Copy of Audit Manual

8/19/2019 Copy of Audit Manual

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Page No. &Para No. Particulars

Related to

Board ECB ACB RMC MC MD IC&CW

Division

HRDA&ID

Monito-ring

Division

Co !li-ance

Division

"#$ "%$ " $ "'$ "($ ")$ "*$ "+$ ",$ "# $ "##$ "# $

1 17 - 3.2

Audit risk arises when the auditor gives an inappropriateaudit opinion and the financial statements are materiallymisstated. Audit risk has three components: (a !ontrolrisk" (# $etection risk % (c &nherent risk.

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2 1' - 3.3

ffective risk assessment must identify and consider #othinternal and e)ternal factors. &nternal factors include thecomple)ity of the organi*ation structure" the nature ofthe +ank,s activities" the uality of personnel"

organi*ational changes" and employee turnover. )ternalfactors include fluctuating economic conditions" changesin the industry" socio-political realities and technologicaladvances.

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3 1' - 3.3

he risk assessment #y &nternal Audit focuses on all riskareas specially on compliance with regulatoryre uirements" social" ethical and environmental risksthose affect the #anking industry.

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/ 1' - 3./

&ndividual items in the $epartmental !ontrol 0unction!hecklist($!0! need to #e assigned a risk rating interms of the following dimensions: a I !act +eforetaking into account any mitigation (such as insurance "what is the impact of the lapse omission

# Pro/a/ilit0 After taking into account the mitigation"what is the likelihood of the event occurring

4onito-ring

$ivision

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HRD28 - 3./

Annual audit plan will #e drawn up. +ased on the riskassessment matri)" the audit plan will #e as 9isk 9ating(i igh; (ii medium; (iii ow and 1re2uenc0 (i


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HRD3. Audit Division- o carry out speciali*ed(& &= andvigilance audit.

11 21 - /.1

!ompliance division may #e further divided in to thefollowing divisions units-#. E3ternal Audit Co !liance Division o monitorcompliance activities of #ranch and officeunder internal audit.%. Internal Audit Co !liance Division o monitorcompliance activities of #ranch" Effice and su#-divisionsunder e)ternal audit (+angladesh +ank Audit &nspection"!ommercial Audit" )ternal Audit statutory audit andother regulatory authorities .

!ompli-ance

$ivision

12 22 - /.1

Monitoring Division : (i o verify the internal controlsystem % Eperational activities #y &mplementing of$!0! "


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HRD1/ 21 - /.1

he scope of work of the $epartment is to determinewhether the +ankFs network of risk management" controland governance processes" as designed and represented

#y management" is ade uate and functioning in a manner to ensure:

Ade uacy and effectiveness of risk managementsystem

Ceed-#ased interaction with the various governancegroups

=ignificant financial" managerial and operationalinformation in accurate" relia#le and timely manner.

mployeesF actions in compliance with policies"standards" procedures" laws and regulations.

se of ac uired resources economically" efficientlyand ade uately.

Achievement of programs" plans and o#?ectives. 0ostering the uality and continuous improvement in

the #ankFs control process. Appropriate recognition and addressing of legislative

and regulatory issues impacting the #ank.

&!%!@

1 22 - /.2 he scope of work of the $epartment is to determinewhether the +ankFs network of risk management" controland governance processes" as designed and represented

#y management" is ade uate and functioning in a manner to ensure: Ade uacy and effectiveness of risk managementsystem

Ceed-#ased interaction with the various governancegroups

=ignificant financial" managerial and operational

&!%!@

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Board ECB ACB RMC MC MD IC&CWDivision

HRDinformation in accurate" relia#le and timely manner.

mployeesF actions in compliance with policies"standards" procedures" laws and regulations.

se of ac uired resources economically" efficientlyand ade uately.

Achievement of programs" plans and o#?ectives. 0ostering the uality and continuous improvement in

the #ankFs control process. Appropriate recognition and addressing of legislative

and regulatory issues impacting the #ank.

16 22 - /.2

Efficers of &!!$ are authori*ed to: ave unrestricted access to all functions" records"

property and personnel.

he ead of &!!$ has full and free access to theAudit !ommittee. =et fre uencies" select su#?ects" determine scopes of

work and apply the techni ues re uired to accomplishaudit o#?ectives.

E#tain the necessary assistance of personnel in alldepartments of the #ank where they performaudits inspection as well as other speciali*ed servicesfrom within or outside the #ank.

&!%!@

17 23 - /.2 Efficers of the &!!$ are not authori*ed to- 5erform any operational duties for the +ank or its

affiliates. &nitiate or approve accounting transactions other than

those of the &nternal Audit $epartment. $irect the activities of any +ank officer not employed

in the &nternal Audit $epartment e)cept to the e)tentsuch officers have #een appropriately assigned to

&!%!@

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HRDauditing inspecting teams or to otherwise assist theofficers of the $epartment.

Audit their own works performed in their previous$epartments Effices.

1' 23 - /.3

&n line with !ommittee of =ponsoring Ergani*ation ofthe readway !ommission (!E=E and +ank for&nternational =ettlement(+&= " the following" #ut notlimited to" standards should #e followed:• he internal audit function,s control risk assessment"audit plans" and audit programs areappropriate for the #ank,s activities.• he internal audit activities have #een ad?usted forsignificant changes in the #ank,s environment" structure"

activities" risk e)posures" or systems.• he internal audit activities are consistent with thelong-range goals and strategic direction of the #ank andare responsive to its internal control needs.

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1> 23 - /.3

• he Audit !ommittee of the +oard promotes the !hiefAudit )ecutive,s (!A Fs impartiality andindependence #y having the !A directly report auditfindings to it.

A!+

28 23 - /.3• he !A is placed in the management structure in sucha way that the independence of the function is notimpaired.

4!

21 23 - /.3• he #ank has promptly responded to significantidentified internal control weaknesses. 4!

22 23 - /.3 • he internal audit function is ade uately managed to A%&$

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HRDensure that audit plans are met" programs are carried out"and results of audits are promptly communicated tosenior management and mem#ers of the Audit

!ommittee and full +oard.• @orkpapers ade uately document the internal auditwork performed and support the audit reports.

23 23 - /.3• he Audit !ommittee periodically assesses the

performance of internal audit.A!+

2/ 23 - /.3

• he internal audit function provides high- ualityadvice and counsel to management and the +oard oncurrent developments in the #ank,s internal control

policies and procedure" and in the performance of theother control functions of the #ank (9isk 4anagementand !ompliance

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2 2/ - /.3

he =tandards consist of (i Attri#ute =tandards" (ii5erformance =tandards" and (iii &mplementation=tandards.(i he Attri#ute =tandards address the characteristics oforgani*ations and individuals

performing internal audit activities and provide ualitycriteria against which the performance of these services can #e measured.(ii he Attri#ute and 5erformance =tandards apply tointernal audit services in general.(iii he &mplementation =tandards apply the Attri#uteand 5erformance standards to specific types ofengagements (for e)ample" a compliance audit" a fraudinvestigation" or a self-assessment pro?ect .

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26 2/ - /./ ead of &!! will #e responsi#le for total administration &!%!@ 9$

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HRDof &nternal !ontrol and !ompliance (&!! of the #ank.

27 2/ - /./ he rank of the ead of &!! must not #e lower than onestep immediate #elow the ! E.+oard 9$

2' 2/ - /./he appointment" posting" transfer % termination

dismissal of &!! ead must #e approved #y +angladesh+ank.

+oard 9$

2> 2/ - /./

he ead of &!! will always report his activities andfindings to the A!+ and will #e responsi#le to the A!+.

e =he will #e appraised #y the !hairman of the Audit!ommittee solely.

&!%!@

38 2 - /.

he purpose" authority and responsi#ility of the internalaudit activity should #e formally defined in a charter

consistent with the =tandards #y the head of &!! and to #e approved #y the A!+ and the +oard.

+oard A!+ A%&$

31 2 - /.6.1

&nternal auditors should have to #e #old" honest andtruthful. hese ualifications will #ethe #asis for trust on the internal auditorFs professional

?udgment. &nternal auditors should keepstrict confidentiality of information found during audit.

hey should not use such information for personal gain or malicious action and should #eresponsi#le for protection of such information.

he ead of the internal audit and all internal auditorsshould avoid conflicts of interest. &nternalauditors should a#ide #y the #ank,s code of ethics. Acode of ethics should address the principlesof o#?ectivity" competence" confidentiality and integrity.

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32 2 - /.6.2 a 5ersons punished for ma?or offence and persons under 9$

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HRDdisciplinary proceedings must not #e posted in &!!$.rack record of officers to #e checked and maintained

#efore posting them in &!!$.

# &!!$ people should have thorough professionalknowledge and #anking e)perience with good academic

#ackground.

33 2 - /.7

he ead of three units (immediate #elow to head of&!! to #e appraised #y the head of &!! primarily and

#y !hairman of the Audit !ommittee finally. &n case ofother &!! officials first appraiser should #e concernedunit ead and 2nd appraiser should #e the ead of &!!and finally appraisal report to #e countersigned #y the!hairman of the Audit !ommittee with necessary

review.

A!+ &!%!@ A%&$4onito-

ring$ivision

!ompli-ance

$ivision

3/ 2 - /.'

&n compliance with the essence of Anti 4oneyaundering and 0raud forgery prevention" unit heads

under &!! should prepare a confidential mandatoryannual (1 days per year leave plan for employeesworking under her him with the consent of the ead of&!! and it should #e implemented accordingly.

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3 26 - /.>

he instructions contained in the etter Co-4alapro#i(#ishesh 267 288/-3>1'-3>66 dated 1> 18 288/ of Anti4oney aundering $epartment will #e applica#le for

&!! officials including the ead of &!!$. he ead ofthe &!! will effect rotation among the employees of thethree units (Audit and &nspection nit" 4onitoring nitand !ompliance nit .

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36 26 - /.18 All mem#ers staff of the &!! should #e provided withappropriate and advance training.&!%!@ 9$

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HRD37 26 - / .18.1

9 raining" 9esearch % $evelopment $ivision of the #ank should conduct various training programs for the

)ecutives Efficers =taff to develop their efficiency so

that they can apply their knowledge and e)perience inthe #ank regularly.

9$

3' 26 - / .18.2

4utreac5 6raining on1. &nternal Audit !ompliance2. &nternal !ontrol Audit in +ank 3. Agri 0inancing % 9ecovery/. !redit 9isk Grading

. !ompliance of +angladesh +ank &nspection6. !ompliance of !ommercial Audit o#?ections7. Accounting % Auditing =tandards

'. & Auditing

9$

3> 27 - / .18.3

o keep pace with the changes taking place all aroundthe glo#e and ever developing technology" )ecutivesand Efficers should #e sent a#road to attend varioustraining courses" workshops" seminars" conferences andsymposia to ac uire updated knowledge of modern

#anking.

9$

/8 2' - .1 (a ach Hear the ead of &!! will set out an Audit plan forthe year.&!%!@

/1 2' - .1 (a Audit plan will #e approved #y the Audit !ommittee ofthe +oard (A!+ .A!+

/2 2' - .1 (che deficiencies identified during the audits should #e

notified to the appropriate level and significant auditfindings should #e reported to the A!+.

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HRD/3 2' - .2 9isk assessments also need to include input frommanagement and the +oard.

+oard 4!

// 2' - .2&!! will evaluate" at least annually every departmentoffice #ranch su#sidiary foundation within theorgani*ation to analy*e the degree of risk.

&!%!@

/ 2' - .2An internal auditor is to assist in determining priorities ofinternal audit activity consistent with the organi*ationFsgoals.

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/6 2> - .2

Assessing control risk focuses on the followingincidents:I &ncome recognition #y accounting ?ugglery in violationof +95$ !ircular-1 2812I $eclaring dividend #y de#iting retained earningsI =howing presence in office #y punching &$ for two

persons or more #y one person or representing one person #y other personsI =ingle person using operating two password (forchecker % maker for illegal purpose.I 0und shown as #orrowed and reported as other asset( #ut practically was in placement .

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/7 2> - .2

he ead of &!!$ should communicate the internalaudit plans and resource re uirements" includingsignificant interim changes" to the Audit !ommittee ofthe +oard for review and approval.

A!+ &!%!@

/' 2> - .2 he ead of &!!$ should also communicate the impactof resource limitations to the A!+.A!+ &!%!@

/> 2> - .3 0or auditing corporate authori*ed dealer #ranchesdedicated team should #e formed consisting of mem#ers

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HRDhaving professional knowledge on international trade" &e)pert" financial reporting e)pert" credit e)pert ande)perienced general #ankers.

8 2> - .3&n case of other #ranches team should #e formed with

persons considering risk e)posure and growth rate ofrisky e)posures.

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1 2> - .3

Ceeded num#er of e)tra staff strength to #e arranged for concurrent audit to look into whether the #ank isfollowing the guidelines of regulatory #odies"institutional policies and procedures set #y approved #ythe +o$ and aws of land.

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2 2> - .3A surprise check of audit work procedure can #e made

#y the high officials during audit program of large units. A%&$

3 38 J . / (ii

apses arise out of any kind of irregularities"misstatements" non-compliance with e)isting policiesand procedures of the #ank" or failure to o#serve laws ofthe land" #y which the #ank may incur financial losses.

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/ 38 - . / (ii

=ometimes non-compliance of e)isting policies and procedures may not cause any financial loss with animmediate effect" #ut they can result in an erosion ofreputation. At the same time" any malpractice in #anking"misuse misappropriation of the #ankFs funds can #edefined as lapses.

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38 J ./(iii 5unishment is an action to #e taken #y the managementof the #ank against employees for committing lapsesoffences. 5unisha#le offences are activities" for which

9$

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HRDhigher management thinks administrative action must #etaken.

6 38- ./ (ii iAuditors should detect the level or uantum of lapsesoffence and report to higher management. A%&$

7 38- ./(iv

ngagement letter" which is sent to management of theaudit area up to two weeks #efore the commencement ofthe audit and includes details of su#?ect" o#?ectives"scope" staffing and timing of the audit.

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' 31- ./ (vhe auditor should ensure that they have gathered

sufficient evidence to meet the audit o#?ectives and tocomplete the audit program.

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> 31- ./ (v

&f the auditor is investigating a fraud" then the level of

detail and evidence will need to #e sufficient to ensurethat the case can proven.A%&$

68 32- ./(viiAll findings should #e reviewed #y the eam eader and!hief Audit )ecutive prior to the final audit report

#eing issued.A%&$

61 32 - .

I he &!!$ will prepare report on individual inspection programs within 1 days (e)cept for items that needs to #e escalated immediately and su#mit the same to the #ranch #usiness unit for rectification with a copy to linemanagement.

I 0or low and medium risk items findings will #ereported to the 4$ ! E.I 0or high-risk items findings will #e reported to the4$ ! E and the Audit !ommittee of the +oard.

A!+ 4$ &!%!@

62 32 - . &!!$ will prepare an annual integrated report on thehealth of the +ank to #e su#mitted to the +oard of

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HRD$irectors for onward su#mission to +angladesh +ank.

63 32 - .

At the end of the year there should #e a summary reporton the audit findings and corrective actions taken whichshould #e forwarded to the Audit !ommittee of the #oardand the 4anaging $irector simultaneously.

A!+ 4$ A%&$

6/ 32 - .+ased on the review of monitoring reports the audit teamshould also conduct surprise check on the #rancheswhere regular gaps are identified.

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6 33 - .6.1&!! will collect 0inancial ealth =core" &!! ealth=core" and &mage % 9eputation ealth =core from the

!+" the A!+" and )ternal Auditor ( A respectively.A%&$

66 33 - .6.3

$epending on the nature of #usiness" the +oard of

$irectors will decide on the weight of the sectors" andinform the same to +angladesh +ank #efore preparingreport.

+oard A%&$

67 3/ - .6./

he health analysis of the #ank to #e done on yearly #asis as a regulatory compliance" andanalysis should #e made immediately after completing anaccounting year.

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6' 3/ - .6.he yearly integrated health report of the #ank is to #e

su#mitted to the +oard of $irectors for

approval and review.

+oard A%&$

5age 1/ of 16

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