1. Statutory Branch Audit in CBS Environment ONE BY SIX ISSUES
INDORE BRANCH OF CIRC OF ICAI

2. DISCLAIMER
All references are shared for helping understand the key issues and concerns. All members are requested to take appropriate care before drawing any conclusions.

3. Changes in Business
Traditional banking to high level financial advisory
Traditional products of deposits and lending to boutique of financial services/ Para- banking activities.
Branches to Service outlets.
Customer of branches to customer of bank.

4. Changes in Business
Multi-level organization to centralized organization Decentralized data processing to centralized-data processing.
Manual accounting to complex computerized- data processing and accounting.

5. CONCERNS IN CBS Risks Compromise on Controls Loss of Trail
Behavioral Issues
Attrition
Complexity in working

6. KEY ISSUES KNOWLEDGE TECHNOLOGY EXCEPTIONS REPORTS DOCUMENTATION
OTHER ISSUES

7. KNOWLEDGE

8. KNOWLEDGE OF CBS Cases on CBS Day End Controls
System Generated Transactions

9. Knowledge of CBS: Cases
NPA PROVISIONS: IRAC norms
TERM LOAN WITH CREDIT BALANCE IN BANK
SAVING BANK ACCOUNT WITH DEBIT BALANCES

10. KNOWLEDGE OF CBS: Day End Controls
Review of day end reports: More in heading EXCEPTION reports

11. KNOWLEDGE OF CBS: System Generated Transaction
Interest debits
Charges debits
Application of Interest.
Application of service charges.
Updation of parameters globally.
Balancing & Reconciliations.
Classification of inoperative accounts etc.
Classification of Probable NPA’s

12. KNOWLEDGE OF CBS: System Generated Transaction
Though these runs are controlled centrally at the Data Centre, yet there are several reasons of failure /incorrect output of such runs, like:
Interest rate not mapped correctly: for example, interest rate of housing loan to staff linked to interest rate of vehicle loan to staff.
Interest rate field kept as “Zero”. Interest collection flag kept as “N” instead of “Y”.
Account wrongly marked as Past-due/ “NPA”.

13. KNOWLEDGE OF CBS: System Generated Transaction
Case on OD on FD: Link to exception report.

14. KEY ISSUES
TECHNOLOGY

15. Technology
Auditor’s need to gain knowledge and understanding about clients business.
The relationship technology has with business its impact on controls and related impact on audit procedures.
Case of ATMs:
Change in operations
ATMs on moving vehicles.

16. KEY ISSUES
EXCEPTIONS

17. EXCEPTIONS
The most critical aspect for any statutory auditor to look into:
Cases
What to look for?
Where to look for?
How to interpret?

18. EXCEPTIONS: Cases
BoM case
OD against FD
Cheque number change

19. EXCEPTIONS: WWH What: Exception Reports
Where: The BM system. There are daily report folders.
How: Generated on:
Daily: Detailed discussion in heading REPORTS.
Monthly
Quarterly
Yearly

20. KEY ISSUES
REPORTS

21. REPORTS
Day End Reports from CBS
Other Auditor’s Reports

22. Reports: Day End Excess allowed over limit
Debits to Income head accounts
Overdue bills and bills returned
Withdrawal against clearings
Deposits accounts debit balance
Temporary O/D beyond sanction limit
Standing instruction failed in day

23. Reports: Day End Debit /Credit balance change Maturity record deleted
Inactive accounts reactivated
Rejected/Cancelled entries
GL affected Balances Report
Report on large cash transactions /KYC & Anti Money Laundering etc.
Change in master : Auditor should check mainly for sep, mar, 1-2 apr.

24. Reports Statutory Audit Stock Audit Tax Audit Revenue Audit
Concurrent Audit
Forensic Audit

25. KEY ISSUES
DOCUMENTATION

26. Documentation
Case : IPO fraud

27. KEY ISSUES
OTHER ISSUES

28. Migration
The process of Migration is now a days of more use in case of Co-operative banks & RRB’s.
If migration process has been undertaken in the supervision of controlling office team, to check & comment.
Check with the help of a Sample.

29. Migration
Check the pre migration and post migration reports of any ledger. BALANCING OF BOOKS is relevant from LFAR POINT
If branch has undergone an independent Migration Audit, to check whether all irregularities and recommendations have been duly attended/followed.

30. SECURITY MASTER DATA
To check whether values of various securities are updated promptly and drawing powers are allowed on current value of such securities, based on the report of valuation officer.
To check whether periodical reports on securities master are taken and scrutinized for verification of various fields i.e. value of securities, date of inspection, insurance, date of valuation, etc.,

31. ATM
To check whether adequate control over physical inventories of ATM cards has been exercised .
ATM CARDS at branch and PIN at branch are separately stored with different person.
Proper Controls over HOT CARDS and CAPTURED CARDS.
To check whether ATM Cash has been verified periodically cash should come in branch balance sheet or not.
To check whether ATM transactions are reconciled periodically.

32. Thanks
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