mkcb audit plan rec on 28 jan

8/7/2019 MKCB AUDIT PLAN REC ON 28 JAN

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INTERNAL AUDIT PLAN FOR YEAR 2011

1 Introduction

This is a one year plan that is intended to highlight the areas which will beaudited for transactions of the period from January to December 2011.

1.1 Audit Procedures.

The auditors will perform the following procedures in the course of audit:

a. Inspection and observation, this will be in the case of;

(i) Securities;

(ii) Loan agreements;

(iii) Collateral;

(iv) Commitment agreements; and

(v) Cash

b. Inquiry and confirmation wherever possible; this will be in the case of

(i) Collateral.

(ii) The value of assets and liabilities

(iii) Securities held by third parties;

(iv) Loan accounts;

(v) Deposit accounts;

(vi) Guarantees; and

(vii) Letters of credit.

c. Computation will be applied to banks financial statements

d. Analytical procedures for performance reviews

1.3 Audit Tools

In carrying out the audit work, the department will use policies of the bankrelevant to the department auditing, Banking and Financial Institutions Act,BOT regulations, International Financial Reporting Standard and InternationalStandard Auditing.

1.4 StaffingCurrently the department has two staff.

1.5 Annual PlanThe Audit Plan for this year is as set out in the timetable below. The AuditPlan identifies Head office audits and branch audits together. This assiststhe planning and managing of both the audits and staff time. However thereport will differentiate the head office functions and branch functions.

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2.0 AREAS OF AUDIT FOR 2011

The plan has identified areas of audit according to banks businessoperations. The most risk areas the audit department has identified is thedeposit and credit areas, these areas will be audited each quarter to ensure

early discovery of problems before they become big problems. Some areasappear once or twice as are seen to be not of very risk compared to thosetwo areas above.

However the department will not audit only areas identified in the plan butfinancial reports submitted to BOT daily, weekly, monthly and quarterly willbe a good source for audit.

The department will make follow up of the findings and recommendationsgiven out by external auditors and BOT examiners on the other hand andmanagement responses. The results of follow up for both reports will be

communicated to BOT quarterly as required under Regulations of 2005.

2.1 FIRST QUARTER

2.1.1 LOANS AND OVERDRAFT(i) Salaried loans(ii) Group loans(iii) Business loans

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(iv)Staff loans

Audit Objective:The overall objective is to ensure that loans are granted in accordance withstipulated rules and regulations as well as laid down policies and procedures.This is meant to ensure that loans granted are collected and loss risks areminimised.

Expected outcome

It is expected that if compliance is followed properly during issuance of loansthen bad loans will be minimal and therefore minimal loss and good income.

The work plan will include the following:

1) Salaried loans(i) Check recruitment procedures.(ii) Check collective agreements(iii) Check specimen signatures for authorised officers to sign loan

application forms at employers side(iv)Check arrears reports(v) Check written off loans status

2) Group lending(i) Check recruitment procedures(ii) Check registration fees, insurance fund and loan application fee(iii) Visit sampled groups and check recruitment and training procedures(iv) Check arrears reports - provisions(v) Check written off loans status

3) Business loans(i) Check procedures for issuing loans(ii) Review loans disbursed(iii) Check securities and their legality(iv)Check arrears reports - provisions

2.1.2 DEPOSITS(i) Current accounts(ii) Saving accounts(iii) Time deposits(iv)Other deposits

Audit Objective:

The overall objective is to ensure that customer service related policies andmanuals are being adhered to. These include Current Account, SavingsAccount and Time deposits Manuals. Other objective is also to checkcompliance with the Banks anti money laundering procedures.

Expected outcome

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It is expected that if compliance to the opening of these accounts is followedthen we expect to have good deposits, good customers whom bank canextend other contract relationship of banking services.

The work plan will include the following:(i) Check the procedure for opening account if are in line with bank

policy(ii) Check the documentation required for opening of accounts, theseincludes; introduction letter, picture, ID, Memorandum of a company,VAT, TIN etc. i.e. check compliance to KYC

(iii) Proper filling of accounts opening forms(iv)Check minimum opening balance(v) Check charges required for opening account such as ID charges on

savings and cheque book on current account

2.1.3 CASH, BALANCE WITH OTHER BANKS AND OTHERINVESTMENTS

(i) Cash at strong room(ii) Balance with other banks(iii) Investment in treasury bills(iv) Investments in bonds(v) Investments in other banks (placements)(vi) ATM

Audit Objective:The overall objective is to ensure that policies and manuals are beingadhered to. The overall objective is to ascertain that the amount transferred

upcountry or outside and inside the country are properly supported and duecare is observed.


(i) Check if there is temporary and permanent insurance for cash in hand(ii) Check cash limit for strong room and tellers cubic(iii) Reconciliations of the balance with other banks(iv) Check interest accrual computation by the system(v) Check the documents used to transfer the funds if properly supported(vi)Check application of controls for anti money laundering transactions

(vii) Check the whole procedures involved in cash and investments

2.1.4 SHAREHOLDERS REGISTER

Audit ObjectiveThe overall objective is to ascertain that the amount received from membersis properly received and recorded.

The expected outcome

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If all shares are properly received and accounted for paid up capital will beproperly accounted for and share register will also be well prepared andregistered as required by law.

The work plan will include the following(i) Check members register if agreeing with General ledger.(ii) Check advance towards share capital if agreeing with General ledger.

(iii) Check Annual General meeting approval over movement of sharecapital.

(iv)Check capital adequacy requirement.(a) Core Capital.(b) Total Capital.

(v) Check requirement of BOT over capital build up compliances

2.2 SECOND QUARTER2.2.1 LOANS AND OVERDRAFT

(v) Salaried loans(vi)Group loans(vii) Business loans(viii) Staff loans

Audit Objective:

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The overall objective is to ensure that loans are granted in accordance withstipulated rules and regulations as well as laid down policies and procedures.This is meant to ensure that loans granted are collected and loss risks areminimised.

Expected outcome

It is expected that if compliance is followed properly during issuance of loans

then bad loans will be minimal and therefore minimal loss and good income.


3) Salaried loans(vi)Check recruitment procedures.(vii) Check collective agreements(viii) Check specimen signatures for authorised officers to sign loan

application forms at employers side(ix)Check arrears reports(x) Check written off loans status

4) Group lending(vi)Check recruitment procedures(vii) Check registration fees, insurance fund and loan application fee(viii)Visit sampled groups and check recruitment and training procedures(ix) Check arrears reports - provisions(x) Check written off loans status

3) Business loans(v) Check procedures for issuing loans(vi)Review loans disbursed

(vii) Check securities and their legality(viii) Check arrears reports - provisions

2.2.2 DEPOSITS(v) Current accounts(vi)Saving accounts(vii) Time deposits(viii) Other deposits

Audit Objective:


Expected outcome


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The work plan will include the following:(vi) Check the procedure for opening accounts if are in line with bank

policy(vii) Check the documentation required for opening of accounts, these

includes; introduction letter, picture, ID, Memorandum of a company,VAT, TIN etc. i.e. check compliance to KYC

(viii) Proper filling of accounts opening forms(ix)Check minimum opening balance(x) Check charges required for opening account such as ID charges on


2.2.3 INCOME(i) Interest income

(a) Interest on loans(b)Interest on Treasury bills(c)Interest on placements

(ii) Non interest income(a)Commitment fee(b)Registration fee(c)Tender fee(d)Foreign income(e)Income from western union(f) Other incomes

Audit Objective:The overall objective is to ensure that procedures for income calculation andrecording are being adhered to.

Expected outcomeIt is expected that if procedure for recognition and collection of income arefollowed as per policy and tariff guide and computer is accruing incomeproperly then there will be no loss of income.

The work plan will include the following(i) Check registration fee(ii) Check application fee(iii) Check interest receivables/accruals(iv)Check reversals from income(v) Perform ratios and advice on the profitability of the bank(vi)Check other income

2.2.4 EXPENSES

(i) Interest expense

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(a) Interest on saving accounts

(b) Interest on current accounts

(c) Interest on time deposits

(ii)Non interest expenses

(a) Payroll expenses

(b) Other expenses paid/ payable

Audit ObjectiveThe overall objective is to ascertain that all expenses are authorised beforepayment, interest calculation procedures are being adhered to.

Expected outcomeIt is expected that if all payments were paid through authorised procedures

as set out by the bank, and computer system is behaving good in accruingexpenses, then there will be no bad loss and income is expected to be good.

The work plan will include the following(i) Check recording procedures(ii) Check statutory remittances(iii) Check payroll expenses(iv)Check interest expenses on money deposited with bank(v) Check recording and postings non interest expense(vi) Check commission and fees payables(vii) Check recording and treatment of bad debts

2.2.5 HUMAN RESOURCE(i) Companys Policies and legal requirements on employment laws of

the country(ii) Personnel Files(iii) Job descriptions(iv)Health and welfare plans(v) Training and development(vi)Employment contracts(vii) Health and welfare plans

(viii) Other staff matters

Audit objectivesThe overall objective is to provide an assurance, that within the HumanResource section, control is in place and working effectively.

Expected outcomeIt is expected that if there is compliance to Companys policies, regulations,best practices and law of the country, then banks growth and manpower willbe managed. Salary payment will be to the right people and right money at

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the right time. Risk will be identified and mitigated. Staff turn-over, fraudissues and disputes will be managed.

The work plan will include the following(i) Review for legal compliance(ii) Review for compensation, benefits/salary administration(iii) Review for employment procedures/recruitment including

employment contracts(iv) Review of orientation procedures(v) Review of terminations procedures(vi) Review for employment relations(vii) Review communications procedures within the bank in regard to

awareness of the staff about the banks regulations, vacant positions,important events etc. All staff must have equal information about thisinformation.

(viii)Review for proper set up of files/record maintenance, relevancy ofinformation and redundant information

(ix) Review for Policies and procedures ( Including employee handbook if

any)(x) Review for all aspect of human resources

2.2.6 ASSETS VERIFICATION(i) Fixed assets

(a) Computers(b) Fixtures and fittings

(ii) Current assets(a) Stationery Stocks(b) Other receivables

Audit Objective:The overall objective is to ensure that procedures related to the acquiringassets, recording and disposals are followed.

Expected outcomeIt is expected that if recording of assets is properly done then there will beproper depreciation in case of fixed assets, and proper charging for expensesfor current assets like stocks and increase in cash for receivables. Balancesheet will show actual position.

The work plan will include the following(i) Check if acquisition of assets are properly authorised and within the

budget(ii) Check if recording of assets are properly done and depreciation of

values are in accordance with regulation set up by bank(iii) Check value of stocks and receivables are properly accounted for(iv) Check if physical assets can be traceable and value ascertained

example stationery stocks

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(v) Check if there is any insurance cover for assets for examplecomputer

(vi)Check all procedures related to fixed assets.

2.3 THIRD QUARTER

2.3.1 LOANS AND OVERDRAFT(i) Salaried loans(ii) Group loans(iii) Business loans(iv)Staff loans

Audit Objective:The overall objective is to ensure that loans are granted in accordance withstipulated rules and regulations as well as laid down policies and procedures.This is meant to ensure that loans granted are collected and loss risks areminimised.

Expected outcome



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5) Salaried loans(i) Check recruitment procedures.(ii) Check collective agreements(iii) Check specimen signatures for authorised officers to sign loan


6) Group lending(i) Check recruitment procedures(ii) Check registration fees, insurance fund and loan application fee(iii) Visit sampled groups and check recruitment and training procedures(iv) Check arrears reports - provisions(v) Check written off loans status



Audit Objective:


Expected outcome



(i) Check the procedure for opening account if are in line with bankpolicy

(ii) Check the documentation required for opening of accounts, theseincludes; introduction letter, picture, ID, Memorandum of a company,VAT, TIN etc. i.e. check compliance to KYC.



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2.3.3 ICT / BCM MATTERS

Audit Objective

The overall objective is to ensure that controls over ICT and BCM matters doactually exist in accordance with stipulated rules and regulations as well as

laid down policies and procedures.This is meant to ensure that ICT procedures and BCM matters are properlyfollowed and loss risks are minimized.


It is expected that if compliance were properly followed there is highpossibility of minimising risk to the bank resulting from ICT / BCM

The work plan will include the following

(i) Check compliance with BCM

(ii) Verification of controls over computer facilities

(iii) Verification of system access controls

(iv)Verification of physical security equipment

(v) Verification of disaster and backup planning procedures

2.3.4 SWOT ANALYSIS, GOALS AS ANALYSED IN THE BANKS PLANAND BUDGET

Audit ObjectiveThe overall objective is to determine whether expenditure is contained withintargets.

The work plan will include the following(i) Review performance against budget(ii) Review goals(iii) Review SWOT analysis.

2.3.5 FOREIGN EXCHANGE OPERATION

(i) Letter of credit if any

(ii) Buying and selling foreign currency

(iii) Money transfer including that of western Union

Audit Objective

The overall objective is to ascertain that stipulated foreign exchange rules,policies and procedures are being adhered to.

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If compliance is followed during opening of letter of credits, making transfersand buying and selling of foreign currency, then good income and minimumloss is expected. Compliance to money laundering policy is expected to behigh.

The work plan will include the following

(i) To verify accounts in operation

(ii) To verify buying and selling procedures

(iii) To examine adherence to approval requirements

(iv) To examine operational procedures relating to foreign operations

(v) To check compliances on BOT Regulation and other related policies.

2.4 FOURTH QUARTER

2.4.1 LOANS AND OVERDRAFT(i) Salaried loans(ii) Group loans(iii) Business loans(iv)Staff loans

Audit Objective:The overall objective is to ensure that loans are granted in accordance withstipulated rules and regulations as well as laid down policies and procedures.This is meant to ensure that loans granted are collected and loss risks are

minimised.Expected outcome



7) Salaried loans(i) Check recruitment procedures.

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(ii) Check collective agreements(iii) Check specimen signatures for authorised officers to sign loan


8) Group lending

(i) Check recruitment procedures(ii) Check registration fees, insurance fund and loan application fee(iii) Visit sampled groups and check recruitment and training procedures(iv) Check arrears reports - provisions(v) Check written off loans status



Audit Objective:


Expected outcome


The work plan will include the following:(i) Check the procedure for opening account if are in line with bank

policy(ii) Check the documentation required for opening of accounts, these

includes; introduction letter, picture, ID, Memorandum of a company,VAT, TIN etc. i.e. check compliance to KYC

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2.4.3 SHARES

Audit ObjectiveThe overall objective is to ascertain that the amount received from membersis properly received and recorded.


If all shares are properly issued and accounted for paid up capital will beproperly accounted for and share register will also be well prepared andregistered as required by law.

The work plan will include the following(i) Check members register if agreeing with General ledger.(ii) Check advance towards share capital if agreeing with General ledger.(iii) Check Annual General meeting approval over movement of share

capital.(iv)Check capital adequacy requirement.

(a) Core Capital.(b) Total Capital.

(v) Check requirement of BOT over capital build up compliances

2.4.4 CASH, BALANCE WITH OTHER BANKS AND OTHERINVESTMENTS

(i) Cash at strong room(ii) Balance with other banks(iii) Investment in treasury bills(iv) Investments in bonds(v) Investments in other banks (placements)(vi) ATM

Audit Objective:The overall objective is to ensure that policies and manuals are being

adhered to. The overall objective is to ascertain that the amount transferredupcountry or outside and inside the country are properly supported and duecare is observed.


(i) Check if there is temporary and permanent insurance for cash in hand(ii) Check cash limit for strong room and tellers cubic(iii) Reconciliations of the balance with other banks

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(iv) Check interest accrual computation by the system(viii) Check the documents used to transfer the funds if properly

supported(ix)Check application of controls for anti money laundering transactions(x) Check the whole procedures involved in cash and investments

2.4.5 INCOME(i) Interest income

(a) Interest on loans(b)Interest on Treasury bills(c)Interest on placements

(i) Non interest income(a)Commitment fee(b)Registration fee(c)Tender fee(d)Foreign income(e)Income from western union

(f) Other incomes

Audit Objective:The overall objective is to ensure that procedures for income calculation andrecording are being adhered to.Expected outcomeIt is expected that if procedure for recognition of income is followed as perpolicy and tariff guide and computer is accruing income properly then therewill be no loss of income.

The work plan will include the following(i) Check registration fee(ii) Check application fee(iii) Check interest receivables/accruals(iv)Check reversals from income(v) Perform ratios and advice on the profitability of the bank(vi)Check other income

2.2.4 EXPENSES

(i) Interest expense

(a) Interest on saving accounts

(b) Interest on current accounts

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(c) Interest on time deposits

(ii) Non interest expenses

(a) Payroll expenses

(b) Other expenses as per general ledger

(c) Other sundry credits

Audit ObjectiveThe overall objective is to ascertain that all expenses are authorised beforepayment, interest calculation procedures are being adhered to.

Expected outcomeIt is expected that if all payments are paid through authorised procedures asset out by the bank, and computer system is behaving good in accruingexpenses, then there will be no bad loss and income is expected to be good.

The work plan will include the following(i) Check recording procedures(ii) Check statutory remittances(iii) Check payroll expenses(iv) Check interest expenses on money deposited with the bank(v) Check recording and postings of non interest expense(vi) Check commission and fees payables(vii) Check recording and treatment of bad debts

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TIME TABLE FOR INTERNAL AUDIT PLAN FOR YEAR2011

S/N AREA OF AUDIT TIMEFRAMEFORAUDIT

DATES

2.1 FIRST QUARTER 2010

2.1.1

Loans and Overdraft 12 days 7/2 18/2

(i) Salaried loans

(ii) Group loans

(iii) Business/Corporate loans

(iv) )Staff loans

2.1.2

Deposits 12 days 21/2 4/3

(i) Current accounts

(ii)Savings accounts

(iii) Time deposits

(iv ) Other deposits

2.1.3

Cash, balance with other banks andother Investments

12 days 7/3 18/3

(i) Cash in Strong room At leastonce per

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Month

(ii) Balance with other banks

(iii) Investment in Treasury Bills

(iv) Investment in Placements

(v) ATM

2.1.4

Shares 5 days 21/3 25/3

(i) Share capital Register

(ii) Advance towards share capitalRegister

2.2 SECOND QUARTER 20102.2.1


(i)Salaried loans

(ii)Group loans

(iii)Business/Corporate loans

(iv)Staff loans

2.2.2


(i)Current accounts


(iii) Time deposits


2.2.3

Income 12 days 16/5 27/5

(ii) Interest Income

(a) Interest on loan

(b) Interest on Treasury Bills

(c ) Interest on placement

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(ii) Non Interest Income

(a) Commitment fee

(b) Registration fee

(c ) Tender fee

(d) Foreign Income

(e) Other Income

2.2.4

Expenses 12 days 30/5 10/6

(i) Interest expenses

(a) Interest to Savings account

(b) Interest to current account

(c ) Interest to Time deposit

(ii) Non Interest expenses

(a) Pay roll expenses


2.2.5

Human resource 12 days 13/6 24/6

(i) Personnel Files

(ii) Job descriptions

(iii) Training development plan

(iv) Employment contracts

(v) Human resource policy and governinglaws

(vi) Health and welfare plans

(vii) Other staff matters

2.2.6

Assets Verification 12 days 27/6 8/7

(i) All fixed Assets

(ii) All current Assets

2.3 THIRD QUARTER

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2.3.1


(i)Salaried loans

(ii)Group loans


(iv)Staff loans

2.3.2


(i)Current accounts


(iii) Time deposits

(iv) Other deposits

2.3.3

ICT / BCM 12 days 22/8 2/9

(i) Internal control in ICT

(ii) Compliance with BCM

2.3.4

SWOT analysis, and goals asanalysed in the banks plan/budget

12 days 5/9 16/9

(i) Review performance

(ii) Review goals

(iii) Compare performance againstplan/budget

(iv) Review SWOT analysis

2.3.5

Foreign exchange operations 12 days 19/9 30/9

(i) Letter of Credits

(ii) Buying and selling of foreign currency

(iii ) Money transfer

2.4 FOURTH QUARTER

2.4.1


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(i)Salaried loans

(ii)Group loans


(iv)Staff loans

2.4.2


(i)Current accounts


(iii) Time deposits


2.4.

3

Shares 12 days 7/11 18/11

(i) Share capital Register

(ii) Advance towards share capitalRegister

2.4.4

Cash, balance with other banks andother Investments

5 days 21/11 25/11

(i)Cash in Strong room

(ii)Balance with other banks

(iii)Investment in Treasury Bills

(iv)Investment in Placements

(v) ATM

2.4.5

Income 11 days 28/11 8/12

(i) Interest Income

(a) Interest on loan

(b) Interest on Treasury Bills

(c ) Interest on placement

(ii) Non Interest Income

(a) Commitment fee

(b) Registration fee

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(c ) Tender fee

(d) Foreign Income

(e) Other Income

2.4.

6

Expenses 12 days 12/12 23/12

(i) Interest expenses

(a) Interest to Savings account

(b) Interest to current account

(c ) Interest to Time deposit

(ii) Non Interest expenses

(a) Pay roll expenses


mkcb audit plan rec on 28 jan

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