Concurrent Audit

Definition:
Concurrent Audit is an ongoing examination of financial transactions as and when they occur. It is designed to detect and rectify errors or frauds in real time before they escalate.

Key Features:

• Real-time or near real-time transaction scrutiny

• Conducted throughout the year, typically on a monthly reporting cycle

• Performed by independent auditors (usually Chartered Accountants)

• Covers high-risk and high-volume branches or operations

Scope of Work:

• Daily transaction verification

• Adherence to KYC/AML norms

• Monitoring of cash balances and critical limits

• Review of loan sanctions and disbursements

• Income leakage detection

• Verification of internal controls and compliance

Purpose: Concurrent audits provide an immediate check on irregularities, preventing their accumulation. This ensures smooth branch functioning and strengthens the bank’s control environment, thereby protecting depositor interest and public funds.

2. Internal Audit / Information Systems (IS) Audit

Definition:
Internal Audit is conducted by or on behalf of the bank to evaluate internal controls, risk management practices, and compliance with internal policies. Information Systems Audit, a sub-part of internal audit, focuses on the IT systems, cybersecurity, and automation processes used by banks.

Key Features:

• Conducted as per internal schedules and audit plans

• May be area-specific (e.g. credit, forex) or cover the entire branch

• Includes on-site branch visits by audit teams

• Increasingly focused on IT platforms like Core Banking Systems (CBS), internet and mobile banking

Scope of Work:

• Review of internal control mechanisms

• Evaluation of risk management frameworks

• Verification of compliance with standard operating procedures (SOPs)

• System access, data security, and IT governance review

• Software performance, data integrity, and cyber risk assessments

Purpose: With the digitalization of banking operations, Internal and IS Audits ensure that both manual and technology-driven processes are reliable, secure, and efficient. It also prepares the bank for regulatory reviews and reduces vulnerability to cyber threats.

Statutory Audit

Definition:
Statutory Audit is a legally mandated audit carried out at the end of each financial year to ensure that the financial statements of the bank reflect a true and fair view, as required by law and RBI guidelines.

Key Features:

• Conducted annually (typically in March–April)

• Mandated by the RBI and conducted by RBI-approved audit firms

• Focuses on the overall financial health of the bank

• Determines classification and provisioning of NPAs (Non-Performing Assets)

Scope of Work:

• Review of final accounts and financial statements

• Verification of asset classification and NPA provisioning

• Adherence to statutory requirements like CRR, SLR, and PSL

• Audit of loan portfolios and interest recognition

• Compliance with RBI circulars and accounting standards

Purpose: Statutory Audit provides external validation of the bank’s financial position. It ensures legal compliance and transparency in reporting, enabling accurate disclosure to regulators, shareholders, and the general public.

Why Bank Audit Matters

Bank audits are vital for:

• Safeguarding depositor funds

• Preventing fraud and mismanagement

• Ensuring regulatory compliance

• Identifying operational inefficiencies and control gaps

• Strengthening public confidence in the banking system