Define the auditing as “auditing is concerned with the verification of accounting data, with determining the accuracy and reliability of accounting statements and reports”. Auditing is a systematic examination of the books and records of a business or other organization, in order to ascertain or verify, and to report upon the facts regarding the financial operations and results thereof
The functions of the Audit Committee include the following: 1. Oversight of the Company’s financial reporting process and the disclosure of its financial information, to ensure that the financial statements are true and accurate and provide sufficient information. 2. Recommending to the Board, the appointment, re- appointment and, if required, the replacement or removal of the statutory auditor and the fixation of their audit fees. 3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors.
Statutory Audit: This is an annual audit determined by statute and done normally at the end of the financial year while some of the larger branches are similarly audited half yearly. Inspection Auditor: The highest coverage of audit is under this category of audit. As we know, the Revenue audit responsibility lies with this auditor and test checks of revenue calculation is not uncommon even if the same was covered by a Revenue Auditor earlier. Safety of advances is the other main function of the auditor. Concurrent Audit: This brought into limelight special category of audit called concurrent audit or continuous audit. This stemmed from the need of filling in the gap between the annual statutory audits and the intervening period between two inspections, which is a period sufficiently large to cause damage to the Bank.
Let us see the broad areas covered by the Concurrent Auditor. A. Revenue Aspects: 1. Interest earned and service charges earned by the Bank 2. Interest Paid 3. All charges paid like cancellation charges, compensation under Court Directive etc. B. Expenditure: 1. Salary payments 2. Branch expenses like printing and stationary, temporary employees etc. 3. Rent of premises etc C. Documentation and other aspects of advances department: 1. Documentation correctness of ALL new advances granted during the period 2. Validity of all old advances to ensure that they are not time barred. 3. Currency of insurance cover of stock machinery etc. 4. Whether the inspections of units and stock have been carried out at the pre-set intervals
RBI Audit: The Central Bank of the country also sends its own auditors to the Banks for their own inspection. Their actions cannot be covered in this project because it is more of a supervisory implementation of a Government Policy existing from time to time. Information Technology/System Audit: This audit is introduced more as a compulsion of the Invasion of technology in all aspects of Banking. No longer is this just an office machine or even a back-office recording machine.
. Audit documentation is the written record of the basis for the auditor‘s conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise. It includes records of the planning and performance of the work, the procedures performed, evidence obtained, and conclusions reached by the auditor. Audit documentation also may be referred to as work papers or working papers.
Inspection indicates that the regulatory authorities are checking documents, records, facilities and any other resources to verify a certain set of standards. It is the act of examining something, often closely. Inspection is one of the important tools for controlling the affairs of bank and also judging the efficiency of management. It is a multi purpose function, and includes all the elements of audit. It basically helps in overall improvement in the working and efficiency of the branch
Reserve Bank of India had appointed a committee under Chairmanship of A. Ghosh, the then Dy. Governor, RBI Recommendations are:- 1.Banks should have sound internal inspection system. 2. Constant steps to be taken to improve the quality of officers in the Inspection dept. 3. Inspection Dept. of the Bank should be headed by senior officer having proven integrity and he should directly report to the Chairman 4. Internal Inspection should be undertaken once in every 12 months and it should have a surprise character 5. Regular annual inspection to be supplemented by short surprise inspection at irregular intervals
Examination of various periodic control returns. Position of irregular accounts pointed out by the RBI inspectors. Balancing of books Inventory of dead stock articles Suspense accounts Special audit of credit portfolio Audit of Investment portfolio
OSS system was introduced to Schedule UCBs from March 31, 2001. From June 30, 2004 OSS system was introduced to non-scheduled UCBs having deposits above Rs. 100 crore. In all 8 statements. 7 statements are quarterly. 1 statement is yearly. Every return to be submitted to RBI within one month from the end of quarter / year. If any return is based on un-audited position, then revised statement needs to be submitted within three weeks of completion of audit.
RBI observed that internal inspection machinery has failed to highlight and pinpoint existence of gross and serious irregularities such as, 1. Improper credit appraisal 2 Suppression of information relating to unauthorized excess drawls allowed 3. Kite flying in bills and cheques 4. Making no comments on failure of officials of Head Office / Controlling Offices 5. Very few cases of fraud and malpractices could be located.
To build up and maintain a strong banking system in the country To safeguard the interests of the depositors To ascertain whether the sound banking practices, in conformity with the Banking Regulation act, 1949 (aacs) and the directives issued by the RBI, from time to time, are built up and followed To see whether the banks have involved themselves in socio-economic development of the country