Auditing and Assurance: Specialized Industry in 3.

Shifts in Consumer Behavior Commercial banks primarily focus on accepting

Banking Industries (Key Concepts and Practices) Changes in consumer preferences deposits and providing loans, facilitating day-to-day
are prompting banks to enhance banking operations and supporting local businesses
their digital services, like if aha and consumers. Deposits, loans, payment
Importance of Financial Services in the Economy convenient for the consumer didto processing. Regulated by government authorities to
by ana sila pud. ensure they operate safely and soundly.
• Mobilizing savings and facilitating
investments driving economic growth. These banks operate under stringent
4. Sustainability in Financial Services
• Support businesses by providing loans for Oo, basta.
regulations set by authorities, ensuring
capital expansion/operational compliance with financial standards and
improvements. maintaining public trust in the banking
system.
Financial Sector Non-Financial Sector
Manages money Focuses on goods and
Financial services sector includes, services production.
Subject to more Not so. Thrift banks (savings & loan association) play a vital
o Banking role in encouraging savings among individuals,
stringent regulatory
o Insurance promoting financial literacy. Focuses on accepting
oversight
o Investment services savings deposits and making mortgage loans. Often
Higher leverage in Not so.
o Real estate terms of capital offer housing loans at lower interest rates.
o Payment services structure discrepancies.
o Daghan pa. These banks provide essential financing
options for SME.

Trends and updates affecting the financial services BANKING INSTITUTIONS

sector: Rural banks are essential to farmers, helping them
Universal banks serve a pivotal role by offering a purchase necessary inputs. Agricultural purposes.
1. Regulatory Changes in Banking wide range of financial services retail banking,
Recent updates that have altered wholesale banking, investment banking, and
bank and non-bank’s operational insurance products, thus catering to diverse Cooperative banks empower local communities by
framework. customer needs. Customers benefit from having all pooling resources and offering services tailored to
their financial needs met in one place. the needs of their members.
2. Technological Advancements in Finance
Rise of fintech has reshaped how
banks operate.
4 Audit Procedures For Banking Institutions: Auditing and Assurance: Specialized Industry in Key Audit Considerations:
Banking Sector
1. Understanding the Banking Environment • Nature of the risks associated with the
and Its Unique Audit Challenges transactions undertaken by banks.
Auditors must comprehend the • Extensive independence on IT to process
Banking and Financial Sector
specific challenges, including transactions.
regulatory compliance and risk • Primarily responsible for the mobilization of • Effect of the regulations in the various
management. domestic savings and the conversion of jurisdictions in which they operate.
these into direct productive investments. • Continuing development of new banking
2. Design and Implementation of Robust • Providing funds to companies for their practices that may not be matched by the
Internal Controls capital expansion. concurrent development of accounting
Effective internal controls are • It is crucial for the banking sector to principles/internal control.
crucial, as they mitigate risks encourage household to save their extra
associated with fraud and ensure money, so these savings can be turned into
accuracy in financial reporting. loans to help businesses grow.

3. Risk Assessment Techniques in Banking

Audits 3 classes of Banking Industry:
Auditors should utilize specific risk
assessment techniques, focusing on 1) Universal and Commercial banking
inherent and control risk. Accepted domestic deposits and
offered checking accounts, had a total
of 12trillion pesos of deposits.
4. Compliance with Regulatory Standards in
Banking Audits
2) Rural and Cooperative banking
Auditors must ensure that banking
3) Thrift banking
institutions comply with
established regulatory standards.
 PLANNING THE AUDIT 4) Country risk IV. Development of an Overall Audit Plan
Potential impact of Auditor gives particular attention
I. Obtaining a Knowledge of the Business
economic, social to:
Obtaining a knowledge of the events on a foreign
bank’s business requires the country on a bank’s 1) Complexity of transactions
auditor to understand: financial health. 2) Extent to which core activities
are provided by the bank
a) Bank’s corporate 5) Risk modeling risk 3) Regulatory considerations
governance structure. 6) Currency risk 4) Contingent liabs and off-
b) Economic and 7) Settlement risk balance sheet items.
regulatory environment it 8) Operational risk 5) Extent of IT and other systems
operates. 9) Solvency risk used by the bank
c) Market conditions existing 10) Fiduciary risk 6) Inherent and control risks
in each of the significant 11) Price risk 7) Work of internal auditing
sectors in which it 12) Transfer risk 8) Assessment of audit risk
operates. 13) Interest rate risk 9) Assessment of materiality
14) Replacement risk 10) Mgmt. representations
II. Understanding the nature of banking risks 15) Concentration risk 11) Involvement of other auditors
1) Liquidity risk 16) Legal documentary risk 12) Geographic scope of bank’s
Basin di sila 17) Regulatory risk operations
kabayad sa ila 13) Existence of related party
utang. Happens if transactions
the bank cannot III. Understanding the risk management 14) Going concern considerations
obtain funds. process
Management develops controls and
2) Credit risk uses performance indicator to aid V. The complexity of transactions undertaken
If ang borrower dili in managing key business. For it to VI. Regulatory considerations
kabayad. be effective: PAPS 1004 – guidance on the
relationship between a bank’s
3) Reputational risk 1) Oversight and involvement in external auditor and BSP.
Potential for the control process by TCWG.
negative publicity, 2) Identification, measurement Basta and Bael Committee ug BSP
causing a decline in and monitoring of risks. nay guidance for the auditors to
customer base. 3) Control activities follow.
4) Monitoring activities
5) Reliable information system
VII. The extent of IT and other systems
High volume transactions
+ short amount of time = extensive
reliance and use of IT.

VIII. Expected assessment of inherent and

control risks
IX. Management’s representations
X. Coordinating the work performed
XI. Going concern considerations

Framework for Internal Control Systems in

Banking Organizations – PAPS 1006

• Issued by the Basel Committee on Banking

Supervisions
• September 1988
• Provides banking supervisors with a
framework evaluating banks’ internal
control system.
• Auditors may find this framework useful.