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BANK AUDIT in COMPUTERISED ENVIRONMENT THE OTHER SIDE OF AUDIT

BANK AUDIT in COMPUTERISED ENVIRONMENT THE OTHER SIDE OF AUDIT. Effect of Computerisation- Golmaal. Issues in Branch Audit- Kasauti Auditor Ki. Conclusion- Rang De Basanti. Over the next 40 min. Effect of Computerisation. Processing is Concentrated Audit Trails may be Undermined

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BANK AUDIT in COMPUTERISED ENVIRONMENT THE OTHER SIDE OF AUDIT

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  1. BANK AUDIT in COMPUTERISED ENVIRONMENT THE OTHER SIDE OF AUDIT BRANCH AUDIT in CE ICAI

  2. Effect of Computerisation-Golmaal Issues in Branch Audit-Kasauti Auditor Ki Conclusion- Rang De Basanti Over the next 40 min BRANCH AUDIT in CE ICAI

  3. Effect of Computerisation • Processing is Concentrated • Audit Trails may be Undermined • Human Judgment is bypassed • Data are stored in Device-Oriented rather than Human-Oriented forms • Invisible Data • Stored data are Erasable • Data are stored in a Compressed form • Stored data are relatively accessible • Computer Equipment is Powerful but Complex and Vulnerable BRANCH AUDIT in CE ICAI

  4. Effect of Computerisation • Does computerisation help banks • BASEL II Norms • SOX Act/Clause 49 • ERM • In prevention and early detection of frauds Broadly speaking there are (a) frauds in non-credit areas and (b) frauds in credit areas. BRANCH AUDIT in CE ICAI

  5. Effect of Computerisation • In non-credit areas, frauds relate mainly to fraudulent encashment of cheques, withdrawal slips, refund orders, demand drafts, bankers cheques, misappropriation, as also fraudulent transactions entered by the bank’s staff in the branch books. Computerised systems will help in prevention, as also early detection, of frauds which will save banks precious funds BRANCH AUDIT in CE ICAI

  6. Effect of Computerisation RISK Br. : Computer Ar. : not computer expert Br. : Manual Ar. : May or may not computer expert Br. : Comp. Ar. Comp. expert BRANCH AUDIT in CE ICAI

  7. Effect of Computerisation- Issues in Branch Audit Conclusion- Over the next 30 min BRANCH AUDIT in CE ICAI

  8. Where do we Start…. As per AAS 8 & 20 BRANCH AUDIT in CE ICAI

  9. Extent of Computerisation • Partial Branch Automation (PBA) • Total Branch Automation(TBA) • Core Banking Solution(CBS) Does it Mean that everything is computerised?? BRANCH AUDIT in CE ICAI

  10. At a Glance- BRANCH AUDIT in CE ICAI

  11. SCOPE: Coverage in Bank Branch Audit • LFAR • JILANI GHOSH COMMITTEE • NPA Analysis • Miscellaneous Issues BRANCH AUDIT in CE ICAI

  12. LFAR • ADVANCES • DOCUMENTS • REVENUE • MASTER FILE • OPERATIONS SECURITY BACK UP GENERAL ISSUES BRANCH AUDIT in CE ICAI

  13. LFAR -ADVANCES Changes in Interest Rates- to be given effect BRANCH AUDIT in CE ICAI

  14. LFAR -ADVANCES • Master File • Checking of the Parameters • Interest Rate • Drawing Power • Penal Int • SI • Stock Statement submission ( some software ) • Who Creates and who is authorised ( done by sample ) BRANCH AUDIT in CE ICAI

  15. OPERATIONS • Whether all accounts (Opening & Closing) are duly authorised. • Whether all the GL accounts codes authorised by H.O. and are in existence in the system? • Whether Beginning of the Day and End of the Day register maintained? Whether Time is properly entered and time and date are normal and during office hours only? BRANCH AUDIT in CE ICAI

  16. OPERATIONS • Whether the Account Master and balance cannot be modified /amended /altered except by the authorised personnel? • Whether the records of errors arising during daily operations are reported? And how they are rectified? • Whether dummy accounts created using master creation still exist in the Branch • A sample verification of SDRs / FDRs should be carried out to ascertain whether lien is marked on such deposit receipts in the system. BRANCH AUDIT in CE ICAI

  17. LFAR -SECURITY • Physical Controls • Logical Controls • Environmental Controls C I A BRANCH AUDIT in CE ICAI

  18. Lets Get Physical !!! BRANCH AUDIT in CE ICAI

  19. Environmental Controls What about man made Environmental problems?? BRANCH AUDIT in CE ICAI

  20. Logical Controls-User ID-KAUN BRANCH AUDIT in CE ICAI

  21. Logical Controls BRANCH AUDIT in CE ICAI

  22. Logical Controls PASSWORD- • ISSUE:Users should change their passwords periodically. • shud be inbuilt within the software so no need of checking, and it shud not accept previously used password • ISSUE :Sharing of password. • Declaration to be taken • Cross Verifying with attendance register and Access Log BRANCH AUDIT in CE ICAI

  23. PASSWORDS ISSUE: Important passwords like DBA, Branch Managers are kept in sealed cover with Branch Manager -Checked by Physical Verification BRANCH AUDIT in CE ICAI

  24. LFAR-Security OUTPUT CONTROLS- • Hard Copy Print Out- Normally Ignored • Screen Saver/Automatic Log Off • Reports are signed –Normally Ignored BRANCH AUDIT in CE ICAI

  25. LFAR-BACK UP • Most Imp Issue • Qualification • A simple activity ignored BRANCH AUDIT in CE ICAI

  26. LFAR-BACK UP BRANCH AUDIT in CE ICAI

  27. Have the figures, as at the year-end, in the control and subsidiary records been reconciled? Balance reports e.g. GL Consistency report should be verified for balancing of books. And for those heads, which are not made live, balancing should still be verified with the help of balance books. LFAR-Done Miss this!!! BRANCH AUDIT in CE ICAI

  28. JILANI GHOSH COMMITTEE BRANCH AUDIT in CE ICAI

  29. Suggestion from preventive vigilance angle in computer installations. Activities of vendors to be monitored adequately, user IDs of retired / transferred staff, multiple user IDs should be controlled etc. GHOSH COMMITTEE RECOMMENDATIONS BRANCH AUDIT in CE ICAI

  30. Various tests to be carried out to ensure that EDP applications have resulted in consistent and reliable system for inputting, processing and generation of output of data. Manual calculations or black box checking by input of a dummy data. GHOSH COMMITTEE RECOMMENDATIONS BRANCH AUDIT in CE ICAI

  31. Schedule of Advances (D2K statement or CA-19 in some banks), where categorization of advances into performing and non-performing, into secured and unsecured, into priority and non-priority etc. is done Generally the software for D2K statement is different than the banking software and the data is to be manually fed, at least partially, into the same. MISCELLANEOUS BRANCH AUDIT in CE ICAI

  32. NPA ANALYSIS

  33. NPA ANALYSIS- • Issues • Is the classification correct • Is the calculation correct • Is the provisioning correct • Is the revenue charged on such accounts BRANCH AUDIT in CE ICAI

  34. How do we check • Going thru each account or sample • Applying Various criteria of classification • Relying on information provided by Branch BRANCH AUDIT in CE ICAI

  35. NPA ANALYSIS • How Computerisation can help • If it is in built in the software at the master level which is difficult So what shud we do to save time BRANCH AUDIT in CE ICAI

  36. NPA ANALYSIS • Import the files in excel ( PBA,TBA) • Convert the files in required format (Delimit) • Apply Vlook up to match data • Apply Filter,Sort,Mathematical Functions Possible in EMI A/C,Term Loan BRANCH AUDIT in CE ICAI

  37. MISCELLANEOUS ISSUES • Exception Reporting • Registers • Miscellaneous Issues BRANCH AUDIT in CE ICAI

  38. Exception Report • Debit /Credit balance change • Maturity record deleted • Inactive accounts reactivated • Excess allowed over limit • Debits to Income head accounts • Overdue bills and bills returned • Withdrawal against clearings • Deposits accounts debit balance • Temp O/D beyond sanction limit • Standing instruction failed in day BRANCH AUDIT in CE ICAI

  39. REGISTERS-Our Tool • User id register • Floppy register • Checksum register • Software problem register • Machine breakdown BRANCH AUDIT in CE ICAI

  40. REGISTERS • Asset register containing details of hardware • Manuals, guidelines • Media stock movement register • Hardware /software Register • Parameter updation register BRANCH AUDIT in CE ICAI

  41. Miscellaneous BRANCH AUDIT in CE ICAI

  42. Is this the END…. BRANCH AUDIT in CE ICAI

  43. IT IS THE START !!! Comment that IS Audit should be conducted Comment that Conversion Audit should be conducted BRANCH AUDIT in CE ICAI

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