Page 50 - Banking Finance June 2023

ARTICLE

regulations, laws, standards, procedures etc. to check the Apart of this, internal allocation of resources in audit
adherence of the same, but now technological competence department also needs to be rationalized. Traditional
is one of most important skills to have. External auditors are approaches here also will not give results. Deployment of
primarily not accustomed to use bank systems and audit resources as per the complexity, importance and
softwares, so they get dependent on management for quality need more scientific approach.
information required for audit. Moreover, different banks
are using different technologies, so it is not easy to acquire 4. Knowledge Deficiency
diverse technical competence. Internal Auditors are more Indian banking industry is still in evolving stage. Everyday
competent in dealing with internal technology of bank, but there is a new challenge and there is a new solution to the
now a days banking has emerged as sea of diverse and problem. Regulators, Government, Management are
complex products and services. Internal Auditors are also coming up with new rule, regulations, policies and guidelines
finding themselves in trouble to cope up with diversity and every other day. Being in service industry, banks are
advancement of technology. supposed to maintain highest level of standards. Financial
business demands absolute transparency. Audit department
There are lot of examples to establish this, but the classic is supposed to shoulder the responsibility to check the
case of Nirav Modi Incident seems to be more appropriate compliance of all the rules, regulations, standards, policies,
because it is widely known. The auditors could not judge the that's why they need to have thorough knowledge of all. It
procedure lacuna because there was no technological is like to be king of all traits which is every extraordinary
integration between two softwares being used. The auditors demand of profession. Above on that, there is no relaxation
were also dependent on the people for information who time because of compulsion of regular updating. To cater
were the main culprits. The technical competence of the need of customers, a branch or business outlet is
auditors could have detected the lapses in time. providing variety of services, and an auditor or couple of
auditors need to check all the compliances in limited time.
2. Adapting to new strategies So, knowledge gap which if any, may defeat the purpose of
Diminishing Margins also are leading banks to look for audit and inspection activity.
opportunities to diversify their business strategies. New
revenue streams are being identified and implemented. But Measures to rise on the occasion
every new revenue stream and business strategy requires
In this environment, audit department and auditors are
new operational and support functions and opens up new
being challenged to meet a higher standard regarding their
categories of risk that must be assessed, controlled, and
understanding of their organization's risk profile and often
managed. One of the main responsibilities of the auditor is
must adapt new approach to reflect changing business
to actively assess how a new business line or product will
priorities. The magic words to overcome the challenges is:
affect the institution's risk parameters and to assess how
UPDATE, UPDATE and UPDATE.
those parameters can be addressed effectively and
efficiently. In this fast pace world, sometimes till auditors
Regular updating of knowledge, skills, attitude is the key to
find out the risk parameters and controls, the damage is
establish the image of Audit and inspection again functions
already done.
3. Reallocation of Audit Resources
Pressure on bottom-line of banks is compelling them to
curtail expenses and resources spent of audits are also under
pressure. Banks are reassessing the cost-effectiveness of all
the departments and processes and sometimes they are not
infusing resources required by audit system. Audit system
which must evolve to cope-up with new products, strategies,
technologies and increased regulatory requirements, and
this required resources. Traditional audit system may not be
effective in current scenario.

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