Audit Of Banks

Question 1

Requirement of effective risk management process in a bank

Answer 1

Involvement of TCWG
identification, measurement & monitoring of risks
Control activities
Monitoring of controls
Reliable information system

Question 2

Need for special audit consideration in audit of banks

Answer 2

Nature if risk associated with the financial transactions
Voluminous scale and resultant significant exposures
Extensive dependence on IT for processing
Various statutory and regulatory requirements
The continuing development of new products which may not be matched by concurrent development of accounting principles and auditing practices

Question 3

Internal controls in areas of loans and advances in banks

Answer 3

Creditworthiness of the borrower
Loan documentation
Sufficient margin to be kept against securities taken so as to cover the decline in the value of security
Securities to be kept by responsible officers and should be kept in joint custody
Security to be registered with the bank
Physical possession - test check
Hypothecated then - surprise check
Personal enquiries for market value of goods
Dp adjustment in case of fluctuation in market value of securities
Operations in each advance should be reviewed at least once every year

Question 4

Evaluation of TT and DD

Answer 4

Codes of TT to be known only by responsible officers
Coding and decoding only by authorized officers
Signature check with signature book
All DD and TT sold should be immediately confirmed by the branch concerned

Question 5

Verification of advances

Answer 5

Sanction
Delegation of authority
Security
Post disbursement supervision