Private sector banks will have to get their branch accounts audited by an RBI-approved panel along the lines of PSU lenders if a proposal of accounting regulator ICAI goes through. 

“We have proposed that every private sector bank branch should be audited only by the auditors approved by the RBI. It will bring in efficiency as computer data does not always give a true picture and human intervention is necessary to check fraud,” Institute of Chartered Accountants of India (ICAI) President G Ramaswamy said.

Earlier this year, the accounting regulator had cautioned the Reserve Bank against over-reliance on a centralised audit system for banks that have completed computerisation of their operations in view of incidents of fraud at banks.

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Currently, the statutory auditors of private sector banks conduct branch audits, but it is not mandatory. However, their PSU peers need to conduct independent audits at the branch level by an RBI-approved panel of auditors.

“The appointment of branch auditor should be left with the RBI and not with the bank board,” Ramaswamy said.

He said non-performing assets (NPAs) are an area of concern for banks and such audits would help to detect it at the branch level.

“Since a lot of restructuring is taking place in banks, it is necessary to conduct audits at the branch level independently,” he said.

The RBI is understood to have contemplated doing away with the branch audit system for banks that have opted for core banking solutions. He said deliberations are being held within the banking division of the Finance Ministry and in the RBI to replace branch audits with a centralised audit system at such banks.

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0 responses to “ICAI proposes branch-level audit for private sector banks along the lines of PSU Banks”

  1. pvc says:

    It is absolutely essential to cut down the Branch Audit of Public Sector banks. Most of the Auditors today are not HAVING clear IDEA ON bank accounting system and internal control system in computerised environment. In a very short span of 2-3 days it is not possible to verify one years transactions.

    Some Change is vital IN THE ENTIRE SYSTEM. Branch Statutory Auditors is not the worth for which it is paid for.

  2. pvc says:

    It is absolutely essential to cut down the Branch Audit of Public Sector banks. Most of the Auditors today are not clear banking accounting system and internal control system in computerised environment. In a very short span of 2-3 days it is not possible to verify one years transactions. Some Change is vital. Branch Statutory Auditors is not the worth for which it is paid for.

  3. CA.subhash Chandra Podder says:

    In addition to my comments dated 29/12/2011, I once again express my personal opinion in favour of the financial statements of Private Sector Bank Branches to be audited by the RBI approve auditors . Irregularities / malpractices/ fraud/ unauthorized overdrawing / non submission of financial statements / stock statements etc. are the grass root of Assets are being Non-Performing at a certain date from the date of occurrence of the transaction .A small portion of non recovery of advances become a huge sum to be either make provision / restructuring of debt in future and adequate provision is require .Fraud and transactions are being routed through the branches itself. RBI and other regulators must look in to the matter and implement branch level compulsory statutory audit by the RBI approved Auditors in the line of Public Sector Banks. Though ,it might be some cost to the bankers yet they can relied upon the auditors ( branch auditors ) .On the basis of their reports the Central Auditors may finalize their report , and may signed the consolidated financial statement of the bank.Over reliance on Central Auditors / core banking etc. are no good in a financial institutions.Joint audit have more impact than single auditor in a financial sectors. In number of cases i have the opportunity to see that there are lot of mistakes on the basic documents which are being putted in to the system are not correct in all respect. To rectify this one has to visit at the branches on several times. CA. G.Ramaswamy has said correctly ” HUMAN SOFT WARE” is one of the best software to detect and prevent fraud and others in the financial sectors . Hope , the authority must give respect to the accounting regulator”s verdict ( are the verdict of the Body as a whole ) if not implemented this year ,ultimately they have to abide by the massage /warning given by the Institute of Chartered Accountants of India. I will be waiting for that day.
    When lot of money will have to spent by Private Sector Banks. Heads of the regulators will not be there , but will be well placed in Government of India either in India or aboard . May GOD bless them .
    CA. subhash Chandra Podder
    Kolkata
    07/01/2012

  4. CA. Subhash Chandra Podder says:

    It is absolutely necessary to get branch level Statutory Audit in all branches of private sector banks by the RBI approved Auditors in order to detect and prevent of frauds.” Human soft ware ” is the best software other than software used in banks . Besides above, a moral checking on the personnel at the branch and verification of the financial statements of banks , in- depth checking of the doubt full transactions apart from other checking made by the Regulators is necessary. In RBI “s master Circulars in respect to frauds and reporting system states that all the banks are not duly complied with the circulars ” to give information and report ” properly to the regulators including the various committee of the banks . ( source , RBI web site ) .
    Hope RBI , Finance Ministry and Banks should realize the matter and implement the system as proposed by the President of ICAI , from the year 2011-2012 on wards.
    CA. Subhash Chandra Podder
    Kolkata
    29/12/2011

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