How to do Concurrent Audit of a Bank- 3Qs & 3Cs

Most of the young chartered Accountants always dwell in the Question How to do concurrent Audit of a Bank. There are many reasons of this anxiety they possess for concurrent audits, Such as Lack of experience, Lack of opportunities, Lack of confidence etc.

CA Snigdha Nigam

Most of the young chartered Accountants always dwell in the Question “How to do concurrent Audit of a Bank.” There are many reasons of this anxiety they possess for concurrent audits, Such as Lack of experience, Lack of opportunities, Lack of confidence etc.

Here in this article, I am going to share my personal experience of learning how to do concurrent audit of a bank, specifically when you are a Newly Qualified Chartered. Hopefully many would find it beneficial.

I had also qualified my CA recently and was assigned with concurrent audit of a nationalized bank by my employer firm. It was the biggest branch of any banks in my city.

Though I had good experience of auditing private banks, but it was my first assignment as a CA and of auditing a nationalized bank, so I was pretty excited & confident enough that I can easily handle this assignment.

First Day was a formal meeting, met all designated officials, including our Audit coordinator and the very next day I realized that it is not going to be easy to deal this assignment due to following major reasons:

1. I had experience of auditing private banks and the cultures of private banks & nationalized banks are completely different.

2. It was the first time any external concurrent auditor was appointed in that branch, and I was almost half the age of 90% of the staff in that branch.

Perhaps few officials could not digest the fact that a girl, half of their age, Will point out their mistakes.

Well!! Somehow I managed to start my work next day by going through their CBS, Audit module and major circulars and guidelines.

I introduced myself to each and every staff, mentioned the reason Why I was there, and requested them to help me so that I could help them.
And you would be glad to know, that it took me 3 months, to make them realize that I wasn’t their enemy.

Soon I started enjoying my work and all appreciated my efforts too (Always remember, Never Give Up!!).

Due to what I experienced, I developed my own methodology to do a bank concurrent audit effectively and efficiently

I strongly believe that like me, It would be really beneficial to all those who want to have perfection in their work.

Let’s answer a question before we move to the main content of this article:

What is a Concurrent audit?

Few friends of mine say, that is not statutory audit (good answer)!!!!

Yes certainly, it’s not!! Because first u are not so well welcomed as a statutory auditor in concurrent audits.

Second, it’s not a 3-4 day work that you mostly enjoy having food and roaming places!!! The real audit work starts when are doing a concurrent audit because you are going to do in-depth audit.

To put it simply it is majorly an audit of controls & compliances.

1. Whether adequate controls are there?

2. Whether the policies and guidelines of the bank and RBI and duly complied with (In context to banks)?

Now when we know in simple words what concurrent audit is all about, let’s know about how to do it. For that all we need to understand is: the 3 Q’s and 3 C’s of Concurrent Audit.
What are these??? Let’s understand:

3Q’s are the questions we should ask ourselves before starting any audit; these are:

1. What

2. Why

3. How

Let’s discuss these three questions in detail:

1. What do we want to do?

This question will scope our audit work.

– Clearly understand your audit assignment,

– Identify your roles & responsibility,

– Evaluate the authority (power) that are assigned to you.

It’s most important to understand two things:

Responsibility: what if you don’t do your job properly?

Authority: what are the powers you are given to do your work effectively, efficiently & most important independently.

2. Why do we want to do this audit?

Here we analyze the reason behind what we do in auditing.

This we can easily understand if we go through the Circulars, manuals, policies & guidelines.

We should read these well to understand the need behind the checks ,always keep a folder by your side which has all the relevant circulars and guidelines, so that you can refer those in case of any confusion.

But practically we all refuse to do so because its time consuming. You know many times we can know the reasons to perform any check by applying common sense too!!  Don’t you agree??

Let’s take a simple example: While checking custody of deliverables we check that ATM cards & ATM pins are held by two different custodians, and ATM card custodian should never become the ATM pin custodian & vice versa.

We just read it in Audit Report format as a requirement and check it, do we ever think why??

3. Why this should not happen?

Simple: It’s a control measure, so that no single custodian is given authority to misuse that ATM card which belongs to customers.
The same happens in all the areas that are covered in audit report.

Once we know the reason behind the checks & controls, we will always use the correct measure to evaluate that those checks and controls are working effectively or not.

And once we know the answer to this question, we easily get the answer of the next question too i.e. How!

4. How are we going to perform our audit work?

Answer to this question points out the techniques & methods which we will use to perform the tasks.

One of the most important thing to remember is, that you are an auditor, not an engineer or technician or any process owner.
Hence if you don’t know how to do something (not a big deal!), you should always take management help.

Ask them about the whole process, why and how it is done, and I assure you that you are capable enough to bring out the loopholes and decide measures to check that.

If you are not familiar with the banking software, there is no need to panic, No one learn those since childhood. Take management help, ask your seniors, or search it on GOOGLE Baba!!! (Believe me, it knows everything!!)

And mostly there are just 4-5 commands that are of our best use, and we get to learn them by practice.

So now we have understood the 3Q’s and the next thing to understand is 3C’s.

Let’s discuss what these 3C’s are all about.

3 C’s are the essential requirements to conduct a concurrent audit successfully: These are as follows:

1: Coordination

2: Cooperation

3: Continuous efforts

How does these words effect the quality of our audit work in case of concurrent audits?

Let’s discuss:

1. Co-ordination:

Co-ordination between whom??

There must a good co-ordination between the members of Audit Team.

Who will deal which area?

(Like cash processing, inventory & deliverables, loan documents, forex & trade desk, customer service etc.):
Assign jobs to the members according to their capabilities. And be assured in it because you are not here to do experiments.

Who will be the one managing whole audit work?

There must one coordinator who will just coordinate work the members (I believe that more than one coordinator will spoil the work rather than managing it, remember too many cooks spoil the food!!), and guide them about the risk weightage of every area and the time that we should devote in every area,Higher the risk higher would be the time devoted.

This Coordination should be continued with same intensity during the period of assignments.

2. Co-operation:

One of the most important things that one needs to understand is that the ultimate aim of a concurrent audit is not to report the deficiencies, but to apply measures to mitigate the risk that arises due to weaknesses in the system.

The mistake that most of us do in concurrent audits is to report the discrepancies without suggesting any proper action that management should take to avoid those mistake again in future. Reporting same discrepancies every time creates frustration to controlling officers.

Here comes the role of second most important element i.e. Co-operation.

We always have to report in a manner, that management should feel that you are not there for Investigation but to work as a supporting hand. Let me tell you few ideas that can help you:

1. Always communicate over emails; it has two benefits:

You have a proof that you have reported the deficiency to the management.

Most of the problems are resolved over mails, so you don’t have to put everything on report. Which is surely a sign of relief for management.

2. Have a good understanding with the staff members, educate them about the mistakes that are of recurring nature, and how it harms their performance in the audit report.

3. Don’t go and ask for everything from a single staff member, even if he is your audit coordinator. They have got their work to do too, it makes them really annoyed if u keep asking them for petty things, instead contact the staff directly who deals that area of your concern.

4. Gain confidence of staff, by letting them know about what is actually happening in the reports about their respective area. Discuss everything before you put it on report. But remember you have to report it on mails to your controlling officer too, so that everything is on record.

5. Don’t be so keen to make your report size larger & larger every time. Always remember that if even after 6 months of your assignment, you are reporting the same issues in the report, then it’s not the mistake of management, it’s your mistake because you can’t make the management understand the reason behind it.

6. If you are lucky enough (like me!!) there would be at least one person in the bank staff, who would always be happy to help you in need. Identify that one man in the opposite army, and utilize him, till you win the battle of egos.

Do believe me, you can do both, win their hearts and draft a very good, true and fair report, if you behave well with them. Co-operation is key to success in these audit, I have experienced it myself.

Let’s move to the final & most important element- Continuous efforts.

3. Continuous efforts:

It’s in Human nature that we tend to get bored by things we do continuously, and this is the biggest reason we fail to draft a strong audit report. We tend to fill the audit report ourselves on the basis of trends, assuming there won’t be any changes. This is the worst thing one can do with the professional capabilities he possess.

Concurrent audit requires continuous efforts that too with the same level of hard work and enthusiasm that we applied for the first time.
Every time you draft report, try to dig it deeper, do better from the last time; don’t get satisfied with your work.

Make sure that once you report an issue in report, measures are taken by management that it doesn’t happen again. Check that all compliances have been done. Don’t believe on talks, always demand proves that the reported issues are complied with.

Start afresh every month, look from different perspective. Don’t build opinions that certain area is always bad, and certain area is always fine, because you never know when unexpected errors may surprise you.

Enjoy your work!! Then only you will not feel bored or tired of it.

Bottom Line:

Many friends of mine used to wonder how do I manage to do the same thing again & again, there was only one reason behind it- My strong desire to achieve perfection in my work and my will to enjoy my work.
To answer few questions that always demotivate young chartered, let’s go through following motivational thoughts:

Q. 1: I am a young CA, I can’t get a bank audit.

Wrong! You can get a bank audit, not in your name, let the name be of any experienced old firm, work as an associate with them, or join them as an employee. They have lack of man power, you have lack of experience, join hands and work for each other. This is how we can give maximum benefits to our community.

Q.2: What is the benefit of spending time and money on professional courses like DISA/CISA if I can’t get an audit?

Yes it may take you another 5 years to get a bank audit in your name, but till then you can get more qualified, better than others in the competition.

If you can’t cut the tree at night…spend time to sharp your axe all night so that you cut it at once when the sun arrives. Make the best use of your time.

Q.3: There are no opportunities in my city.

Stop acting like a toddler; the whole world is waiting for talents like us. The time has gone where you need to be physically present to do some work. The whole world is in your hands, explore the opportunities.

Q.4: I am a CA, and I need rewards for my work.

Be assured in one thing, no one will give you work on your degree, you need to gain knowledge and capabilities to earn the rewards. If you don’t have that capabilities, be ready to get burnt in fire of hard work, then only you will shine like Gold.

Q.5: I have spent all these years in studies, how long do I need to learn more?

You will need a lifetime to learn, and even that won’t suffice. We have to keep learning to grow, river has pure water because it keeps moving. If you want to shine like a shining star, Keep learning.

I hope this article was worth your time. Keep learning and sharing knowledge. Best wishes to all my readers.

(This article is written by CA Snigdha Nigam (ACA,DISA, MBA -Finance, She is a practising Chartered Accountant, with major exposure in bank audits. She can be reached at snigdha.231290.nigam@gmail.com)

Categories: CA, CS, CMA

View Comments (6)

  • Hi Snigdha

    Thank you for sharing the practical difficulties faced by most of us during the initial phase of our professional career. We have to keep self-motivated if we want to update ourself.

  • Hello Ma'm
    Good guidance. I feel all auditors (internal or external) are friend, philosopher and guide to the institutions. Bank also need not to frustrate or afraid of pointed mistakes. Early the bank knows, better are the chances for rectification. Keep it up this gist of guidance in letter and spirit.

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