Problem:
Banks commonly undertake a wide range of activities which have many audit implications. In addition to understanding the external factors that could indicate increased risk; an auditor needs to consider the nature of risks arising from the bank’s operations.
Required:
Question1. Illustrate out the objective of audit of a bank’s financial statements.
Question2. Illustrate out and discuss how the need to process high volumes of transactions accurately within a short time might contribute significantly to operational risk.
Question3. By the nature of their business, banks are ready targets for those engaged in money laundering activities by which the proceeds of crime are converted in funds which appear to have a legitimate source. Banks establish policies, procedures and controls to deter and to recognize and report money laundering activities. Illustrate out five such procedures which an auditor is required to evaluate for its effectiveness.
Question4. An auditor needs to consider some significant factors when developing an overall plan for the audit of the financial statements of a bank. Discuss the following three factors:
(i) The difficulty of Transactions undertaken
(ii) Involvement of Other Auditors
(iii) The Extent of use of Information Technology and Other Systems
Question5. In audit of a bank’s financial statements, auditor might perform different audit procedures. Explain the following audit procedures. Your answer must include one instance of each in a banking environment.
(i) Inspection
(ii) Inquiry and Confirmation
(iii) Computation