Group Report on Concurrent Audit

Report of Group on Concurrent Audit

Coverage of business/branches

The exact coverage of business, various activities and branches to be covered by the concurrent audit shall be determined by each individual bank keeping in view its size and geographical dispersion. With a view to achieve the intended objective of concurrent audit, a broad coverage is suggested below:

8.1       The Departments/Divisions at the Head Office/ branches undertaking Treasury functions viz. investments, funds management including inter-bank borrowings, bill rediscount, dealing rooms and foreign exchange business are to be subjected to concurrent audit.

8.2       The coverage of branches should ensure that concurrent audit covers:-

(i)        Branches whose total credit and other risk exposures aggregate to not less than 50% of the total credit and other risk exposures of the bank; and

(ii)       Branches whose aggregate deposits cover not less than 50% of the aggregate deposits of the Bank.

8.3              To achieve these twin criteria, branches may be listed according to credit and other risk exposures and selected in the descending order of exposures to achieve 50% coverage. If the deposits of these branches do not aggregate to 50% of the Bank’s deposits, additional branches in descending order of deposits may be added to achieve 50% coverage of the branches.

8.4              In addition, each bank depending on their risk analysis, extent of computerisation process, volume and complexity of activities & products offered by them and their risk appetite may increase the aforesaid threshold limit for coverage of branches under concurrent audit.

8.5       While complying with the above parameters, it is necessary to ensure that the coverage encompasses:-

-          Exceptionally large branches

-          Very large and large branches

-          Special branches handling foreign exchange business, merchant banking business, large companies/wholesale banking business, currency chest and dealing room operations.

-          Large problem branches rated as poor/very poor i.e. branches with adverse internal rating.

-          Head Office departments dealing with treasury/funds management and handling investment portfolio, credit card.

-          Regional processing units (handling centralized activities like loan processing, clearing, opening of AOF, centralized payments of expense etc.)

-          Any other branches or departments where in the opinion of the Bank, concurrent audit is desirable.

8.6       In addition, certain conditions may warrant conduct of concurrent audit at certain branches though not covered in the aforesaid list. An indicative list of such conditions could be:-

                                                                          i.      Branches with unusually high growth in business.

                                                                       ii.      Branches having unusually large number of accounts opened within a short period.

                                                                     iii.      Branches with significant quick mortality of advances.

                                                                     iv.      Branches where there has been occurrence of fraud with the alleged connivance of staff.

8.7              Branches subjected to concurrent audit should not normally be included for revenue/income audit.

 Classification of branches

	Mandays requirement*
(On the basis of quantum of deposits + advances)	Prop/Partner	Qualified Chartered Accountant	Article
Upto Rs.50 crore	1	10	25
Above Rs.50 crore and upto Rs.300 crore	2	20	25
Above Rs.300 crore and upto Rs.500 crore	3	25	50
Above Rs.500 crore and upto Rs.750 crore	4	25	75
Above Rs.750 crore	4	50	100

  * assuming 25 working days in a month and 7 hours a day.

Above mandays are estimated for the branches doing business other than following activities. Scope of concurrent audit at specialized branches is very vide and fees should be fixed separately for following offices apart from above as mutually agreed between auditor and the bank according to the volume of work:

• Service branches/Regional processing units (including branches carrying out Clearing House Operations)
• NPA recovery branches
• ATMs
• Treasury/Investment offices
• Branches undertaking foreign exchange transactions. (Inward, outward remittances & trade activities etc)
• Extension counters
• Loan processing offices

Lets hope for some reforms on the subject.  

 

Ranjit Vijh
B.Com.,LLB.,FCA.,DISA(ICAI),
4th Floor, Noble Enclave,
Opposite Hotel Majestic Park Plaza,
Bhaiwala Chowk,Ferozepur Road,
Ludhiana.
Mobile 98140-98083