DSB with the specialized team of professionals viz Charted accountants, Cost Accountants, Banking Professionals etc ensures to obtain assurance to the stake holders about the fairness of the operations of the organization and financial statements. The specialized team with their skill and technical tools detects misstatements, errors, frauds or mismanagement in the operations to control various risks associated with the business and helps in increasing the productivity and reducing costs.
Auditing is the on-site verification activity, such as inspection or examination, of a process or quality system, to ensure compliance to requirements. An audit can apply to an entire organization or might be specific to a function, process, or production step. An audit may also be classified as internal or external, depending on the interrelationships among participants.
Various types of Audits include:
INTERNAL AUDIT
An internal audit is the examination, monitoring and analysis of activities related to a company’s operations, including its business structure, employee behavior and information systems.
Internal audit reports are presented to the CEO and board (via the audit committee) as they provide an independent viewpoint on the extent to which an organisation is poised for success and advice on areas for improvement.
BENEFITS
- Helping protect assets and reduce the possibility of fraud.
- Improving efficiency in operations.
- Increasing financial reliability and integrity.
- Ensuring compliance with laws and statutory regulations.
- Establishing monitoring procedures.
EXTERNAL AUDIT
An external audit is an independent examination of the financial statements prepared by the organization. It is usually conducted for statutory purposes (because the law requires it).
Business owners can use external audits to review their accounting process and financial information.
BENEFITS
- Provides validity
- Discovers errors
- Limits legal and tax issues
- Educates business owner
FOLLOW-UP AUDIT
A product, process, or system audit may have findings that require correction and corrective action. Since most corrective actions cannot be performed at the time of the audit, the audit program manager may require a follow-up audit to verify that corrections were made and corrective actions were taken. Due to the high cost of a single-purpose follow-up audit, it is normally combined with the next scheduled audit of the area. However, this decision should be based on the importance and risk of the finding.
An organization may also conduct follow-up audits to verify preventive actions were taken as a result of performance issues that may be reported as opportunities for improvement. Other times organizations may forward identified performance issues to management for follow-up.
INTEGRATED AUDIT
DSB provides integrated audit services for establishing an effective and efficient internal control environment of the organization and increasing the productivity. The scope of audit is widened to include critical areas of operations of the business including information technology, financial and operational controls which are mutually dependent.
From an information technology perspective, the objective is to assure that information technology controls are effective and efficient to support the business process. From a financial and operational perspective, the objective is to assure that financial and operational controls are effective and efficient to support the business process. Even though issues may not be identified in financial and operational controls, issues identified in information technology may negate the effectiveness of the financial and operational controls and visa versa. Therefore for an integrated audit, all perspectives need to be considered since information technology, financial and operational issues can significantly impact the achievement of management’s objectives of safeguarding information system assets and ensuring reliability and integrity of information.
COST AUDIT:
Cost Audit is a critical review undertaken to verify the correctness of Cost Accounts and to check that cost accounting principles and planning have been efficiently followed. It is noteworthy that India is the only country which has introduced statutory cost audit to regulate about 45 vital industries of the country. ‘Statutory Cost Audit is a system of audit introduced by the Government of India for the review examination and appraisal of the cost accounting record and added information required to be maintained by specified industries’ (ICWA of India).
In short Cost Audit includes:
(i) The verification of Cost Accounting Records, such as Cost Accounts, Cost Reports, Cost Statements, Cost Data and Costing Techniques.
(ii) Examining these records to ensure that they adhere to the cost accounting principles, plans, procedures and objectives.
OBJECTIVES
- Determination accurate cost of jobs, materials, finished products, comparing present cost with previous experience.
- Help in determining prices of finished products by furnishing all relevant data.
- Determination of efficiency of operations by furnishing data as to cost, volume of production etc.
- Serves as a tool to know whether resources are being properly utilized.
- Making of accurate periodical financial statements for information and guidance of management.
Advantage of cost audit
Prevention of frauds and errors and with presentation of Profit and Loss Account and Balance Sheet which exhibit a true and fair view of the state of affairs (of profit earned during the year and of financial position at the end of the year).
REVENUE AUDIT:
A Revenue Audit is a crosscheck or review by Revenue of the Tax Returns that have been submitted by the business or taxpayer, against the business records or back up documentation. Revenue check to make sure the Tax Return are accurate and that there are no omissions. A Revenue Audit is a crosscheck or review by Revenue of the Tax Returns that have been submitted by the business or taxpayer, against the business records or back up documentation. Revenue check help to make sure the Tax Return are accurate and that there are no omissions.
Revenue Audit is important due to following reasons:
- Screening tax returns: examining your returns and compliance history for any trends
- Projects on business sector: revenue might focus on particular business sector, trade or profession when choosing businesses or tax payers for audit. This mass review of a certain industry allows them to compare and contract businesses and can help Revenue improve their knowledge on a particular sector.
Revenue audit procedures can account for a substantial portion of your company’s audit budget. As such, understanding the revenue audit process can help you better align company resources to complete this section of the audit as efficiently as possible.
IT AUDIT:
Information technology audits determine whether IT controls protect corporate assets, ensure data integrity and are aligned with the business’s overall goals. IT auditors examine not only physical security controls, but also overall business and financial controls that involve information technology systems.
Objectives of IT Audit
- Evaluate the systems and processes in place that secure company data.
- Assuring compliance with legal and regulatory requirements, as well as the confidentiality
- Determine inefficiencies in IT systems and associated management.
- Determine risks to a company’s information assets, and help identify methods to minimize those risks
While doing IT Audit following things need to be keep in mind:
- Review IT organizational structure
- Review IT policies and procedures
- Review IT standards
- Review IT documentation
- Interview the appropriate personnel
- Observe the processes and employee performance
- Examination, which incorporates by necessity, the testing of controls, and therefore includes the results of the tests.
CREDIT AUDIT FOR BANKING & NBFCs
The Audit of banks has played a major role in assisting the Regulators to supervise the entire banking system in the country even through these difficult times. At the root of importance of audit is this supplementary role played by the auditors along with banking regulators. The auditors of banks have to adapt themselves to the changing situations in banking business and handle bank audits differently in view of the risks attached with banking business. The audit profession considers increase in number of audits as an opportunity while the Banks look at it as a matter of concern since the banks have to negotiate and deal with a larger number of audit firms.
The auditors of banks have to adapt themselves to the changing situations in banking business and handle bank audits differently in view of the risks attached with banking business. The audit profession considers increase in number of audits as an opportunity while the Banks look at it as a matter of concern since the banks have to negotiate and deal with a larger number of audit firms.
Credit Audit aims at achieving continuous improvement in the quality of the Commercial Credit portfolio. Duly aligned with Risk Focused Internal Audit, it examines the probability of default, identifies risks and suggests risk mitigation measures.
Advances are classified as Performing and Non Performing Assets. The banks should follow the Reserve Bank of India’s guidelines to classify an advance as Non Performing Asset (NPA) and the proper classification of advances is the primary responsibility of the bank’s management.
Objectives of Credit Audit
- Improvement in the Quality of Credit Portfolio
- Review Sanction process and Compliance status
- Feedback on regulatory Compliances
- Credit Risk Assessment
- Pick up early warning signals and suggest remedial measures
- Recommend corrective action for improving credit quality, credit administration, skills of staff in credit department