CA Intermediate · Auditing and Ethics · Audit of Banks

While auditing a branch of Kaveri Bank, the branch auditor notices that the branch's reported provision for NPAs appears lower than needed because the head office has centrally computed a provision for some advances that the branch auditor cannot verify. The branch is one of many, and advances audited by the branch auditor cover less than the total advances. The central statutory auditor will rely on branch auditors' reports. What is the most appropriate approach for the branch auditor?

The branch auditor should audit and report on the advances within the assigned branch scope and communicate the concern about centrally computed provisions to the central statutory auditor. The central auditor is responsible for the overall opinion on the bank, including head office computed provisions, so the branch auditor should not refuse or issue a bank-wide opinion.

1. ARefuse to report any findings because head office computed the provision
2. BAudit only those advances examined at the branch, report on the assigned scope and bring the matter to the central auditor's attention, since the central auditor is responsible for the overall opinion on advances including those at head officeCorrect
3. CModify the opinion to adverse for the whole bank
4. DInstruct the branch manager to revise provisions without reference to the central auditor