Audit points - audit process, Auditing

Audit points - Audit Process

Key audit points are as

1. Internal control particularly along with regard to computerisation and internal audit. 

2. Provision for doubtful debts in advances. 

3. The manner of describing the profit figure and balance sheet items those invloved hidden inner results.

4. Critical review of the bank's financial position and reserves also

(a)Profit and loss account: Whenever looking at a bank's loss and profit account the accountant should seek to discover that what proportions of the bank's profits are derived from sustainable business and how much approach from sources of income such are uncertain or speculative.  The three main sources of income which require examination are: the net interest among lending and borrowing, dealing profits derived from the banks investments commissions and fees and portfolio.

(b)Current status: Therefore he may be auditing a prior time the auditor should talks along with the management any recent problems to discover where profits are still being made in the recent trading time.

(c)Review of projected profits: Enquiries should be made to ascertain where projected profits obtain into account suspended interest, bad debts provision and any another decline in the realisable value of assets.

(d)Frequency of reviews: The auditor should enquire where provisions are thus reviewed on a regular basis.

(e)Further enquiries: in future enquiries are made in the following areas: investments, foreign exchange, certificates of deposits, land and loans.  The fee earning activities of the bank are investigated also in the areas of loan commitment, portfolio management, acceptances and corporate advisory work.

Banks are incorporated within the Companies Act such as any other business however are granted particular privileges according to the same Companies Act and subjected to especially strict controls by the Central Bank of US.  Separate from frequent visits from the Central Bank and usual reports to the Central Bank on liquidity levels the auditor is necessary to submit a copy of his audit report to the Central Bank.  The auditor should review the reports submitted to the Central Bank and the reports submitted to the bank through the Central Bank as a conclusion of the visits.  Also the auditor is concerned along with enquiring into compliance along with the Banking Act.  Hypothetically banks are permitted to set up secret reserves through writing down creating or assets excessive provisions with no disclosing such they have done like. The effect of this is as:

(a)The actual position may be better rather than that disclosed however never worse.

(b)In good years, secret reserves are making and in bad years they are run down.  The result of this is to still out the profits and the customers are not then attracted to withdraw their deposits whether the bank has a bad year.

Whether the bank was to take benefits of these provisions so, it would be impossible for the auditor to give a fair and true view report on the accounts.  Practically banks in US do not take benefits of the provisions and hence the auditor carries out a common audit and obtains a report in fair and true terms.

Posted Date: 1/28/2013 2:48:57 AM | Location : United States

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