Importance of Audit in Banks

Audit or the auditing is an activity which is undertaken by any business organisations like the banks. The
audit is undertaken on its own or by the requirement under law to go through its accounts, transactions
and the documents to ensure that the same are correct and legal and also as per the system and
procedures. The bank audits are broadly classified under three broad categories:

1) Concurrent Audit

2) Internal Audit

3) Statutory Audit

Besides above there are other audits which have become compulsory to be undertaken by the banks
like the credit audit, stock audit, management audit and the customer service audit and the vigilance
audit. The audits are conducted by the various agencies like the internal audit by the team of the
officials of the bank from the audit and inspection teams. The short term audit by the regional or zonal
office and vigilance audit from the vigilance department of the banks.

The Companies Act 2013 has clearly defined the roles and responsibilities of statutory Auditor, the
responsibilities of the auditor are a focus in Companies Act 2013 as compared to Companies Act 1956.

Concurrent Audit:

The audit or examination of transactions happening as and when a transaction actually happens, it is a
continuous audit which goes on all the year around and this audit is generally conducted by the external
auditors (Chartered Accountants)

Internal Audit:

When the bank constitutes a team for the audit within its own organization to cater to its auditing
requirements. Generally such types of audits are conducted as over the requirement after a year or half
year

Stock Audit: The audit of the stock, debtors to work out the amount required for working capital/funds
provided by the bank. It is to check the diversion of funds and utilization for intended purpose. The audit
is conducted by the chartered or cost accountants not related with the branch or the unit or concurrent
or the statutory Auditors. The banks are also subject to the IT audits and the credit audit. According to
the business of the branches the audit is also conducted by the Reserve bank of India.