The Tacis project «Support for the Accounting Reform in the Banking Sector» has developed a comprehensive Internal Audit Manual and a companion Field Guide that may be accessed through the project’s website – http://www.tacis-bankreform.ru.
The Manual has been developed to provide and to document guidelines to Russian banks based on International Standard of Auditing practice. The reference material covers issues discussed with the management of the project’s pilot banks and subjects presented in work-shop training sessions held during the project for bank internal audit staff. Emphasis is given to international risk-focused audit standards and practices applicable to commercial banks, including guidelines and recommendations issues by the Basle Committee.
The Manual and the Guide have been prepared to be conceptually consistent with the regulations issued by the Central Bank of the Russian Federation (CBRF). However, the content is not all encompassing for every internal audit issue and/or regulation and each bank should use professional judgement in adapting the material to conform to its own internal regulations and requirements.
The work of bank auditors, however, follows some basic fundamentals which are common throughout the world and which cover the following groups of issues:
Financial. This refers primarily to the accounting practices and methods utilised and reported by the institution to its national authorities.
Compliance. Work which focuses on both financial and operational controls and banking transactions to assess their conformity with current established rules, regulations and procedures.
Operational. Activities which cover work related to how well and efficiently internal bank operations are conducted and how they meet the bank’s overall objectives.
However, as risks and financial transactions have become more complex over time, today’s bank auditors have been forced to develop new ways and methods to conduct audits. Audits cover not only financial, management and compliance issues but also include assessing environmental risks related to certain loans and a spectrum of other risks. For this purpose, rules, definitions and guidelines have been evolving in the major western industrialised countries’ regulatory and audit institutes to provide the auditor with the required tools and techniques to facilitate audit work. The aim is to give regulatory authorities, corporate and financial institutions’ senior management the confidence that the auditors’ work contributes to the safety and protection of the banking institutions’ depositors and lending operations. However, to conduct this audit activity some written guidelines, definitions and scope of audits have to be provided. This has evolved into a body of audit work based on international standards of auditing.
The Manual consists of two Volumes. Volume 1 focuses on the internal management issues of a bank’s internal audit department and provides a methodology for operating such a department. The chapter headings are as follows:
Section 1: Definitions and Principles
Chapter 1: Objectives of our Internal Audit Department
Chapter 2: Audit Philosophy and Principles
Chapter 3: Summary of CBRF Regulations Governing Internal Audits in the Banking Sector
Chapter 4: Internal Audit regulation or Audit Charter
Chapter 5: Roles and Responsibilities
Chapter 6: Internal and External Auditor relations
Section 2: Technical Applications
Chapter 7: Time Budgeting
Chapter 8: Preparing the Annual Internal Audit Budget
Chapter 9: Internal Audit Skills Profile
Chapter 10: Staff Performance Monitoring and Evaluation
Volume 2 of the Manual is designed to provide a practical and separate field manual. It is meant to be a «living document» and to provide a handy reference guide for carrying out head office and branch audits. Section 3 of this volume consists of a list of questionnaires which each auditor can refer to during the course of the audit examination process. In effect, this Section 3 could be considered the «internal auditors’ field handbook». The three sections of Volume 2 cover the following issues:
Section 1: Starting and Completing the Audit
Chapter 1: General Description of the Audit Process
Chapter 2: Individual Audit Assignment Planning Process
Chapter 3: Audit Risk Assessment
Chapter 4: Internal Control Assessment
Chapter 5: Selecting Audit Work Procedures
Chapter 6: Audit Tests
Chapter 7: Analytical Techniques and the Use of Audit Ratios
Chapter 8: Audit Working Papers
Chapter 9: Audit Findings and Conclusions
Chapter 10: Internal Audit Report Process
Chapter 11: Audit Approach to Computers & Computer Processing
Chapter 12: Use of Computer Assisted Audit Techniques
Section 2: Other Field Guide Documents
Chapter 13: Sample Audit Planning Format
Chapter 14: Guidance on Selecting Audit Samples including Statistical Sampling
Chapter 15: Audit Assisted Tools-Spreadsheets
Chapter 16: Guidance on producing Flowcharts
Section 3: Internal Control Questionnaires
Chapter 1: Internal Control Questionnaires
Chapter 2: Treasury and Inter-Bank Transactions
Chapter 3: Operations with Clients
Chapter 4: Operations with Securities
Chapter 5: Long-term Investments, Fixed and Intangible Assets
Chapter 6: Capital of the Bank
Chapter 7: Income and Expenses
Chapter 8: Management Accounting
Chapter 9: Audit of «Off-balance» Accounts
Chapter 10: Audit of Computer Systems
Chapter 11: Audit of Branches
The website contains both the full version of the Manual and other material related to accounting reform within the Russian banking sector, and specifically to issues related to international accounting standards (IAS).
The Manual is available on a «soft-copy» basis only and may be downloaded at the following website: http://www.tacis-bankreform.ru.
The Manual may not be used or reproduced in any form whatsoever for commercial purposes. Neither the European Union (Tacis Project) nor PricewaterhouseCoopers, as contractor for this Tacis funded project «Support for the Accounting Reform in the Banking Sector» assume any legal, technical, financial, or other responsibility for the contents, conclusions, interpretations derived from this Manual or website contents.
Enquiries concerning the Manual or its contents should be directed to its principal author, Jorge Iwaszkiewicz, at jorge.iwaszkiewicz@ru.pwcglobal.com.