Project Report

(Project Semester 1June-15July 2019)

Comparative Study Using Concurrent Audit At

Rajasthan Urban Cooperative Bank

Under the CA Firm

Jain Paras Bilala & Company

Submitted by

SHUBHAM KHETAWAT
Student ID: 17BBAN042

Under the Guidance of

Faculty Internship Guide: Industry Gudie:

Name: DR. MONU KURUVILLA Name: CA Manoj Kumar
Designation: Designation: Partner

Faculty of Management

JECRC UNIVERSITY, JAIPUR

1June to 15 July, 2019

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2
 PREFACE

In today’s era, the managerial ability is so demanded in the company. For doing
better managerial work, the person must have the knowledge of the management.
The knowledge is not only based on theoretical but also on practical aspects.

The students are required to examine the different industries to get the practical
knowledge as well as it helps them to know about different types of management
structure followed in different companies.

The practical study is an opportunity to blend the the Knowledge with practicality
of the subjects. The training gives inopportunity to test and verify the application
of theories and comprehended interaction between management theory and
practice. Being the student of management,.

I have done the training in one of the best government bank, “THE RAJASTHAN
URBAN COOPERATIVE BANK” under the CA firm. After visiting the
merchants carefully, I have tried to collect some important data & interpreted
it in the best possible manner and best of my ability.

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 Declaration

I hereby declare that the project work entitled “Comparative study using
concurrent audit” is an authentic record of my own work carried out at
“Rajasthan urban cooperative bank” as requirements of six months project
semester for the award of degree of BBA., JECRC University, under the guidance
of “CA Manoj kumar” and “DR. MONU KURUVILLA”, during 3 June, 2019
to 17 July, 2019.

Signature of student :
Name of Student : Shubham Khetawat
Student ID : 17BBAN042

Date: ___________________

Certified that the above statement made by the student is correct to the best of our
knowledge

Faculty Guide Internship Guide

Name: DR. MONU KURUVILLA Name: CA Manoj Kumar
Designation: Designation: Partner
Signature:
Seal of Company:

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 ACKNOWLEDGEMENT

The pleasure and the satisfaction of the completion of our summer internship
project would be impossible without the support and the guidance of few, who
spared there valuable time for us apart from their regular schedules. They have
been the source of inspiration towards the progress of our project.

Profound sense of gratitude is due to Mr. MANOJ KUMAR who helped us to

clarify my thoughts & guided me to conduct the training in the right direction.

I am also thankful to Mr. SANDEEP AGARWAL, Concurrent Auditor & Mr.

RISHI LASHKARI, Head, RAJASTHAN URBAN COOPERATIVE BANK ,
Jaipur who provided us with all the required information on the concurrent audit
procedures.

Special thanks to our project guide DR. MONU KURUVILLA for guiding me &
giving me valuable advice. This project has been made possible through direct or
indirect cooperation of various persons for whom I wish to express my
appreciation & gratitude.

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 TABLE OF CONTENTS

S.NO. Components PAGE NO.

1 Preface

2 Internship Certificate

3 Declaration

3 Acknowledgement

5 Table of Contents

4 CHAPTER-1
INTRODUCTION TO INDUSTRY
1.1 Banking Sector
1.2 The Institute of Chartered Accountants
of India (ICAI)
5 CHAPTER-2
COMPANY PROFILE
2.1 The Rajasthan Urban Cooperative Bank
2.2 Jain Paras Bilala And Company

6 CHAPTER-3
About Concurrent Audit
7 CHAPTER-4
Research Methodology
8 CHAPTER-5
Data Analysis And Interpretation
9 CHAPTER-6
Findings
10 CHAPTER-7
Conclusion
11 CHAPTER-8
Suggestion and Recommendation
12 CHAPTER-9
Biblography

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CHAPTER- 1

INTRODUCTION
TO THE
INDUSTRY

7
1.1 INTRODUCTION TO BANKING
In the past i.e., before the introduction of money there was a barter system. When
the Money came into vogue its use was limited to buying and selling activities
only. Growth of economy consequent upon development in the fields like
communication, science, transportation has necessitated the increase in the usage
of money. With the growth of money the use of credit instruments also increased.
The origin of Banks can be traced the money lenders who used to lend money for
business purpose and also used to accept the deposits from friends, relatives and
others in a limited sense. The growth in the fields like trade, commerce, industry,
science and technology has accelerated the growth of banking sector. Today the
Banking industry has become a part and parcel of the Economic system and we
today cannot imagine economy or growth in the economy without Banks.

MEANING AND DEFINITION OF BANK AND

BANKERS

The word Bank associated with the Institution dealing in money raised from the
public. In other words Banks is an institution which borrows money from public
in the form of deposits and creates credit by lending it to the needy. According to
Kinley , “A Bank is an establishment which makes to individuals such advances
of money as may be required and safely made, on to which individuals entrust
money when not required by them for use”. Normally a Bank receives deposits
from the public and supplies credit to manufacturers, businessmen, agriculturists,
artisans and other productive purposes for the economic growth of the country. In
the words of Hart “A Banker is one who in the ordinary course of his business,
receives money which he repays by honoring cheques of persons from whom or
on whose account he receives it”. According to World Bank Encyclopedia, “Bank
is a business establishment that safeguards people’s money and uses it to make

8
loans and investments .According to Cowther, Banker is “a dealer in debt of his
own and other people’s.

BANKING INDUSTRY IN INDIA:

In India, the first joint stock bank was the Bank of Hindustan, established in 1770.
In 1881, came the Oudh Commercial Bank as a purely Indian joint stock bank,
followed by the Punjab National Bank in 1894. The East India company
established three presidency banks in Calcutta, Bombay and Madras. These banks
were amalgamated in 1921 into a single bank called the Imperial Bank of India. It
served as a Government’s bank till the arrival of a Central Bank namely Reserve
Bank of India in 1935. RBI was nationalized in 1949. Banking Act in India were
passed in 1946 and in 1949.

The year of 1949 was a watershed in the banking history of India. 14 major
Commercial Banks were nationalized on 19th July 1969. There was
denationalization on 10th February 1970 by the order of Supreme Court based on
writ petition filed after a prolonged hearing challenging the validity of the act. But
on 14th February, 1970 a new Ordinance was promulgated to remove loopholes in
earlier Act and to renationalize 14 major Indian commercial banks, namely:

Central Bank of India

Punjab National Bank

United Bank of India

Bank of Baroda

United Commercial Bank

Canara Bank

Dena Bank

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Syndicate Bank

Union Bank of India

Allahabad Bank

Indian Bank

Bank of Maharastra

Indian Overseas Bank

Bank of India

After first phase of nationalization again on 15th April 1980, six more banks were
nationalized. They are –

Andhra Bank

Corporation Bank

New Bank of India

Orienal Bank of Commerce

Punjab and Sindh Bank

Vijaya Bank

PROSPECTS OF THE INDUSTRY:

All the banks are forced to struggle to retain their identify and maintain the
growth process in the changed scenario, marked with the following features.:

 Deployment of the additional funds available consequent to the reduction

in Statutory Reserve Requirement, in a profitable manner.

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  Servicing of increased external funds mobilized/received to meet the
prescribed norms of Risk Assets Ratio (CRAR)
 High volume of non performing assets creating an adverse impact on the
return on advances.
 Market determined interest rates, investing in low yield on Government
securities, instead of extending the loan portfolio.
 Enhanced competition with the entry of new private sector banks.
 Rejuvenated public sector banks re-emerging at the market place with
their inherent strength, to claim their market share.

Liberalization and de-regulation process started in 1991-92 has made a sea change
in the banking system. From a totally regulated environment, the Indian banking
has gradually moved into a market driven competitive system.

The concept of universal banking is gaining momentum on the strength of

increased coverage of activities between developing Financial Institutions and
banks

The traditional banking functions would give way to a system geared to meet all
financial needs of the customers. We could see emergence of highly varied
financial products, which are tailored to meet specific needs of the customer in the
retail as well as corporate segments. Retail lending will receive greater focus.
Banks would compete with one another to provide full range of financial services
to this segment.

Mergers and acquisitions would gather momentum, as managements will strive to

meet the expectations of stakeholders.

Corporate governance in banks and financial institutions would assume greater

importance in the coming years.

A major challenge in improving organizational effectiveness of banks lies in

strengthening their capabilities of risk management.

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1.2 The Institute of Chartered Accountants
of India (ICAI)
The Institute of Chartered Accountants of India (ICAI) is the national
professional accounting body of India. It was established on 1 July 1949 as a
statutory body under the Chartered Accountants Act, 1949 enacted by the
Parliament (acting as the provisional Parliament of India) to regulate the
profession of Chartered Accountancy in India. ICAI is the second largest
professional Accounting & Finance body in the world. ICAI is the only licensing
cum regulating body of the financial audit and accountancy profession in India. It
recommends the accounting standards to be followed by companies in India to
National Financial Reporting Authority and sets the accounting standards to be
followed by other types of organisations. ICAI is solely responsible for setting the
Standards on Auditing (SAs) to be followed in the audit of financial statements in
India. It also issues other technical standards like Standards on Internal Audit
(SIA), Corporate Affairs Standards (CAS) etc. to be followed by practicing
Chartered Accountants. It works closely with the Government of India, Reserve
Bank of India and the Securities and Exchange Board of India in formulating and
enforcing such standards.

Motto and mission

New CA Logo for exclusive use by Chartered Accountants

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The motto of the ICAI is Ya Aeshu Suptaeshu Jagruti (Sanskrit) which literally
means "a person who is awake in those that sleep". It is a quotation from the
Upanishads (Kathopanishad). It was given to the ICAI at the time of its formation
in 1949 by Sri Aurobindo as a part of its emblem. CA. C. S. Shastri, a Chartered
Accountant from Chennai went to Sri Aurobindo and requested him through a
letter to give an emblem to the newly formed Institute of which he was an elected
member from the Southern India. In reply to this request, Sri Aurobindo gave him
the emblem with a Garuda the mythical eagle in the center and a quotation from
the Upanishad: Ya Aeshu Suptaeshu Jagruti. The emblem along with the motto
was placed at the first meeting of the Council of the Institute and was accepted
amongst many other emblems placed by other members of the Council.

History
The Companies Act, 1913 passed in pre-independent India prescribed various
books which had to be maintained by a Company registered under that Act. It also
required the appointment of a formal Auditor with prescribed qualifications to
audit such records. In order to act as an auditor, a person had to acquire a
restricted certificate from the local government upon such conditions as may be
prescribed. The holder of a restricted certificate was allowed to practice only
within the province of an issue and in the language specified in the restricted
certificate. In 1918 a course called Government Diploma in Accountancy was
launched in Sydenham College of Commerce and Economics of Bombay (now
known as Mumbai). On passing this diploma and completion of three years of
articled training under an approved accountant, a person was held eligible for
grant of an unrestricted certificate. This certificate entitling the holder to practice
as an auditor throughout India. Later on, the issue of restricted certificates was
discontinued in the year 1920.

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In the year 1930, it was decided that the Government of India should maintain a
register called the Register of Accountants. Any person whose name was entered
in such register was called a Registered Accountant. Later on a board called the
Indian Accountancy Board was established to advise the Governor General of
India on accountancy and the qualifications for auditors. However it was felt that
the accountancy profession was largely unregulated, and this caused lots of
confusion as regards the qualifications of auditors. Hence in the year 1948, just
after independence in 1947, an expert committee was created to look into the
matter.

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CHAPTER- 2

COMPANY
PROFILE

15
2.1 THE RAJASTHAN URBAN COOPERATIVE
BANK

RSCB has successfully completed almost six decades of services to the state of
Rajasthan in general and to the rural and farming community in particular.

Looking at the area of Rajasthan State, RSCB has converted its regional offices
into regional branches and presently five regional branches are catering the
financial needs of DCCBs situated in their area of operation.

OUR MISSION
Our corporate mission is to become a strong and competitive Cooperative
Banking Network, which offers innovative financial products along with varied
range of services to serve rural masses with rejuvenated short-term cooperative
credit structure to serve the people of Rajasthan.

PRIORITIES
1. To issue Kisan Credit Card to all eligible farmers.

2. To inculcate thrift habits in rural areas by mobilizing rural savings through

PACS/MINI Banks and branches of DCCBs.

3. To start AADHAR based services for the customers.

4. Computerisation of PACS earmarked for the first phase in the state.

5. To release farmers from the clutches of moneylenders by providing cheaper

and timely institutional credit.

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6. To increase investment credit to farmers to create/enhance capital formation in
the state.

7. To promote Farmer’s Club & SHGs ensuring credit linkage of maximum

number of SHGs & special efforts for women SHGs.

8. To bring about technological changes in the Short-Term Cooperative Credit

Structure.

1. To enhance corporate image of cooperative banking in general and Apex

Bank in particular.

2. To serve the rural masses through Mini banks in 4000 Bharat Nirman Rajeev
Gandhi Seva Kendra’s constructed at Gram Panchayat Level.

RSCB'S ORGANISATIONAL SET-UP

At present Board of Directors is functional in The Rajasthan State Cooperative
Bank, which has been constituted after due election process. The Chairperson
presides over board meetings. The Chief Executive Officer of the bank is
designated as Managing Director and shall be responsible for the general
administration of the bank subject to the control of the Board of Directors. There
are three General Managers and six Dy. General Managers for different
departments in Head Office to assist M.D. in day-to-day management. The bank
has six major departments at HO level, which are:

 Administration & Personnel (A&P)

 Operation (Opr.)

 Planning & Development (P&D)

 Accounts & Finance (A&F)

 Inspection & Supervision (I&S)

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 Electronic Data Processing (EDP)

Banks Regional offices viz; Jaipur, Kota, Udaipur, Jodhpur and Bikaner are
functioning with a view to keep a close watch on District Central Cooperative
Banks within their area of operation. Regional Offices have also started banking
business as full-fledged regional branches. Banks' remaining 11 branches are
functioning in the municipal area of the Jaipur city.

OBJECTIVES
According to the Byelaws main objectives of RSCB are as under

 To promote the economic interest of the members of the bank in accordance

with cooperative principles.

 To serve as a balancing center for all cooperative banks & societies of the
State.

 To grant loans to cooperative institutions registered or deemed to be registered

under the Act and other members enrolled as per provisions of the Byelaws.

 To lend money or grant overdrafts to, or open cash credit for, depositors and
members of the bank's staff on the security of:-

i. Fixed deposits,

ii. Government securities, and

iii. Other securities approved by the Registrar, also grant clean overdrafts
to depositors, who are at least nominal members according to the rules
framed by the Board.
iv. • To undertake inland exchange business by collecting or discounting
bills of exchange and hundies or to issue demand drafts. The

18
 discounting of bills shall be for those who are at least nominal
members according to rules framed by the Board.

v. • To receive for safe custody securities, ornaments and valuables.

vi. • To buy and sell for the legitimate investment of surplus funds,
securities of the Govt. of Rajasthan or other securities as specified in
clauses (a), (b), (c) and (d) of section 20 of the Indian Trusts Act, 1882
and to act as agent for cooperative institutions for the purchase and
sale of such securities.

vii. • To open branches where necessary, in its area of operation to

following the procedure applicable therefore on the bank, and

viii. • To open, establish, maintain & operate currency chest & small coin
depots in such terms and conditions, as may be required by the RBI
Act, 1934 and to enter into all administrative or other arrangements for
undertaking such functions with Reserve Bank of India.

 Generally to undertaking such activities as may be conducive to the attaining

of the above objects.

OTHER ACTIVITIES :
1) KISAN CREDIT CARD
In the State of Rajasthan, the crop loans are being disbursed in the cash credit
form with introduction of Kisan Credit Card (KCC) Scheme. At present all crop
loans are being disbursed under KCC. Upto Rs. 1,50,000/- without charge on land
and above this limit under KMY.

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The State Govt. has also taken keen interest to see that more and more KCC are
issued to the eligible farmers of the state. Short-term cooperative credit structure
of the state has issued 39.99 lac KCC up to 31st March, 2014.

2) DIVERSIFIED LOAN SCHEMES

Ever reducing margin on agricultural lending made diversification need of the
time. Consequent to this concept several loan schemes were launched from time
to time keeping in view the requirement of general public of the state by Apex
Bank. Most of the schemes have been adopted by DCCBs, some of them are as
under: -
 Personal Loans.

 Vehicle Loans.

 Working capital finance to the existing & new industrial units.

 Cash Credit limits.

 Krishak Mitra Yojana

 House Loan Scheme

 Vyavasayik Parisar Loan Scheme.

 Swarojgar Credit Card Scheme.

 Gyan Sagar ( Education) loan scheme.

 Financing against N.S.Cs & Securities.

 Avika Sahkari Credit Card Scheme for Sheep rearing.

 Viswas Yojna for handicapped persons.

 Loan against property- mortgage loan/limit.

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3) ISO CERTIFICATION
• RSCB has implemented ISO 9001: 2008 QMS standards in its HO, Tonk Road
and Nehru Bazar branch. ISO 9001: 2008 certification has been received for the
HO, Tonk Road and Nehru Bazar branch.

4) CREATING INNOVATIVE FINANCIAL PRODUCT FOR THE

POOREST OF THE POOR (SELF HELP GROUPS):
Under the micro-credit system promoted by Short Term Cooperative Credit
Structure in the State, the DCCBs/PACS have been playing the role of facilitators
to organize Self Help Groups specially the women clientele to address their
common socio-economic needs by pooling their resources to make available small
interest bearing loans to their members. This process helps them in inculcating
saving habits and imbibes the essentials of financial intermediation including
prioritization of needs, setting terms & conditions, accounts keeping & building
financial discipline by handling resources of a size beyond their individual
capacities.
These groups are graduated to be linked with DCCBs/PACS. Since beginning of
the SHG-Pilot project 78541 new SHGs have been formed of which 75208 SHGs
were benefited by providing cumulative credit of Rs 43772.64 lac up to
31.03.2014.

5) CROP INSURANCE SCHEME:-

The Agriculture Deptt. Of GoR issues notifications for implementation of Crop

Insurance Schemes in the State. During Rabi 2013-14, Modified National
Agriculture Insurance Scheme (NAIS) was implemented in 12 districts. In
remaining 21 districts WBCIS was implemented by selected Insurance
Companies. During Kharif 2014, Modified NAIS is to be implemented in 12
districts viz. Barmer, Chittorgarh, Sawai Madhopur, Pratapgarh, Rajsamand,
Bhilwara, Jhunjhunu, Tonk, Ajmer, Jaisalmer, Jalore & Pali. In remaining 21
districts WBCIS will be implemented.
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6) PERSONAL ACCIDENTAL INSURANCE SCHEME

Personal Accidental Insurance Scheme has been introduced in the state through
M/S United India Insurance Company with an objective to provide financial
security to its loanee members, customers, depositors & staff members at a
nominal premium against the accidental losses. During the period from 1-04-2013
to 31-03-2014 total insured persons were 1296382 and premium amount Rs 1.05
crore was paid to insurance company. 200 claims were sanctioned amounting to
Rs 1.00 crore. Claims under consideration are 40 amounting to Rs 20.00 lac.

7) GROUP LIFE INSURANCE

on compulsory basis. It is optional for depositors & employees. The coverage for
loanees is up to Loan outstanding at the time of becoming member of the scheme
or Rs. Ten lac whichever is less. MOU was signed on 14 March, 2012 with L.I.C,
as per approval of GOR for implementation of the scheme.
Under the scheme so far premium of Rs. 35.16 crore of 1823091 loanees from
1.04.2013 to 15.01.2014 remitted to L.I.C. So far 10027 claims amounting to Rs
40.62 crore are passed by LIC. 923 claims were rejected & remaining 1016 claims
were pending of Rs. 2.54 crore.

8) NREGA labourers Accounts:-

Basic Savings Bank Deposit Accounts (No Frill Accounts) of about 46 lac
NREGA labourers of the state are opened by STCCS and prompt payment of
wages through these accounts is being done.

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 2.2 Jain Paras Bilala & Co.

Jain Paras Bilala & Co. is the one of the leading Chartered Accounting and
Consulting firms of Rajasthan – The upcoming and the largest state of India. The
firm is known for its work discipline, expertise, straightforward approach and
professional presentations on various legislative, accounting and other
developments.

Established in 2002 and in a short span of time it has gained a good reputation
with best professional services. Jain Paras Bilala & Co. is a multifaceted
organization providing a range of professional services in various fields including
direct & indirect taxation, internal & statutory auditing, management consultancy,
project financing, business-restructuring and back-office handling.

The team at Jain Paras Bilala & Co. has a strategic-mix of experienced and
young professionals dedicated to the delegated task. The composition of team is
such that it can handle any size of assignment, at office or at site. The in-house
departmentalization has given to the firm the requisite expertise and specialization
in various fields.

Strategically chosen headquarters at heritage City Jaipur is not only very close to
national capital New Delhi, but is well connected to all important parts of the
country, particularly national capital Delhi and commercial capital, Mumbai. The
HQ at Jaipur facilitates functioning of the firm at moderate cost without any
compromise on qualitys.

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Factsheet
Basic Information

Nature of Business Service Provider

Year of Establishment 2002
Legal Status of Firm Partnership

Statutory Profile

GST No. 08AADFJ5301L1ZF

Team / Manpower
The team at Jain Paras Bilala & Co. has a strategic-mix of experienced and
young professionals dedicated to the delegated task. The composition of team is
such that it can handle any size of assignment, at office or at site. The in-house
departmentalization has given to the firm the requisite expertise and specialization
in various fields.

Directors of JAIN PARAS BILALA AND CO are

1. SWATI KHUNTETA
2. DIMPLE KYAL
3. PARAS BILALA
4. MANOJ KUMAR
5. DEEP CHAND JAIN
6. AYUSHI JAIN
7. RUCHITA AGARWAL

24
 8. AKASH METHA

Products & Services

26 products available

 Accounting Services
 Project Finance
 Corporate Services
 Corporate Governance Services
 Payroll Services
 Design & Implement Services
 Financial Accounting Services
 Financial Reporting Services
 Financial Analysis Services
 Asset Accounting Management Services
 Management Services
 Tax Management Services
 Advisory Services
 Tax Planning Services
 Tax Rulings Services
 Tax Deposit Services
 Filing Income Tax Services
 Double Tax Services
 Registration Service Tax
 Accounting Consultancy Service
 Tax Payable Services
 TDS/TCS Services
 Obtaining Tax Services

25
 Application Development

26
CHAPTER- 3

About
Concurrent Audit

Introduction
27
Though a system of concurrent already in existence in large and exceptionally
large bank branches, it was formally introduced by the Reserve Bank of India
vide its circular of October 1993. This measure of the Reserve Bank of India arose
out of the recommendations of the Ghosh Committee on Frauds and Malpractices
in Banks. In its said circular, the banking regulator explained concurrent audit as
being “an examination which is contemporaneous with the occurrence of
transactions or is carried out as near thereto as possible. It attempts to shorten the
interval between a transaction and its examination by an independent person.”
The primary objective if the introduction of a formal system of concurrent audits
in banks was to “serve as an administrative support to branches, help in The RBI
circular also clarifies that concurrent audit is essentially a management
process.The importance of concurrent audit was highlighted by the banking
regulator as being essential for:

• Sound internal accounting functions

• Effective controls

• Setting the tone for vigilance internal audit to preclude incidence of serious
errors and fraudulent manipulations.

The regulator, however, made it amply clear that the concurrent auditor would not
sit on the judgment of the decisions taken by the branch manager or an authorized
official. Subsequently, a working group was set up by RBI under the
Chairmanship of Shri Jilani, (the then Chairman, Punjab National Bank) for
reviewing the working of concurrent audit system in banks and giving its
recommendations for improving it. Further, some of the Public Sector Banks had
also sought additional guidelines on the scope of the system, coverage, reporting
procedures, remuneration payable to Concurrent Auditor, etc. Accordingly, RBI,
in consultation with Audit Sub-Committee of the Board for Financial Supervision

revised the guidelines vide its circular dated 14th August 1996. RBI issued
another circular on 12th August 1997 in connection with Concurrent Audit
System – Foreign Exchange Transactions - Enlargement of scope.

28
The objectives of concurrent audit
1). To supplement efforts of the Bank in carrying out simultaneous internal
checks of transactions and compliance with the systems and procedures of the
Bank.
2). To perform substantive checking in key areas and rectification of deficiencies
in the earliest possible period to preclude the incidence of serious errors and
fraudulent manipulation.
3). To reduce the interval between a transaction and its examination by an
independent person not involved in its documentation.

4). To improve the functioning of the branch, leading to up gradation of working

of the branch and prevention of fraud

5). Compliance with internal control as well as RBI/Government of India

guidelines.

6). Identification of areas/activities requiring corrective action and urgency.

7). To assess overall performance of the branch while assessing productivity and
profitability and to offer useful comments on the basis of audit conducted.
Restriction of matter discussed on the spot with the help of concerned official

8). To report any inefficiency in any operational level.

9). To report any irregularity in working which may result in financial or other
loss to branch.

10). To reporting to appropriate levels of management for appropriate actions for

remedial measures.

29
The concurrent auditor is engaged to supplement the efforts of the branch in
carrying out simultaneous internal check of transactions and other verifications
and compliance with the stipulated procedures laid down. In particular, it should
be seen that: -

• The transactions are properly recorded/documented and vouched

• The irregularities are rectified immediately

• The systems and procedures of the bank are implemented properly

• The transactions are performed or decisions are taken within the policy
parameters stipulated by the Head Office, and is not violating the instructions or
policy prescriptions of the RBI.

• The delegated authority is exercised and the same is within the terms and
conditions of the delegated authority.

In very large branches, which have separate sections dealing with specific
activities, concurrent audit is a means by which the branch in-charge can ensure
that the different sections function within parameters and procedures.

Relationship Between Risks Based Internal Audit and

Concurrent Audit:

The concurrent auditor does scrutinize the important and vital transaction of the
branches having qualitative magnitude of the bank/branch business. It facilitates
correction of irregularities in least possible period so as to minimize the incidence
of errors/irregularities and fraudulent manipulations. Whereas in case of the risk
based internal audit, the focus will shift from the present system of full scale
transaction testing to risk identification, measuring the risk, prioritization of audit
area, periodicity, and allocation of audit resources in accordance with the risk
assessment of the bank /branches.

30
Scope of concurrent audit :
Concurrent audit is an examination which is contemporaneous with the
occurrence of transactions or is carried out as near thereto as possible. It attempts
to shorten the interval between a transaction and its examination by an
independent person not involved in its documentation. There is an emphasis in
favour of substantive checking in key areas rather than test checking. This audit is
essentially a management process integral to the establishment of sound internal
accounting functions and effective controls and setting the tone for a vigilance
internal audit to preclude the incidence of serious errors and fraudulent
manipulations.

A concurrent auditor may not sit in judgement of the decisions taken by a branch
Manager or an authorized Official. This is beyond scope of concerned audit.
However, the audit will necessarily have to see whether the transactions or
decisions are within the policy parameters laid down by the Head Office, they do
not violate the instructions or policy prescriptions of the RBI, and that they are
within the delegated authority.

In very large branches, which have different divisions dealing with specific
activities, concurrent audit is a means to the in-charge of the branch to ensure on
an on-going basis that the different divisions function within laid-down
parameters and procedures.

Before acceptance of assignment of concurrent audit, it is necessary for auditor to

go through carefully the terms and conditions of audit and scope of the
concurrent audit.

Scope of Concurrent Audit is very wide like a ocean. Expectation of Bank and
RBI are very high from chartered accountants. It mainly covers following:

31
a . General Banking

b. Forex

c. Loans and advances

d. Compliance

GENERAL BANKING:
a. CASH
b. DEPOSITS
c. KYC/AML
d. INCOME TAX/SERVICE TAX/OTHER TAX RELATED ISSUES.

 GENERAL BANKING- CASH

a) Handling of cash in the branch and cash in transit. It mainly covers

i) Surprise physical verification of cash

ii) Custody of cash and cash keys
iii) Insurance
iv) Clean Note Policy
v) Re-Issues bank notes in denomination of Rs. 100 and above after
checking authenticity
vi) Facility of exchange of mutilated/soiled notes
vii) Use of ultra violet lamps for verification of notes
viii) Process of detection and impounding of counterfeit notes

ix) Updating cash transactions in computer system without delay

particularly rectification entries.
x) Bait Money

32
 xi) Maintenance of cash records
xii) Reversal of entries outstanding in cash in transit account
xiii) Submission of cash related returns to head office
xiv) Proper accounting and reporting of inward and outward cash
remittances: Movement of cash between branches and currency
chests and reporting
xv) thereof and movement of cash between branches and business houses
under door step banking facility
xvi) Cash retention limit
xvii) Cash receipt in cash collecting machines
xviii) Adherence of other cash processes

b) ATM audit.

i) Surprise physical verification of cash

ii) Custody of ATM cash and keys
iii) Insurance
iv) Retention limit of cash in ATM
v) Retention of ATM roles taken from ATM machines.
vi) Verification of retained cards in machine
vii) Verification of cash packets deposited in Machine
viii) Audit of daily statement prepared by branch officials at the time
loading of cash
ix) RBI license for ATM
x) Reconciliation of ATM account in GL with physical cash.
xi) Maintenance of ATM
xii) Reconciliation of account of cash replenishment agency if ATM are
being operated by outsource agency

 GENERAL BANKING- DEPOSITS

33
a) Check the transactions about deposits received and repaid

b) Checking of correct value dating of deposit transactions in the computer

system

c) Checking of vouchers passed manually in respect of payment of interest on

deposits and deduction of TDS thereon

d) Checking of deduction of penalties on interest in case of premature closure

of FDR

e) Checking of conversion of term deposits, daily deposits or recurring

deposits for reinvestment in term deposits

f) Percentage check of interest paid on deposits may be made, including

calculation of interest on large deposits

g) Interest on Saving Bank Account on Daily product basis

h) Checking of important aspects with regard to interest on deposits

i) Senior Citizen interest benefit is not applicable to Non resident

ii) Extra rate of interest to staff

iii) Renewal of overdue FDR

iv) NRE can only be the joint holder in NRE account

v) Renewal of deposit which are frozen by authorities

34
 i) Activation of inoperative accounts. Operation in inoperative accounts and
payment of interest on unclaimed and unpaid term deposits

j) Check the modification of details relating to account holders as maintained

in the computer system, like change of address, addition/deletion of name,
change of signature, change in contact details like telephone no

k) Checking of accounts opened for person with Autism, Cebral Palsy,

Mental Retardation and Multiple Disabilities Act 1999
l) Date of deposit in PPF- Clarification by RBI.

 GENERAL BANKING- KYC AND AML

The objective of KYC guidelines is to prevent the Bank from being used,
intentionally or otherwise, by unscrupulous elements for fraudulent or money
laundering activities as enunciated in the Customer. Acceptance Policy of the
Bank. The Guidelines are issued to reinforce the existing checks and controls
developed by the Bank and to ensure due diligence while starting/extending
relationship with a new/existing customer.

“Know Your Customer” guidelines for Retail Liability Resident accounts are
revised based on inputs / suggestions received from various teams, necessary
approvals have been taken for the amendments.

Checking of guidelines for know your customer (KYC) norms/Anti Money

Laundering (AML) Standards/combating of financing of terrorism (CFT)/
obligation of banks under PMLA, 2002. Illustrative items are given below:

a) Verification of account opening forms and compliance of KYC norms.

35
b) Checking of new accounts opened particularly current accounts. Operation
in new current/SB accounts may be verified for initial periods to see
whether there is any unusual operations.

c) Check compliance of AML guidelines in connection with foreign

currency/TC/Travel card purchase and sale

d) Accepting cash for purchase of bank drafts or pay orders or banker cheque
for an amount aggregating Rs.50000 or more during any one day (Rule
114 B (i) of Income Tax Act) but as per AML guidelines of RBI, no
PO/Bank draft for Rs.50000 and above cannot be issued by accepting cash

e) Scrutiny of high value cash operations in newly opened account

f) Review of cash transactions for Rs.10 lacs and above

g) Review of accounts having abnormal receipts and payments and nature of

transactions not commensurate with the nature of account

h) Issuance of AML certificate

 GENERAL BANKING- OPERATIONS AND

HOUSEKEEPING

36
a) Auditing of day to day transactions in systematic manner and passing of
vouchers, more attention to be given on following issues
i) Vouchers need approval of Branch Manager and Assistant Branch
manger.
ii) All expenses vouchers are approved as per DFP
iii) All vouchers relating to debit to income
iv) Rectification of entries wrongly passed.
v) Passing of debit entries without feeding cheque number in system
vi) Checking of high value transactions (Cash
payments/transfers/clearing cheques for passing, availability of
vouchers and debit mandate
vii) Passing of payment/cherub in accounts where signature are pending
for scanning
viii) Preparation of vouchers.

b) Review of compliance of MITRE committee recommendation at branches

c) Custody and movement of branch keys.

d) Fixed Assets physical verification.

e) Safe custody of Branch Documents. Physical verification and audit of

branch documents with Branch Document Register. Verify availability and
quality of documents like death claim cases, Issuance of duplicate
DD/PO/FDR, checking of indemnities etc

f) Audit of death claim cases documents

37
g) Physical verification of Gold, Control over sale/transfer, safe keeping and
custody of Gold

h) Physical verification of inventory, control over issue of inventory, safe

keeping and custody of inventory.

i) Physical verification of ATM cards and PINS, control over issue, safe
keeping and custody of ATM cards and PINS

j) Audit of all registers maintained at branch like inward and outward

registers etc

k) Periodical balancing and reconciliation of all the GL head- on computer

and manually.

l) Review all balance sheets heads and outstanding entries in accounts. Egg.
Suspense, sundry, interbank and interbank accounts. Ensure early
adjustment of large value entries and follow up

m) Transfer of entries in various balance sheet accounts.

n) Reconciliation of accounts with other banks

o) Investments kept at branch on behalf of corporate office

p) Verification of lockers documents and locker operations.

i) Physical verification of locker keys

38
 ii) Audit of locker documents
iii) Stamp duty affixed on locker documents
iv) Exchange of vacant locker keys
v) Process of break open of lockers
vi) Recovery of overdue locker rent
vii) Process of permission of locker operations
viii) Linking of FDR/ FD as security for locker/ wait list/ operation of
locker/ due diligence/ un-operated lockers/ nomination/ other issue.

q) Audit of clearing account/transactions:

i) Obtaining balance confirmation from Bank.
ii) Periodical reconciliation of clearing account.
iii) Entries outstanding in reconciliation for reversal and follow up
iv) Accounting of difference in clearing account
v) Delay in debit to party account- Reason/Approval for
TOD/recovery of income
vi) Verify the complete process of inward and outward clearing along
with accounting of inward/outward clearing cherubs bounced
vii) Interest/charges debited by clearing house

r) Verify cherub returned/bills returned and look into reason of return of

those instruments

s) Control over tax collections and remittances.

t) Audit of Government Business like PF/Pension etc

u) System Audit (Computer audit) including sharing of passwords

39
 v) Audit of transactions relating to anywhere banking facility provided to
account holder in all branches

w) Checking of Demit operations

x) Checking of credit cards operations

y) Compliance of security arrangements at branch.

z) Report on scrutiny of staff account.

Types of activities to be covered:

(1) The main role of concurrent audit is to supplement the efforts of the bank in
carrying out simultaneous internal check of the transactions and other
verifications and compliance with the procedures laid down.

(2) The scope of concurrent audit should be wide enough to cover certain fraud –
prone areas like handling of cash, deposits, safe custody of securities,
investments, overdue bills, exercise of discretionary powers, sundry and suspense
accounts, inter-branch reconciliation, clearing differences, foreign exchange
business including Nostro accounts, off-balance sheet items like letters of credit
and guarantee, treasury functions and credit-card business.

(3) The detailed scope of the concurrent audit should be clearly and uniformly
determined for the Bank as a whole by the Bank’s Inspector and Audit
Department in consultation with the Bank’s Audit Committee of the Board of
Directors (ACB)

40
(4) In determining the scope, importance should be given to checking high-risk
transactions having large financial implications as opposed to transactions
involving small amounts.

(5) While the detailed scope of the concurrent audit may be determined and
approved by the ACB, some of the suggested items of coverage are given in the

(6) Initiate and operate a system for the appraisal of the performance on
concurrent auditors.

(7) Ensure that the work of concurrent auditors is properly documented.

(8) Be responsible for the follow-up on audit reports and the presentation of the
quarterly review to the ACB.

Suggested items of coverage:

(A) Cash

(i) Daily cash transactions with particular reference to any abnormal receipts and
payments.

(ii) Proper accounting of inward and outward cash remittances.

(iii) Proper accounting of currency chest transactions, its prompt reporting to the
RBI.

(iv) Expenses incurred by cash payment involving sizeable amount.

(B) Deposits

41
(i) Check the transactions about deposits received and repaid.

(ii) Percentage check of interest paid on deposits may be made, including

calculation of interest on large deposits.

(iii) Check new accounts opened particularly current accounts. Operations in new
current/SB accounts may be verified in the initial periods to see whether there are
any unusual operations.

(C) Advances

(i) Ensure that loans and advances have been sanctioned properly (i.e. after due
scrutiny and at the appropriate level).

(ii) Verify whether the sanctions are in accordance with delegated authority.

(iii) Ensure that securities and documents have been received and properly
charged/registered.

(iv) Ensure that post disbursement supervision and follow-up is proper, such as
receipt of stock statements, instalments, renewals of limits, etc.

(v) Verify whether there is any misutilisation of the loans and whether there are
instances indicative of diversion of funds.

(vi) Check whether the letters of credit issued by the branch are within the
delegated power and ensure that they are genuine trade transactions.

(vii) Check the bank guarantees issued, whether they have been properly worded
and recorded in the register of the bank. Whether they have been promptly
renewed on the due dates.

(viii) Ensure proper follow-up of over due bills of exchange.

(ix) Verify whether the classification of advances has been done as per RBI
guidelines.

42
(x) Verify whether the submission of claims to DICGC and ECGC is in time.

(xi) Verify that instances of exceeding delegated powers have been promptly
reported to controlling / Head Office by the branch and have been got confirmed
or ratified at the required level.

(xii) Verify the frequency and genuineness of such exercise of authority beyond
the delegated powers by the concerned officials.

(F) Housekeeping

(i) Ensure that the maintenance and balancing of accounts, ledgers and registers
including clean cash is proper.

(ii) Early reconciliation of entries outstanding in the interbranch and inter bank
accounts, Suspense Account, Sundry Deposits Account, DDRR Account, Drafts
account, etc. Ensure early adjustment of large value entries.

(iii) Carry out a percentage check of calculations of interest, discount,

commission and exchange.

(iv) Check whether debits in income account have been permitted by the
competent authorities.

(v) Check the transactions of staff accounts.

(vi) In cash of difference in clearing there is a tendency to book it in an

intermediary suspense account instead of locating the difference. Examine the day
book to verify as to how the differences in clearing have been adjusted. Such
instances should be reported to Head Office in cash the difference persists.

(vii) Detection & prevention of revenue leakages through close examination of

income and expenditure persists.

43
(viii) Check cheques returned/bills returned register and look into reasons for
return of those instruments.

(ix) Checking of inward and outward remittances. (DDs, MTs and TTs).

(G) Other items

(i) In case the branch has been entrusted with government business, ensure that
the transactions are done in accordance with the instructions issued by
Government, RBI & HO.

(ii) Ensure that the branch gives proper compliance to the internal inspection/audit
reports.

(iii) Ensure the customers’ complaints are dealt with promptly.

(iv) Verification of statements, HO returns, statutory returns.

COMPLIANCE

44
 Compliance of RBI audit reports, Internal audit reports, snap audit reports and
the previous month concurrent audit reports.

 Verify compliance of RBI audit report, Internal audit report and snap audit
report.

 Concurrent audit reports

 Pending items of previous month should be consolidated and
given at the
 End of subsequent month report if possible to have track on
pending irregularities or as prescribed by appointment letter.
 Do not drop the pending irregularities unless until needful has
been done by the branch officials or auditor is convinced with
replies of branch.

 If possible for pending items, take commitment from the branch by which
date needful will be done and report so that reports can be closed at
corporate office at the earliest If possible for pending items, take
commitment from the branch by which date needful will be done and
report so that reports can be closed at corporate office at the earliest

EXISTING BANKING PRACTICE AND GUIDELINES

FOR BANK AUDIT

45
 After acceptance of appointment, most important thing for Concurrent
auditors is to update themselves with the existing practice and guidelines of
the bank and new circulars in banking industry. Auditors can take help of
following to update their knowledge and skill on day to day basis:
 Manual on Concurrent Audit of Banks issued by ICAI.
 Guidance Note on Audit of Banks issued by ICAI.
 Concurrent audit manual provided by bank.
 Reading of Bank Manuals and Circulars on day to day basis.
 RBI circulars, Master circulars, FAQ placed on RBI website rbi.org.in.
 ICAI Journal andRegional councils monthly JournalMutual discussion with
branch manager or staff or professionals.
 If some issues are not clear matter can be taken up with appropriate
authority of the bank for clarification.

EXECUTION OF AUDIT

46
 Staff appointed for audit, should have computer knowledge. Ask the bank
management to provide onsite training of computer system. One of senior
member of audit team should also attend this training.
 Go through the appointment letter and audit material provided by bank. See
the % of checking is to be done as per appointment letter and ensure that same
is adhered to.
 A check-list covering audit program should be provided to audit staff along
with % of checking to done as prescribed by bank.
 Query sheet should be given to branch officials on day to day/weekly basis as
prescribed.
 Replies of the branch officials should be obtained regularly and updated in
draft report .
 Senior chartered accountant/ partner/ proprietor should visit branch
periodically to discuss the query sheets with branch manager and compliance
of the same.
 Efforts should be made for spot rectification. It will help in minimizing the
incidence of the serious irregularities and fraudulent manipulations.
 Proper records of attendance of staff in the branch should be maintained as
required generally by appointment letters.
 Wherever audit has been conducted on sample basis, ensure records of sample
is documented in working papers files for future reference.

QUALITY OF REPORT
 Observations in audit report should be specific. It should not be like “ in some
case “ or “ in few cases”. All the remarks should be written with instances.

47
 Ensure that in report, only those items verified during the month should be
confirmed. If some areas not covered, comment should be given accordingly.
 Wherever audit has been conducted on sample basis same should be disclosed
in audit report or sample sheet attached with the audit report.
 Report should be made in the format provided by bank if any. Observations in
audit report should be specific. It should not be like “ in some case “ or “ in
few cases”. All the remarks should be written with instances.
 Ensure that in report, only those items verified during the month should be
confirmed. If some areas not covered, comment should be given accordingly.
 Wherever audit has been conducted on sample basis same should be disclosed
in audit report or sample sheet attached with the audit report.
 Report should be made in the format provided by bank if any.

TIMELY SUBMISSION OF AUDIT REPORT

 Report should be submitted on time.

48
 A draft report can be handed over to branch manager by 4th of
subsequent month for his final replies and report can be signed and
submitted as prescribed in the appointment letter.

CHAPTER- 4

49
 Research
Methodology

Research methodology
Research methodology is the specific procedures or techniques used to identify,
select, process, and analyze information about a topic. In a research paper, the
methodology section allows the reader to critically evaluate a study's overall
validity and reliability.

50
It helps in studying the various steps that are adopted by the researcher to study
the researcher problems along with the logic behind the it describes mail what
must be done, how will be done. What data will be needed and how the data will
be analyzed.

Scope of Study
To conduct a financial analysis using with concurrent audit.

OBJECTIVES OF THE STUDY:

 To collect information regarding back office operational activities with
special reference to account only.

 To face original banking situations regarding audit and to gain real

accounting experience.

 To find out facilities provided by Rajasthan urban cooperative Bank.

Data Collection
Data collection is a standout amongst the most essential stages in carrying on a
research. You can have the best research plan in the world, however, in the event
that you can’t gather the necessary data you will not have the capacity to complete
your venture. Data collection is an extremely challenging work which needs

51
exhaustive planning, diligent work, understanding, determination and more to
have the capacity to complete the assignment effectively. Normally we can gather
data from two sources namely primary and secondary.

Primary Data- Primary data will be the data that you gather
particularly with the end goal of your research venture. Leverage of
Primary data is that it is particularly customized to your analysis needs. A
drawback is that it is costly to get hold of. Primary data is otherwise
called raw information; the information gathered from the first source in a
controlled or an uncontrolled situation.

Secondary Data- Secondary data refers to data that is collected

by someone other than the user. Common sources of secondary data for
social science include censuses, information collected by government
departments, organizational records and data that was originally collected
for other research purposes.

 Source of data: Only secondary data used.

Limitations of the report:

The main objective of the report was to make a thorough study of external audit
procedure. Throughout my internship period I have faced different obstacles
which I had to handle efficiently and effectively. Moreover, during writing my
report I also had faced some limitations. Some of the limitations are shown below:

52
1. Time Constraint: Audit procedure is a huge concept and quite difficult to
master it’s all aspects. I tried to project those aspects that I learned
throughout my internship program. Hence, many aspects can be discussed
if there was enough time.

2. Limitation in Practical atmosphere: As a junior student, I was given very

limited responsibility to fulfill as I may make huge mistake in sensitive
issues. Thus, the scope was limited for me to understand the whole process
of auditing.

3. Firm’s Code of Conduct: I was not authorized to provide several

information regarding audit procedure because to maintain confidentiality
of my firm and its client. Thus, I was not able to write everything in
details which I wanted to.

53
CHAPTER- 5

DATA ANALYSIS

AND
INTERPRETATION

54
 Deposits
( Rs in crores )

6000

5000

4000

3000

2000

1000

0
2017 2018

Interpretation: The bank has tried to increase its deposit by opening

accounts in self help group (SHG) and it has also succeeded in increase in
deposits so the bank is in a good financial position and should maintain
and focus on increasing the same.

55
 Total Loans Outstandings

( Rs in crores )

9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2017 2018

Interpretation: The bank has tried to increasing the loan providence to

the customers because they charge low fee on loans accounts like

56
processing fee, annual renewal fee etc. and they also provides many types
of loans .

57
 Net Profit

( Rs in crores)

25

20

15
Column1
Column2
10

0
Category 1 Category 2

Interpretation: The net profit of the bank is reduced which is not a sign
so the bank should focus on increasing the net profit in order to survive for
a longer period.

58
 Locker Accounts

( Rs in crores)

100
90
80
70
60
Column1
50 Column2
40
30
20
10
0
Category 1 Category 2

Interpretation: The locker accounts have been decreases which is not a

good sign for the bank and they also decrease their income which is earn
from the customers. So they tried to encourage customers towards the loan
accounts.

59
CHAPTER-6

FINDINGS

60
 During the Course of Audit, We have found some Loans/Advances which
were not renewed for the FY 2017-18
 During the course of Audit we found that in some accounts charges not yet
charged to account holder.
 During the Course of Audit we have not found any Irregularity with
respect to Deposits.
 Cash was Physically verified & checked with cash Register
 During the course of Audit, We found that KYC requirements have not
fulfilled Properly.
 During the Course of Audit, We have found some Loans/Advances where
Insurance on Collateral/ Primary Security was not in document file.

61
CHAPTER-7

CONCLUSION

62
A sound concurrent audit plays an important role in contributing to the
effectiveness of the banking system. The audit function should provide high
quality counsel to management on the effectiveness of concurrent audit and
internal controls including regulatory compliance by the Bank. Historically, the
concurrent audit in banks has been concentrating on transaction testing, testing of
accuracy and reliability of accounting records and financial reports, integrity,
reliability and timeliness of control reports, and adherence to legal and regulatory
requirements. However, in the changing scenario such testing by itself would not
be sufficient. There is a need for widening as well as redirecting the scope of audit
to evaluate the adequacy and effectiveness of banking procedures and internal
control systems in the banks.

63
CHAPTER-8

Recommendation
And Suggestion

64
For effective concurrent audit, it is essential that the audit program is detail and
preplanned. Since the period during which the concurrent auditor is to conduct
checking of manifold items in the branch of the Bank is limited and transactions
are numerous rationing of the time of the concurrent auditor is a pre-condition to
successful audit. The checklist is to be time oriented with volume of transaction
and vulnerability of the same being considered for ascertaining frequency of
checking. An auditor should also check :

1. KYC Norms compliance by bank

2. Physical cash verification

4. Physical Stationery verification and security measures applied by bank for

stationery items

5. Cash retention limit of the branch and if cash is exceeding that limit, branch
should report to HO/RO

6. During the month new CC/OD/SB/Current account opened.

7. Very important- documentation of these above opened accounts. for CC/OD,

documents should be as per sanctioned letter (strictly)

These are few broad areas which an auditor must check. Also find out which are
major CC/OD Accounts of that Bank.(which one can find from closing
balances).or an auditor can ask the concerned person in bank handling cc/od
facilities.

1. One of the condition is to submit last audited balance sheet. Tally the
stock shown in audited balance sheet vis-a-vis average stock shown
during monthly stock statement.

2. Newly opened savings/current accounts. Documents taken thereof..

65
3. Find out How and who maintains cheque returns
Register/Record..Whether charges are collected for such cheque
Return Transactions

4. Cash should be checked by senior most person once in a month.

5. Other facility like fire extinguisher, alarm system, hidden camera,

securities, all these to be seen. If any major deficiency u can surely
report. Because proper security of cash is main purpose.

66
CHAPTER-9

BIBLIOGRAPHY

67
www.icai.com

www.indianbanking.com

www.auditguide.com

www.rscb.org.in

www.jainparas.com

68