Scope of Internal/Concurrent Audits of Banks
Concurrent Audit – on the spot examination of transactions & activities at very frequent intervals to assure substantive checking in key areas rather than test checking. In the present scenario, risk-prone area to be covered under concurrent audit.
After the recent Nirav Modi PNB Fraud and Vijay Mallya Case, a question has been put on the auditors, “Who will audit the auditors?” To nullify this requirement, determining the scope of Audit becomes a necessity.
In this Article, we have briefed the scope of a concurrent audit, which will be elaborated in the next articles.
- The scope of Concurrent Audit
- Generally, an auditor should cover all the areas of operations of the bank under Concurrent Audit.
- Following are the areas, which are commonly found in the scope/guidelines issued by almost all the banks:
- Surprise verification/ count of cash
- Checking Cash retention limit and reporting the cases where cash has been exceeded such limits and branch dispose of the surplus cash.
- The procedure of exchanging and disposing of mutilated notes should be followed as per RBI norms.
- Whether registers relating to cash should be properly maintained.
- Physical verification and safe custody verification of Postage Stamps and stamped documents/Adhesive Stamps.
- Unusable or under stamped/torn stamps.
- Physical verification of DD stock, pay order, chequebook stock, F.D. receipt, etc & Checking whether they are kept in lock & key or not. Reporting of Non Usable Stock.
- Verify whether Security Alarm is properly working or not.
- Opening & Operations of Deposits Accounts: –
- 100% Checking of Account Opening forms & Compliance of KYC Norms as per RBI.
- Operation in newly opened accounts to be verified for large deposits and withdrawals.
- Debit balances in savings and current accounts.
- The issue of Cheque Books.
- Stop Payment Instructions.
- Nomination for Deposits/Lockers to be verified.
- Cheque Return Register Checking.
- Voucher Verification
- Vouchers to be properly prepared and authorised and summary sheets to be verified with vouchers & are signed by the officer verifying the same.
- Vouchers are stitched, bundled, and properly stored.
- Safe Deposit Lockers
- Locker application is properly obtained and stamped as required.
- Branch maintains access visit register.
- Letters for the surrender of the locker are properly verified & changing of locks when lockers are surrendered and reissued.
- Locker rent register for rent dues is properly maintained.
- Deposit amounts are obtained as per Head Office circulars.
- Notices are affixed on lockers and hirer should not be given access to locker if the locker rents are in arrears.
- All pre Sanction and post sanction formalities issued by HO are to be checked for verification of Advances.
- Sanctioning is on records and contains all factual information and Disbursement checking
- All Prescribed documents are obtained and are properly filled up.
- Creation of security
- Registration of Banks charge – Banks charge is registered with ROC within 30 days from the date of disbursement.
- Bank Guarantee
- Two types: Performance and Financial.
- Proper sanction, Proper commission charged adequate security margin & Proper procedure for issue / renewal.
- Liability register is maintained.
- Margin by way of Term Deposit is discharged and lien marked.
- Proper follow up in case of expired guarantees.
In this Article, we Have Discussed some of the aspects of the scope of Internal/concurrent audit of banks which will be further discussed later on.