1. Challenges in Bank
Branch Audit
CA.K.Raghu
Central Council Member

2. Peculiarity of Bank Audit
 Peculiar nature of banks and need for special audit considerations owing to
 risks associated with the transactions- custody of large volumes of monetary items,
which needs to be stored and transferred, they are vulnerable to misappropriation and
fraud
 Scale of operations
 large number of branches –inland and overseas
 large volume and variety of transaction in both numbers and value
 extensive dependence on IT to process transactions as
 operates through wide network of branches requiring decentralization of authority and
delegation of power.
 Wide range of services offered such as ATM, net/phone banking, etc.
 Statutory and regulatory requirements
 Increasing number of new services and banking options
 Large number of branches requiring decentralization of authority and delegation of
power.

3. Audit Planning
 Time is short as
 Banks desire adoption of audited accounts within a few
weeks of the year end
 Many a times appointments of auditors are delayed
 There is a limited time available for familiarisation of
systems & processes
 Time available does not match the scope and risk
 Computerisation has increased the banking activity
manifold .
 This makes off site preparation and pre-
commencement work essential

4. Audit Planning contd.
 The basis audit activity can be divided into
three segments namely
 Off Site Preparations
 On Site and
 Audit Executions.

5. Pre- commencement activities

6. Off site activities
 Get information on Bank profile, Staff, etc.
 Study thoroughly
 Previous report of Branch Auditors
 Concurrent Audit report of the branche
 Revenue Audit report (if any)
 System Audit report
 Unit/stock Inspection reports
 Diligence reports
 RBI inspection reports
 Bank internal management report
 Relevant laws/ regulations /RBI circulars
 Knowledge of banking business

7. Off site activities contd.
 Receipt of appointment letter
 Audit Engagement letter
 Send acceptance letter

8. HR allocation and skills
 Plan for the requisite staff
 Number
 Adequate knowledge and experience
 Obtain updated information on changes
 RBI circulars
 Change in related laws
 Corporate laws
 Foreign policy


9. Other pre-commencement
activities
 Knowledge of business
 Banking Industry and the Bank
 Organisational structure of the Bank
 Products of Bank
 Banking terminology and schemes
 AAS relevant in understanding business of branch
 A reading of Guidance note on audit of banks by
ICAI would provide valuable guidance.
 Review accounting policies and auditors report of
the bank for the preceding year.
 Ratio analysis with previous years figures

10. Coordination
 Co-ordination with management for effective and
efficient audit
 Availability of books, personnel and equipment
 Travel to unit visits chosen by you – especially
outstation
 Discussion of serious pending issues

11. Audit Programme

12. Audit programme
 Scope of audit
 Expected assessment of inherent and control risk
 Delegation of work to audit team
 Nature, timing and extent of audit procedure
 Going concern assumption
 Materiality thresholds
 Time schedule
 Flexibility to accommodate change in programme to
focus on weak areas
 Remember , Audit planning is a continuous exercise

13. Compliance aspects
 Compliance with RBI/ICAI Guidelines
 Compliance with Banks internal
guidelines/manual of instructions
 Compliance with terms of appointment
 Compliance with Accounting Standards
 Compliance with Auditing and Assurance
Standards.

14. Peer Review
 ICAI has introduced Peer Review in 2007
 Assessing the quality of attestation service
engagements performed by practise units.
 Ensuring that the practise unit has maintained
adequate documentation
 Peer Reviewers appointed by Peer Review Board
 Records for immediately preceding three completed
financial years are verified by the Peer Reviewer.

15. Peer Review for Branch
Auditors
 AllCentral Statutory Auditors of Public
Sector, Private Sector Banks and
ForeignBanks are covered by Peer Review in
Stage 1
 Peer Review ensures that the practise units
comply with the professional and ethical
standards
 Practise units have adequate training
programmes and systems and procedures for
conducting audit

16. Q&A