This being very different year ending than all earlier years of our life due to COVID 19. We never think that bank branch statutory audit if allotted whether to be performed or carried out from remote location. Though the allotment has not received yet, but we have to be prepared for such a situation of the allotment is come.
There are two aspects of working from remote location in case of bank branch,
- Carrying out audit from nearest branch and
- Carrying out the audit from home.
In case we have to do audit from the nearest branch then it will be easier as only the physical files and details which were available at the particular branch will not be available to us, but all the online data on the server will be available as we can login our branch from any branch location. The some of the following files details are not available on both the cases.
- Supporting evidence of Loan sanction, renewal, loan appraisal, correspondence with the clients for follow up.
- Original verification details of KYC.
- Physical Verification of Cash & Security forms.
- Verification of ATM / Cash Deposit machines attached to branch.
- Identification of person behind the work.
- Security systems.
- Verification of Stock & Book Debt statements.
- Hardware & Software Security, including password etc.
- Interaction of Auditor, Branch Manager & client.
- Verification of the loan document whether kept at branch or at the Hub.
- Verification of Jilani & Ghosh committee recommendations.
- LFAR comments regarding Cash, Advances, Guarantees, LC, Contingent liability, details of frauds if any.
- Verification of Guarantees and Letter of credits.
- Verification of Tokens, Key, Decoy money,
- Feel of the branch, customers, staff, location risks and benefits.
- Verification of Fixed Assets.
- Client visit to verify their position in critical accounts.
- Verification of vouchers & their supporting evidence.
- Verification of Tax audit 15 G, 15H forms etc.
- Verification of Legal documents on suit for recovery etc.
The auditor has to device or decides the methods by which he should arrive at the conclusion on verification of the above items. Some of the techniques are.
- Interactive meetings on apps.
- Notes on particular topic or subject be prepared by the branch manager and the same should be mailed.
- Interaction and view on video calls or video recordings.
- Basic documents of which the authenticated scan copies should be obtained.
- Hardware & software security details from the third party or vendors.
- Certificate of verification of cash, security items, tokens, from the auditor nearby, or the branch manager nearby.
- Updating of suit filed or legal cases in the form of certificate or note from the respective advocates who is handling the particular case.
- Asset numbers of a particulars fixed assets along with their photo.
- Scan copies of daily cash registers and other records for test check and record.
- Latest reports of the Branch Inspection or other auditors covering the above topic if available and they have covered the same. Say, verification of cash at ATM from camera recordings.
From the above it may be noted that, the first task of such audit is to list out the details not possible to verify from the server or system of the nearest branch or from home and then the alternate method to be used for verification of such items. If the details, to be received through mail, it is advised to make the folders in the audit file for each date specifying the mails received. You may have folders like,
Mail Recd dated, having sub folders like Advances, Deposits, Monitoring, Tax Audit, Housekeeping etc.
The respective details of particular subject to be stored in each folder.
- The folders of Advances, housekeeping having scan copies.
- The folders of Notes, and submissions received from the Branch managers & third party.
- Requirement of Audits in the form of progressive List 1, List, 2, List, 3, Final Points, Points to be taken in LFAR, Points to be considers for Main Report.
- Updating folder contain queries raised, Explanation recd and closed.
If the system is available, the classification, provision, IRAC norms, test checking of customer accounts, Drawing power details, Delegated Powers, Claims of subsidy,appraisal Notes and sanction letter, KYC details submitted and such type of maximum details can be easily verified from the system.
IN case the audit is to be conducted from home the screen shots and converted soft copies from the systems can be obtained.
The previous audit report, closure report, branch inspections, con current audit report, AGM, or visiting notes of the higher authorities, closing & other circulars will be easily available in soft copies.
All communication like acceptance of appointment, Engagement letter, NOC request, submission of list of requirements, etc should be advised to be done with the digital signature on respective word or excel file. Even while accepting the details, information, explanation, scan documents, third party notes & reports should be taken with the authenticated digital signature.
The fact of being carried out the audit either from remote location or from nearest branch be specifically mentioned in the engagement letter as well as in the form of disclaimer in the last Colum of LFAR.The position that since the items could not be verified the reliance is placed on the submission of the branch authorities should be specifically stated correctly.
The circulars issued during the lock down due to COVID 19 regarding IRAC norms, classification of NPA etc should be practically studied and their application should be verified.
The suggested paragraph in the engagement letter / last column of the LFAR could have been.
Due to COVID 19, there is a lock down and the audit was conducted from remote location as such the verification of items like cash, security items, fixed assets, loan documents, and alarm system and other items which are to be verified at the branch could not be verified, in all such cases the report, note, from the branch manager, nearest branch manager or third party is obtained and we have place our reliance on the same. We are unable to verify vouchers, etc and our report is subject to the items not verified by us, the list of such items is given in …………….
Though, the allotment is not yet come , I request the ICAI to come out with Guidance notes, Examples of the Engagement letter, Notes and qualification in the main report and elsewhere to be given wherever the audit to be carried out from nearest location or from remote location and particularly for bank branch statutory audit this year.
This is an attempt to visualize the situation of the Statutory Bank branch audit and the facts or final understanding will come when we actually carryout the audit, but this will serve a new beginning in the era of practice.
Hope the note will help to understand the basics of such type of audit.