Bank Audit Checklist & Procedure: Concurrent Audit

By Mayashree Acharya

Updated on: October 12, 2021

Financial institutions, particularly banks, require a robust continuous monitoring mechanism for transactions, where concurrent audit plays a crucial role. This audit process offers a real-time examination of financial transactions, serving as an early warning system to identify potential irregularities or issues promptly.

Concurrent Audit Procedure

Covering all transactions, a concurrent audit necessitates a clear understanding of a bank's operations, including:

• Acceptance of deposits
• Loans and advances
• Cash management
• Safety lockers
• Forex transactions
• Bill payment services

Conducting a concurrent audit involves breaking down bank functions into individual transactions, with assigned checks and balances.

Acceptance of Deposits

Managing deposit acceptance is vital for banks, typically involving:

1. Detail collection
2. Adherence to KYC (Know Your Customer) and AML (Anti-Money Laundering) norms
3. Account creation within Core Banking System (CBS)

Checklist for accuracy:

• Form completion and authorized signing
• Verification of KYC and AML documents
• Correct data entry and account creation in CBS
• Scanning of signature and photograph
• Document filing and interest rate application verification

Variation in KYC norms depends on the account holder's profile.

Loans and Advances

Lending involves significant risk due to potential non-recovery. The fundamental stages include:

1. Building customer relationships
2. Document collection
3. Assessing customer credibility
4. Loan disbursement and monitoring

Checklist to avoid defaults:

• Loan application completeness
• Document verification and credibility checks
• Guarantor documentation
• Pre- and post-sanction inspections
• Compliance with bank's interest rate policy

Loan monitoring ensures early detection of Non-performing Assets (NPA).

Cash Management

Proper cash management is crucial as it impacts a bank's earnings. To ensure balance, auditors need to:

• Verify cash balances and policy compliance
• Conduct surprise audits
• Ensure cash insurance coverage
• Approve large cash expenses

Safety Lockers

Banks offer lockers for safekeeping valuables, requiring the following audits:

• Maintaining locker registers
• Collecting appropriate locker rents
• Verifying locker rent transactions in CBS
• Updating locker insurance
• Monitoring for suspicious transactions

Forex Operations

For forex transactions, ensure:

• Correct foreign exchange rate entries
• Compliance with RBI norms
• Proper forex valuation

Bill Payments

Banks facilitate utility payments; auditors must ensure:

• Correct execution of standing instructions in CBS
• Reconciliation of utility accounts

Income Leakage

To conclude the audit, auditors check for:

• Cost collection accuracy
• Correct interest rate calculations
• Comprehensive MIS report generation
• Monitored rate changes in the system

Concurrent audits help reduce the gap between transaction occurrence and review, playing a key role in safeguarding bank operations.