Concurrent Audit

Meaning of Concurrent Audit

Concurrent Audit is a systematic and continuous examination of financial transactions carried out at the same time (concurrently) as the transactions are taking place.
Unlike statutory or tax audits (which are post-mortem in nature), concurrent audit is a real-time or parallel audit that aims to detect and prevent irregularities before they escalate.
It is widely used in banks, financial institutions, NBFCs, large corporates, and government organizations.

Objectives of Concurrent Audit

• Preventive Control – Detect and prevent frauds, errors, and irregularities at the transaction stage.

• Compliance Check – Ensure adherence to regulatory guidelines (RBI, SEBI, MCA, Income Tax, GST, Labour laws, etc.).

• Operational Efficiency – Verify whether systems, internal controls, and processes are functioning effectively.

• Early Warning System – Identify potential risks, NPAs (non-performing assets), and irregularities in advance.

• Safeguard Assets – Protect company assets, cash, and stock against misuse or misappropriation.

• Transaction Verification – Ensure accuracy and authenticity of financial transactions.

Scope of Concurrent Audit

The scope depends on the organization’s size and nature of business, but generally covers:

1. Banking / Financial Institutions

• Verification of loans, advances, and credit disbursements.

• Checking compliance with RBI/SEBI/NHB guidelines.

• Identification of early signs of NPA accounts.

• Monitoring cash transactions, suspicious transactions (AML/KYC).

• Verification of investment transactions, forex dealings, and treasury operations.

2. Corporate Sector

• Real-time checking of purchase and sales transactions.

• Verification of vendor payments, employee reimbursements.

• Inventory and stock movement checks.

• Contract compliance and approval system.

• Verification of statutory dues (TDS, GST, PF, ESI).

3. Government / PSU Sector

• Verification of budgetary allocations and utilization.

• Preventing misuse of funds or leakages.

• Ensuring compliance with procurement rules and tendering process.

Key Areas Covered

• Cash & Bank Transactions – Daily checking of vouchers, bank reconciliations.

• Loan & Advances – Documentation, sanctioning process, end-use verification.

• Investments & Treasury – Investment approvals, interest/dividend verification.

• Income & Expenditure – Verification of revenue recognition and expense controls.

• Regulatory Compliance – GST, TDS, Income Tax, Labour Laws, RBI, SEBI.

• KYC / AML Norms – Customer due diligence for banks and NBFCs.

• Stock & Inventory – Spot verification of stock records.

• MIS & Reporting – Regular monitoring and submission of reports to management.

Process of Concurrent Audit

1. Planning & Risk Assessment – Define scope and risk-prone areas.

2. Transaction Sampling – Select high-risk and high-value transactions for detailed checking.

3. On-Site Verification – Continuous checking of vouchers, ledgers, and supporting documents.

4. Compliance Review – Match with applicable laws, internal policies, and RBI/SEBI/MCA guidelines.

5. Reporting of Irregularities – Immediate escalation of discrepancies.

6. Monthly / Quarterly Audit Report – Submission of findings with recommendations.

7. Follow-Up – Ensure corrective measures are implemented.

Deliverables of Concurrent Audit

• Concurrent Audit Report (CAR) – Monthly/Quarterly report highlighting findings.

• Compliance Checklist – List of compliance gaps and corrective action needed.

• Risk Assessment Report – Identifying high-risk areas for management.

• Recommendations – Practical solutions to strengthen internal controls.

Benefits of Concurrent Audit (for Businesses & Banks)

• Timely detection of frauds, errors, and irregularities.

• Ensures real-time compliance with laws and regulations.

• Improves financial discipline and internal control systems.

• Acts as an early warning system against NPAs or frauds.

• Builds investor confidence and improves corporate governance.

• Helps in decision-making with accurate MIS and control reports.

Consequences of Not Having Concurrent Audit

• Increased risk of fraud, embezzlement, or misappropriation.

• Non-compliance with RBI/SEBI/Tax laws leading to penalties and legal actions.

• Weak internal controls affecting business reputation.

• Delayed detection of errors leading to financial losses.