Do Bank Frauds Always Mean Audit Failure? CA Explains the Truth:

Do Bank Frauds Always Mean Audit Failure? CA Explains the Truth Whenever a bank fraud occurs, the statutory auditor is the first person to be questioned. However, before blaming them, it is important to understand how bank audits actually happen. As per CA Himank Singla, bank audits happen in three stages:

• Concurrent Audit: This audit is conducted continuously throughout the year.
• Branch Statutory Audit: An annual audit of identified branches, which is conducted after the financial year-end.
• Central Statutory Audit: Audit of the bank's consolidated financial statements.

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Central Statutory Auditors (CSAs) do not sit at every branch checking every transaction. Singla explained that they are required to audit the financial statements of the bank on a risk-based and test-check basis. They evaluate internal control systems, review system-driven processes, and depend on branch audit reports. They also check the system control to make sure the financial statements are accurate. The CA also explained that over the past few years, the branch audit coverage has significantly reduced. As per the norms of the Reserve Bank of India, in many cases, only around 20-30% (or even less) of branches are covered under statutory branch audit. The rest of the branches operate under an internal and concurrent audit system.

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Since the independent audits at the branch level are reduced, there are more chances of fraud. In such a condition, expecting no fraud at all is unrealistic. He mentioned that chartered accountants have repeatedly urged the regulators to increase the branch audit coverage. In short, if fraud cases occur at banks, it does not always mean that the statutory auditor has failed to perform their duty properly. "If any lapse is found after investigation, due process exists through RBI, ICAI and other regulators. But mere occurrence of a fraud does not automatically mean central statutory auditors failed. Facts must lead the narrative, not assumptions," Singla said.

All noise and less facts. Let’s first get some facts straight about bank branch audit and central statutory audit.

Let’s first understand one basic fact that bank audit happens in three stages: concurrent audit, branch statutory audit, and central statutory audit. In banks,… https://t.co/ptE8MXArb0 — CA Himank Singla (@CAHimankSingla) February 23, 2026