Bank Audit: The killing silence of RBI & ICAI

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The allotment of audit by the SBI was done on 2nd May 2020 and the due date for its completion was by 5th May to 8th May. The similar deadline is there with various other banks like federal bank, Union Bank of India, Central bank of India, which have allotted the audit.

The question now, when the Government itself wants everything to be hold by putting a lockdown, why bank are insisting to do the audit in a time bound manner?

What difference will it make if they defer the audit for a month’s time? Why bankers are getting so hard for audit? At the ground level, neither manager nor auditor are comfortable for audit.

Why RBI is not ensuring the deferment of audit? Audit at this hour will not only be harmful for the health of the banker but also of the auditor. RBI has deferred the due date for submission of LFAR to 15th June. However, RBI has not issued any instructions specifically asking to defer the audit requirements period till 15th June.

Why ICAI has not asked its members to have their safety first and refuse to go ahead till the environment is normalized? Why the Government is not asking the bankers to keep audit process on hold?

It may be worthwhile here to mention that there are various cases where the city of branch for audit and the location of the branch is not same.

Why an open instruction is issued to the bankers to have audit after a gap of around month’s time? Bank audit is nothing which is falling under the “essential commodities”?

The very purpose of lockdown is getting defeated by the silence of all the regulators.

Auditors have an onerous duty to perform while carrying out the bank audit. This time will indeed be a tough time for the auditor now. Completing the audit within a short span of just 3 days or 5 days without visit will not be an easy task.

The way the present situation is handled by regulatory like

–         RBI

–         Government

–         ICAI

–         Bank

–         IBA

is not worth appreciation.  It appears that none of the above regulatory will now come out with any sort of relief whatsoever in the prevalent situation arisen due to COVID-19.

Now, How to complete the audit:

Let us discuss what an auditor should do to complete the audit in such a situation when the movement is also prohibited.

  1. Make a new group of whatsapp or telegram consisting of branch officials and the teams members of CA firm. It will ensure better and timely coordination.
  2. The branches are under a CBS mode. So, if required, the auditor may ask the bank to ensure the access from other branches of the same bank in a locality nearer to the auditor location.BY this, the auditors are able to access all the required information in the system of the auditee branch.
  3. Ask branch officials to mail the copy of Financial statements for the FY 2019-20 & 2018-19.
    Auditors may make separate file for all the branches they are auditing. They can take the print out of two years and can carry out comparison and ratio analysis so as to decide the level, area and quantum of checking.
  4. Take the complete list of advances outstanding as on 31.03.2020 along with overdue report, sanction date, outstanding balance, value of primary and collateral security, credit summation, debit summation, etc.
  5. Take the list of the NPA A/c as on 31.03.2020, 30.09.2019.
  6. Take the list of the Potential NPA A/c as on 31.03.2020, 30.09.2019.
  7. Take the list of new loans sanctioned during the year along with the copy of the sanction letter. On this basis, auditor can decide the copy of the bank statements required for verification of the accounts. To be on a better side, bank statements of all the loans sanctioned during the year can be called for.
  8. Ask the branch to scan and mail the copy of the
    a) Last statutory audit report
    b) Inspection and internal audit conducted during the year by branch or external auditor
    c) Compliance report of previous audit
    d) Revenue audit report, if any for the year.
    e) Stock audit report of all the advances above Rs. 1 Cr.
    d) Documents of all loans above Rs. 2 Cr as separate account report is required to be given in LFAR (Annexure F)
  9. The information with regard to the fraud cases can be further called by the auditor.
  10. The suitable clarification and comments may be placed in the audit report whenever needed as to the extent of verifications and prevailing constraints.
  11. The branch may be asked to mail all the statements which are needed to be certified by the auditor. For each and every statement, auditor can seek the details by way of mail or whatsapp from the branch.
  12. The whatsapp video call could be one of the most powerful tool for instant viewing of the documents.
  13. It will be advisable to appoint an assistant in the location of the branch. It can be done by taking the help of some CA in the nearby location of the branch. (Like for Nagpur, one can contact me on 85510-70846). Cash verification and few other things could be carried out through whatsapp video call and with the help of local assistants.
  14. The auditor can ask for the details of all the new accounts opened furing the year and KYC can be checked randomly through whatsapp video call whereby the branch would show the KYC documents on the mobile screen.
  15. MOC effect of the previous auditor should be verified by asking branch to mail it along with voucher.
  16. Invariably, ledger account statement of suspense debits and credits should be called by the branch auditor
  17. For tax audit report, separate team in the office should be assigned. TDS returns and fixed assets additions, deletions details, etc can be asked to mail.
  18. For LFAR, the date is already extended by RBI to 15.06.2020. If required, the auditor can defer it till the lockdown is opened so that it can be done by thorough verifications of all the advances. However, if the bank insists, the same can be done by the mode mentioned above.

These are just an illustrative version to convey that the few audit function now can be performed in e-mode. Let us take the things in a positive spirit. Let us think of Income Tax Officers who are able to complete the assessment function electronically then why we cannot

It may be noted that TCS has taken a decisions that 75% of their team would now be working on the concept of “work from home”.

This is the time we the CA also need to be ready with this concept.

Let us start it now. Let us turn every challenge in to an opportunity. Let us start bank audit remotely. Kindly comment your views and opinion on this article to make it more useful for all the CA.

[If any help is needed to any auditor at Nagpur, feel free to call @ 85510-70846]

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