactions together


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Nature of Returns Submitted

Flash Report Advances Sanction List TOD/EOD Statement

B.P/B.D Statement B.P/B.D Returned Unpaid Statement Compliance of Audit reports like Statutory

Audit, Internal Inspection, SurpriseInspection, RBI Inspection, Credit Audit,

FOREX Audit or Concurrent Audit TDS Return Service Tax Return


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Registers to be maintained

Register of adhoc/temporary sanction

Register of suit filed accounts

Guarantee issued register

Proposal sanctioned register

Irregularities pointed out in previousRBI/LFAR/Inspection reports are not

rectified. Poor follow up of NPA / suit filed /

decreed accounts


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Management Representation

As some of the banks require some certificatesfrom the Auditors and everything cannot bechecked by us, so safeguard yourselves byobtaining a MR in relation to that which could

relate to the following: We hereby certify that no fraud, irregularities or

serious fraud has occurred during the current month

Only clean and unstapled notes are issued to thepublic and accepted as well

No writing is done on the watermark portion of thenotes.

Staples, Adhesives are not used to secure notes


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Cont.

We certify that we do exchange the soiled andmutilated notes when customer asks for the same

We accept Ashoka Pillar notes but do not issue themto public, instead remit them to RBI

We stamp on the forged notes and impound thesame, issue a receipt to the Customer and then lodgea FIR with simultaneous forwarding to the nearestPolice station. We also send a report in this regard tothe Forged Notes Vigilance Cell along with a copy ofthe FIR.

We have the Ultra Violate Machine for detection offake notes and this is used for detection as well.

We have correctly collected service tax on variouscustomer services and transferred the same to G/LService Tax payable


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Revenue Leakage

Possible points of Revenue Leakage couldbe: Process fee for adhoc limit is being levied.

Levying of 1% additional interest above theapplicable rate in case of adhoc sanctions underBO/RO/HO powers.

Penal Interest for late submission of stockstatement.

Inspection charges as per policy of the bank. Process fee on pro-rata basis is being charged

w.e.f the date of expiry of limit to the date ofreview/renewal.


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Cont.

Appropriate charging of Commission on LC, BG etc.

Folio Charges at year end.

Processing charges.

Documentation charges.

Cheque returning charges.

Cash handling charges (if applicable).

Non maintenance of minimum balance.

Against Clearing Charges(If it is the policy of the

bank) TOD/Excess charges

In case of CC/OD A/cs, penal interest for returning ofCheque must be charged by the bank.


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Legal Compliances

Frauds detected must be reported in Flash report.

Deduction & Depositing of TDS must be correctlydone.

TDS returns to be checked.

Insurance cover of Cash-in-hand and Cash-in-transit. Observance of KYC/AML guidelines.

Whether cash transactions of Rs. 10lacs or above arenoted and reported to Controlling Authority well intime.

FBT, TDS, Service Tax, Unit Visit (Important) Compliances of Bank Circulars, RBI Notifications &

Guidelines etc.


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Unit Visit overview

Before going for unit visit, read all the documents

available with the bank and terms & conditions ofsanction and check whether all the conditions arecomplied with.

Management personnel who was available at theunit.

Name Plate of the bank at main gate. Whether the unit is working?

Whether the stock register is maintained & updated,if yes take a copy of the same.

Books of accounts updated till which date, a copy of

trial balance is to be obtained. Whether physical stock is APPARENTLY the same as

what is appearing in the stock register.

Take a receiving of the stock statement and trialbalance supplied by them.


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Foreign Exchange

Verify the foreign bills purchased and collectionperiod thereof.

Check whether calculation of FCNR interest is on360 day basis and is credited to depositaccounts.

In case of forex dealing branches, form A1, A2and Bill of Entry to be checked thoroughly.

PC is to be adjusted only through export

proceeds. R return register are to be sent to RBI in time.


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Operational Part

Generation of End of day reports/statements,exceptional reports and authentication of the sameby the branch head.

Matters relating to secrecy of passwords, locking of

passwords on someones leave, deleting the userafter his relieving etc...

Whether ATM card & PIN are with two differentpersonnel to ensure Dual Control Mechanism.

Check Overdue in case of Locker Rent.

Whether Security forms are under Independent DualControl?

Verify stock of security forms with the physical ones.


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Cont.

Inward/Outward chq returning charges to be debited. Look for TODs/Excess in case of Saving/Current accounts. Check whether any difference in clearing has been

adjusted by debit/ credit to an intermediary suspenseaccount instead of locating the difference.

Suspicious transactions in staff accounts. Cash Payments of sizeable expenditure are to be

scrutinized thoroughly. No DD/PO is made in cash of above Rs. 50,000/- No payment is made in excess of Rs. 20,000/- in case of

repayment of Demand Deposits.

Proper accounting of Inward/Outward remittances is doneor not?

Income from fund based and non fund based advances areto be shown separately.


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Cont.

Comments on revenue & Capital expenditure(vouchers to be signed doubly).

Exceptional transactions in case of sundry charges.

Ensure all transactions which are system generated

must accompany by a corresponding debit & creditslip and properly initialed by a branch official.

Check for presence of any soiled/mutilated notes.

Complaint register is to be maintained at branch leveland no complaints should be pending.

Non submission of Control returns for more than amonth is to be reported in Flash Report.

Guarantees invoked during the month to be noted.


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Cont.

Due date diary of following is to be maintained : Insurance

Renewal

Drawing Power

Cheque Purchase register must be there and it mustbe within branch powers, Realisation of same must bemade in appropriate time.


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General Points

During the opening of branch, was the official keyholders of cash were actually present along withBranch Head?

While opening of strong room was Guard present andalso the main gate remains locked?

Does the citizens charter is displayed in the bankpremises?

Rate of Interest offered on Deposits and Interest onadvances are displayed prominently and alsoupdated.

Name of the

BanksOmbudsman along with hiscontact details are displayed.

Addresses and Contact details of concerned Regional& Zonal offices are also to be mentioned.


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Cont.

Notice regarding acceptance of old notes and coins tobe displayed near the cash counter.

Cash/Cheque deposit forms are readily available tocustomers.

List of Service Charges are to be displayed at branchpremises.

Latest circulars are to be displayed at branch andalso the concerned department also needs to beinformed with it.

While opening new account, the customer must be

informed with all the service charges. Persisting Irregularities: Always look for anyirregularity which has not been complied with till thenext report is to be mentioned in the current month.