Page 263 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
2. Risk-based Internal Audit: Risk-based Internal audit is conducted based upon the risk assessment of
business and control risks of branches.
2A. Identification of Business Risks: The risk assessment process includes: -
Identification of inherent business risks in various activities undertaken by branches (Business risk)
2B. Assessment of Control Systems: Assessment of effectiveness of control systems for monitoring inherent
risks of business activities of branch (Control risk)
2C. Assessment of Risk Areas: Making an assessment of level and direction of various risk areas and assess
level and direction of overall business risk and control risk.
2D. Drawing up of Risk Matrix: Drawing up of risk matrix taking into account factors viz. Risk of branch

(CNO-BA.260) Examples of Internal Controls in a Bank
General Controls
Story to Remember Points
1 Character – Bank Manager performing his duties.
st
Financial powers: The financial powers of officers of different grades should be clearly defined.
Rotation: The staff and officers of a bank should be shifted from one position to another frequently and
without prior notice.
Insurance: The bank should take out insurance policies against loss due to all the risks such as fire, natural
calamities, theft and employees’ infidelity.
Cooperating in Surprise Inspection: There should be surprise inspection of head office and branches at
periodic interval by the internal audit department. The irregularities pointed out in the inspection reports
should be promptly rectified.

2 Character – Store In-charge performing his duties.
nd
Bank forms: All bank forms (e.g. Cheque books, demand draft/pay order books, travellers cheques, foreign
currency cards etc.) should be kept in the possession of an officer, and another responsible officer should verify
the issuance and stock of such stationery.
Confidential Books: The signature book and the telegraphic code book should be kept with responsible
officers and access should be allowed only to authorised officers.

3 Character – Dedicated Employee performing his duties.
rd
Checked by another: The work of one person should always be checked by another person (usually by an
officer) in the normal course of business.
Mail: The mail should be opened by a responsible officer. Signatures on all the letters and advices received
from other branches of the bank or its correspondence should be checked by an officer with the signature
book.
Arithmetical accuracy: The arithmetical accuracy of the books should be proved independently every day.
Cash
1. Custody and Management of Cash:
- Joint custody of cash by two responsible officers.
- Daily test-checks and occasional full counts by an officer other than cash handlers. Agreement of actual cash
with Day Book balance.
- Verification of high-value transactions by a higher officer and remittance of excess cash to currency chest
daily.
2. Segregation of Duties:
- Cashier's restriction from accessing customer’s ledger accounts and the Day Book.
- Officer in Cash Department and receiving cashier to sign the counterfoil of cash receipt vouchers.
- Payments made post voucher authorization and entry in customer’s account.
3. Verification and Reconciliation:
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