In the era of uncertainity and Non compliance for any organization to operate various Business functions smoothly and effectively and to achieve the Organisation Business Objective , top management should be fully equipped with the State of Art of effective internal checks and internal controls functions and also to identify vulnerable areas , lapses and serious irregularities such as frauds along with corrective measures for Non occurance of such deficiencies.
Keeping in view of the above functionality, the Eenadu Cooperative Urban Bank Ltd evolved and laid down an audit policy comprising of the salient features of Concurrent audit, Internal Inspection , IS Audit, Statutory Audit .
The audit policy is framed considering various Directives /guidelines issued from time to time by the regulators , namely viz : RBI and RCS. The very basis of framing the policy is to ensure protection of interest of the Stakeholders , Depositors investors and creditors ,for proper functioning of the Bank on prudential norms.
Scope of Concurrent Audit:
The concurrent audit system being an integral part of Bank’s internal system, senior person with relevant background of Banking experience of not less than 5 years with proven integrity shall be appointed/identified for undertaking the concurrent audit. The Concurrent Auditor shall inter alia discharge the duties meticulously identifying the frauds prone areas , malpractices, violation of rules and procedures and instances of suppression of facts and figures which are required to be submitted to the Top Management of the Bank.
This concurrent Auditor shall examine in a structural way, all the Banking/financial transactions on a periodical basis to ensure accuracy, authenticity, compliance
with procedures and guidelines framed by the Bank from time to time so that in case of any irregularities or deviations to take appropriate corrective measures and to have a built in system of internal reporting in case of very serious irregularities viz frauds operational deviations etc.
The concurrent audit report shall critically analyse and make in depth study of the fraud prone areas such as appraisal of credit proposals, balancing of books, reconciliation of inter branch accounts, settlement of clearing transactions, suspense accounts and stationery accounts leaving no scope for any deviations / irregularities.
The concurrent auditor should ensure that the off-balance sheet transactions are properly followed by all branches and report critically periodically unbalanced, lapses / irregularities in this regard.
The concurrent auditor should ensure proper functioning of the bank so that the periodical audit and inspections conducted by the statutory auditor and Reserve Bank of India respectively do not find any instances of lapses / irregularities.
The concurrent audit shall also comply with statutory auditor’s report and Reserve Bank of India inspections’ reports.
The concurrent auditor shall bring out cases of non-compliance of the prudential norms relating to income recognition, assets classification and provisioning for taking suitable action in the matter.
The concurrent auditor shall certify that the investment held by the bank as on the last reporting Friday of each quarter as reported to the Reserve Bank of India are actually owned/ held by it as evidenced by physical securities or the custodians statement. The certificate should be submitted to the Regional office, RBI within thirty days from the end of the relative quarter.
The concurrent auditor shall specifically verify compliance to the instructions contained in RBI Cir No. UBD.BPD.SUB.No.5/09.80.00/2003-04, Dt.28.04.2004
regarding transactions in Govt. Securities.
The concurrent audit shall strive for strengthening the credibility of the system in detecting cases of frauds / malpractices and suggest steps need to be taken to gear up the internal audit machinery.
The reports of concurrent audit shall be submitted to managing Director who in turn forward them to the Audit committee of the Board of Directors for further scrutiny and necessary action.
Beside, concurrent audit system, senior officers of the Bank shall undertake periodical inspection of all the branches as follows:
- General Manager and also the Nodal Officer shall inspect each branch invariably once in a Six Months and submit their findings to the Managing Director who in turn send them to the Audit committee of Board of Directors of the Bank.
- Also the Managing Director of the Bank shall make surprise checks of all branches at random to ensure that branch officials do not indulge in
Information System (IS) Audit
Bank has adopted Digital Banking technology offering services like ATM, Mobile banking, RTGS/NEFT funds transfer, Debit cards, UPI, GPAY, BHIM Accessbility etc to its customers.
In view of the above digital Banking services and having threat and exposed to cyber risks emanating from adoption of digital technology, there is need to introduce IS audit,
The bank has adopted appropriate systems , procedures and practices for facilitating IS audit on annual basis covering all the critically important areas .
IS audit is undertaken simultaneously alongwith the statutory audit so that IS audit reports are available to the statutory auditors well in time for examination and for incorporating comments, if any, in the Statutory audit reports.
IS audit reports shall be placed to the Managing Director and compliance should be ensured within the time frame as outlined in the audit policy.
The IS Audit is conducted on Yearly basis by a Qualified professional with
CISA/ISA qualified .
Statutory Audit :
Appointment of Statutory
The bank shall appoint one audit firm (Partnership firm/LLPs) for conducting statutory audit. The procedure for appointing Statutory auditor is mentioned herein the policy.
For appointment of statutory Auditor, the Bank shall take prior approval of RBI ( Department of Supervision ) on an annual basis as per guidelines issued vide RBI circular No : RBI/2021-22/25. DOS.CO.ARG/SEC.01/08.91.001/2021-22, dated
27.04.2021. For this purpose , the Bank shall apply to the Regional Office of RBI ( Department of Supervision ) before 31st July of the reference year.
2. Eligibility Criteria of Auditors.
The Bank is required to appoint audit firm(s) as its SA(s) fulfilling the eligibility norms as prescribed by RBI.
3. Independence of Auditors.
- The Board of Directors shall monitor and assess the independence of the auditors. Any NOT UPTO THE MARK audit services issues in this regard may be flagged by the Board to the concerned RO of
- In case of any concern with the Management of the Banks such as non-availability of information/non-cooperation by the Management, which may hamper the audit process, the SAs shall approach the Board/ACB/ of the Bank, under intimation to the concerned RO of
- Concurrent auditors of the bank should not be considered for appointment as SAs of the same
- The restrictions as detailed above, should also apply to an audit firm under the same network of audit firms or any other audit firm having common
Professional Standards of SAs.
The SAs shall be strictly guided by the relevant professional standards in discharge of their audit responsibilities with highest diligence.
The Board of the Bank shall review the performance of SAs on an annual basis. Any serious lapse/negligence in audit responsibilities or conduct issues on part of the SAs or any other matter considered as relevant shall be reported to RBI within two months from completion of the annual audit. Such reports should be sent with the approval/recommendation of the Board with the full details of the audit firm.
In the event of lapses in carrying out audit assignments resulting in misstatement of Bank’s financial statements, and any violation/lapses vis-à-vis the RBI’s direction/guidelines regarding the role and responsibilities of the SAs in relation to Banks, the SAs would be liable to be dealt with suitably under the relevant statutory/regulatory framework.
Tenure and Rotation.
In order to protect the independence of the auditor audit firms, Banks will have to appoint the SAs for a continuous period of three years, subject to the firms satisfying the eligibility norms each year. Further, bank can remove the audit firms during the above period only with the prior approval of RBI Regional office (Department of Supervision).
An audit firm would not be eligible for reappointment in the same Bank for six years (two tenures) after completion of full or part of one term of the audit tenure. In case an audit firm has conducted audit of any Bank for part-tenure (1 year or 2 years) and then not appointed for remainder tenure, they also would not be eligible for reappointment in the same Bank for six years from completion of part-tenure.
Audit Fees and Expenses.
The audit fees for SAs shall be decided in terms of the relevant statutory/regulatory provisions.The audit fees for SAs of all the Banks shall be reasonable and commensurate with the scope and coverage of audit, size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, identified risks in financial reporting, etc.
The Board of Bank shall make recommendation to the Annual General Meeting (AGM) for fixing audit fees of SAs.
Eligibility Criteria for Appointment as Statutory Auditor.
|Asset Size of Bank as on 31st March of Previous Year||Minimum No. of Full-Time partners (FTPs) associated with the firm for a period of at least three (3) years
|Out of total FTPs,
Minimum No. of Fellow Chartered Accountant (FCA)
Partners associated with the firm for a period of at least
three (3) years
|Minimum No. of Full Time Partner Paid CAs with CISA/ISA
Qualification Note 2
|Minimum No. of years of Audit Experience of the firm
|Minimum No. of Professiona l staff
|Upto Rs 1,000 crore||2||1||1*||6||8|
* Not mandatory for UCB with asset size of up to Rs. 1,000 crore.
Note 1: There should be at least one-year continuous association of partners with the firm as on the date of empanelment (for PSBs)/ short listing (for other Banks) for considering them as full time partners.
Note 2: CISA/ISA Qualification:
For UCBs with asset size upto Rs 1,000 crore, there is no minimum requirement in this regard. However, such Banks may give priority to firms with full
time partners or full time CAs having CISA/ISA qualification. There shall be at least one-year continuous association of Paid CAs with CISA/ISA qualification with the firm as on the date of empanelment for considering them as Paid CAs with CISA/ISA qualification for the purpose.
Note 3: Audit Experience:
For UCBs , audit experience shall mean experience of the audit firm as Statutory Central/Branch Auditor of Commercial Banks (excluding RRBs)/ UCBNBFC AIFIs. In case of merger and demerger of audit firms, merger effect will be given after 2 years of merger while demerger will be effected immediately for this purpose.
Note 4: Professional Staff:
Professional staff includes audit and article clerks with knowledge of book- keeping and accountancy and who are engaged in on-site audits but excludes typist/steno/computer operator / secretaries/subordinate staff etc. There should be at least one-year continuous association of professional staff with the firm as on the date of empanelment for other Banks for considering them as professional staff for the purpose.
- The audit firm, proposed to be appointed as SAs for Bank, should be duly qualified for appointment as auditor of a company in terms of Section 141 of the Companies Act,
- The audit firm shall not be under debarment by any Government Agency, National Financial Reporting Authority (NFRA), the Institute of Chartered Accountants of India (ICAI), RBI or Other Financial
iii) The Bank shall ensure that appointment of SAs is in line with the ICAI’s Code of Ethics/any other such standards adopted and does not give rise to any conflict of interest.
- If any partner of a Chartered Accountant firm is a director in any Bank, the said firm shall not be appointed as SA of any of the group banks of that
- For audit of UCBs, the SA of the firm should have a fair knowledge of the functioning of the cooperative sector and shall preferably have working knowledge of the language of the state in which the UCB/branch of the UCB is
Continued Compliance with basic eligibility criteria:
In case any audit firm (after appointment) does not comply with any of the eligibility norms (on account of resignation, death etc. of any of the partners, employees, action by Government Agencies, NFRA, ICAI, RBI, other Financial Regulators, etc.), it may promptly approach the Bank with full details. Further, the audit firm shall take all necessary steps to become eligible within a reasonable time and in any case, the audit firm should be complying with the above norms before commencement of Annual Statutory Audit for Financial Year ending 31st March and till the completion of annual audit.
In case of any extraordinary circumstance after the commencement of audit, like death of one or more partners, employees, etc., which makes the firm ineligible with respect to any of the eligibility norms, RBI will have the discretion to allow the concerned audit firm to complete the audit, as a special case.
Procedure for Appointment of SAs:
- The Bank shall shortlist minimum of 2 audit firms for every vacancy of SAs so that even if firm at first preference is found to be ineligible/refuses appointment, the firm at second preference can be appointed and the process of appointment of SAs does not get delayed. However, in case of reappointment of SAs by UCBs till completion of tenure of continuous term of 3 years, there would not be any requirement of short listing and sending names of multiple audit firms to RBI while seeking approval to
- The Bank shall place the name of shortlisted audit firms, in order of preference, before the Board for selection as SA. Upon selection of SAs by the bank in consultation with the Board and verifying their compliance with the eligibility norms prescribed by RBI, the UCBs shall seek RBI’s prior approval for appointment of
- The Bank shall obtain a certificate, along with relevant information as per Form B, from the audit firm(s) proposed to be appointed as SAs by the Bank to the effect that the audit firm(s) complies with all the eligibility norms prescribed by RBI for the purpose. Such certificate should be signed by the main partner/s of the audit firm proposed for appointment of SAs of the Banks, under the seal of the said audit
- The bank shall verify the compliance of audit firm(s) to the eligibility norms prescribed by RBI for the purpose and after being satisfied of their eligibility, recommend the names along with a certificate, in the format as per Form C, stating that the audit firm(s) proposed to be appointed as SCA/SA by them comply with all eligibility norms prescribed by RBI for the
- While approaching the RBI for its prior approval for appointment of SAs, bank shall indicate their total asset size as on March 31st of the previous year (audited figures), forward a copy of Board Resolution recommending names of audit firms for appointment as SAs in the order of preference and also furnish information as per Form B and Form C as mentioned above, to facilitate expeditious approval of appointment/re-appointment of the concerned audit
Eligibility Certificate from (Name and Firm Registration Number of the firm)
Particulars of the firm:
|Asset Size of Bank as on 31st March of Previous Year||Number of Full- Time partners (FTPs)
associated* with the firm for a period of three
|Out of total FTPs, Number of FCA Partners associated with the firm for a period of three (3)
|Number of Full Time Partner Paid CAs with CISA/ISA
|Number of Years of Audit Experience#||Number of Professional staff|
# Details may be furnished separately for experience as SAs.
B. Additional Information:
- : Copy of Constitution
- : Whether the firm is a member of any network of audit firms or any partner of the firm is a partner in any other audit firm? If yes, details
- : Whether the firm has been appointed as SA by any other Commercial Bank (excluding RRBs) and/or All India Financial Institution (AIFI)/RBI/NBFC/UCB in the present financial year? If yes, details
- : Whether the firm has been debarred from taking up audit assignments by any regulator/Government agency? If yes, details
- : Details of disciplinary proceedings against firm by any Financial Regulator/Government agency during last three years, both closed and pending.
C. Declaration from the firm:
It is certified that neither I nor any of our partners / members of my / their families (family will include besides spouse, only children, parents, brothers, sisters or any of them who are wholly or mainly dependent on the Chartered Accountants) or the firm / company in which I am / they are partners / directors have been declared as willful defaulter by any bank / financial institution.
It is confirmed that the information provided above is true and correct.
Signature of the Partner (Name of the Partner): Date:
Certificate to be submitted by the UCBs regarding eligibility of audit firm proposed to be appointed SA
The bank desirous of appointing M/s , Chartered Accountants (Firm Registration Number ) as Statutory Central Auditor (SCA)/ Statutory Auditor (SA) for the financial year for their 1st/2nd/3rd term and therefore has sought the prior approval of RBI as per the section 30(1A) of the Banking Regulation Act, 1949/ Section 10 (1) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980/ Section 41(1) of SBI Act, 1955.
The bank/UCB has obtained eligibility certificate (copy enclosed) from (name and Firm Registration Number of the audit firm) proposed to be appointed as Statutory Auditor of the bank / UCB for FY along with relevant information (Copy enclosed), in the format as prescribed by RBI.
The firm has no past association / association for years with the bank/UCB as SA.
The bank/UCB has verified the said firm’s compliance with all eligibility norms prescribed by RBI for appointment of SAs of UCBs.
(Name and Designation) Date: