MANAGEMENT AUDIT IN BANKS

Management Audit in Banks is conducted annually to arrive at the health of the Circle, Region, or Zone, as per the terminology adopted by the concerned Bank in India.  

Management audit involves going through the Books of Accounts of the entire Circle/Region/Zone, but available in one place.  Management Audit is done at the macro level, while the Branch is done on a micro basis.

Management Audit of a Circle/Region/Zone :

The Central Management of the Bank entrusts this assignment to the Auditing Panel within the Bank of a different Zone which has no connection with the Auditee Circle/Region/Zone.  To be precise, the Auditing Officials headed by the In-charge of another Audit Office conduct this task with a team of Officials from his Office, and are sometimes assisted by One Officer from another Auditing Zone.

The Auditing Office would send a communication to this effect to make adequate preparation for the Audit.  The Office being audited should keep necessary files, records, etc. ready for perusal by the Audit Officials without any hassle. 

The Head of the Audit Office will give necessary instructions to his Team Members and they will be assigned the Departments to audit exclusively.  The Departments like Planning and Development Department, Credit Department, Credit Monitoring Department, etc. 

Planning and Development Department:

 

This Department would provide the data related to the Branches coming under their jurisdiction.  The data on Deposits, Advances and Non-Performing Assets, etc. would be culled out to arrive at the Circle/Region/Zone's aggregate figure. The following data are obtained from P & D Department :

 

D    Deposits	Type of Deposit	Amount	Target	Actual	Growth (+ or -)
	Savings Bank
	Current Deposits
	Term Deposits
	CASA
	Low-Cost Term Deposits
A         Advances	Total Advances
Sector wise Adv.	Priority Sector Advances
	Non-Priority Sector Advances
	Retail Lending
	Secured Advances
	Unsecured Advances
N P A	Total NPA
	NPA as of Last audit
	NPA as of present Audit
	Sector-wise NPA
	Sub-standard
	Doubtful
	Loss
	Gross NPA
	Net NPA
	Provisions made
Branch                          Network	No. of newly opened Branches
ATM Expansion	No. of newly opened ATMs
	Average hits per ATM
Profitability	Profit / Loss
	No. of Branches making Loss

 

This apart, the P & D Department is required to furnish files of frauds, FMRs submitted to Central Management, and the present status of such frauds.

 

Security Department is attached to P&D Department, which is headed by an Officer, who will give his visits made to Branches under their jurisdiction at periodical intervals.

 

The Visit Reports submitted by the officials of the Controlling Office should be perused by the Auditing Officials and make their comments on the same.

Credit Department:

 

From Credit Department, the Auditing Team will obtain the files relating to large borrowers, i.e. the Credit proposals which do not fall within the delegated powers of the Branch and are sanctioned by the Higher Office.  Out of the above proposals, at random, a certain number of files will be selected by the Auditing Team for perusal.  The Team is required to go through the papers thoroughly and make their comments.  

 

It is obligatory on the part of the Credit Department to submit the papers pertaining to monitoring of advances sanctioned at their end and also at the Branch level.  Such Monitoring Reports and Various Returns submitted to Central Management are required to be produced to the Auditing Officials for perusal.  

 

It is also the duty of the Credit Department for making effective follow up with the Branches concerned in the case of Stressed Assets, where overdues are observed, and also ensure that the same are recovered well within the stipulated time to avoid those accounts slipping into Non-Performing category.  For this purpose, the RBI has instructed the Banks to incorporate Early Alert System and Special Mention Account system.

Credit Monitoring Department:

 

Credit Monitoring Department is in charge of taking up Non-Performing Assets with the concerned Branches for recovery of the dues in Sub-standard and other categories of NPA to avoid further loss to the Bank by way of making necessary provisions in their Balance Sheet.

 

Wherever necessary, the Credit Monitoring Department is required to initiate legal measures for recovering Bad Debts.  Therefore, the Legal Department is supposed to associate itself with Credit Monitoring Department.  

 

The Credit Monitoring Department should provide the data on no. of NPAs, their bifurcation, and the total amount of recoveries made.  Besides, they are also required to submit the data on Lok Adalats conducted, recoveries made thereon, number of cases filed with the Debt Recovery Tribunal and their present position, Possession Notices issued, and further developments, if any.

 

The Auditors are required to conduct SWOT Analysis, prepare an Executive Summary of the audit along with their report, and submit to Central Management.

 

After getting the above details, the Audit Team would enter the data in the structured format of the Report and submit the same to Central Management.

 CLOSURE OF AUDIT REPORT

The Central Management will then follow up with the concerned Circle/Regional/Zonal Office for rectification of the adverse observations, if any, made by the Auditors and ask for their reply.  Based on the reply submitted, the Central Management would place the same in the Audit Committee Board and close the report.