Bank Audit – Planning, Approach

and Documentation

CA V.Jawahar
My Experiences
 Holiday
 Quick Buck
 Bankers Don’t Cooperate With
Documentation
 How Can One Person Complete All
Branches Within Time
 Only Advances Are Critical
 Balance Sheet Covers Most Of The Work

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Why Planning
 Required by SA 300 & 315, so that the audit
will attain its objectives
 Need of the Hour – Expectations from CA’s
 Assess and deploy resources
 Systematic execution
 Helps you understand where you are
 Gives the whole picture to the team
 Helps comply with the requirements of SQC

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What is to be done
 Obtain declaration of willful defaulter,
indebtedness and fidelity and secrecy
form all the partners
 Submit the required declarations along
with acceptance to the bank

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What is to be done
 Ensure that your firms policies and
procedures addressing the following are
up to date:
a. Leadership Responsibilities for quality within
the firm
b. Ethical Requirements
c. Acceptance and continuance of client
relationships and specific engagements
d. Human Resources

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What is to be done
e. Engagement performance
f. Monitoring
 If the appointment letter does not contain
the names and addresses of the previous
auditors. Contact the branch and obtain
the same
 Dispatch letters to the previous auditors
seeking No objection

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What is to be done
 Similarly reply to the letters from the
auditors of the branches audited by you
previously
 Draft an engagement letter in line with
SA 210
 Send the letter asking for information on
the branch to help your time plan your
resources

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What is to be done
 Plan your travel Itinerary based on the
location of the branches
 Compile a list of all the reports and
certificates that need to be attested and
the number of copies to be certified
 List of persons to whom the reports and
certificates need to be sent.

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What is to be done
 It is practical to keep a document
showing the information requested, the
person who was requested and the date
and time when the information was
received
 Keep the team members abreast of the
relevant RBI circulars and the closing
circulars of the bank

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What is to be done
 Copies of all the relevant Master circulars
issued by the RBI.
 Remember that the Branch auditors are
responsible not only to the SCA's but
also to the shareholders, Bank
Management and RBI
 Verification of various reports and the
issues identified.
 Substantive procedures carried out
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Structure on Internal control
procedures in Banks
 Delegation of  Take a copy of the
powers approved delegation
of powers
 Review the
 Authorisation of delegation of powers
transactions to note the
authorization,
approval, exception,
waiver and
ratification powers of
each bank official.

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Structure on Internal control
procedures in Banks
 Segregation and  Work of one person
Rotation of Duties is supervised or
checked by another
usually of a higher
rank. Take on record
the evidence that
rotation of duties has
in fact taken place at
the branch.

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Structure on Internal control
procedures in Banks
 Maintenance of  Take a list of all the
adequate records records registers
and documents maintained at the
branch
 Accountability and  Maintenance of
Safeguarding of records and their
assets physical verification

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Planning The Bank Audit
 Planning Memorandum
◦ Identify the characteristics of the engagement
◦ Ascertain reporting objectives
◦ Consider factors that are significant in
directing the engagement teams efforts
◦ Consider the results of preliminary
engagement activities
◦ Ascertain the nature timing and extent of
resources necessary to perform the audit

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Planning The Bank Audit
 Develop an audit plan to include
◦ Nature timing and extent of planned risk
assessment procedures- Identifying and Assessing
the risks of material Misstatement through
Understanding the Entity and its Environment.- SA
315
◦ Nature timing and extent of planned further audit
procedures at the assertion level – Auditors
response to assessed risks
◦ Other planned audit procedures that are
required to comply with the other SAs. - SA330
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Planning The Bank Audit
 For every area checked, please ensure the
documentation includes the name of the
person who checked and the extent of
check.
 In case of sample selection, please note
the basis on which the sample was
selected. The materiality levels adopted.
This is critical as bank audit is mainly an
audit of samples.
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Planning The Bank Audit
 Document how you have understood the
CBS system. Understand which are the
fields that are manually input by the
branch, and which fields are editable.
 Main points out of all the reports, studied
should be documented. Also document
how the audit is planning to deal with
them.

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Planning The Bank Audit
 External confirmations should be taken
on file. In case of differences, the
reconciliation must also be taken on file.
 Document the physical verification of
cash, gold, security documents,
investments if any etc.
 Document the analytical procedures
carried out.

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Planning The Bank Audit
 Management Representation.
 Queries should be inwriting along with
the written replies.
 Who has carried out the comparison of
the previous years’ figures. Financial and
non financial information should be
verified for accuracy.

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Planning The Bank Audit
 All the accounting and auditing standards
and guidance notes issued by the ICAI are
applicable to the bank audit.

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Audit Approaches
 Department wise
 Head of Account wise
 Checklist wise

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Audit Documentation
 Main purpose
◦ evidence of the auditors basis for a conclusion
about the achievement of the overall
objectives of the auditor.
◦ Evidence that the audit was planned and
performed in accordance with the SA's and
applicable legal and regulatory requirements.

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Additional Purposes
 Assisting the engagement team to plan
and perform the audit
 Assisting the engagement team
responsible for supervision to direct and
supervise the audit work and discharge
their review responsibilities as per SA 220
 Enabling the engagement team to be
accountable for its work

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Additional Purposes
 retaining the record of matters of
continuing significance to future audits.
 Enabling the conduct of quality control
and reviews and inspections in
accordance with SQC1
 Enabling the conduct of external
inspections in accordance with the legal
regulatory and other requirements

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Characteristics of Evidence
 Relevance
 Objectivity
 Timeliness
 Authoritativeness
 Directness

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Form content and Extent of
Audit documentation
 The auditor shall prepare audit
documentation that is sufficient to enable
an experienced auditor having no
previous connection with the audit to
understand
◦ the nature timing and extent of the audit
procedures
◦ the results of the audit procedures performed
and the audit evidence obtained

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Form content and Extent of
Audit documentation
◦ Significant matters arising during the audit,
the conclusions reached thereon and the
significant professional judgements made in
reaching those conclusions
◦ The documentation must also show the
identifying characteristics of the specific items
or matters tested
◦ who performed the audit work and the date
on which such work was completed

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Form content and Extent of
Audit documentation
◦ who reviewed the work performed and the
date and extent of such review
◦ Discussions on significant matters with the
management when and with whom the
discussions took place

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Form content and Extent of
Audit documentation
 If the auditors identified information that is
inconsistent with his final conclusion
regarding a significant matter , the auditor
shall document how the auditor addressed
the inconsistency
 If in exceptional circumstances the auditor
feels that it is necessary to depart from the
relevant requirement of the SA's the auditor
shall document the alternate procedures
performed too achieve the audit objective.
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Ghosh & Jilani Committee
Recommendations

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Use of CBS reports in audit and
documentation
 Jotting Report – JTRPT helps the auditor
to review the process from the list of
advances scheme wise.
 ACLI – Transactions, details , DP and
Sanction limits, type , purpose scheme
code details Asset classifications
repayment schedule and overdue status in
individual term loan accounts
 LAOPI – loan overdue position specially
for term loans
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Use of CBS reports in audit and
documentation
 HCLM updation of stock statement
 HACLI / HACCBAL – transaction enquiry,
balance details, interest enquiry, account
turnover details, sanction date, loan
documents date
 AINTRPT displays interest calculation
worksheets for advances and deposits
 ASSCR generates list of NPA’s
classification wise
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Use of CBS reports in audit and
documentation
 MINRPT reflects manual entries which
are not system generated
 TDSIP generates complete TDS deducted
and deposited
 EXCPRPT exception transaction report

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Final File
 Should be assemble in a timely manner
 After the final assembly no document
should be deleted or discarded before the
end of the retention period

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Each Audit Paper must contain the
following information:
 Name of the Client
 Period covered by the audit
 Subject Matter
 File Reference
 Initial of the member of the audit team
 Initial of the reviewer of the working papers
 Working papers to agree with books of
account
 Audit Summary memorandum
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General Guidelines for preparation
of working papers
 Clarity And Understanding
 Completeness And Accuracy
 Pertinence
 Logical Arrangement
 Legibility And Neatness
 Safety
 Initial And Date
 Summary Of Conclusions

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Contents of an Audit File
 Engagement
 Accounts
 Reports and Final File
 Audit Plan
 B/S/ P&L – Systems Testing
 Accounts Preparation
 Audit Programme
 Statistical Information

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Guidance Note 2021
 Illustrative Format of Engagement Letter to
be sent to the Appointing Authority of the
Nationalised Bank by Branch Auditor – page
913
 Illustrative Format of Written
Representation Letter to be obtained from
the Branch Management – page 922
 Illustrative Bank Branch Audit Programme
for the Year ended March 31, 2021 – page
944 and Annexure in page 951

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Guidance note 2019
 Reports in CBS environment
 Appendix IX -List of Important Menu
Commands of CBS
 Appendix X - Illustrative Checklist on
Audit activity through CBS

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Bank Audit Seminar 12th March 2021 -
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