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CA Intermediate · Auditing and Ethics · Audit of Banks

M/s Rao & Co., chartered accountants, are appointed as statutory central auditors of a nationalised bank. The bank has 1,200 branches, and the firm visits 60 of them. Which statement best describes the auditor's position about the remaining branches?

The central auditor should rely on the reports of the branch auditors for branches not visited and take them into account in forming the opinion on the bank's financial statements. Visiting every branch is impractical and not required, and the opinion covers the entire bank, not only the visited branches.

  1. AThe firm need not consider the remaining branches because the bank's head office maintains consolidated records
  2. BThe firm must personally visit every branch before signing the report
  3. CThe firm should rely on the reports of branch auditors for the branches not visited and consider them in forming its opinionCorrect
  4. DThe firm should restrict its report to the 60 branches it has visited

Explanation

In a bank audit with many branches, the central auditor does not visit all branches. Branches are audited by statutory branch auditors (appointed by the RBI for nationalised banks) or are covered through the central auditor's own selected visits. The central auditor relies on and uses the branch auditors' reports for branches not visited, and keeps overall responsibility for the opinion. Visiting all branches is impractical and not required. Restricting the report to 60 branches is wrong because the opinion covers the whole bank.

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