Standards on Auditing - Special features of Audits of Banks and NBFCs

Audits of banks and Non-Banking Financial Companies (NBFCs) have unique characteristics due to the large volume of financial transactions, regulatory oversight, and significant reliance on financial instruments and lending activities. The auditor must place strong emphasis on loan portfolio evaluation, asset classification, provisioning for non-performing assets (NPAs), income recognition, and compliance with regulatory guidelines issued by the Reserve Bank of India. In addition, auditors evaluate internal control systems over lending, treasury operations, investments, and deposit management, since these areas carry significant risk. The audit also involves verification of capital adequacy, statutory reserves, liquidity ratios, and compliance with prudential norms, along with detailed review of branch operations and IT systems due to the highly technology-driven nature of banking operations. Because of these complexities, audits of banks and NBFCs require specialized audit procedures, regulatory knowledge, and close coordination with supervisory requirements, making them more intensive compared to audits of typical commercial entities.

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SESSION 3

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