Nitant P. Trilokekar is a Mumbai-based chartered accountant equipped with systems audit credentials. Using his two decades of experience in the banking industry, he has written Contemporary Bank Audit, from Snow White (www.swpindia.com).
"Banks record their books on principles of triple entry," he writes in the intro. In this system, key is GL or General Ledger, "in which vouchers are posted directly in addition to the posting in the respective accounts." Trilokekar explains that this control is so important to bankers that they insist on triple entry even after computerisation.
Banks are subject to many an audit at high frequency; so much so, "on any day in a year, there is always some audit in progress at the bank, either as internal inspection, revenue audit, statutory audit or RBI audit." In addition, most well-managed banks have internal control systems in place, and you can place reliance on the same, assures the author. However, when you find an exception, that should set all alarm bells ringing, he cautions.
A chapter on internal controls speaks about topics such as rotation of duty, head-office returns, and balancing of books. A checklist helps in internal control determination, while a flowchart outlines the steps involved in clearing forward.
The chapter on verification of assets begins with cash, and moves on to other valuables (such as tokens, forex and postage), balances with other banks, investments and so on.
The discussion of `audit of advances' is elaborate; it encompasses term loans, cash credit, overdraft, guarantees and more. Under each, the author lists `common errors'. For instance, `absence of documentation' is one of the most common errors in TOD or temporary overdraft; sanction may not be written in the required format "though vouchers bear the signature of the manager implying sanction."
Ready takeaways for a majority of CAs are in the chapters on statutory audit, and concurrent audit. To seekers of specialised knowledge, there is much to reap from the pages that talk about audit of forex transactions, forex dealing room audit, bank system audit, prudential norms, and Basel II impact. Trilokekar points out that Basel II concerns were woven into the format that came in 2002, ushering in risk-based supervision.
Of immense relevance are the annexures at the end of each chapter; these contain the text of RBI's circulars and reports, summarise the findings of committees, provide glossary, and give samples of formats.
A not-to-miss chapter is the one on frauds, which begins with a quote of Oscar Wilde: "The thief is the artist. The policeman is only a critic." Trilokekar classifies the frauds as computer-based and `the rest'. In the non-computer ones are situations such as opening false accounts to deposit stolen instruments, transfer of money from dormant accounts, flouting exchange control provisions, forgery, and so on. Each fraud is described, and the author elaborates upon the modus operandi, before giving tips for detection and prevention. The book has an accompanying CD, with printable checklists.
Essential addition to the professionals' bookshelf.