Attended a webcast with the ICAI. Here are the few notable snippets about the key changes in the recent RBI circular about the concurrent audit of the public sector banks.
1. Quantity and quality of the banking has changed drastically. Huge jump in quantity of branches, transactions, types of transactions, etc in banking. Also the complex transactions like derivatives, foreign exchange, ATM, E-lobby, data center, etc need a different expertise.
2. Certification of transactions and things like LFAR is an issue. It’s like making concurrent auditor responsible for statutory part.
3. Circular calls for concurrent audit of functions apart from branches are concerned. Also the model seems to he moving from size to the risk models of the proposed subject. High risk like type of transactions, fraud prone branches, etc needs to be brought in. Even high deposits may be important parameter apart from advances to cover branches in the audit.
4. The expectation from concurrent auditor of the bank is to be eyes and years of the management. They have to act as extended arm of the bank. This also suggests that concurrent auditor needs to be value add not only to the adherence to the framework but also to challenge the framework.
5. Cooling period of the auditor with the same bank may go away. However the performance monitoring of the auditor may go up from basic documentation to the risk based smart review.
6. New exceptions are brought out like quick mortality in KYC and so on points out that the mindset should grow more fraud sensitive. Forensic audit mindset is becoming more important.
7. It’s the prime duty of the bankers to provide timely and complete information to the Auditors.
8. Banks should organize training and familiarization program for the auditors. This will help making the auditors equipped for better judgement and quality can go up.
9. Working post banking hours is NOT a desirable guideline. A representation to the RBI should be done on this. A computer and dedicated space is a basic minimum expectation while fulfilling huge responsibility of concurrent audit of the bank.
10. Renewal of loans without supporting documents being received in the system.
The members understanding on the IT side is the must to handle the banks concurrent audit now onward.
As conclusion, banks and concurrent auditors should work as a team to meet expectations of this New RBI circular for the concurrent Audits.