CONCURRENT AUDIT UNDER COMPUTARISED ENVIRONMENT – CHECKPOINTS & PROCEDURES
BY CA ARVIND JOSHI
Bcom. FCA, DISA (ICAI), CISA (USA)
Many of us are in Bank Audit since many years. Some of us may be new entrants in this filed.
Concurrent Audits are also now a settled form of Audit in the Banks. The audit is conducted as
per the guidelines of RBI as well as there is a specific format/ checklist of every bank specific to
its own requirements.
The concurrent Auditor has to conduct the Audit on day to day basis & that too of the
voluminous transactions. Almost all the Banks are now Computerised & most of them are on
CBS platform. There are still few Banks/ Branches which are under TBM platform i.e. standalone
platform where each branch has its own server & maintains own database.
Whatever the form of computerization, Computerised Environment can make the work of
Auditors easy.
The Auditors need not have any technical knowledge for the same. There are various menus of
any application which are useful in generating useful information, which can in turn be used to
analyse or there are some reports which itself will provide the reporting material.
Auditor has to make himself accustomed with the Application the Bank is using for its
operations. Initially he has to spend some time with the Bank officials to understand different
menus, how to surf the information, how to generate & from where to generate various
information & reports from the Application. Different Banks use different applications.
Some information may not be easily available but we can request EDP Dept. to get the
information by putting SQL query.
Sample testing of few transactions is sufficient because that which is correct for some
transactions is correct for all transactions due to use of Software applications, it will give same
results unless basic information fed to the system is wrong e.g Interest application, levy of
different charges.
In the computerized systems what is most important is that the Parameters fed to the system
should be correct. Most of the processing is done on the basis of these parameters.
Get an access to the system from the system administrator. Note that the access given to the
Auditor should have browse option only. It should not have edit/ modify or entry option.
Different Applications have different types of MENUS. The auditor has to understand the
application software used by the Bank.
Spare some time & take a round of all the MENUS available in the system on your own. That will
apprise the Auditor various kinds of reports available on the system which can be used by him
for the purpose of Audit.
The reports generated are only guiding factor. We have to understand how to use the same for
analysis purpose & effectively use for our Audit.
Concurrent Audit in computerized environment is not a IS Audit. Considering this factor, we will
discuss the reports normally available on most of the applications & understand how the same
can be used to address various checkpoints under concurrent Audit. However the nomenclature
& view of the report may differ from system to system.
VARIOUS CHECK POINTS & PROCEDURES TO VERIFY THE SAME
CHECKPOINT
Cash & ATM balance
REPORT AVAILABLE
USE OF REPORT
Cash Summary & ATM To know balance of Cash & ATM
cash summary
Cash
Gives denomination wise summary
Excess Cash holding Report To find out whether cash holding
has exceeded the retention limit
Total number of days excess
Counters summary & JP rolls
Deposits
New Accounts opened
Accounts closed
List
of
closure.
premature Unscanned
Report
signature holding
Average excess cash holding
Average cash holding during the
period
Maximum amount of excess cash
on a particular day
For ATM cash verification with
denominations of cash in each
counters
Matching the online & offline
transactions to reconcile balance
in ATM
It is a list of all the new accounts
opened during the period.
Useful for verification of A/Cs
opened during the period with
documentary evidence
it is a list of accounts closed
during the period
Useful for verification of A/Cs
closed during the period with
documentary evidence
To check premature closures of
Deposits
It is the list of all the accounts
where signature is not scanned in
Accounts modified but not authorized listing
Abnormal transactions in Exceptional transactions newly opened A/Cs
report
Correctness
Application
of
interest Interest Applied Report
the system
Useful at the time of verification
of A/C opening formalities.
It gives details of all the account
masters modified during the
period but have not been
authorizes by the officer.
One of the report gives
operations in newly opened A/Cs
upto 6 months from opening of
A/C
We have to select transactions
for
verification
by
using
judgment.
To verify Interest applied
To verify basis of interest
application, penal interest etc.
Calculation of penal interest by the
system – as per bank policy – over
due installments, excess drawal etc.
Trial Application of Interest Whether system calculates interest
from the period starting after the
latest interest application – i.e from
date should be by default date after
last interest applied date & to date
should not be later than last date of
the current month.
Interest is applied to all Summery / Error Report
accounts
Cash payment of Term
deposits above `20,000/-
Customer Unification
Customer Master –
search for all A/Cs of the
customers
Interest run programme helps to
check whether any accounts are
skipped by the system for
application of interest.
Shows all deposit & other A/Cs of
a particular customer as on a
given date.
Can verify if total deposits as on
the date of payment of any
deposit by cash, exceeded
`20,000/-
Many
banks
rout
payment of FDs through
a separate A/C. Find out
from the A/C those paid
by cash.
Search for Customer It helps identify whether system
Number
allows
different
customer
number for same customer.
Loans & Advances
Loans disbursed during the
period
Security held against loan
Renewal of Limits for
CC/OD/PRFIN
Drawing Power monitoring
Insurance monitoring
Overdrawn CC/OD A/Cs
/ List gives Loans Accounts opened
during the period
List of Loans outstanding as on
given date with full details.
Also offset rate entered in
system can be verified from the
A/C master under this module.
Security Master
It shows the details of all the
security held against loan.
List of post dated cheques taken
on record can also be
determined from PDC module.
Inspection / Visit module is also
available under this head. It is
the information of inspection or
visit carried out related to the
loan.
Jotting of CC/OD
It shows sanction limit, date,
Sanction Limit expiry
expiry date, closing balance (as
Listing
on date of report) and
disbursement date.
The list shows A/Cs where limit
has expired as well as A/Cs which
have been renewed during the
period
DP under Advances Verify the Stock/ Drs & Crs
menu
actually fed in the system
To verify the Statements not
Report on DP Expired
received for any of the CC A/cs
Grace period for submission of
Stock Statements. – Advances –
Masters – Grace period should
never exceed 10 days.
Policy expired listing
It is a list of all the expired
insurance policies expired during
the period.
It gives details such as account
number, name of insurer, policy
amount, policy number and
expiry date.
Excess drawl report
To know how many times the
account has been overdrawn
Accounts
opened
jotting of loan A/Cs
Temporary O/D or
Enhancement for limited
period
Monitoring of CC A/Cs
Pledged Gold Parcels
Bills Purchased
Out word Bills for Collection
Income Recognition &
Classification of Advances
during a particular period.
To know the amount of excess
drawl in the account.
To check expiry of drawing
power.
To know sanction limit, date and
expiry.
Maximum amount of excess
withdrawal
Verify the monitoring of TODs /
enhancements by the branch
History of changes in limits is available in the
advances menu.
Adhoc limit Report
Turnover report
Verify whether the turnover is in
consonance with the limit
sanctioned.
Where the limit not utilized
properly, commitment charges
are recovered as per the Banks
policy.
Jotting of Gold Loans as Physical verification of Gold
on date
Parcels to be done considering
the A/Cs o/s as on the date as
per the jotting.
Any day balance of bills
It is a listing of all the bills
outstanding as on date along
with details such as date, amount
account number etc.
O/W biils for collection It is the list all the outward bills
Report
for collection that are pending
along with name, amount etc.
Defaulter
List
with Report gives list of all defaulters
number of Installments
across all category of advances
(except CC A/Cs)
Unapplied interest A/C Take a listing of defaulters from
wise – Mostly in case of
zero installments & above.
CC
A/Cs
interest Examine border line cases in
receivable is put in this
depth.
For CC A/Cs – individual A/Cs has
A/C
to be verified as the reports for
different
parameters
are
generally not available from the
system.
Bank Guarantee / Letter of
Credit (Inland & FLCs)
Debit balance in SB & CD
Compare the list with last year’s
NPA List.
Understand accounting system
followed. Those followed in CoOp Banks & Nationalised Banks
differs.
Don’t just have a focus on the list
but also verify other weaknesses
by scrutinizing the A/C
Unapplied interest on CC A/Cs,
whether interest has been
accounted manually whenever
there is a recovery in the
account.
In case of Nationalised Banks
Accounting system for interest
on NPA A/Cs is different that Coop Banks. Verify accordingly on
the basis of system generated /
Manual records available.
Court cases / legal suits module
contains
details
of
such
information related to the
account.
Jotting/ Balancing Report The list gives details of Customer,
of Bank Guarantees/ LCs
Beneficiary, date of issue, date of
expiry & amount of BG/LC.
Identify those issued during the
year & verify the documents for
the same.
Identify those which have
expired but not reversed in the
books.
Can
verify
recovery
of
commission & deferment thereof
in the accounts.
Statement of debit
It shows the accounts (SB & CD)
balance during the
along with date on which it had
period
debit balance and also the
amount.
Verify whether the debits
allowed are within the powers of
Manager.
Scrutinise the account to see
FDs lien marked in system
View specific lien
marking from the specific
menu on lien marking in
the Advances menu
Report on Lien Marking
Report of lien marking
expired
General Ledger & Profit &
Loss A/C
Report of Profit & Loss
A/C & Balance Sheet as
on date from the system.
Dead Stock/ Fixed Assets
Statement of Account –
category wise
Vouching of transactions
above specified limit
Stop Payment verification
Cash scroll
Cash transaction Report
Transaction listing for all
the batches
Transaction above
specified limit
Stop payment listing
whether the accounts are
frequently having debit balances.
May confirm that lien is marked
on the system on the FDs/ RDs
kept as security.
Verify whether the FDs which are
lien marked have expired.
May prompt corrective action.
TD Interest Transfer account
number module helps to
determine whether transfer of
interest of the lien marked FDs is
done to respective loan account.
Helps in understanding the
nature of Accounts at the branch.
Can identify ledger A/C s to be
scrutinized.
Can identify the pattern of
income & expenses.
The statement of account can be
viewed. It gives the voucher
number. The respective voucher
can be accordingly browsed from
the browse voucher option.
Statement gives details of
category of Asset, description of
Asset, date of purchase, date put
to use, rate of Depreciation, date
of sale/ discarding, depreciation
charged & WDV.
The statement is available only
when the Asset module is
activated inn the system.
Can be used to select the
transactions for which vouching
to be done.
Can understand the transaction
&
accordingly
verify
the
vouchers.
To identify the stop payments
recorded in the system.
Verify with the letter received by
the branch
Return of cheques
Frequent cheques return
report
Minimum balance in SB and
CD
Minimum balance in SB
and CD
Inoperative A/Cs
Listing of inoperative
A/Cs
Unauthorized issue of
cheque books
Unauthorized cheque
books issue report
Charges not recovered
Oustanding charges
report – available in
day’s control reports
Charges recovery can be verified
for the respective A/Cs
No. of times cheques returned on
financial ground.
If maximum number of times the
instrument has returned proper
reporting has to be done.
Recovery of charges can be
verified for respective A/Cs
It is the list of all the accounts in
which minimum balance was not
maintained during the period.
Application of minimum balance
charges can be verified.
Listing available on the system
only when proper parameters
are fed in the system & the
system automatically marks the
inoperative A/Cs.
In some applications inoperative
A/Cs are periodically marked in
the system.
Exception report gives details of
transactions in inoperative A/Cs.
Such transactions needs to be
scrutanised in detail.
It is a list of all the cheque books
that are issued but not
authorized by officer.
It gives details of account
number, cheque book series and
date of issue.
It helps determine how long the
Cheque book is issued and for
how much time it is pending
authorization.
Gives listing of accounts for
which charges were not debited
as there was no balance in the
account at the time of levy of
charges through system.
This module has to be run on
daily basis to ensure that
Verification of Stock of
sensitive items
Pay orders pending
IBT – Inter Branch
Transactions
Report on stock of
stationery (the report is
available only where
there is a system to
enter the stocks received
& issued in the system)
Pending P.O
Reconciliation report
Whether all the accounts
are balanced & there is no
difference in the accounts
Rent overdue of the lockers
Available lockers
All OK Report or
Balancing report for each
category of Loans and
Deposits
Locker Rent overdue
listing
Locker availability listing
whenever there is a balance in
the account, the charges are
debited to the account &
recovered.
Charges application module
makes available list of various
charges applied through the
Application Software.
Physical stock can be verified &
reconciled with the report.
The report gives details of stock
in hand, received during the
period & issued at the counters
during the period.
It is a list of unreconciled pay
orders i.e. pay orders issued but
not paid/ cleared till date.
Total number of entries in IBT &
amount
Difference in IBT statement, if
any.
Unresponded entries for a longer
period of time may be verified in
detail.
To determine if there is
difference between GL balance
and jotting balance
This report will be available only
where locker module has been
activated.
It is the list of all the lockers
where rent is overdue.
It gives details as to locker
number, name of account holder,
amount of rent o/s.
It is a listing of all the lockers
along with locker type, total
number available, total lockers
utilized and unutilized rent
amount.
Customer Keys of such unissued
lockers can be verified.
Exception report
Exception report
List of active logins branch
Active Login
Linking Shares – specifically
in case of Co-op banks
Verify the Share
suspense A/C
Where share module is
activated may view
shares subscribed by
particular borrower.
WISH YOU ALL A SMOOTH CONCURRENT AUDIT !!
Recovery of locker rent can also
be verified from the list.
It gives the details of any
abnormal transactions
Different parameters available.
Have to select proper parameters
& verify the transactions
accordingly.
Managers are supposed to take
print outs of the same on daily
basis, verify the same & sign &
preserve the reports.
Also helps to identify whether
duplication of cheque numbers
are detected by the system.
Helps to detect whether system
automatically
identifies
the
cheques received for clearing
with cheque numbers stored in
data base.
It displays the user id, name,
designation of all the logins that
are active at the branch as at
particular date.
Verify the list with the muster to
confirm that all those having
active logins are present & on roll
at the branch.
IDs of those who are on longer
leave should be suspended.
Every borrower has to be a share
holder – for Co-op Banks.
Linking shares is a must as the
only option available for raising
Capital.
Relaxation given for certain
Banks for linking shares having
healthy CAR