Concurrent Auditing

Audit or auditing is an independent checking procedure that involves checking or studying the financial details and information of any entity, company, or organisation. It involves examining whether the company is profit-oriented or not and expressing an opinion thereon. There are different types of audit or auditing, each of which is used in different circumstances. They are Balance Sheet Audit, Concurrent Audit, Continuous Audit, Voluntary or Independent Audit, statutory or Mandatory audit, Cost Audit, Interim Audit, Financial Audit, and Management Audit.

What is a Concurrent Audit?

The meaning of the concurrent audit can be obtained from the name itself. Concurrent means down along with, i.e. the examination takes place parallel when the transaction takes place. It differs from other types of auditing where the examination is conducted after the transaction, i.e. post-transactional review. It ensures accuracy and due compliance with the internal systems, procedures, and guidelines of the bank Reserve Bank of India.

A concurrent audit is defined as a process of continuously verifying the transaction of a company or entity for a particular year. The auditor who is involved in the checking process will usually determine the period of verification. This concurrent audit is performed systematically regularly to know all the financial transactions made to ensure accuracy, authenticity, and compliance with procedures and guidelines. With concurrent auditing, the assets and the liabilities are verified at the year-end at the time of finalization. Also, with concurrent auditing, there is no preparation of financial statements.

One major advantage of concurrent audit is that here early detection of irregularities and lapses is possible. A concurrent audit makes it easy to determine whether the financial management arrangements are effectively working and to know the areas of improvement used to increase efficiency.

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Key Areas of Concurrent Audit

Verification of Loan and other related documents

Verification of Documents like Stock Statement,Unit inspection, Audited & Projected Financials of borrowers

Verification of daily reports generated like balance sheet, profit, and loss account, exceptional report, cash report signed & stamp by branch manager, and Rate of Interest all accounts

Others include Camera  condition, Burglary Alarm condition, Locker area, Cash Locker, etc

Process of Concurrent Audit

Within the concurrent audit, all sorts of transactions are parallel covered and included. Knowing the process of the concurrent audit will help the auditor to understand how the audit must be conducted.

  1. Acceptance of deposits
  2. Loans & Advances
  3. Cash management
  4. Safety Lockers
  5. Forex
  6. Bill Payment
    1. Acceptance of deposits

One of the major functions of the banks is the acceptance of deposits. Based on the holden and the purpose of the account, the deposit type may vary. The process of acceptance of deposits is put together as-

      • Collection of details
      • KYC and AML norms compliance
      • Creation of account in Core Banking System (CBS)

It’s important to ensure

      • Is the account opening form duly filled?
      • Does an officer sign the application?
      • Are all the required details and proofs submitted in the right manner and subsequently verified as per the KYC and AML norms?
      • Are all the details inputted in the CBS correctly, and is the account created? Etc.
    1. Loans & Advances

Acceptance funding is the next core function of the bank. The margin between the acceptance of the deposits and the lending cash is the bank’s profit. But the possibility of the debt not being recovered is higher, and so proper documentation is essential. The process for disbursement of a loan includes-

      • Building a relationship with the customer
      • Collection of all requisite documents
      • Checking the credibility of the customer
      • Disbursing the loan and monitoring the loan

Based on the type of loan, the documents needed may also vary. It’s the auditor’s responsibility to ensure whether all the documents are perfect, also for pre-NPA (Non-Performing Assets determination, post-sanction, the loans, and advances are monitored periodically and report discrepancies if any.

    1. Cash management

As the bank lends money to its customers, there are possibilities for interest losses as a large amount of cash dealing is made. To ensure correct funding to the ATMs, the bank must retain a balance properly.

    1. Safety Lockers

Many customers have their properties, including high-value products in the bank, and so the bank deals with such valuables in the lockers.

    1. Forex

For forex operations of a bank, it’s important to ensure

      • The rate of foreign exchange in effect on the date of the transaction, as well as accurate entry in the books.
      • Adherence to RBI norms relating to forex
      • Obtaining an accurate assessment of foreign currency kept in hand at the time of the audit
    1. Bill Payment

Bill payments are an additional service that the bank is providing. Any customer can make their shopping and other kinds of payments through bank transactions. So it’s important to verify.

      • If standing instructions have been received from customers, ensure that the same has been noted in the CBS to generate an auto payment.
      • Ensure proper reconciliations of the utility accounts
    1. Income leakage

The auditor must ensure whether all the charges are collected and interest rates are inputted accurately in the CBS. Also, MISs to be generated are used to analyze the various charges and interest computations. All the process is documented in case of changing the rates in the system and must be monitored.

Conclusion

Thus concurrent audit is useful in reducing the distance between the occurrence of a transaction and its examination. It usually includes all types of transactions, and so it acts as the second line of defence for any bank.

Frequently Asked Questions

Concurrent Audit is mandatory for banks with deposits of more than rs.50 crores.

Yes, the concurrent auditor of a Bank can choose to relinquish the Concurrent Audit and accept the assignment of Statutory Audit.

Yes, it is mandatory to have the UDIN for the Networth Certificate. So once you get the Net worth certificate, please make sure you register at the UDIN Portal.

Auditors have used concurrent auditing techniques to collect evidence on a transaction as it passes through an application system and to assemble and report this evidence in a way that can be easily understood.