1. CA NILESH JOSHI PARTNER CHOKSHI & CHOKSHI LLP
AUDIT PLANNING
CA NILESH JOSHI
PARTNER
CHOKSHI & CHOKSHI LLP

2. CA NILESH JOSHI

3. STANDARDS ON AUDITING SA 210, Agreeing the Terms of Audit Engagements
SA 220, Quality Control for an Audit of Financial Statements
SA 230, Audit Documentation
SA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements
SA 250, Consideration of Laws and Regulations in an Audit of Financial Statements
SA 260, Communication with Those Charged with Governance
SA 265, Communicating Deficiencies in Internal Control to Those Charged with Governance and Management
SA 300, Planning an Audit of Financial Statements
SA 315, Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and Its Environment
SA 320, Materiality in Planning and Performing an Audit
SA 330, The Auditor’s Responses to Assessed Risks
SA 500, Audit Evidence
SA 520, Analytical Procedures
SA 530, Audit Sampling
CA NILESH JOSHI

4. Peculiarity of Bank Audit
Peculiar nature of banks and need for special audit consideration owing to:
Risks associated with transactions
Scale of operation
Extensive dependence on IT to process transactions
Statutory and regulatory requirements
Increasing number of new services and banking options
Branches requiring decentralization of authority and delegation of power.
CA NILESH JOSHI

5. AUDIT PLANNING
As per SA 300, The auditor shall develop an audit plan that shall include a description of:
The nature, timing and extent of planned risk assessment procedures, as determined under SA 315 “Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment”. 
The nature, timing and extent of planned further audit procedures at the assertion level, as determined under SA 330 “The Auditor’s Responses to Assessed Risks”.
Other planned audit procedures that are required to be carried out so that the engagement complies with SAs.
CA NILESH JOSHI

6. AUDIT PLANNING Time constraints 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 familiarization of systems & processes.
Time available does not match with the scope and risk.
Computerization has increased the banking activity manifold.
CA NILESH JOSHI

7. PLANNING PROCESS FOR AUDIT
STEP 1- Gather Information
Regarding the following:
The scope of the engagement
Requirements, Timing and Communications
Significant changes that will impact the Audit Approach
CA NILESH JOSHI

8. PLANNING PROCESS FOR AUDIT (CONTD.)
STEP 2- Assess the risk of material misstatement (RMM) on the Financial Statement Level
A preliminary assessment of the RMM at the overall financial statement level can be used to develop the preliminary overall audit strategy. The reason is that a low assessment of risk overall (appropriately documented) maybe used to reduce substantive procedures required at the assertion level. Conversely, a high risk assessment would result in more work being required at the assertion level.
CA NILESH JOSHI

9. PLANNING PROCESS FOR AUDIT (CONTD.)
STEP 3 Develop Overall Responses The next step is to consider all the information obtained (in Steps 1and 2 above) about the entity and the assessed risks to develop an overall audit strategy for conducting the engagement. The overall audit strategy sets the scope, timing, and approach to the audit and guides the development of the more detailed audit plan.
CA NILESH JOSHI

10. AUDIT PLANNING UNDER CIS ENVIRONMENT (CONTD.)
For efficient audit planning in CIS environment, following points are required to be considered:
Understanding of the CIS Environment.
Nature of risk and internal control prevalent:
Lack of transaction trails
Uniform processing transactions
Lack of segregation
Dependence of other controls over computer processing
CA NILESH JOSHI

11. Audit Planning Procedure
Off Site Preparations
On Site
Audit Programme and Execution
CA NILESH JOSHI

12. OFF SITE PREPARATIONS Get information on Bank profile, Staff, etc.
Study thoroughly:
Previous report of Branch Auditors
Concurrent Audit report of the branches
Revenue Audit report (if any)
System Audit report
Unit/stock Inspection reports
Due Diligence reports
RBI inspection reports
Bank internal management report
CA NILESH JOSHI

13. OFF SITE PREPARATION (CONTD.)
Relevant laws/ regulations /RBI circulars
Knowledge of banking business
Receipt of appointment letter
Audit engagement letter
Send acceptance letter
Other pre commencement activities
CA NILESH JOSHI

14. Other pre-commencement activities
Knowledge of business
Banking Industry and the Bank
Organizational structure of the Bank
Products of Bank
Banking terminology and schemes
SA 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
CA NILESH JOSHI

15. ON SITE Verification of Loan and other related documents. KYC Norms.
Voucher verification (including income & expenses)
Cash management, Collection & clearing of Cheques.
Checking of Daily reports generated.
Unit inspection, Verification of Stock statements, Audited & Projected Financials of the Borrowers. 
CA NILESH JOSHI

16. ON SITE (CONTD.)
Application of Interest (received/paid) for all the accounts.
Verifying the suspicious transactions in all the accounts including Staff accounts.
Checking the Various compliance functions to be adhered by the Branch such as TDS & Service tax (Remittances & Returns), Monthly & Quarterly returns & Certificates submitted to the Controlling office, etc.
CA NILESH JOSHI

17. AUDIT PROGRAMME AND EXECUTION
Scope of audit
Expected assessment of inherent and control risk
Delegation of work to audit team
Nature, timing and extent of audit procedures
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
CA NILESH JOSHI

18. AUDIT PLANNING DOCUMENTATION
Appointment Letter
Acceptance letter, Engagement letter (Opinion/AS/ Management Responsibility, etc), Declarations
NOC from previous auditors
Requirement letter to Branch
Management Representation letter
Communication/ correspondence with the branch
Visit the branch – before year end & meet the staff
CA NILESH JOSHI

19. SCHEDULE
OFF SITE – 2 DAYS AT OFFICE (GUIDANCE NOTE, BANK BRANCH MANUAL, AS, SA, SAP, ETC., TRAINING TO ARTICLES)
ON SITE
1ST DAY – REVIEW OF CONCURRENT AUDIT REPORT, INSPECTION REPORT, SMA RETURNS, TB ANALYSIS, VARIANCE ANALYSIS, SAMPLING, ETC.
2ND DAY TO 5TH DAY – ADVANCES APPRAISAL & DOCUMENTATION (CA / SENIOR), MASTER CREATION, DP CALCULATION, EXPENSES VERIFICATION, STATUTORY COMPLIANCE, ETC. (ARTICLES)
6TH DAY - CERTIFICATES RELATED VERIFICATION
7TH DAY – AUDITORS REPORT, LFAR, CERTIFICATE PREPARATION
CA NILESH JOSHI

20. THE END