A concurrent audit runs alongside the business. Transactions are examined close to the time they are recorded, so an error or an exception is raised in the same month rather than at the year end.
This describes the subject in general terms and is not advice; what applies depends on the facts, and the law changes.
Understanding the service
Concurrent audit is most familiar in banking, where the Reserve Bank of India's framework on concurrent audit in banks requires the system and leaves scope, coverage and the appointment of auditors to each bank's own policy within that framework. Banks typically appoint firms from the panel maintained for them, and a firm's category affects which branches it may be allotted.
The same idea is used outside banking. A business with high transaction volumes, several locations or substantial cash handling may put a concurrent review in place to catch exceptions early.
It is not a statutory audit and does not produce an opinion on financial statements. It reports exceptions, process failures and departures from the organisation's own rules.
When it becomes relevant
- A bank branch or processing centre where the bank's policy requires concurrent audit
- A business with high transaction volumes, multiple branches or significant cash collections
- Management that wants errors surfaced monthly rather than at the year end
- An organisation tightening controls after a problem has come to light
What the work usually covers
- Testing of transactions during or shortly after the period in which they are recorded
- Verification against the organisation's own policies, limits and approval requirements
- Review of documentation, authorisations and exceptions
- Reporting at agreed intervals, with observations and the responses of the unit concerned
- Follow-up on points raised in earlier reports
Framework and sources
The law and professional standards this work is carried out under. Links open the official site.
How the work runs
- Agree scope and coverageSettle which transactions, units and periods are covered, and the reporting intervals.
- Understand the processDocument the flow of transactions and the controls applied at each stage.
- Test during the periodExamine transactions and supporting records close to the date they arise.
- Report exceptionsIssue periodic reports, with observations discussed with the unit.
- Follow upTrack whether earlier observations have been addressed.
A general sequence. Engagements differ, and the scope of each is agreed in writing.
Common questions
Does a concurrent audit replace the statutory audit?
No. It is a separate engagement and does not result in an opinion on the financial statements.
How often is it reported?
That is agreed at the outset. Monthly or quarterly reporting is common; where a bank's policy prescribes a frequency, that governs.