Banking in India has become service oriented, maturing from the days of ‘walking in business’ to the present situation of 24*7 banking solutions to attract customers. With such widespread and rapid growth of the banking industry and their entry into a wide variety of services like insurance, mutual funds, etc., the onus of the healthy sustenance and growth of the banking industry lies on the back of reliable financial statements which can only be assured by quality audits. The bank audit is thus an important step for all banks who seek a better optimization of its overall management. It is essential that the members undertaking statutory audit of banks, both at the branch as well as the central level, keep themselves abreast with the latest developments in the banking sector. The Auditing and Assurance Standards Board of ICAI has been helping the members in maintaining quality in bank audits by bringing out its benchmark publication “Guidance Note on Audit of Banks” to provide detailed guidance to the members who undertake audits of banks and their branches. The Guidance Note is updated every year to incorporate the recent updates, impact of amendments and changes in banking environment which require attention of statutory auditors, such as, master directions/circulars of RBI, relevant advisories, pronouncements of ICAI having bearing on bank audits and amendments/changes in applicable laws or regulations.
We are happy to place in your hands this revised 2021 edition of the Guidance Note on Audit of Banks. The Guidance Note is broadly bifurcated into two Sections i.e. Section A – Statutory Central Audit and Section B – Bank Branch
Audit. For benefit of the members, the Guidance Note also contains various Appendices like illustrative formats of engagement letter, illustrative formats of auditor’s report both in case of nationalized banks and banking companies,
management representation letter, the text of master directions, master circulars and other relevant circulars issued by RBI.
RBI has made reporting on internal financial controls mandatory for statutory auditors of public sector banks from the financial year 2020-21 onwards. Further, RBI has issued revised formats of LFAR in September 2020 which will be applicable for audits of banks for the financial year 2020-21 and onwards. To provide specific guidance to the members on these aspects, two separate publications i.e. “Technical Guide on Audit of Internal Financial Controls in case of Public Sector Banks” and “Technical Guide on Revised Formats of Long Form
Audit Report” have been issued by Auditing and Assurance Standards Board. Accordingly, we request the members to use this Guidance Note in conjunction with the aforesaid publications.
At this juncture, we wish to place on record our sincere gratitude to CA. Prasanna Kumar D, Central Council Member, ICAI and Convenor of the Study Group and other study group members for revising the Guidance Note.
We express our sincere thanks to CA. Nihar N Jambusaria, Honourable President, ICAI, CA. (Dr.) Debashis Mitra, Honourable Vice-President, ICAI and CA. Atul Kumar Gupta, Honourable Immediate Past President, ICAI for their
guidance and support to the activities of the Board.
We are thankful to all the Board Members and Central Council Members for their guidance and support in finalizing this Guidance Note. We appreciate the efforts made by CA. Megha Saxena, Secretary, AASB, CA. Nitish Kumar, Executive Officer, CA. Samriddhi Bhatt, Assistant Project Officer, Ms. Anitha P., and Mr. Chirag Popli for their hard work in giving the Guidance Note its final shape.
We are sure that the members would find the Guidance Note useful while conducting audits of banks and bank branches.
CA. Shriniwas Y. Joshi
Auditing and Assurance Standards Board
CA. G. Sekar
Auditing and Assurance Standards Board