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.
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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