A debate is on over the move to up the minimum advance limit for making statutory audit compulsory in a public sector bank branch.
All PSU bank branches having advances of over Rs.5 crore are now subject to statutory audit. The minimum advance limit is now sought to be increased to Rs.20 crore, it is learnt.
The increase in floor advance limit for a statutory branch audit is sought to be justified on two counts primarily. For one, since most of the branches are networked in the wake of PSBs adopting CBS (core banking system), the advances made even at branches are evaluated, monitored and captured in the central system. Two, the move is intended to reduce the cost of audit in an environment which is proving intensely competitive for banks. Informed sources aver that this move will push many a rural branch out of the statutory audit. This could put the branches under greater risk, they point out. “The due diligence and audit functions of an external agency cannot be wished away in warding off branch-level frauds,” sources point out. NPA (non-performing asset) statements often are generated through computers.
“However, these can be manipulated by altering the dates and data available. These can be found out only in an audit,” they argue.
Audit is for detection
Audit is for detection. Scam can take place in any branch. It does not differentiate between higher or lower turnover.
“In stock markets, problems took place in co-operative banks,” points out a top market consultant, who declined to be quoted. “If the issue is cost, the remedy lies in reducing the cost and not abolishing the audit per se,” he argues.
The move, it is pointed out, will also send out a wrong signal, and encourage lower-end turnover branches to go carefree on compliance. When there is an audit, at least books will be kept in order. If the idea is to replicate the Western model, why so many banks failed in the U.S.? Even a section of the banking community feels that a proper system audit should be in place before taking statutory audit off a branch.
Keywords: compulsory audit, public sector banks
When Chartered accountants community advocates need for Bank Branch Auditors, It is perceived as bias argument as the auditors are having interest and concern for loosing client and fees. The bank branch audit was considered to be very lucrative in terms of cost efforts ratio. The people who see Audit Expense as Cost the Chartered accountants community must see them as high potential client of future. Whether Auditor add value or not the presence of an auditor makes a difference. RBI and Bank must concentrate on NPA rater then the Audit Fees. King Fisher Air Lines advances can meet out audit expenses all the Nationalize Branches many years. So wait and watch and appreciate the move.
Statutory Audit of Public Sector Bank is warranted for the reason that they are managing the public fund. So, each and every rupee of finance or loan is to be highly critical and it is essential to carry out the statutory audit. That will only help the Govt to ascertain the efficiency of the public funds being managed. This policy should also be extended to other private sector banks irrespective of their advance limit.
If the Audits are not adding any significant value, then why Banks
are also opting for Concurrent Audits, System Audits, Stock Audits
and so on. Even in the limited time span that is given to the
Auditors to complete the Audit Work, a lot of irregularities are
discovered, rectified, and reported where necessary. Many times the
additional revenue recovery itself compensates for the cost spent on
the audit. Quality can be improved by giving better guidelines and
improved time frame for completion of the audit. It would be sheer
waste of world class talent, if audit itself is rendered
unnecessary. The Annual Audit is like a periodical medical checkup,
not doing it would save costs, but would expose the Banks to to
greater risks. Banks themselves, unnecessarily rush these branch
audits in an unhealthy competition to complete their annual audit in
a record time, as a result the CAs work under pressure compromising
the quality of work. Hope the RBI would reconsider with a positive
mind.
entire country is depending on the banking systems who are depositing money with good confidence that their money is safe in the hands of nationalised banks. the money deposited is lent for other general public with taking security measures like collateral security. the statutory branch audit will keep a watch on the managers of branches so that they stick to the guidelines given by the Head Office. Hence this system of audit is always recommended to safe guard interest of the general public and should not be disposed of irrespective of the limit of advances.
In a Banking System it is the smaller/rural branches (advances less than 10 crores) having 3 to 6 official staff are more prone to all the financial irregularities than as compared to large branches who often have either Chief Manager or Assistant General Managers for control of affairs of Branch. In my career of more than 10 years of bank audit I have seen so many branches being run on the knowledge, experience and wisdom of peon or sub staff than the Branch Managers who are prone to transfers and are generally not aware of the branch and the customers. It is also often seen that BM's are posted at and around Feb- March making him extremely difficult to face audit in the given time period. We have also seen a number of rectification which is undertaken by the Branches since the mere presence and feeling of Branches under Audit.Despite this the abolition of Audit will at what cost only Bank can answer.
'Advance limit' for the purpose of bank branch should be eliminated. Frauds, irregularities, errors are not only done in ADVANCES.Deposits of various types,transfers,Government schemes,cash transactions,TDS deductions and compliance, interest rates and calculations, compliance regarding income tax (Tax audit) RBI guide lines, expenditure control and payments, Income wrong calculations deliberately or fraudulently, and many more are the areas where frauds and irregularities are committed. I have personal experience of such type of fraud and irregularities during my 40 years touch as Bank Audits. So I strongly oppose the Advance base for Bank audits. Small branches, particularly rural and remote area branch should be compulsorily audited without any limit of Advances.
It is in the interest of the banking system, the existing practice of statutory audit of branches should continue. We can not be penny-wise and pound foolish;In the guise of saving few thousands of audit fees, one can not allow frauds of greater magnitude to placate the system. Despite introduction of CBS, manual operation in certain banking transactions can not be fully dispensed with. Human discretion still plays a pivotal part. Only during the annual closing of accounts in March, everything is set right to meet the auditors. Compulsory statutory auditor plays a crucial role of a friend, philosopher and guide to the Bank Branch Manager. SCA should neither be dispensed with nor diluted.
Audit is not costing matter, its to be a regulating matter, Just RBI see fundamental of Bank corrupt issue in US and India (Co-Operating), Non regulating and closed regulating control is a foundation of Mistake. Here RBI is having over confident of CBS system, one thing I remind RBI human error is punishable offence in India. In India not defined clean cyber law. Today also bank facing lot of problem in CBS. Like ATM fraud, non receipt of Money, wrong debit, highsite charges, server down problem etc., if black money, Hawala Fund, Terrorism fund kept in below 20 crore advance branch how monetor? Advance is not a Factor, Fact fraud is main. So RBI aware of it and awake of it. Think deeply and take decision, Agri Advance is main in small advance branch, NPA is more, Possible Hide/less shown in this advance. High level fraud may hide out in small advance Branches.
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