The Institute of Chartered Accountants of India (ICAI), the national standard setting body of auditors, has proposed comprehensive changes to the current accounting practices in commercial banks to make bank audits foolproof and effective.

The auditing restructure will imbibe the spirit of banking regulator Reserve Bank of Indias (RBIs) Know Your Customer (KYC) principles and help check financial frauds, identify money laundering and suspicious activities and scrutinise large cash transactions.

The proposed changes had been submitted to the Indian Banks Association, Amarjit Chopra, president of ICAI said.

Currently, the auditors are bogged down by routine auditing requirements and are unable to be vigilant against possible frauds. Once the audit requirements are restructured and re-prioritised, auditors can ensure compliance level with credit dispersal and take care of overdue bills, payments etc, Chopra said.

The apex bank has been stressing on KYC guidelines to safeguard banks from being used for the transfer or deposit of money from suspicious origins.

The new system, if approved, will allow auditors to ensure even the authenticity of customer identification methods followed by banks.

Under KYC norms, banks are required to issue travelers cheques, demand drafts, mail transfers and telegraphic transfers of Rs 50,000 and above only by debit to customers accounts or against cheques. Similarly, banks are required to keep a close watch on cash withdrawals and deposits of Rs 10,00,000 and above and maintain proper records of such transactions.

RBIs KYC guidelines talk about the establishment of internal control systems, checks against terrorism finance, need for periodic, independent evaluation of such controls and adherence to the Foreign Contribution Regulation Act.

According to Chopra, the new responsibilities will also see that auditors are eligible for much higher fee than what they charge on Monday.

The fee levels in concurrent audit (in banks) are abnormally low keeping in view the stipulations in the agreement. The revised proposal will definitely lead to prioritising those work requirements and also set a minimum fee structure.