Raman & Suman, Chartered Accountants, are the statutory auditors of Santosh Bank Ltd. The bank uses a centralized core banking system (CBS) for…

The auditor should design and perform tests of controls to obtain sufficient appropriate audit evidence about the operating effectiveness of relevant controls within the core banking system. This is because: The auditor intends to rely on the operating effectiveness of controls for assessing risks of material misstatement; andSubstantive procedures alone cannot provide sufficient audit evidence due to the high volume and automated nature of transactions. In designing and performing tests of controls, the auditor shall obtain more persuasive audit evidence, the greater the reliance the auditor places on the effectiveness of controls. This includes examining system logs, testing automated interest calculations, reviewing exception reports, and observing authorization controls in operation. A higher level of assurance may be sought about the operating effectiveness of controls when the approach adopted consists primarily of tests of controls, in particular, where it is not possible or practicable to obtain sufficient appropriate audit evidence only from substantive procedures.