Bank Audit suggestions--CA S. SANTHANAKRISHNAN

Dear Colleagues,   My greetings and best wishes to each and every one of you for a successful and satisfying financial year ahead.   I am sure that all of you, whether in the industry or in practice, are very busy with the end of financial year 2011–12. As usual, most of you would be particularly busy with bank audits.   While doing so, you should also be aware of certain concerns raised by the regulators and the banking industry from various news reports   We, at the ICAI, can address the concerns of the regulators through discussions. But at the same time, we also need to introspect ourselves on the quality and the resources that we place on such important audits, where large-scale public monies are involved.   While no one can point out specific instances of gross negligence on our part, it would be prudent on our own part to clear the doubts raised by some.    Therefore, to make bank audits more effective, my suggestions would be to:   1.        Keep a record of the mandays spent on the audit by various levels.   2.        Do a thorough audit and avoid the large variations being identified by RBI auditors.   3.        Record the reasons for not marking any asset as NPA in borderline cases.   4.        Never take a lenient view or a business friendly approach, which may lead to large income leaks or differences in NPA being found subsequent to audits by the inspection teams.   5.        Give detailed Long form reports that would enhance audit quality. Minimise use of LFAR for general statements; rather give value added reports by highlighting important points, internal control issues and major suggestions.   6.        Keep a record of the time taken for analysis of the top 10 major accounts, including the controls thereon, retrieval time and completeness of the data on the core banking system, among others.