A Study of Bank Audit Process

A DISSERTATION REPORTON“A STUDY OF BANK AUDIT
PROCESS”AT GS Mahanagar Co-operative Bank Ltd., Mumbai
CHAPTER NO -1
EXECUTIVE SUMMARY
1
EXCUTIVE SUMMARY
INTRODUCTION
The audit of banking companies play a very important role in India as it helps to regulate
the banking companies in right manner. In audit of banks includes various types of audit
which are normally carried out in banking companies such as statutory audit,
revenue/income expenditure audit, concurrent audit, computer and system audit etc...The
above audit in mainly conducted by the bank own staff or external auditor. However, the
rules and regulation relating to the conduct of various types of audit or inspection differ
from bank to bank expect the statutory audit for which the RBI guideline is applicable. In
this, I have given more important on the overall bank audit system. In today’s
competitive world audit is very much necessary as well as compulsory, because investor
investing decision is depend on that particular concept if auditor has expressing his view
about particular organization is true and fair than investor can get his ideas about how
much he should invest in particular companies.
Every bank should have an internal audit department on which – with regard to the
volume and nature of its activities – it can rely. In smaller bank internal audit is often
provided externally. The internal audit department in a banking institution must be
independent from than activities which it controls and must likewise be independent from
day-to-day internal control processes. In this way it is guaranteed that this department
per-forms internal control processes. In this way it is guaranteed that this department per-
forms its activities objectively and impartially. Internal auditor may not have a conflict of
interests with the bank. Every bank should have formalized principal of internal audit
providing for its position and power in the framework of the bank. There should here be
codified the scope of work of internal auditors, the position of the whole department in
the banks organizational structure, relation with other control departments, etc..
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CHAPTER NO 2
INDUSTRIAL
PROFILE
3
AUDIT OF BANK
1. A snapshot of banking industry :

The Reserve bank of India (RBI), as the central bank of country, closely monitors
developments in the whole financial sector.
The banking sector is dominated by scheduled banks (SBCs). As at end- march 2002,
there were 296 commercial banks operating in India. This included 27 public sector
banks (PSBs), 31 private, 42 foreign and 196 regional rural banks. Also there were 67
scheduled co-operative banks consisting of 51 scheduled state co-operative banks.
Scheduled commercial banks touched, on deposit front, a growth of 14% as against 18%
registered in the previous year. And on advances, the growth was 14.5% against 17.5% of
the earlier year.
Higher provisioning norms, tighter asset classification norms, distancing with the concept
of ‘past due’ for recognition of NPAs, lowering of ceiling on exposure to a signal
borrower and group exposure etc… are among the measures in order to improve the
banking sector.
Minimum stipulated Capital Adequacy Ratio (CAR) was introduced to strengthen the
ability of banks to absorb losses and the ratio has subsequently been raised has
subsequently been raised from 8% to 9%. It is proposed to hike CAR to 12% by 2004
based on the Basle committee recommendations.
Retail banking is the new mantra in the banking sector. The homes lone alone account for
nearly two-tired of the retail portfolio of the bank. According to one estimate, the retail
segment in expected to grow at 30-40% in the coming years.
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Net banking, phone banking, mobile banking, ATMs and bill payments are the new buzz
words that banks are using to lure customers.
With a view to provide an institutional mechanism for sharing information on borrowers /

potential borrowers by banks and financial institutions, the credit information Bureau (India) Ltd
(CIBIL).as set in august 2002 the Bureau provides a framework for collecting, processing and
sharing credit information on borrowers of credit institution. SBI and HDFC are the promoters of
the CIBIL.
2. Reforms in the banking sector :
He first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and
resulted in a shift from class banking to mass banking. This in turn resulted in a significant
growth in the geographical coverage of banks. Every bank has to earmark a minimum percentage
of their loan portfolio to sectors identified as “priority sectors”. The manufacturing sectors also
grew during the 1970 in protected environs and the banking sector was a critical source. The next
wave of reforms saw the nationalization of six more commercial banks in 1980. Since the
number scheduled commercial banks increased four-fold and the number of banks branches
increased eight-fold.
After the second phase of financial sector reforms and liberalization of the sector in the early
nineties, the public sector banks (PSB) found it extremely difficult to complete with the new
private sector banks and foreign banks. The new private sector bank first made their appearance
after the guidelines permitting them were issued in January 1993. Eight new private sector banks
are presently in operation. This bank due to their late start has to state-of-the-art technology,
which in turn helps to save on manpower costs and provide better services.
During the year 2000, the state bank of India (SBI) and 7 associates accounted for a 25% share in
deposits and 28.1% share in credit. The 20 nationalized banks accounted for 53.5% of the
deposits and 47.5% of credit during the same period. The share of foreign accounted for 5.7%,
3.9% and 12.2% respectively in deposits and 8.41%,3.14%and 12.85% respectively in credit
during the year 2000.
3. Classification of banks:
The Indian banking industry, which is governed by banking regulation act of India, 1949 can be
broadly classified into two major categories, non-scheduled banks and scheduled banks.
Scheduled banks comprise commercial bank and co-operative banks. In terms of ownership,
commercial banks can be further group into nationalized banks, regional rural banks and private
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sector banks (the old/new domestic and foreign). These banks have more 67,000 branches
private sector and foreign banks. The private sector banks are again spilt into old banks new
banks.
Banking System (structure):
Banking System in India Reserve bank of India
(Controlling Authority)
Development Financial institution Bank
IFC IDBI ICICI NABARD NHB IRBI EXIM BANK SIDBI
Commercial Regional Land Development Co-operative

Banks
Bank Bank Banks
Public Sector Banks Private Sector
SBI Groups Nationalized Banks Indian Banks Foreign Banks
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4. History of GS Mahanagar Co-operative bank in India –
The Bank was founded on 10.02.1937, simultaneously setting up domestic and overseas
branches on the same day: a befitting description of the name of the Bank. Mr.. M.Ct.M. This
Bank was established by the people from the Ahmednagar Dist. in the name of “The
Ahmednagar Sahakari Bank Ltd.” on 6th October 1973. Late.Solicitor Mr.. G.S.Shelke and his
colleagues were the motivating force behind the establishment of this bank. Late.Solicitor Mr.
G.S.Shelke became the first Chairman, Lt. Mr. .G.A.Thube, the first Vice-Chairman,
Mr.. .S.S.Bhagat, the first Secretary. These were the people with deep and abiding ideals, faith,
vision, optimism and entrepreneurial skills. These dedicated men in charge of the Bank had
commendable sense of service and duty imbibed in them. Even today, our honorable founders
inspire a sense of awe and respect in the Bank and amongst the Shareholders of this bank.
The Bank has a humble but a very inspiring beginning. The minimum amount of Rs.10/- per
share was required from prospective members and as such practically, from all over Mumbai,
they collected the initial share capital of Rs.1.36 Lakhs. With this small amount they started this
co-operative activity in Greater Mumbai. The Bank was initially set up to help Mill workers from
Kalachowki and Lalbaug area and Dock workers from Carnac Bunder, Fruit, Vegetable and
Flower vendors from Crawford market, Byculla and Dadar market, Fish vendors from Colaba
and small number of shop keepers and self employed persons.
In the later stages, the Bank has changed its object and decided to cater the needs of common
people from all sectors of the society. To obtain this, the bank has decided to change the name
from “The Ahmednagar Sahakari Bank Ltd.” to “The Mahanagar Co-operative Bank Ltd.” The
new name came into force with effect from 21st January, 1998.
Thanks to the sustained and assiduous efforts over 43 years after its inception, the bank had
gained Strong foundation in terms of its membership, resources, assets and profits. During this
period the bank grew from strength to strength. The Bank has grown in stature, progressed in its
social and economic objectives and produced an image of what an ideal bank should be. It is
secured ‘A’ grade classification for all the years from the beginning. Resultantly the Reserve
Bank of India awarded scheduled status to the Bank on 30th January 1998. This also boosted the
confidence of our members, account holders and depositors of the Bank.
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At the helm of the Bank affairs, the bank has been consistently fortunate to have a galaxy of
illustrious men. These erudite men with excellent academic qualifications on the Board of
Directors of the Bank have given the Bank the benefit of wisdom, expertise and experience with
its rich heritage and the solid support that the Bank receives on all fronts from all its constituents.
The Bank is confident to make future wisely and consistently. The Bank has been paying
dividend to its share holders at the rate of 15% which is maximum permissible dividend as per
the MCS Act. Bank has a total of 61 Branches and nonstop 12 hours service in 5 Branches. Area
of operation covers the all over Maharashtra. The Bank is perhaps the fastest growing Bank in
the Co-operative sector.
Besides this, the Board of Directors have visualized the future increasing competition in this
industry and also the expectations of Reserve Bank of India. For this purpose, the Board of
Directors is considering the introduction of Modern Banking Services such as ATM Centers,
Debit Card, Home Banking, RTGS, NEFT, Demat, IMPS, Net Banking, etc. With this we are
fully geared to face the cut throat competition in the Banking Industry in the near future.
Innovative Banking is another area of operation that Mahanagar Bank is currently focusing on
for a sustainable long term growth. The Bank has always endeavored for providing satisfactory
customer service with the help of the latest technology. The Bank has provided fully
computerized services to its valued clients. With a view to meet the challenges of technologically
advanced banking system and to upgrade its existing technology, the bank has introduced "Total
Bank Automation" to provide the facility of inter-branch connectivity for any time and any
branch banking transactions.
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GS MAHANAGAR CO-OPERATIVE BANK DEPOSITS, LOAN FOR

CUSTOMER
 Fix deposit schemes of Indian overseas bank
Indian overseas bank offers a verity of fix deposit schemes which can be chosen by customer
depending upon their preferences and need.
 Fixed deposit
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This is a standard fixed deposit scheme which includes depositing a lump-sum deposit
amount for a particular period of time and earning interest of the same. This interest can be
cumulative or non cumulative. The deposit period for this schemes ranges from 6 month to
120 month. The interest for this deposit is credited half-yearly. The minimum deposit
amount for this scheme is Rs 1000.
 Floating rate deposit
The floating rate deposit scheme, as the name suggest is a slight variation of the regular fix
deposit scheme wherein the interest rate offered in the floating instead of fixed i.e. rates are
reset every six months a year. The deposit period ranges from 3 year to 10 years. The
minimum deposit amount accepted is Rs 100,000. There is, however, no upper limit to the
maximum amount that can be deposited. Premature closure is chargeable.
 Tax saver schemes
This scheme offered to those looking to save on tax by investing funds in a fixed deposit.
This scheme features deposit periods of 5 year to 10 years and the maximum of Rs 1.5 lakes
is accepted as deposit from a single entity is one financial year. A special rate of 9% is
offered on this schemes which senior citizens enjoy a rate of 9.5% per annum on the tax
saver schemes.
Some of the most significant features of Indian overseas bank
Listed below are some of the key differentiating features of fixed deposit schemes by Indian
overseas bank
 Extremely attractive interest rates

 Nomination facility for deposit schemes
 Pre-closure available as pre bank guidance.
 Loans can be availed against fix deposit funds; up to 90% of the fix deposit amount.
 Floating rate of interest is available on certain deposit.
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 Replacement of stolen or destroyed deposit receipts.
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CHAPTER NO 3
ORGANISTION
PROFILE
12
BANK DETAILS
HEAD OFFICE ADDRESS: GS Mahanagar Co-Op Bank Ltd.,

Hiramani Super Market BLDG, DR.B.A.Road
Lalbag, Mumbai- 400012.
DATE OF RAGISTRATION: 6th October 1973
HEAD OFFICE: 1 Head Office

NO OF BRANCHES: 67 Branches
ATM CENTARES: 57+1=58 ATM’S
PRODUCT: Loans, credit card, savings, investment, vehicles etc…
REVENUE: RS 27,252.34 Lakhs
OPRATING INCOME: RS 28,773.93 Lakhs
NET INCOME: RS 1,961.93 Lakhs
TOTAL ASSETS: RS 3,62,773.77 Lakhs
OWNER: Late.Solicitor Mr.. G.S.Shelke
NO OF EMPLOYEE: 622
CAPITAL RATIO: 2.68%
WEBSITE: www.mahanagarbank.net
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14
15
BOARD OF DIRECTORS
GS Mahanagar Co-operative Bank Ltd., Mumbai
PERSON DESIGNATION
Adv. Mr. Uday Gulabrav Shelke Chairman
Mr. Bhaskar Babaji Kawad Vice Chairman
Mr. Bhaskar Laxman Khose Director
Mr. Vasanji Dharshi Dedhiya Director
Mr. Banshi Chimaji Bangar Director
Mr. Suresh Homaji Dhome Director
Mr. Ramchandra Rajaram Trikone Director
Mr. Satish Anant Khankar Director
Mr. Baban Bhau Lanke Director

Mr. Vikas Damodar Undre Director
Mr. Shivaji Kondiba Karkhile Director
Mr. Bhanudas Janardan Khose Director
Mr. Shridhar Kondiram Kothawale Director
Mr. Ravindra Dattatray Dhole Director
Smt. Suman Gulabrav Shelke Director
Smt. Dr. Mrs. Gitanjali Rajesh Dere Director
Mr. Narayan Shankar Kurhe Director
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Mr. Vilas Dagdu Palave Director

Mr. Santosh Bhaurav Randive Director
Mr. Vijay Devram Barude

Executive Director
Mr. Ashok Sukhdev Navale Executive Director
Executive Director
Mr. Manjunatha Thimma Kanchan
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ORGANISTION PROFILE
Project: Study of Bank Audit Process
Organization: GS MAHANAGAR CO-OPERATIVE BANK, BRANCH
Bank was established under the name of “The Ahmednagar Sahakari Bank Ltd.” on 6th October
1973 by Late.Solicitor Shri. G.S.Shelke and his colleagues.
The new name came “The Mahanagar Co-operative Bank Ltd.” into force with effect from 21st
January, 1998.
Secured ‘A’ grade classification from Reserve Bank of India on 30th January 1998
Bank has a total of 67 Branches and nonstop 12 hours service in 5 Branches and 52 ATM
machines.
Area of operation covers the all over Maharashtra.
Fastest growing Bank in the Co-operative sector.
Introduction of Modern Banking Services such as ATM Centers, Debit Card, Home Banking,
RTGS, NEFT, Demat,online banking, etc.
Introductin to introduced "Total Bank Automation"
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CHAPTER NO 4
OBJECTIVES AND
SCOPE
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OBJECTIVES
1. To study the audit procedure adopted by GS Mahanagar Co-operative Bank Ltd.,

Mumbai branch.
2. To analysis the problems which are created at various stages of the audit process.
3. To understand the importance of the banking audit.
4. To understand the advantages and limitation of audit.
5. To understand the audit report.
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SCOPE OF STUDY
Scope of the project generally refers to the boundary within which research
is conducted. It indicates the specified area of working of researcher.
1. Research undertaken in the project to restrict to GS Mahanagar Co-operative
Bank Ltd., Mumbai.
2. This research project is to analyses the process undertaken for banking audit in
Indian overseas bank.
3. Research undertaken in this project is restricted to the information given by the
branch manager and information under RBI norms all banks, which include GS
Mahanagar Co-operative bank.
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CHAPTER NO 5
RESERCH
METHODLOGY
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RESSEARCH METHODOLOGY
Research has adopted Descriptive Research methodology in this project.
 Descriptive Research
Descriptive research does not fit neatly in to the definition of either qualitative or quantitative
research methodologies. But instead it can utilize elements of both, often within the same study.
The term descriptive research refers to the type of research question, design, data analysis, that
will be applied to a given topic. Descriptive statistics try to determine cause and effect.
 PREPARING THE RESAERCH DESIGN
Research design is conceptual structure within which research would be conducted.

The function of research design is to provide for the collection of relevant information with
minimum expenditure of effort Time and money.
The preparation of research design, appropriate for a particular research problem, involves the
consideration of the following:
1) Objective of the research study.
2) Method of data collection to be adopted.
3) Source of information-sample design.
4) Tool for data collection.
5) Data analysis-qualitative and quantitative.
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 Objective of the research study:

Objective identified to answer the research question have to be listed making sure that they are:
Numbered, and
Statement begins and action verb.
 Source of data collected by researcher :

Data collections and elaborate process in which the researcher makes planned search for all
relevant data. Data is the foundation of all financial research.
There are two data sources:
Primary data
Primary data is generated by the students or the researchers for the preparation of the project and
use by the student immediately for collecting data. He can use various method.
1) Discussions with the bank branch manager.

2) Observation with the organization.
3) Interview.
4) Expletory research.
Secondary data:
This is that which is already available, within the organization. Secondary data provides the
starting point for the research and offers the advantages of low cost and ready availability.
1) Audit report
2) Balance sheet.
3) Bank circulars.
4) Research record.
5) Internet
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LITRATURE REVIEW
Reviewing of literature means essential preliminary task in order to acquaint yourself with the
available body of knowledge in your area of interest.
Literature review integral part of entire research process and makes valuable contribution to
every operational step.
Reviewing literature can be time-consuming, daunting and frustrating, but is also rewarding. It
functions are:
a. Bring clarity and focus to your problem.

b. Improve your methodology
c. Broaden your knowledge
d. Contextualize your findings.
AUDIT OF BANK
 ORIGIN AND EVALUATION OF AUIDTIG

1) Origin of term
The term audit is derived from the Latin term “audire” means to hear. In early days, an
auditor used to listing to the account read out by the accountant in order to check them.
2) Ancient origin
Auditing is as old as accounting it was in use in all ancient countries such as Mesopotamia,
Egypt, Rome, Greece, U.K, and India. The Vedas, Ramayana, Mahabharata contain
references to accounting and auditing. Arthashasastra by kautilya gives detailed rules for
accounting and auditing of public finances. The mauryas, the guptas and the mughals had
development and accounting and auditing system to control state finances.
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Thus basically, accounting auditing had their origin in the need for the government to
control the income and expenditure of the state and the army. The original object of auditing
was to detect and prevent errors and frauds.
 MENING OF AUDIT
AUDITING:
Auditing is a systematic and scientific examination of the books of accounts and records of
business to enable the auditor to satisfy himself that the profit and loss account and the
balance sheet are properly drawn up so as to exhibit a true and fair view of the financial state
of affairs of the business and profit or loss for the financial period.
Continuous audit:
An audit which involves a detailed and examination of the books of accounts at regular
intervals trough out the year along with the accounting work.
Errors:
Mistakes committed innocently and unknowingly while making entries in books of accounts.
Frauds:
Fictitious entries made in the books of accounts with certain motives.
Interim audit:
an audit which is conducted for a part of the accounting period for same specific purpose.
Investigation:
Examination of accounts for specific purpose
Qualified auditor:
A person who is a charted accountant within the meaning of the chartered accountants act
1949.
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Statutory audit:
An audit undertaken under any specific status or act.
True and fair view:
A phrase which manes that the financial statements must not contain anything which is untrue,
unfair, unlawful and unethical.
 PRINCIPAL OF AUDIT
Principals, which govern the auditor’s professional responsibilities and which should be
complied with whenever an audit is carried out these are:-
1. Integrity, objectivity and independence:
The auditor should be straight forward, honest and sincere in his approach to his professional
work. He must be fair and must not allow prejudice or bias to override his objectivity. He
should maintain an impartial attitude and appear to be free of any interest which might be
regarded. Whenever it actual effect, as being incompatible with integrity and objectivity.
2. Confidentiality:
The auditor should respect the confidentiality of information acquired in the course of his work
and should not disclose any such information to a third party without specific authority and
unless there is legal or professional duty to disclose. It is remarked that an auditor should keep
his ears and eyes open but his mouth shut.
3. Skill and competence
The audit should be performed and the report prepared with due professional care by persons
who have adequate training. Experience and competence this can be acquired through a
combination of general education, technical knowledge obtained to study and formal courses
concluded by a qualifying examination recognized for this purpose and practical experience
under proper supervision.
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4. Work performed by others:
When the auditor delegate work to assistant or uses work performed by other auditor or experts
he will continue to be responsible for forming and expressing his opinion on the financial
information. At the same time he is entitled to rely on work performed by others provide he
exercises adequate skill and care and is not aware of any reason to believe that he should not
have relied. The auditor should carefully direct, supervise and review work delegated by
assistances. He should obtain reasonable assurance that work performed by other auditor or
expert is adequate for this purpose.
5. Documentation:
The auditor should document matters, which are important in providing evidence that the audit
was carried out in accordance with the basic principle.
6. Planning
The auditor should plan his work to enable him to conduct an effective audit in an efficient and
timely manner. Planes should be based on knowledge of client business. They should be
further devolved and revised, if required during the course of audit.
7. Audit evidence:
The auditor should obtain sufficient appropriate audit evidence through the performance of
compliance and substantive test procedure. It will enable him to draw reasonable conclusions
there from on which he has to base his opinion on the financial information.
8. Accounting system and internal control:
The auditor should gain an understanding of the accounting system and related internal
controls. He should study and evaluate the operation of those internal controls upon which he
wishes to rely in determining the nature, timing and extent of other audit procedures.
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9. Audit conclusions and reporting:
The auditor should review and assess the conclusions drawn from the audit evidence obtained
and from his knowledge of business of the entity as the basis for the expression of his opinion
on the financial information.
The audit report should contain a written expression of the financial information. It should
comply with the legal requirements. In case of a qualified opinion or disclaimer of opinion
or disclaimer of opinion is given or reservation on any matter is to be made reasons thereof.
 TYPES OF AUDIT
Audit is not legally obligatory for all types of business organizations or institutions. On this
basis audits may be of two broad categories i.e.; audit required under law and voluntary
audits.
I) Audit required under law:
The organization which required audit under law are the following: (a) companies
governed by the companies Act, 1956; (b) banking company governed by the companies
Act, 1949; (c) electricity supply companies governed by the electricity supply act 1948;
(d) public and charitable trust register under various and endowment acts; (e) specified
entities under various section of the income tax Act, 1961.
II) In voluntary category are the audits of the accounts of proprietary entities, partnership
firms, Hindu undivided families, etc… in respect of such accounts there is no basis
legal requirement of audit. Many of such enterprises as matter of internal rules require
audit. Some may be require getting their account audited on the directives of
government for various purposes like sanction of grants, loans, etc… but important
motive for getting accounts audited lies in the advantage that follow for an independent
professional audit. This is the perhaps the reason why large numbers of proprietary and
partnership business get their accounts audited.
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1. INTERIM AUDIT
An audit that is taken up between two annual audits is called an interim audit. A specific
date, as per the client requirement is taken into account, e.g. 30th September, 31st
December, etc… a trial balance is drawn and verified with a view to prepare financial
statement. Financial statement are prepared and authenticated for the interim audit period.
Assets and liabilities are verified for interim balance sheet purposes. It depends on the
nature of work, coverage and audit observations.
2. CONTINIOUS AUDIT
A continuous audit is one in which the auditor staff is engaged continuously in checking the
accounts of the client, during the hole year round or when for the purpose. The staff
attends the quite frequent intervals say weekly basis during the financial period. A
continuous audit is preferred for the following reason: 1) it makes it possible for
management to exercise a stricter control over the accounts in as much one is able to
check sooner the causes of any errors of frauds uncovered by such an audit. 2) The
frequent attendance by the staff deters person so inclined from committing a fraud. 3)
The accounting staff of the client is motivated to keep the books of account up-to-day.
 BANKING AUDIT PROCESS:-

1. For each audit assignment an audit programmed should be prepared. The audit
programmer describes the objective as well as outline for the audit work that is
considered necessary to achieve them. It is relatively flexible tool that will have to be
adapted and completed according to the risk identified.
2. All audit procedures forming part of the assignment should be documented in working
papers. These must reflect the examinations that have been made and emphasize the
evaluations formulated in the report. The working papers must be drawn according to a
will- determined method. Such method must provide sufficient information to verify
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whether the assignment was duly performed and enable others to check the manner in
which it was performed.
3. A written audit report of each assignment is to be issued as quickly as possible. It is

transmitted to the division audited and its management and – principle, in executive
summary form – to senior management.
4. The audit report presents the purpose and scope of the audit and includes the internal audit
department’s finding and recommendations, as well as auditee’s responses. It also discloses
the items on which a consensus exists at the end of assignment. The internal audit
department indicates the relative importance of the deficiencies found or the
recommendation made.
5. The internal audit department maintains a record of the assignments performed and of the
report issued.
ADVANTAGES OF AUDITING
1) Assurance of true and fair accounts:
Audit provides an assurance to the various uses of final accounts such as owners,
management, creditors, leader’s, investor, government’s etc. that the account are true and
fair.
2) True and fair balance sheet:
The user accounts can be sure that the assets and liabilities shown in the audited balance
sheet shown the concern, as it is i.e. neither more nor less.
3) True and fair profit and loss:
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The user can be confident that the audited profit and loss account shown the true amount
of profit or loss, as it is i.e. neither nor less.
4) Tally with books:
The audited final can be taken into tally with the books of accounts. Tues the income tax
offers can be start with the figure of audited books profit, make adjustments and compute
taxable income. An outside user need not go through the entire books.
5) As per standard accounting and auditing practices :
The audited final accounts follow the standard accounting and auditing principals laid
down by professional bodies. Thus, audited accounts are base on objectives standard and
not a personal whims and fancies of a particular accountant or auditor.
6) Detection and prevention of errors and frauds:
Audited accounts can be assumed reasonably free from errors and frauds. The auditor
with his expert knowledge would take care to see that errors and frauds are detected so
that the accounts shoe a true and fair view.
7) Advice on system, taxation, finance:
The auditor cans also advice the client about the accounting system, internal control,
internal check, internal audit, taxation, finance.
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CHAPTER NO 7
DATA ANYLISIS AND
INTERPRETATION
33
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DATA ANYLISIS AND INTERPRTATION
Procedure of audit:
This is the procedure of audit which followed by the auditor. In process of

audit 4 thing are important which are as followed:
1) Planning
2) Fieldwork
3) Audit report
4) Audit follow-up
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AUDIT
PROCESS
Planning Fieldwork Audit report Audit follow-

up
Announcement Transaction testing Discussion draft

letter Follow-up review
Advice and formal Exit conference

Initial meeting communication Follow-up report
Formal draft
Preliminary Audit survey Audit annual
survey report to the
board
Client response
Working papers
Internal control
review
Client comment
Audit program
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• The audit process is similar for most engagements & normally consist of four stages: -
planning (sometimes called survey or preliminary review) fieldwork audit report, and
follow up review. Client involvement is critical at each stage of the audit process. As in
any special project, an audit results in a certain amount of time being diverted from your
department’s usual routine. One of the key objectives is to minimize this time and avoid
disrupting ongoing activities.
• During the planning portion of the audit, the auditor notifies the client of the audit,
discusses the scope and objectives of the examination in a formal meeting with
organization management, gathers information on important processes, evaluates existing
controls, and plans the remaining audit steps.
• Announcement letter: - the client is informed of the audit through an announcement or

engagement letter from the internal audit director. Initial meeting the client describes the
unit or system to be reviewed, the organization, available resources (personal, facilities
equipment, funds) & other relevant information.
• Preliminary survey: - in this phase the auditor gathers relevant information about the unit
in order to obtain a general overview of operations. Internal control review: the auditor
will review the units internal control structure, a process which is usually time
consuming.
• Audit program preparation of the audit program concludes the preliminary review phase.
This program outlines the fieldwork necessary to achieve the audit.
• Discussion draft at the conclusion of fieldwork, the auditor drafts the report. Audit’s goal
is to complete the audit & issue a draft audit report within 30 days after the completion of
fieldwork. Audit management reviews the audit working papers & discussion draft is
submitted to the client for review before the exit conference.
• Exit conference internal audit meets with the unit’s management team to discuss the
findings, recommendation, and text of the discussion draft. At this matting, the client
comments on the draft. At this meeting, the client comments on the draft and the group
work to reach an agreement on the audit findings.
36
• Exit conference is an opportunity for the auditor, department management, process

owners, & other to review and validate audit outcomes. The exit conference should
accomplish the following:
1) Present observation and determine if current operating context might affect past
transactions.
2) Confirm facts, observation & conclusions, e.g., that the finding are accurate.
3) Validate the cause leadings to findings & present recommendations.
4) Estimate the effect of the findings on operations or its risk management.
5) Solicit draft management comments on the audit findings and determine if alternative
recommendations adequately eliminate the cause of findings.
6) Define the timeline for issuing the final audit report and implementing
recommendation.
37
-P
w
tR
u
A
k
W
d
sF
c
o
p
y
a
iln
m
re
Preliminary process:
 Stages in the Audit Process
The examinations of the above stages are as follows:
 Stage 1
Auditor set up the conference with the audited to discuss audit. Auditee provides the information
to the auditor.
38
Auditors obtain an understanding of auditee’s mission activities and organization.
Auditor identifies the audit objectives, issues and, scope.
Then the auditor develops the audit program according to the auditees information obtains by
him.
 Stage 2
Field work:
Auditor gathers the evidence from the information provided by the auditee. Using this
information auditor develop the work papers. While developing the work papers there is a
constant communication between the auditee and auditor.
Once the audit staff determines that the records are substantially complete and well organized the
audit staff will:
1) Review the bank disclosure reports to determine whether receipt and disbursement
information was properly reported and mathematically accurate.
2) Review the bank disclosure reports to determine whether receipt and disbursement
information was properly reported and mathematically accurate.
3) Check the KYC of accounts.
4) Review the cash flow statements.
5) Check the cash flow statements.
 Stage 3
Audit Report
Auditor drafts the report of audit findings and recommendation. The audit supervisor reviews the
quality of work papers and drafts the report. Auditor submits the draft report to the auditee and
set up formal exit conference.
39
Auditee review and comment on draft report and exit conference.
Auditee develops and submits the written response within 10 days.
Auditor review the comments given by the auditee, auditor revise the report if necessary else
submit the report.
 Stage 4
Follow-up Audit Report
Auditor submits the final audit report to the auditee.
 Stages 5
Follow-up audit report:
After the 2-3 months of audit report issued, the office of audit services performs follw-up review.
The purpose of this review is to conclude whether or not the corrective actions were
implemented.
 Audit procedures for obtaining audit evidence :
The evidence-gathering process involves the following steps:
1) Designing the audit procedures or tests:
2) Carrying out audit procedures or tests and/or gathering evidence;
3) Analyzing evidence and drawing conclusions, which may also involve evaluating performance
against the audit criteria; and
4) Making decision about whether additional information is required and can obtained (go back
to step 1) or whether sufficient appropriate evidence exists.
40
Identify the four audit evidence decision that is needed to create an audit program.
41
AUDITED BALANCE SHEET OF GS Mahanagar Co-operative Bank Ltd., Mumbai
AS ON 31ST MARCH 2019
CAPITAL & LIABILITIES 31-3-2019 31-3-2018
Capital 75,26,03,810.00 92409,53
Reserve & Surplus 243,94,14,139.50 1253326,16
Deposits 2500,78,05,819.51 20213534,80
Borrowings 0.00 2332286,00
Other liabilities & Provisions 34,40,08,234.44 574046,98
Total 28,543,832,003.45 24465603,47
Assets
cash & balance with RBI 1,612,055,048.88 983782,50
Balance with banks and money at 00.00 542059,49
call & short notice 1,299,260,294.59
Investments 9,744,102,008 6141734,80
Advances 1675,64,70,597.29 16036411,71
Fix assets 362,145,664.32 184703,63

Other assets 38,18,53,439.25 576911,34
Total 28,543,832,003.45 24465603,47
42
Capital 75,18,72,40.00 75,26,03,810.00
Reserves & surplus 3,112,116,343.04 243,94,14,139.50
Deposits 2644,18,03,531.41 2500,78,05,819.51
Borrowing 0.00 0.00
Other Liabilities & provision 34,48,55,373.25 34,40,08,234.44
TOTAL 29,973,962,47.70 28,543,832,003.45
ASSETS
Cash & balance with RBI 1,332,970,930.12 1,612,055,048.88
Balance with bank 00.00 00.00
Money at call & short notice 149,934,275.39 1,299,260,294.59
Investment 10,854,844,470 9,744,102,008
Advance 17,443,520,094.34 1675,64,70,597.29
Fix assets 349,101,881.67 362,145,664.32
Other assets 48,29,16,235.82 38,18,53,439.25
TOTAL 29,973,962,47.70 28,543,832,003.45
43
Capital 74,88,16,760.00 75,18,72,40.00
Deposits 2699,65,15,661.80 2644,18,03,531.41
Borrowing 0.00 0.00
TOTAL 3373,00,86,551.06 29,973,962,47.70
ASSETS
Balance with bank 312,63,87,839.57 0.00
Money at call & short notice 14,99,34,275.39
Investment 909,79,52,849.92 10,854,844,470
Advance 1690,37,33,331.72 17,443,520,094.34
Fix assets 32,97,36,360.46 349,101,881.67
Other assets 265,45,97,906.46 48,29,16,235.82
TOTAL 3373,00,86,551.06 29,973,962,47.70
44
Capital 72,09,58,610.00 74,88,16,760.00
Deposits 2906,82,83,538.72 2699,65,15,661.80
Borrowing 0.00 0.00
TOTAL 3627,73,77,407.70 3373,00,86,551.06
ASSETS
Balance with bank 424,69,71,344.18 312,63,87,839.57
Money at call & short notice
Investment 1050,26,32,399.00 909,79,52,849.92
Advance 1622,96,13,033.60 1690,37,33,331.72
Fix assets 31,53,02,461.67 32,97,36,360.46
Other assets 317,46,30,371.88 265,45,97,906.46
TOTAL 3627,73,77,407.70 3373,00,86,551.06
45
YEAR ENDED YEAR ENDED
31.3.2022 31.3.2021
A DISSERTATION
INCOME REPORTON“A STUDY OF BANK AUDIT
PROCESS”AT
Interest earned GS Mahanagar Co-operative Bank Ltd.,
255,92,30,256.12 Mumbai
261,40,10,629.05
Other income 17,60,03,693.77 21,85.56,847.06
TOTAL: 273,52,33,949.89 283,25,67,476.11
EXPENDITURE:
Interest expended 139,80,87,290.64 151,53,54,561.77
Operating expenses
PROFIT & LOSS85,20,75,288.68
ACCOUNT 2022 71,61,65,610.77
Provisions & contingencies (net) 00.00 00.00
TOTAL: 225,01,62,579.32 233,15,20,172.54
PROFIT/LOSS(-) 00.00 00.00
Net profit / loss(-) for the year 19,61,92,634.45 24,40,21,477.02
Profit /loss(-)brought forward 0.00 0.00
TOTAL: 19,61,92,634.45 24,40,21,477.02
APPROPRIATIONS
Transfer to statutory reserve 49,100,000.00 61,200,000.00
Transfer to reserve & other reserve 76,342,634.45 1,08,820,690.00
Transfer to capital reserve 138,62,14 36,42,00
Transfer to special reserve 00.00 00.00
Proposed divined (including divined tax) 00.00 00.00
Balance carried over to balance sheet 7,07,50,000.00 7,40,00,787.00
TOTAL: 125,442,643.45 61,200,000.00
Other financial information analysis of the Gs Mahanagar Co-Operative
Bank Ltd.
Working capital status of the bank for the year 2018 – 2022
Year Working capital Rs. In Lac.

2018 283380.22
2019 290043.38
46
2020 307498.95
2021 317430.35
2022 362773.77
Working Capital Rs. in lac

180000
175000
170000
165000
160000
155000
150000
145000
140000
2018 2019 2020 2021 2022
Interpretation:
This chart shows the working capital of the GS Mahanagar Co-operative Bank Ltd., Mumbai
from 2018 (283380.22) to 2022 (362773.77) is increased. Operating efficiency of the GS
Mahanagar Co-operative Bank Ltd., Mumbai can be increased.
Following table shows the “deposits Rs in Lac’’ status for the year 2018 to
2022.
Year Deposits Rs. In Lac
2018 247149.62
2019 250078.06
2020 264418.04
47
2021 269965.16
2022 290682.84
Deposits Capital Rs. in lac

200000
150000
100000
50000
0
2018 2019 2020 2021 2022
Year
Interpretation:
This chart shows the deposits of the GS Mahanagar Co-operative Bank Ltd., Mumbai from 2018
(247149.62) and 2022 (290682.84) is increased. i.e. deposits indicated positive improvements
subsequently in the year.
Following table shows the “loans Rs in Lac” status for the year 2018 to 2022
Year Loan Rs. In Lac

2018 153390.58
2019 167564.71
2020 174435.20
2021 169037.33
2022 162296.13
48
Loan Rs. in lac

180000
175000
170000
165000
160000
155000
150000
145000
140000
2018 2019 2020 2021 2022
Year
Interpretations:
This shows the loan of the GS Mahanagar Co-operative Bank Ltd., Mumbai from
2018(153390.5) to 2020(174435.20) is increased i.e loan indicates positive improvement and
2020(174435.20) to 2022(162296.13) is decreased i.e. loan indicated negative improvements.
49
CHAPTER NO 8
OBSERVATION
OBSERVATION
Appointment of Auditor / Expert
The independent auditor / consultant / expert (auditor) must be nominated by the licensee &
provide approved by the authority prior to the audit/review. The licensee, seeking the authority
approval of their nominated auditor, must provide the authority with the auditor submission
/tender or climes against the selection criteria. The criteria for selection of an auditor are outlined
below.
50
Selection criteria:
The auditor’s selection is to be based on the following criteria:
 Substantial experience in the audit/review team in performance and compliance auditing

with a preference for experience in provision of a similar scope of services across a large
organization/utility.
 The audit/ review team members: audit skill, engineering and technical experience,
business management consulting skill, practically in the areas of customer services
measurement & development, and the resource mix (i.e. the percentage of time to be
undertaken by the various levels of personnel.)
 The cost of providing services
 Methodology proposed for the audit/review, which shall include a proposed program for
the services demonstrating the auditors ability to complete the services & provide the
audit /review report by required dated.
 Compliance with the conditions of engagement (refer section 2.2)
 Compliance with the standard audit guidelines for performance/operational audits and/or
asset management system reviews. The auditor must address the above criteria in the
quotation. The criteria are not detailed in any particular order and are not necessarily
exhaustive or to be given equal weight.
51
CHAPTER NO 9
FINDINGS
FINDINGS
I. Audit activities averagely improve the performance of organization from 2018 to 2022 at
GS Mahanagar Co-operative Bank Ltd., Mumbai
II. The overall internal control of the organization is improving the some extent by work of
internal audit.
52
III. Auditors should recommend actions to correct problems identified during the audit and to
improve programs and operations when the potential for improvement in programs,
operations
IV. The audit report has show total capital of GS Mahanagar Co-operative Bank Ltd.,
Mumbai has been increase in positive from year 2018 to 2022.
V. The audit report showing the number of member the GS Mahanagar Co-operative Bank
Ltd., Mumbai has increase from 2018 to 2022.
53
CHAPTER NO 10
SUGGESTIONS
SUGGATIONS
1) The bank should maintain & accurate books of accounting record. It will help to auditor
to give fair & true view of the bank on the basis of available information.
2) The bank should maintain master file of record.
54
3) Terms and conditions of audit should be followed properly by the bank at the bank time
of maintaining accounting record.
4) Bank should improve internal auditing and evaluation system to understand bank overall
performance periodically.
55
CHAPTER NO 11
LIMITATION
LIMITATION OF THE STUDY:
1. The study provides an insight into the financial, personnel, marketing & other aspects of GS
Mahanagar Co-operative Bank Ltd., Mumbai every study will be bound with certain limitations.
56
2. One of the factors of the study was lack of availability of ample information. Most of the
information has been kept confidential & as such as not assed as art of policy of Bank.
3. Time is an important limitation. The whole study was conducted in limited time duration
which is not sufficient to carry out proper interpretation & analysis.
57
CHAPTER NO 12
CONCLUSION
CONCLUSION
58
The researcher outlines the history and an attempt has been made to shed light on the various
aspects involved in the growth and development of the performance of the GS Mahanagar Co-
operative Bank Ltd., Mumbai.
Without a sound and effective banking system India cannot have a healthy economy. The
banking system of India should not only be hassle free but should be able to meet new challenges
posed by technology and any other external and internal factors. For the past three decades
India's banking system has several outstanding achievements to its credit. The most striking is its
extensive reach. It is no longer confined to metropolitan or cosmopolitans cities of India. In fact,
it has reached even the remote corners of the country. This is one of the main reasons for India's
growth process.
59
CHAPTER NO 13
BIBLIOGRAPHY
Bibliography:
60
Before and at the time of preparing the project report following books were referred which
supported me with some important guidelines for the analysis of project report.
 Books :
 Student reference on Income Tax , Service Tax & VAT
 Student guide to Income Tax By Firake
 Income Tax practice & Procedure – By prof . L. P. Wakale
 Research methodology C.M. KOTHARY
 WEBSITES :-
 www. mahanagarbank.net
 www.google.com
 www.wikipedia.com
 https://www.incometax.gov.in
61

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A DISSERTATION REPORTON“A STUDY OF BANK AUDIT

PROCESS”AT GS Mahanagar Co-operative Bank Ltd., Mumbai

1. A snapshot of banking industry :

With a view to provide an institutional mechanism for sharing information on borrowers /

2. Reforms in the banking sector :

Banking System (structure):

Banking System in India Reserve bank of India

Development Financial institution Bank

IFC IDBI ICICI NABARD NHB IRBI EXIM BANK SIDBI

Commercial Regional Land Development Co-operative

Public Sector Banks Private Sector

SBI Groups Nationalized Banks Indian Banks Foreign Banks

4. History of GS Mahanagar Co-operative bank in India –

GS MAHANAGAR CO-OPERATIVE BANK DEPOSITS, LOAN FOR

 Floating rate deposit

 Tax saver schemes

Some of the most significant features of Indian overseas bank

 Extremely attractive interest rates

 Replacement of stolen or destroyed deposit receipts.

HEAD OFFICE ADDRESS: GS Mahanagar Co-Op Bank Ltd.,

HEAD OFFICE: 1 Head Office

PRODUCT: Loans, credit card, savings, investment, vehicles etc…

REVENUE: RS 27,252.34 Lakhs

OPRATING INCOME: RS 28,773.93 Lakhs

NET INCOME: RS 1,961.93 Lakhs

TOTAL ASSETS: RS 3,62,773.77 Lakhs

OWNER: Late.Solicitor Mr.. G.S.Shelke

CAPITAL RATIO: 2.68%

GS Mahanagar Co-operative Bank Ltd., Mumbai

Adv. Mr. Uday Gulabrav Shelke Chairman

Mr. Bhaskar Babaji Kawad Vice Chairman

Mr. Bhaskar Laxman Khose Director

Mr. Vasanji Dharshi Dedhiya Director

Mr. Banshi Chimaji Bangar Director

Mr. Suresh Homaji Dhome Director

Mr. Ramchandra Rajaram Trikone Director

Mr. Satish Anant Khankar Director

Mr. Baban Bhau Lanke Director

Mr. Shivaji Kondiba Karkhile Director

Mr. Bhanudas Janardan Khose Director

Mr. Shridhar Kondiram Kothawale Director

Mr. Ravindra Dattatray Dhole Director

Smt. Suman Gulabrav Shelke Director

Smt. Dr. Mrs. Gitanjali Rajesh Dere Director

Mr. Narayan Shankar Kurhe Director

Mr. Vilas Dagdu Palave Director

Mr. Vijay Devram Barude

Project: Study of Bank Audit Process

Organization: GS MAHANAGAR CO-OPERATIVE BANK, BRANCH

1. To study the audit procedure adopted by GS Mahanagar Co-operative Bank Ltd.,

Research has adopted Descriptive Research methodology in this project.

 PREPARING THE RESAERCH DESIGN

Research design is conceptual structure within which research would be conducted.

1) Objective of the research study.

2) Method of data collection to be adopted.

3) Source of information-sample design.

4) Tool for data collection.

5) Data analysis-qualitative and quantitative.

 Objective of the research study:

 Source of data collected by researcher :

There are two data sources:

1) Discussions with the bank branch manager.

a. Bring clarity and focus to your problem.

 ORIGIN AND EVALUATION OF AUIDTIG