Audit and certification · Audit and assurance
What is a concurrent audit of a bank branch, and what does it cover?
Short answer
A concurrent audit is a continuous examination of a bank branch's or department's transactions, done at the same time as, or soon after, they take place, to detect irregularities and lapses early. Banks set it up under RBI's guidelines, according to a board-approved policy that decides which branches and activities are covered. Concurrent auditors may be the bank's own officers or outside Chartered Accountant firms, and report monthly, with serious matters reported at once.
Why banks have it
Concurrent audit is part of a bank's internal control. Instead of checking a year's transactions after the year ends, the concurrent auditor checks them as they happen, so that errors, frauds and breaches of the bank's rules are caught and corrected quickly.
Coverage
Each bank decides, under its board-approved policy and RBI's guidelines:
- which branches and business units are covered, usually based on risk and size: large advances branches, treasury, foreign exchange, centralised processing units and others;
- whether the work is done by the bank's own staff or by outside firms; and
- the scope, the reporting format and the auditor's fee.
What is checked
| Area | Typical checks |
|---|---|
| Advances | Sanction within delegated powers, documentation, disbursement and end use, security and insurance, renewals, overdrawn accounts, early signs of stress |
| Asset classification | Correct identification of NPAs and special mention accounts, and provisioning |
| Deposits | KYC and anti-money laundering checks, dormant accounts, interest application |
| Income | Interest, charges and commissions applied correctly, to stop revenue leakage |
| Cash and clearing | Cash balances, suspense and sundry accounts, inter-branch reconciliation |
| Foreign exchange and treasury | Compliance with FEMA and RBI directions, limits and deal confirmations |
| Compliance | Rectification of earlier audit and inspection findings |
Reporting
- A monthly report to the bank's controlling office or audit department.
- Serious irregularities, such as suspected fraud, are reported at once, without waiting for the monthly report.
- The branch must rectify the points and report compliance.
Independence
Banks generally do not appoint a branch's statutory auditor as its concurrent auditor for the same period, so that the two roles stay separate. Concurrent auditors are bound by the bank's confidentiality requirements.
Legal basis
- RBI guidelines on the concurrent audit system in commercial banks (revised September 2019)
Official sources
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