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Review of Closing Instructions and Communication with Branch Auditors

Review of Closing Instructions and Communication with Branch Auditors :

It is a common practice that all public sector banks issue closing instructions to branches, based on which branches prepare their balance sheet,
profit and loss account and other returns necessary for preparation of the financial statements of the bank as a whole. These instructions issued by the HO are called ‘accounts closing instructions’ and include the format of the financial statements and other relevant returns, significant accounting policies to be followed, other instructions necessary for the conduct and completion of the audit, timelines of audit completions and consolidations etc. Many a times, besides general instructions this may also include specific directions on review and verification of certain information required by the SCA for their audit.

Considering the significance of these instructions, it is advisable that before these instructions are sent to branches, the SCA review them to assess whether the instructions are sufficiently comprehensive, clear and adequate to facilitate the compilation of branch financial statements and other relevant data accurately and expeditiously. The SCA should particularly examine whether the instructions are in consonance with the accounting policies of the bank and are in such compliant that stand the test of SA 600 – Using the Work of Another Auditor, so that the SCA has the comfort and confidence in the procedures adopted by the branch auditors by relying on the information and assurance provided by them.

Further, in many cases, immediately after the appointment of branch auditors but before the commencement of audit, the bank’s management
organizes a face to face meeting between the SCA and the branch auditors, wherein the SCA issues specific instructions for the conduct of audit detailing the areas of concern that require extra care and special notice by branch auditors.