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Why Banks in India Should Adopt Advanced Auditing Techniques? Advanced auditing techniques with a proper laid down structure and policies is the only way to avoid, if not eradicate the banking frauds

By Praveen Nigam

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Banks in India surely need advance auditing techniques to avoid the frequent frauds done by the defaulters or so to say the willful defaulters. Though in private sector banks, most of the decisions are centralized, even for the smallest of the issues like debit/ credit card, current account and other related issues, primarily because of system errors in the banks. Ultimately it is the clients that suffer extensively for inefficiencies of the banks. Having said that operational frauds still happens in these banks.

Need for Robust IT Systems

Most of the private sector banks have withdrawn virtually all powers from their branches and kept it with the central office, including the smallest of the powers. This is one of the techniques adopted by the private sector banks. The banking systems are ever evolving in India and specifically, the public sector banks are most vulnerable to any fraud, primarily because of not very rugged IT systems in place. Though most of the banks and their branches are on core banking, robust systems and connectivity is a big issue.

Power Delegation

On the other hand, nationalized banks have major issues like "delegation of powers' which needs to be very well defined and without a doubt, needs better and fast communication within the system. Bnaks need to have better connectivity (IT), should have process/ advanced auditing techniques , so that when anyone goes overboard, the systems automatically check it. Activities should me more process oriented and there should be least manual intervention and no verbal orders by the superiors.

Need for Advanced Auditing Techniques

Advanced auditing techniques are a probable solution, but will work when all the processes are well defined in the first place. In the latest developments, we see that ICAI is now questioning the auditors for their lapses in finalizing the balance sheet, which led to such frauds. Adopting advanced auditing techniques, can help banks detect the wrong doing even before the transaction takes place, having said that it will work if we have well defined systems in the first place and any intervention from any corner doesn't permit the system until and unless the same is authenticated in the system itself. Advanced auditing techniques with a well placed system in place may help PSU banks to considerably stop such frauds if not eradicate the same.

Advanced auditing techniques with a proper laid down structure and policies is the only way to avoid, if not eradicate the banking frauds.

Praveen Nigam

Managing Director and Chief Executive Officer, Amplus Consulting (P) Limited

Praveen Nigam is a Chartered Accountant 1989 Batch. He is a rank holder and a gold medalist in Taxation. Presently he is the Managing Director and Chief Executive Officer of Amplus Consulting (P) limited, the consulting arm of the Amplus Group. Prior to starting Amplus Group, Mr. Nigam was the Partner and National Head for Grant Thornton, India.

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