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BANK BRANCH AUDITS EFFICIENT AND EFFECTIVE AUDIT AN INTEGRATED APPROACH 22 March 2015 CA SRIPRIYA KUMAR.

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Presentation on theme: "BANK BRANCH AUDITS EFFICIENT AND EFFECTIVE AUDIT AN INTEGRATED APPROACH 22 March 2015 CA SRIPRIYA KUMAR."— Presentation transcript:

1 BANK BRANCH AUDITS EFFICIENT AND EFFECTIVE AUDIT AN INTEGRATED APPROACH 22 March 2015 CA SRIPRIYA KUMAR

2 Using Excel – Program Structure Bank Branch Audit – Key aspects Understanding Database concept CBS environment Why Excel – Efficient and Effective audits The Tool kit Basic commands in excel for bank audits Live demonstration One hour talk on Bank Audits – Advances Do it Yourself mode

3 Bank Branch Audits – An overview – Scope and objective The basic objective of Bank Branch audits is to provide an opinion on True and Fair status of the financial statements as at the Balance Sheet date The key reports issued are : Branch Auditors Report Certified Copies of the Balance Sheet and Profit and Loss Account Long Form Audit report Tax Audit report under Section 44AB of the Income Tax Act Special reports and certificates A Unique feature in a bank audit is that unlike in corporates, we are also required to confirm if the transactions of the branch which have come to our notice have been within the powers of the bank. Auditors Report & on Financial statements Long Form Audit Report Tax Audit reports Standard and Special Certificates

4 Bank Branch Audits – Unique Dynamics Assets and Liabilities are properly stated Income and Expenses are completely and accurately accounted Internal Controls over Banking operations RBI norms and circulars are properly complied The Branch Auditors Report is an objective certification of the True and Fair position of the P&L and the Branch Balance Sheet Additionally, we are required to provide assurance on status of regulatory compliances and internal controls in the following sign offs namely the : LFAR Ghosh Committee recos Jilani Committee recos

5 The Landscape Bank Branch Audits True and Fair - Asset quality / Income Assurance Internal controls over banking Operations RBI norms / KYC / AML etc Observation, Inquiry, Computation, Analytical Review, Inspection LFAR Fin. statements Certificates Terms Complianc e Tests and Substantiv e Tests Master Circular on IRAC norms Concurren t Audits, RB audits, Inspection s Engage and Planning Audit working papers Reports

6 Balance Sheet of a Bank as finally presented Balance Sheet Audit Schedule –1 Capital Schedule –2 Reserve and surplus Schedule –3 Deposits Schedule –4 Borrowings Schedule –5 Other Liabilities and provisions Schedule –6 Cash and bank balance with RBI Schedule –7 Balance with bank and money at call and short notice Schedule –8 Investments Schedule –9 Advances Schedule –10 Fixed Assets Schedule –11 Other Assets Schedule –12 Contingent Liability

7 Understanding CBS environment Core Banking solutions are integrated farmeworks that automates all aspects of core banking operations across entities, languages and currencies. Master data, transaction data, access restrictions and business process logic is all in built in the CBS platform minimising and mostly eliminating need for manual intervention beyond input stages Core banking solutions helps banks with: Entire range of banking products including savings, checking, overdraft and deposit accounts Entire range of lending products Complement of transactional services including remittance, foreign exchange, cards and trade finance Accessibility through multiple channels, including mobile banking and web Full integration of front-, middle-, and back-office processes Accurate, timely and actionable information about customer relations Single view between bank and customer “Anytime anywhere” banking

8 Understanding CBS environment CBS does not obviate the need for bank branch audits because NPA classifications are mostly manual Work flow integration for documentation aspects is not complete across all banks. Hence documentation and security cover lapses may still impair asset quality No scale and complexity of automation can substitute human intuition CBS is a good audit enabler as it permits simple views of large transactions, by excel manipulation of text files and helps us to profile and stratify data for sample selection

9 Need for MS Excel in bank audits Enables a good look and feel of the transactions that are audited Data Volume Identification of samples for audit Sample Selection CBS outputs are there as text files that can be converted to excel It is possible Seamless integration of work done and working papers for the audit Integration Easy to recheck interest calculations, NPA movements etc Analytical Procedures And to top it all a Very complex regulatory framework

10 Bank Audit Tool kit Reliance of other Audit reports Use of CBS base and Exception reports Appropriate Sampling and use of excel Integrated Documentation

11 Using Excel Using Excel functions to perform work Understanding relevant files in bank branches Creating Folders to manage work Integrated Documentation

12 Creating Folders A. Data from the Bank B. Signed Reports and Certificates C. Loans related D. Deposits Related E. LFAR tests F. P&L items G. Other Areas H. Miscellaneous Files Assign Responsibility StandardisationClarity

13 Part 1 – Basic Excel Commands File – Open, Close, Save, Save As Insert – Worksheet, Row, Column Copy, paste, paste special, paste values Delete – rows, columns Sort Filter Select – rows, columns, visible cells Find, Find and Replace Auto sum, if commands Window Freeze pane Column and Row – width, height etc Hide and unhide, row, column and sheet Vlook up Pivot tables Edit, go to, fill Text to Column Any others

14 Loan Files Loan balance file and CCOD file Specially Marked Accounts File Irregular fileNPA file

15 Part 2 – Working on the loan file Save the File Data – text to column Numbering of records – the need to Parse the file and create a new excel file Summarise and check with balance sheet Sort to identify the top loans by category Using filters Copy and paste the sample to work sheets created for the purpose Vlook up with IRR / SMA / NPA files NPA movement analysis

16 USING MS EXCEL Obtain Text File Save to excel work book Block area of data to be converted ( Select) Use function Data - text to columns Finish the Action by clicking finish Check for texts in number fields Ensure that numbers are not truncated Select Fixed Width option Index all transactions by nature of advance / deposit type Eliminate blank rows Check the balances of the file with the Balance Comparison report Sort by Loan type by amount Report exceptions in LFAR / provision for NPA Complete the template Select data for audit, document in standard Work template Classify by year using year() function

17 THANK YOU GOOD LUCK


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