BANK BRANCH AUDITS
EFFICIENT AND EFFECTIVE AUDIT
AN INTEGRATED APPROACH
22 March 2015
CA SRIPRIYA KUMAR
Using Excel – Program Structure
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Bank Branch Audit – Key aspects
Understanding Database concept
CBS environment
Why Excel – Efficient and Effective audits
The Tool kit
Basic commands in excel for bank audits
Live demonstration
One hour talk on Bank Audits – Advances
Do it Yourself mode
Bank Branch Audits – An overview – Scope and
objective
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The basic objective of Bank Branch audits is
to provide an opinion on True and Fair
status of the financial statements as at the
Balance Sheet date
The key reports issued are :
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Branch Auditors Report
Certified Copies of the Balance
Sheet and Profit and Loss Account
Long Form Audit report
Tax Audit report under Section 44AB
of the Income Tax Act
Special reports and certificates
A Unique feature in a bank audit is that
unlike in corporates, we are also required
to confirm if the transactions of the branch
which have come to our notice have been
within the powers of the bank.
Auditors
Report & on
Financial
statements
Long Form
Audit
Report
Tax Audit
reports
Standard
and Special
Certificates
Bank Branch Audits – Unique Dynamics
Assets and
Liabilities are
properly
stated
Income and
Expenses are
completely
and
accurately
accounted
Internal
Controls over
Banking
operations
RBI norms and
circulars are
properly
complied
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The Branch Auditors Report is an
objective certification of the True
and Fair position of the P&L and the
Branch Balance Sheet
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Additionally, we are required to
provide assurance on status of
regulatory compliances and internal
controls in the following sign offs
namely the :
• LFAR
• Ghosh Committee recos
• Jilani Committee recos
The Landscape
Bank Branch Audits
True and Fair
- Asset
quality /
Income
Assurance
Internal
controls
over
banking
Operations
RBI norms /
KYC / AML
etc
Observation, Inquiry , Computation, Analytical Review, Inspection
Terms
LFAR
Fin.
statements
Certificates
Engage
and
Planning
Master
Circular
on IRAC
norms
Concurren
t Audits ,
RB audits,
Inspection
s
Complianc
e Tests
and
Substantiv
e Tests
Audit
working
papers
Reports
Balance Sheet Audit
• Balance Sheet of a Bank as finally presented
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
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Capital
Reserve and surplus
Deposits
Borrowings
Other Liabilities and provisions
Cash and bank balance with RBI
Balance with bank and money at call and short notice
Investments
Advances
Fixed Assets
Other Assets
Contingent Liability
Understanding CBS environment
• Core Banking solutions are integrated farmeworks that automates all
aspects of core banking operations across entities, languages and
currencies.
• Master data , transaction data , access restrictions and business process
logic is all in built in the CBS platform minimising and mostly
eliminating need for manual intervention beyond input stages
• Core banking solutions helps banks with:
• Entire range of banking products including savings, checking,
overdraft and deposit accounts
• Entire range of lending products
• Complement of transactional services including remittance, foreign
exchange, cards and trade finance
• Accessibility through multiple channels, including mobile banking and
web
• Full integration of front-, middle-, and back-office processes
• Accurate, timely and actionable information about customer relations
• Single view between bank and customer
• “Anytime anywhere” banking
Understanding CBS environment
• CBS does not obviate the need for bank branch audits because
• NPA classifications are mostly manual
• Work flow integration for documentation aspects is not complete
across all banks. Hence documentation and security cover lapses may
still impair asset quality
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No scale and complexity of automation can substitute human
intuition
• CBS is a good audit enabler as it permits simple views of large transactions
, by excel manipulation of text files and helps us to profile and stratify
data for sample selection
Data Volume
Sample Selection
It is possible
• Enables a good look and feel of the
transactions that are audited
• Identification of samples for audit
• CBS outputs are there as text files that can
be converted to excel
Integration
• Seamless integration of work done and
working papers for the audit
Analytical
Procedures
• Easy to recheck interest calculations, NPA
movements etc
And to top it all a Very complex regulatory
framework
Need for MS Excel in bank audits
Bank Audit Tool kit
Use of CBS
base and
Exception
reports
Appropriate
Sampling and
use of excel
Reliance of
other Audit
reports
Integrated
Documentation
Using Excel
Creating
Folders to
manage work
Understanding
relevant files
in bank
branches
Using Excel
functions to
perform work
Integrated
Documentation
Creating Folders
Assign
Responsibility
Standardisation
Clarity
• A. Data from the Bank
• B. Signed Reports and
Certificates
• C. Loans related
• D. Deposits Related
• E. LFAR tests
• F. P&L items
• G. Other Areas
• H. Miscellaneous Files
Part 1 – Basic Excel Commands
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File – Open, Close, Save, Save As
Insert – Worksheet, Row, Column
Copy , paste, paste special , paste values
Delete – rows, columns
Sort
Filter
Select – rows, columns, visible cells
Find , Find and Replace
Auto sum , if commands
Window Freeze pane
Column and Row – width, height etc
Hide and unhide, row, column and sheet
Vlook up
Pivot tables
Edit, go to, fill
Text to Column
Any others
Loan Files
Loan balance file
and CCOD file
Specially Marked
Accounts File
Irregular file
NPA file
Part 2 – Working on the loan file
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Save the File
Data – text to column
Numbering of records – the need to
Parse the file and create a new excel file
Summarise and check with balance sheet
Sort to identify the top loans by category
Using filters
Copy and paste the sample to work sheets created for the purpose
Vlook up with IRR / SMA / NPA files
NPA movement analysis
USING MS EXCEL
Obtain Text File
Select Fixed Width
option
Save to excel work
book
Ensure that
numbers are not
truncated
Index all
transactions by
nature of advance
/ deposit type
Eliminate blank
rows
Block area of data
to be converted (
Select)
Check for texts in
number fields
Check the
balances of the
file with the
Balance
Comparison report
Use function Data
- text to columns
Finish the Action
by clicking finish
Sort by Loan type
by amount
Classify by year
using year()
function
Select data for
audit , document
in standard
Work template
Complete the
template
Report exceptions
in LFAR / provision
for NPA
THANK YOU
GOOD LUCK
