Brief Note on Bank Audit
This is the time when the CA firms are getting engaged in bank branch audit. CA firms to conduct bank audit in a such a effective way so as to bring true and fair view of the accounts of his auditee.
Here we are taking up a look how to conduct audit of bank branches in the light of guidelines issued so that the same can be conducted in a planned manner.
1. Objectives of Audit Planning.
a. Compliance of RBI ,ICAI, auditee bank guidelines ,AS and AAS.
b. Terms of Appointment to be duly complied.
c. Completion of audit task within time schedule.
d. Preparation of LFAR /TAX Audit Report,Ghosh and Jilani Committee Audit Report
e. Effective Reporting and certification
Step wise Audit Planning.
A . Ground work at office
1 Acceptance Letter alongwith other declaration like letter of fidelity and secrecy, nil indebtedness to bank etc to be sent
2 Obtain basic information from Appointment Letter and Issue Audit Engagement Letter.
3 Send Intimation to the Previous Auditor for no objection.
4 Send Draft representation letter in Advance
5 Familiarity with third schedule of Banking Regulation Act, 1949
6 Study RBI Circulars
7 Study following AAS issued by ICAI
a AAS 1 – Basic Principles Governing Audit
b AAS 3 – Audit Documentation
c AAS 5 – Audit Evidence
d AAS 6 – Risk Assessment and Internal Control
e AAS 8 – Audit Planning
e AAS 17 – Quality Control for Audit Work
f_ AAS 20 – Knowledge of Business
B. Obtain basic understanding about working of branch by reviewing
a. Last year Branch Audit Report
b. Concurrent Audit Report and Revenue Audit Report
c. LFAR Report
d. any other inspection report ,if any available with the bank.
e. Stock audit report of large advances etc.
f. circulars received by H.O. to branch
C. Audit Program/Checklist
1 Time schedule and Manpower planning is most important for timely completion of audit.
2 Cover all area of balance sheet and income and expenditure ie. All items of Assets and Liablities and off Balance Sheet items, check all provisions thoroughly .
3 Conduct Physical verification of cash and physical securities.
4 Acquire information of systems, internal control procedures and accounting software implanted in bank
D. Evaluation of Internal Control System
a. Evaluate the strength, effectiveness and weakness of the control system.
b. Evaluate the areas which has been reported in earlier reports for their current status.
c. Analyse and Evaluate the errors in samples selected and get them rectified.
d. Work as per Audit Program and schedule and Qualify report if found necessary.
a. Branch Returns
b. Statutory Audit Report
This report is Similar to the Statutory Audit Report of company where
the Auditors comment on the True & Fair financial statements. Qualifications cane be through Memorandum of Changes or specific remarks in the last paragraph.
c. LFAR – Long Form Audit Report
The Branch is responsible for preparation of LFAR and the auditors should verify the same. Annexure also attached with the LFAR which is applicable for branches having Large/irregular/critical advance accounts having large limits.
d. Tax Audit Reports (Form 3 CA and 3 CD)
e. Other Certificates and Per Appointment letter.
f. Ghosh and Jilani Reports
- : Others
- brief note on bank audit