Presented by: CA Uday Sathaye Gokhale & Sathe Chartered Accountants 29 Dec 2012 EFFECTIVE CONCURRENT AUDIT REPORTING Certificate course on Concurrent Audit of Banks Presented by: CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Audit Objectives: As per SA 700 issued by ICAI: Audit Objectives are : 29 Dec 2012 Audit Objectives: As per SA 700 issued by ICAI: Audit Objectives are : To form an opinion on the Financial Statements To draw conclusions based on Audit Evidence obtained To clearly express the opinion through a Written Report SA 700- Standard on Auditing (SA) 700 (Revised) Forming an Opinion and Reporting on Financial Statement CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Audit Report Stages Planning Stage Draft Report preparation 29 Dec 2012 Audit Report Stages Planning Stage Draft Report preparation Collection of data Discussion Final draft Revising the Draft Report CA Uday Sathaye Gokhale & Sathe Chartered Accountants

29 Dec 2012 Who are the readers ? 1. Branch 2. Compliance Department 3. Controlling Office 4. RBI 5. Other Govt Agencies, etc. An effective Audit Report should focus on its readers and should contain necessary details of Discrepancies Regulatory / Internal guidelines Risk associated, etc CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Consideration of SIA 4 in Reporting 29 Dec 2012 Title Appropriate Expressing nature of the Report Addressee Appropriately addressed Report Distribution List Mention of the recipients of the report CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Opening or introductory paragraph 29 Dec 2012 Coverage Identify the systems, processes, functional lines or other items of the entity Opening or introductory paragraph The operation of systems, procedures and controls are the responsibility of the entity’s management The responsibility of the internal auditor is to express an opinion Scope paragraph Describe the scope of the internal audit Describe that the internal audit was conducted in accordance with generally accepted audit procedures as applicable. Executive Summary paragraph Indicate the highlights of the internal audit findings, key issues and observations of concern, significant controls lapses, failures or weaknesses in the systems or processes. CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Observations paragraph 29 Dec 2012 Observations paragraph Mention the process name, significant observations, findings, analysis and comments of the internal auditor. Comments from local management The observations and comments from the local management of the entity provided after giving due cognizance to the internal auditor’s comments Local management’s action plan or resolution of the issues and compliance to the internal auditor’s recommendations and suggestions Action taken report Appended after the observations and findings It should include status of compliance / non-compliance w.r.t to previous internal audit observations and reasons for non-compliance thereof CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Date, place & signature of the internal auditor 29 Dec 2012 Date, place & signature of the internal auditor Signed by the internal auditor in his personal name Membership No. Communication to the Management Discussion Draft Exit Meeting Formal Draft Final Report Limitation on scope Describe the limitation CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Report Writing Use of Language in Reporting: Sentence Formation 29 Dec 2012 Report Writing Use of Language in Reporting: Sentence Formation Grammatical accuracy Avoid use of biased language Avoid use of Ambiguous Pronoun Reference Avoid use of words like Generally, Mostly etc. Use of too much technical words to be avoided Use of Bullets Answer each question and do not put symbols like - Audit observations should be concise yet clear Limited Use of Passive Voice Passive voice sentences are used to emphasize the receiver of the action rather than the actor Eg.A report was presented to the stakeholders In the above example REPORT is more important than the auditor It makes the writing unclear by keeping the identity of the actor secret It often sounds awkward and evasive Use of Passive voice sentences sparingly Sentences with passive voice may be interpreted as an attempt to avoid admitting responsibility Example- Passive: “A mistake was made that resulted in an overcharge to your account that has now been corrected and will be shown on your next statement” Active: “Our data entry clerk made a mistake and overcharged your account, but she corrected the entry .Your next stamen will show the correction” Use of passive voice language is acceptable when: 1The objective of the action needs emphasis. 2When the actor is unknown or not important. Avoid use of ambiguous pronoun reference: Example 1-“this is the cause of problem”(whether reader will be able to know what THIS means?) Example 2-“the auditor told branch ,manager,he could correct the error” (one may interpret the sentence as branch manager can correct the error,or other may interpret it as auditor will do the same) CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Report Writing (Contd…) 29 Dec 2012 Report Writing (Contd…) Difference of opinion or understanding with Auditee should be spelled out clearly Clarity about views to be presented in Report Emphasis should be at proper places only s CA Uday Sathaye Gokhale & Sathe Chartered Accountants

General Guidelines for Report Format 29 Dec 2012 General Guidelines for Report Format Selection of Font and consistency throughout the Report (Including Annexures) Margins Spacing Tabs Page size Header and footer Date and Time Formats CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Value Addition to Audit Report 29 Dec 2012 Value Addition to Audit Report Attachments / Annexures / Appendices Executive Summary/Flash Report Key Audit Findings Sample Details Revenue Leakage Statements CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Conclusion of Audit Report 29 Dec 2012 Conclusion of Audit Report Review internally before submission of Final Report : Discussion with Auditee and necessary correction thereafter Stamping/Initials/Timing Keep proper Attendance Record Cover everything and issue Certificates appropriately Disclaimer should be properly given Acknowledgment CA Uday Sathaye Gokhale & Sathe Chartered Accountants

Chartered Accountants 29 Dec 2012 CA Uday Sathaye Gokhale & Sathe Chartered Accountants Email: uday@gokhalesathe.in