ICAI’s Guidance Note on Bank Audits (Revised Edition March, 2018)

The AASB of ICAI has issued Revised Guidance Note on Bank Audits (March 2018 Edition), meant for detailed guidance of members on various important items of financial statements of banks, disclosure requirements, prudential norms of RBI, audit procedures, LFAR reporting, Ghosh and Jilani, special purpose reports and certificates, etc.

ICAI’s Revised Guidance Note on Bank Audits (2018 Edition)

The statutory audit of banks forms an integral and important part of control mechanism of the regulators, like RBI. It provides the stakeholders including the Regulators, a comfort with regard to credibility of the financial information that a bank generates at every year end. Given the nature, scope and volume of transactions undertaken by banks in India, coupled with their geographical spread and the various regulatory directions to which they are subject, audit of the financial statements of banks indeed becomes very challenging for their auditors

For quality bank audits, it is essential that the statutory auditors are well equipped in terms of knowledge of the banking sector and keep themselves abreast with the latest developments. The Guidance Note on Bank Audit 2018 edition is an important resource that provides detailed guidance to the bank auditors on the basic tenets of a bank audit, for the benefit of members.

This Guidance Note is updated every year by AASB of ICAI to reflect the important developments that have taken place in the banking sector, warranting attention of the statutory auditors, for example, RBI’s master circulars, general circulars of relevance, consequential updation of guidance for the auditors, where required, various pronouncements of ICAI, etc.

Members’ attention is invited to relevant directions/ circulars issued by the Reserve Bank of India up to February, 2018 included in a CD accompanying this Guidance Note for ease of use and reference. Members are advised to keep track of legislative/ regulatory developments, for example, circulars of the Reserve Bank of India, issued subsequent to the aforementioned date and having a bearing on the statutory audit of banks/bank branches for the year ended March 31, 2018.

Index: ICAI’s Guidance Note on Bank Audit 2018

Part I – Knowledge of the Banking Industry 

Part II – Risk Assessment and Internal Control 

Chapter 1: Initial Considerations

Chapter 2: Risk Assessment and Internal Control

Chapter 3: Special Considerations in a CIS Environment

Part III – Audit of Advances and NPAs 

Chapter 1: Advances – Agriculture

Chapter 2: Advances – Other than Agriculture

Chapter 3: Scrutiny of Advance Accounts presented in Ind AS by Borrowers

Chapter 4: Asset Classification, Income Recognition and Provisioning

Part IV – Items of Bank’s Financial Statements and Auditing Aspects 

Chapter 1: Cash, Balances with RBI and Other Banks, and Money at Call and Short Notice

Chapter 2: Fixed Assets and Other Assets

Chapter 3: Borrowings and Deposits

Chapter 4: Capital, Reserves and Surplus

Chapter 5: Other Liabilities and Provisions

Chapter 6: Contingent Liabilities and Bills for Collection

Chapter 7: Treasury Operations – Foreign Exchange and Derivative Transactions

Chapter 8: Profit and Loss Account

Chapter 9: Disclosure Requirements in Financial Statements

Chapter 10: Consolidation of Branch Accounts

Chapter 11: Consolidation of Financial Statements

Chapter 12: Inter Office Transactions

Part V – Long Form Audit Reports 

Chapter 1: Long Form Audit Report in case of Bank Branches

Chapter 2: Long Form Audit Report in case of Banks

Part VI – Special Aspects 

Chapter 1: Basel III

Chapter 2: Special Purpose Reports and Certificates

Chapter 3: Compliance with Implementation of Ghosh & Jilani Committee Recommendations

Chapter 4: Other Aspects

Chapter 5: Other Aspects – Service tax /Goods and Services Tax

Contents of Accompanying CD 

Foreword and Preface of Past Years

I. Part I – Knowledge of the Banking Industry 

1. Banking in India

2. Accounting and Auditing Framework

3. Accounting Systems

4. Legal Framework

II. Appendices 

1. Text of the Section 6 of the Banking Regulation Act 1949

2. The Third Schedule to the Banking Regulation Act, 1949

3. Illustrative Format of Report of the Auditor of a Nationalised Bank

4. Illustrative Format of Report of the Auditor on the Standalone Financial Statements of a Banking Company

5. Illustrative Format of Report of the Branch Auditor of a Nationalised Bank

6. Illustrative Format of Report of the Branch Auditor of a Banking Company

7. Illustrative Format of Engagement Letter in case of a Nationalised Bank

8. Illustrative Format of Engagement Letter to be sent to the Appointing Authority of the Nationalised Bank by Branch Auditor

9. Illustrative Format of Engagement Letter to be sent to the Appointing Authority of the Banking Company

10. Illustrative Format of Engagement Letter to be sent to the Appointing Authority of the Banking Company (Separate only for Internal Financial Control u/s 143(3)(i) of Companies Act, 2013)

11. Illustrative Format of Written Representation Letter to be obtained from Branch Management

12. Illustrative Checklist on Audit Considerations in CIS environment

13. Illustrative Checklist on Bank Audit in Computerised Environment

14. Features of the Gold Monetization Scheme

15. Illustrative Audit Checklist for Capital Adequacy

16. Illustrative Audit Checklist for Service Tax

17. Illustrative Audit Checklist for Goods and Services Tax

III. Suggested Abbreviations used in the Banking Industry 

IV. Illustrative list for Basis of Selection of Advance Accounts in case of Bank Branch Audit 

V. Illustrative Bank Branch Audit Programme for the year ended March 31, 2018 

VI. Illustrative Checklist for the Verification of the aspects of the Treasury/ Investments of the Bank in Statutory Audit 

VII. Illustrative Flow Charts for Use of Core Banking Solution software in case of Bank Branch Audit 

VIII. List of Relevant Master Directions issued by RBI 

IX. List of Relevant Master Circulars issued by RBI 

X. List of Relevant General Circulars

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