AUDITING UNDER COMPUTARISED ENVIRONMENT – CHECKPOINTS & PROCEDURES

17TH NOVEMBER, 2012 AT WIRC

BY CA ARVIND JOSHI

Many of us are in Bank Audit since many years. Some of us may be new entrants in this filed.
Concurrent Audits are also now a settled form of Audit in the Banks. The audit is conducted as
per the guidelines of RBI as well as there is a specific format/ checklist of every bank specific to
its own requirements.

Since the concurrent Auditor has to conduct the Audit on day to day basis & that to of the
voluminous transactions. Almost all the Banks are now Computerised & most of them are on
CBS platform. There are still few Banks/ Branches which are under TBM platform i.e. standalone
platform where each branch has its own server & maintains own database.

Whatever the form of computerization, Computerised Environment can make the work of
Auditors easy.

The Auditors need not have any technical knowledge for the same. There are various menus of
any application which are useful in generating useful information, which can in turn be used to
analyse or there are some reports which itself will provide the reporting material.

Auditor has to make himself accustomed with the Application the Bank is using for its
operations. Initially he has to spend some time with the Bank officials to understand different
menus, how to surf the information, how to generate & from where to generate various
information & reports from the Application. Different Banks use different applications.

Some information may not be easily available but we can request EDP Dept. to get the
information by putting SQL query.

Sample testing of few transactions is sufficient because that which is correct for some
transactions is correct for all transactions due to use of Software applications, it will give same
results unless basic information fed to the system is wrong e.g Interest application, levy of
different charges.

In the computerized systems what is most important is that the Parameters fed to the system
should be correct. Most of the processing is done on the basis of these parameters.

Get an access to the system from the system administrator. Note that the access given to the
Auditor should have browse option only. It should not have edit/ modify or entry option.

Different Applications have different types of MENUS. The auditor has to understand the
application software used by the Bank.

Spare some time & take a round of all the MENUS available in the system on your own. That will
appraise the Auditor various kinds of reports available on the system which can be used by him
for the purpose of Audit.

The reports generated are only guiding factor. We have to understand how to use the same for
analysis purpose & effectively use for our Audit.

Concurrent Audit in computerized environment is not a IS Audit. Considering this factor, we will
discuss the reports normally available on most of the applications & understand how the same
can be used to address various checkpoints under concurrent Audit. However the nomenclature
& view of the report may differ from system to system.

VARIOUS CHECK POINTS & PROCEDURES TO VERIFY THE SAME

CHECKPOINT REPORT AVAILABLE USE OF REPORT

Cash & ATM balance Cash Summary & ATM
To know balance of Cash & ATM
cash summary Cash

Gives denomination wise summary
Excess Cash holding Report
To find out whether cash holding
has exceeded the retention limit

Total number of days excess
holding

Average excess cash holding

Average cash holding during the
period

Maximum amount of excess cash
on a particular day
Counters summary & JP
For ATM cash verification with
rolls denominations of cash in each
counters

Matching the online & offline
transactions to reconcile balance
in ATM
Deposits New Accounts opened
It is a list of all the new accounts
opened during the period.

Useful for verification of A/Cs
opened during the period with
documentary evidence
Accounts closed
it is a list of accounts closed
during the period
List of premature
Useful for verification of A/Cs
closure. closed during the period with
documentary evidence

To check premature closures of
Deposits
Unscanned signature
It is the list of all the accounts
Report where signature is not scanned in
 the system

Useful at the time of verification
of A/C opening formalities.
Accounts modified but
It gives details of all the account
not authorized listing masters modified during the
period but have not been
authorizes by the officer.
Abnormal transactions in Exceptional transactions
One of the report gives
newly opened A/Cs report operations in newly opened A/Cs
upto 6 months from opening of
A/C

We have to select transactions
for verification by using
judgment.
Correctness of interest Interest Applied Report
To verify Interest applied
Application
To verify basis of interest
application, penal interest etc.

Calculation of penal interest by the
system – as per bank policy – over
due installments, excess drawal etc.

Trial Application of Interest -
Whether system calculates interest
from the period starting after the
latest interest application – i.e from
date should be by default date after
last interest applied date & to date
should not be later than last date of
the current month.
Interest is applied to all Summery / Error Report
Interest run programme helps to
accounts check whether any accounts are
skipped by the system for
application of interest.
Cash payment of Term Customer Master –
Shows all deposit & other A/Cs of
deposits above `20,000/- search for all A/Cs of the a particular customer as on a
customers given date.

Can verify if total deposits as on
Many banks rout the date of payment of any
payment of FDs through deposit by cash, exceeded
a separate A/C. Find out `20,000/-
from the A/C those paid
by cash.
Customer Unification Search for Customer
It helps identify whether system
Number allows different customer
number for same customer.
Loans & Advances
Loans disbursed during the Accounts opened /
List gives Loans Accounts opened
period jotting of loan A/Cs during the period

List of Loans outstanding as on
given date with full details.

Also offset rate entered in
system can be verified from the
A/C master under this module.
Security held against loan Security Master
It shows the details of all the
security held against loan.

List of post dated cheques taken
on record can also be
determined from PDC module.

Inspection / Visit module is also
available under this head. It is
the information of inspection or
visit carried out related to the
loan.
Renewal of Limits for Jotting of CC/OD
It shows sanction limit, date,
CC/OD/PRFIN Sanction Limit expiry expiry date, closing balance (as
Listing on date of report) and
disbursement date.

The list shows A/Cs where limit
has expired as well as A/Cs which
have been renewed during the
period
Drawing Power monitoring DP under Advances
Verify the Stock/ Drs & Crs
menu actually fed in the system

To verify the Statements not
Report on DP Expired received for any of the CC A/cs

Grace period for submission of
Stock Statements. – Advances –
Masters – Grace period should
never exceed 10 days.
Insurance monitoring Policy expired listing
It is a list of all the expired
insurance policies expired during
the period.

It gives details such as account
number, name of insurer, policy
amount, policy number and
expiry date.
Overdrawn CC/OD A/Cs Excess drawl report
To know how many times the
account has been overdrawn

Temporary O/D or
Enhancement for limited
period
Monitoring of CC A/Cs
Pledged Gold Parcels
Bills Purchased
Out word Bills for Collection
Income Recognition &
Classification of Advances
during a particular period.

To know the amount of excess
drawl in the account.

To check expiry of drawing
power.

To know sanction limit, date and
expiry.

Maximum amount of excess
withdrawal
History of changes in
Verify the monitoring of TODs /
limits is available in the enhancements by the branch
advances menu.
Adhoc limit Report
Turnover report
Verify whether the turnover is in
consonance with the limit
sanctioned.

Where the limit not utilized
properly, commitment charges
are recovered as per the Banks
policy.
Jotting of Gold Loans as
Physical verification of Gold
on date Parcels to be done considering
the A/Cs o/s as on the date as
per the jotting.
Any day balance of bills
It is a listing of all the bills
outstanding as on date along
with details such as date, amount
account number etc.
O/W biils for collection
It is the list all the outward bills
Report for collection that are pending
along with name, amount etc.
Defaulter List with
Report gives list of all defaulters
number of Installments across all category of advances
(except CC A/Cs)
Unapplied interest A/C
Take a listing of defaulters from
wise – Mostly in case of zero installments & above.
CC A/Cs interest
Examine border line cases in
receivable is put in this depth.
A/C
For CC A/Cs – individual A/Cs has
to be verified as the reports for
different parameters are
generally not available from the
system.

Compare the list with last year’s
NPA List.

Understand accounting system
followed. Those followed in Co-
Op Banks & Nationalised Banks
differs.

Don’t just have a focus on the list
but also verify other weaknesses
by scrutinizing the A/C

Unapplied interest on CC A/Cs,
whether interest has been
accounted manually whenever
there is a recovery in the
account.

In case of Nationalised Banks
Accounting system for interest
on NPA A/Cs is different that Co-
op Banks. Verify accordingly on
the basis of system generated /
Manual records available.

Court cases / legal suits module
contains details of such
information related to the
account.
Bank Guarantee / Letter of Jotting/ Balancing Report
The list gives details of Customer,
Credit (Inland & FLCs) of Bank Guarantees/ LCs Beneficiary, date of issue, date of
expiry & amount of BG/LC.

Identify those issued during the
year & verify the documents for
the same.

Identify those which have
expired but not reversed in the
books.

Can verify recovery of
commission & deferment thereof
in the accounts.
Debit balance in SB & CD Statement of debit
It shows the accounts (SB & CD)
balance during the along with date on which it had
period debit balance and also the
amount.

Verify whether the debits
allowed are within the powers of
Manager.

Scrutinise the account to see

FDs lien marked in system View specific lien
May confirm that lien is marked
marking from the specific
menu on lien marking in
the Advances menu
Verify whether the FDs which are
Report on Lien Marking
Report of lien marking
expired
General Ledger & Profit & Report of Profit & Loss
Loss A/C A/C & Balance Sheet as
on date from the system.
Dead Stock/ Fixed Assets Statement of Account –
category wise
Vouching of transactions Cash scroll
above specified limit Cash transaction Report
Transaction listing for all
the batches
Transaction above
specified limit
Stop Payment verification Stop payment listing
whether the accounts are
frequently having debit balances.
on the system on the FDs/ RDs
kept as security.
lien marked have expired.

May prompt corrective action.

TD Interest Transfer account
number module helps to
determine whether transfer of
interest of the lien marked FDs is
done to respective loan account.

Helps in understanding the
nature of Accounts at the branch.

Can identify ledger A/C s to be
scrutinized.

Can identify the pattern of
income & expenses.

The statement of account can be
viewed. It gives the voucher
number. The respective voucher
can be accordingly browsed from
the browse voucher option.

Statement gives details of
category of Asset, description of
Asset, date of purchase, date put
to use, rate of Depreciation, date
of sale/ discarding, depreciation
charged & WDV.

The statement is available only
when the Asset module is
activated inn the system.

Can be used to select the
transactions for which vouching
to be done.

Can understand the transaction
& accordingly verify the
vouchers.

To identify the stop payments
recorded in the system.

Verify with the letter received by
the branch

Charges recovery can be verified
for the respective A/Cs
Return of cheques Frequent cheques return
No. of times cheques returned on
report financial ground.

If maximum number of times the
instrument has returned proper
reporting has to be done.

Recovery of charges can be
verified for respective A/Cs
Minimum balance in SB and Minimum balance in SB
It is the list of all the accounts in
CD and CD which minimum balance was not
maintained during the period.

Application of minimum balance
charges can be verified.
Inoperative A/Cs Listing of inoperative
Listing available on the system
A/Cs only when proper parameters
are fed in the system & the
system automatically marks the
inoperative A/Cs.

In some applications inoperative
A/Cs are periodically marked in
the system.

Exception report gives details of
transactions in inoperative A/Cs.
Such transactions needs to be
scrutanised in detail.
Unauthorized issue of Unauthorized cheque
It is a list of all the cheque books
cheque books books issue report that are issued but not
authorized by officer.

It gives details of account
number, cheque book series and
date of issue.

It helps determine how long the
Cheque book is issued and for
how much time it is pending
authorization.
Charges not recovered Oustanding charges
Gives listing of accounts for
report – available in which charges were not debited
day’s control reports as there was no balance in the
account at the time of levy of
charges through system.

This module has to be run on
daily basis to ensure that

Verification of Stock of
sensitive items
Pay orders pending
IBT – Inter Branch
Transactions
Whether all the accounts
are balanced & there is no
difference in the accounts
Rent overdue of the lockers
Available lockers
Report on stock of
stationery (the report is
available only where
there is a system to
enter the stocks received
& issued in the system)
Pending P.O
Reconciliation report
All OK Report or
Balancing report for each
category of Loans and
Deposits
Locker Rent overdue
listing
Locker availability listing
whenever there is a balance in
the account, the charges are
debited to the account &
recovered.

Charges application module
makes available list of various
charges applied through the
Application Software.

Physical stock can be verified &
reconciled with the report.

The report gives details of stock
in hand, received during the
period & issued at the counters
during the period.

It is a list of unreconciled pay
orders i.e. pay orders issued but
not paid/ cleared till date.

Total number of entries in IBT &
amount

Difference in IBT statement, if
any.

Unresponded entries for a longer
period of time may be verified in
detail.

To determine if there is
difference between GL balance
and jotting balance

This report will be available only
where locker module has been
activated.

It is the list of all the lockers
where rent is overdue.

It gives details as to locker
number, name of account holder,
amount of rent o/s.

It is a listing of all the lockers
along with locker type, total
number available, total lockers
utilized and unutilized rent
amount.

Customer Keys of such unissued
lockers can be verified.

Exception report
List of active logins branch
Linking Shares – specifically
in case of Co-op banks
WISH YOU ALL A SMOOTH CONCURRENT AUDIT !!

Recovery of locker rent can also
be verified from the list.
Exception report
It gives the details of any
abnormal transactions

Different parameters available.
Have to select proper parameters
& verify the transactions
accordingly.

Managers are supposed to take
print outs of the same on daily
basis, verify the same & sign &
preserve the reports.

Also helps to identify whether
duplication of cheque numbers
are detected by the system.
Helps to detect whether system
automatically identifies the
cheques received for clearing
with cheque numbers stored in
data base.
Active Login
It displays the user id, name,
designation of all the logins that
are active at the branch as at
particular date.

Verify the list with the muster to
confirm that all those having
active logins are present & on roll
at the branch.

IDs of those who are on longer
leave should be suspended.
Verify the Share
Every borrower has to be a share
suspense A/C holder – for Co-op Banks.
Where share module is
Linking shares is a must as the
activated may view only option available for raising
shares subscribed by Capital.
particular borrower.
Relaxation given for certain
Banks for linking shares having
healthy CAR