Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: 5.0
Article rating: 5.0
Article rating: No rating
Article rating: 5.0
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 4.0
Article rating: 5.0
Article rating: 3.3
Article rating: 5.0
Article rating: 4.0
Article rating: No rating
RSS

News

After Satyam, Kingfisher Airlines, is PNB fraud another audit failure?

Author: IANS/Thursday, February 15, 2018/Categories: Banking & Financial Services

After Satyam, Kingfisher Airlines, is PNB fraud another audit failure?

Chennai, Feb 15 - The $1.8 billion fraud at the government-owned Punjab National Bank (PNB) shows the failure of various kinds of audits in the bank, including the RBI's inspection, said a senior chartered accountant.

According to him, the Reserve Bank of India has to carry out a deep investigation, forensic audit of the accounts involved in the alleged fraud and also make it compulsory for the banks to carry out forensic audit.

"Every fraud is a lesson for those who want to take it as a lesson. 

"Broadly the kinds of audits or inspections that are carried out in Indian banks are statutory audit (carried out by auditors appointed by banks), concurrent audit (carried out by outside auditors at the bank branches), internal audit (carried out by bank staff) and the inspection by RBI," P.S.Prabhakar, Partner in Rajagopal and Badrinarayanan, a chartered accountancy firm said.

He said the statutory auditor is mainly a test check auditor or an audit where transactions are checked at random.

"The internal audit is done by bank staff. Then there is also inspection by RBI officials. It is strange how the fraudulent transactions that have been carried out since 2011 were not detected," Prabhakar said.

Normally large value transactions should be checked and SWIFT system transactions should be carefully checked, he added.

According to the PNB, the alleged fraud was carried out by two staffers by not entering the transactions in the bank's core banking solution but in SWIFT signalling another bank's overseas branch that the transaction is valid.

Prabhakar said a Letter of Credit should normally be given only against receipt of security but it is not done in banks.

"The PNB case is just one bank and one branch. It is not known how many more banks and branches are involved in such transactions," Prabhakar said.

According to him, the RBI has to carry out a forensic audit of the books of the parties involved in the alleged fraud in PNB and trace the money or the property bought with that money.

He said risk-based information security audit should be done in banks by professionals with specialised knowledge of software systems.

"The costs for the banks will be far less compared to their losses due to frauds," Prabhakar said.

Partner at chartered accountancy firm GSV Associates, M.R.Venkatesh said: "The alleged fraud in PNB is a failure of auditors --internal and statutory -- and also of the regulator." 

"The sad part is that everybody involved in such frauds in India know that nothing would happen to them," Venkatesh added.

"It is a failure of PNB's internal checks and controls. I don't know why the bank officials are given the discretion to enter the data in one system and not in the main system (core banking solution)," Rakesh Nangia, Managing Partner, Nangia & Co said.

According to Prabhakar, bankers should scrutinise carefully the gems, jewellery and real estate players before extending any facility to them.

Print Rate this article:
4.0

Number of views (199)/Comments (0)

Kavita Giridhar Mallya

IANS

Other posts by IANS
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free