Banking · Bank Audit and Supervisory Controls

Bank audit and inspection serve as the dual pillars of supervisory control, ensuring the reliability of financial statements and the robustness of operational systems. While statutory audit is an annual external exercise mandated by law, internal inspection is a periodic self-assessment by the bank. The emergence of Risk-Based Internal Audit (RBIA) has shifted the focus from mere compliance to the evaluation of the risk management framework. Auditors are now required to look beyond the numbers into the 'culture' of risk and the effectiveness of technology controls. The Long Form Audit Report (LFAR) provides a detailed roadmap for auditors to report on sensitive areas like credit quality and fraud. In an era of digital transformation, the audit of Information Systems and the detection of 'window dressing' have become critical for maintaining public trust. Statement I: The Statutory Auditor of a bank is appointed by the shareholders in the Annual General Meeting for all types of banks, including Public Sector Banks, without any external approval. Statement II: A 'Concurrent Audit' is essentially a continuous audit process where the auditor is expected to verify transactions on a daily basis to prevent revenue leakage and procedural errors. Statement III: Under the RBI guidelines, the 'Audit Committee of the Board' (ACB) must be chaired by the Chairperson of the bank to ensure that the audit findings are directly addressed by the top leadership. Statement IV: The 'Internal Audit' function in a bank must be independent of the operational management and should report directly to the Audit Committee of the Board. Statement V: A 'Management Audit' focuses on the evaluation of the efficiency and effectiveness of the management in achieving the organizational goals and the quality of decision-making. Based on the summary and statements above, which of the following is correct?