effective concurrent audit/ concurrent audit reporting

Effective Concurrent Audit/ Concurrent Audit Reporting

ByCA.R.Sivaraman

Partner, M.Anandam & Co,Seunderabad

Why do we talk about thatAudit is evolvingShift towards client orientationMore focus on concurrent auditStake holder expectation

BranchControlling officesStatutory auditorsReserve Bank of IndiaDepositorsBorrowersGeneral public

How do we achieve that?Quality of delivery

StaffingUpdating knowledge – Industry knowledge -

product knowledge – latest developmentsCA vs Articles vs Retd Banker

Timely deliveryUnderstand the need of the consumerBe a professional and not a salesman

I See an opportunity

I See an opportunityRetirement of senior officersInduction of fresh graduatesInadequate trainingTurnover of employeesEver changing RBI guidelinesYour CA backgroundOpportunity as well as risk for concurrent

auditors

Effective Concurrent AuditThere is no shortcut to success

Proper PlanningProper ExecutionClear Reporting

Planning ProcessFirst time AuditU need to understandBusiness profile of the branchProduct mix of the branchStaff complementFeatures of CBSControl mechanism in placeHELPS U TO UNDERSTAND THE RISK LEVEL U HAVE TO ADDRESS

Planning ProcessFirst time AuditReview various documents like Product manuals, Circulars, Delegation of powers, Credit policy etc.,

HELPS TO U TO PREPARE AUDIT PROGRAMME

Planning ProcessDefined by the managementAudit universe, Objective and Scope

Identify the skills required to perform the audit.In case of skill gaps train them to bring up the skill levels.

Planning ProcessDivide the audit programme into daily,

weekly, fortnightly and monthly.Allocate activities for each team member.

From second month onwards Review circulars issued during previous

monthRevise your audit programme based on the

circulars

Execution processHave a audit briefing meeting (entire audit

team with key members of auditee)Team leader to review the observations on a

daily basis.Team to discuss audit observations on a daily

basis with the auditee.Deliver the audit observations to the

concerned on a daily basis and obtain their signature.(or send thro email)

Follow up for compliance.

Execution processDo not step into shoes of the branch

management.Dispute resolution through team leader.Partner in-charge to visit the branch and

review the work done atleast once in a week

Effective ReportingPresent state of affairsAudit Manuals are provided by the BanksReporting Formats are provided by the BankReporting Frequency is fixed by the BankLittle scope for the auditors to modify the

format.Limited scope for bringing in any innovationUnder these restrictions auditors have to

achieve maximum effectiveness

Effective ReportingWhy report is important?It determines the value of your workIt is a database of observations which will

help tacking of compliance.Protects auditor from future disputesReport will talk about your capabilities with

the Bank management.

Effective ReportingPoints to be kept in mind while drafting reportsObservations should be specific not genericObservations should be informative but short

and crisp.Draft the observation immediately and do not

keep it for the last day.Allocate sufficient time for report draftingPlanning/ execution/ reporting should be 25-

50-25

Effective ReportingPoints to be kept in mind while drafting reportsMind your language; No offensive language;

but pinpoint the observation.No use of using adjectives

Two main ingredientsReport becomes effective when it

Adds Value for the auditeeProtects auditor’s interests

How to add value for the auditeeAdhere to the audit scope, frequency and

time norms prescribedFollow the format provided by the auditeeFor all observations try and give circular

reference or manual reference.This makes auditee staff not to dispute over

the observation.Stray observations if rectified may be

dropped.

How to add value for the auditeeSeries of observations even after rectification

may be highlighted as a system failure.Serious irregularities/ Frauds should be

brought to the next higher authority immediately.

Flash/ Special reports may be issued for serious irregularities.

Such Flash/ Special reports should be given a cross reference in the final report.

Highlight the violation to internal/ RBI guidelines.

How to add value for the auditeeRoot cause for deviations may be highlighted.Management response to be obtained for all

observationsIn case auditor is not convinced with the

response given by the branch management, auditor can put a note explaining his stand beneath management response.

Do not copy simply copy paste CBS reports. Try to analyse the reports and add value to those reports.

How to add value for the auditeeImplications of deviations may be

highlightedRepeated observations may be highlightedPending observations of earlier reports

may be grouped at one place.Persons responsible for lapses, persons

responsible for rectification and timeline for rectification may be highlighted.

Protect Auditor’s interestFollow SIA 4Features of a good reportClearFactualSpecificConciseUnambigousTimely

Protect Auditor’s interestCompliance to generally accepted audit

procedureDisclose the Limitation on scopeRestriction on usageObservation should be brought out in right

perspective.

Layout suggested by SIA 4TitleAddresseeReport Distribution ListPeriod of coverage of the ReportIntroductory paragraphObjectives paragraphScope paragraphExecutive summary

Layout suggested by SIA 4Observations, findings and recommendationsComments from the local managementAction taken reportDate of the reportPlace of signatureInternal auditor’s signature with membership

number

Examples of ObservationsLet the observation be specific Few account opening forms are incompleteIn 10 out 0f 52 account opening forms Period

of deposit has not been mentioned (provide the list of 10 instances)

Avoid hypothetical observation This could have resulted in revenue leakageThis has resulted in revenue leakage of

Rs.10,200/-

Examples of ObservationsLet the actual deficiency be highlighted In 50 instances the Account Opening Forms

are not signed by the Branch Manager.The Account Opening was not authorised by

the Branch Manager in 50 instances.In 50 instances Branch has opened the

accounts without the approval of the Branch Manager.

THANK YOU