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CA Ravi Taori
Direct Customer Transactions: Customers can initiate and complete transactions directly through online,
mobile, or ATM channels.
Special audit considerations arise in the audit of banks because of:
(Shortcut: Unique TARA)
Unique Risks: Banks face distinct risks due to the nature of their transactions, rapid exposure changes, and the
scale of operations.
Tech Dependence: Heavy reliance on IT and evolving technology, especially with Net Banking and Mobile
services, increases operational and financial risks.
Auditor Knowledge (Bank Products) : Auditors, including Branch Auditors and SCAs, must deeply
understand bank products and associated risks to address potential material misstatements.
Regulatory Impact: Statutory and regulatory requirements, along with the development of new banking
products, often outpace the growth of accounting and auditing standards.
Application Integration: Auditors should recognize the interplay between different bank applications and
ensure interface controls are robust.
(CNO-BA.040) Legal Framework
There is an elaborate legal framework governing the functioning of banks in India. The principal enactments
which govern the functioning of several types of banks are:
(CNO-BA.060) Form and Content of Financial Statements
1A. Banking Regulation Act: Banking companies must prepare a Balance Sheet and Profit and Loss Account
as per the Third Schedule of the Banking Regulation Act, 1949.
1B. SEBI regulations: Both public sector and private banks, being listed on stock exchanges, must comply with
SEBI regulations, including LODR.
1C. Accounting Standards: Banks must adhere to disclosure requirements under section 133 of the
Companies Act, 2013 and the Companies (Accounts) Rules 2014. Implementation of Indian Accounting
Standards (Ind AS) is deferred by RBI.
2A. Preparation: Balance sheet preparation involves standalone and consolidated financial statements.
2B. PSU Banks: Standalone statements consolidate branch accounts, especially in nationalized/public sector
banks.
2C. Private banks: Private banks have centralized accounting processes and no mandatory branch audit as per
www.auditguru.in 14.2