Focus and skills of bank credit risk audit

Key points and techniques of bank credit risk audit

The risks currently faced by my country’s commercial banks can be divided into endogenous risks and exogenous risks. Endogenous risks are caused by poor internal management of banks and imperfect risk control mechanisms. They are mainly manifested as unbalanced control of total assets and liabilities, difficulty in meeting liquidity requirements, excessive loan proportions in asset structures, incomplete loan contract elements, and credit risk. Errors in decision-making and lack of post-loan management, favor loans and relationship loans, lack of information communication between banks and branches result in ineffective cross-loan review and control of malicious lenders, vicious competition for deposits at high interest rates, illegal issuance of letters of credit and issuance of acceptances Money orders, corruption and illegal operations by bank personnel, off-book operations and illegal self-organized entities, etc. Exogenous risks are caused by various factors outside the banking industry, mainly including: social credit risk, financial fraud risk, and government intervention risk. Below is the knowledge I bring to you about the key points and techniques of bank credit risk auditing. Welcome to read.

Key points of credit risk audit

1. Risk of excessive concentration of loan investment

"China Banking Regulatory Commission's Notice on Bank of China" , China Construction Bank Corporate Governance Reform and Supervision Guidelines" stipulates that the loan balance to the same borrower cannot exceed 50% of the capital, in order to prevent loan concentration risks.

The concentration mainly manifests itself in two aspects: First, the concentration of group customer loans. In recent years, while enterprise groups, especially private enterprise groups, have developed rapidly, some new problems have emerged. For example, some enterprise groups have complicated equity relationships, some related transactions are frequently intertwined, some have low information transparency, and some have mutual guarantees. The phenomena are prominent, including irrational capital operations and blind expansion. These problems have caused a sudden increase in risks for some private group customers. Once a problem occurs in a certain link, a "domino" effect will occur.

The second is to concentrate lending to listed companies. Due to various reasons, China's listed companies still have problems of one kind or another. Many credit funds lent to listed companies have not been well utilized, and some of the funds have even flowed into the stock market. The risks in China's stock market are very high. This creates credit risk for banks.

2. Cyclic discount risk

Cyclic discount refers to the cycle formed by depositing deposits, issuing bank acceptance bills, discounting bank acceptance bills, and re-discounting, which is a form of credit amplification. An inverted "pyramid". Assume that the enterprise obtains a loan of A billion yuan from the bank, conducts recurring discounts and issues bank acceptance bills, the discount rate is r, and the margin ratio is k. Then for the bank loan of A billion yuan, bank acceptance bills can be issued n 1 times, and the bills can be discounted n times. There is a very scary multiplier effect here. Once the chain breaks and no new funds come in, this inverted pyramid will collapse immediately.

3. Related-party loans

The core of related-party loans is to obtain bank credit and loans from banks through various interrelated relationships. One is group association. It means that a group owns several subsidiaries, which are independent legal persons and exclusively bear civil liability.

There are several forms of group-related loans: first, a subsidiary applies for a loan and uses the group company’s total assets as collateral; second, it is a mutually guaranteed loan. Such bank loans obtained through group connections are generally used jointly within the group. Once a crisis occurs, it is the bank that ultimately suffers. A large number of loans cannot be recovered, and risks also arise. The second type is the legal representative relationship. That is, multiple companies have the same legal representative, or one person registers several companies.

4. The mortgage guarantee is not compliant

First, the property that cannot be mortgaged is used as a mortgage. For example, land ownership is used as a mortgage, educational facilities, medical and health facilities and public welfare facilities for public welfare such as schools and hospitals are used as a mortgage, and disputed properties, properties that have been sealed up, detained, and supervised in accordance with the law are used as a mortgage. Second, the collateral was not registered.

For example, if the house mortgage is not registered with the real estate management department, the land mortgage is not registered with the land management department, and the movable facilities mortgage is not registered with the industrial and commercial administration department. Third, the collateral is insufficient in value and cannot meet the needs of repaying principal and interest, resulting in the loss of bank credit assets.

5. Loopholes are exploited in the management of debt-retired assets

There are four main manifestations: First, overestimation and multiple loans. The fundamental purpose of valuation is to increase loans. The second is overvaluation and overpayment. If the loan cannot be returned when it expires, the collateral will be used to offset the loan at an inflated valuation. The third is repeated mortgages, that is, multiple mortgages on the same property. The fourth is to borrow property rights certificates for mortgage, borrowing other people's assets or property rights certificates to make mortgage loans.

Methods of credit risk audit

1. Questionnaire survey method

Questionnaire survey is an indispensable and important method to understand the credit internal control system. All measures, methods and procedures adopted by the control system can ultimately produce control effects only through the implementation and execution of the credit department personnel. Therefore, through the audit method of questionnaire survey, by investigating the specific implementation of the credit internal control system by relevant credit personnel, we can grasp the actual status of the credit internal control system of the audited unit, compare the actual implementation of the system with the system itself, and reflect the audited The actual situation of the unit’s internal control system. Through the questionnaire survey, we can more objectively find out the defects in the construction and implementation of the credit internal control system of the audited unit.

2. Discussion and inquiry method

Discussion and inquiry are of great importance to whether we can carry out audit work smoothly, understand audit matters comprehensively and objectively, and conduct audit evaluation objectively and fairly, especially It can get twice the result with half the effort on some difficult problems where the methods are secretive and the evidence is insufficient. It is mainly divided into communication methods such as relaxed conversation, induced conversation, and direct conversation.

3. Confirmation method

Article 93 of the "International Standards for Auditing Practices - Audit of Bank Financial Statements" stipulates that "auditors should consider using third-party confirmation methods to verify financial statements." Confirmation of any outstanding balances can be obtained from back-end open transaction records or from confirmations from trading partners, dealers or agents. Separate confirmations may also be required for different transactions because the bank records them. The information may not be aggregated according to trading partners but only dispersed."

Auditors must plan in advance to determine whether to use positive or negative confirmation, how to select samples, and when to arrange confirmation. If the reliability of the confirmation procedures is considered insufficient, the scope of confirmation should be expanded or other audit procedures should be used to obtain more evidence. If the audit evidence obtained through confirmation, alternative audit procedures and other audit procedures is insufficient, the scope of confirmation should be expanded or additional audit procedures should be added.

4. Audit sampling method

Audit sampling refers to an audit method that selectively selects certain businesses or a certain part of data in a certain period for review to infer the overall situation. There are three specific categories: the first is the arbitrary sampling method, in which auditors arbitrarily select a part from a large amount of data for review to infer the overall reliability; the second is the judgmental sampling method, in which auditors sample based on their own experience and judgment; the third is Statistical sampling method, auditors conduct sampling according to the random principle and use quantitative statistical methods to make inferences about the population. In the implementation of bank credit business risk audit, a large amount of data needs to be checked. For example, a large amount of data needs to be audited in many aspects such as testing the accuracy of data used in the risk warning system, checking the accuracy of interest rate parameter calculations, checking the accuracy of loan classification results, etc., using Sampling methods can improve audit efficiency.

5. Reference method

The reference method is a basic method of credit risk audit. It is divided into institutional review method and archive review method. The basic ideas, control measures, methods and means of the audited unit's credit internal control system are generally reflected in the relevant business management system and clarified in written documents. Such as credit management system, credit business job responsibilities, etc.

In order to understand the status of the internal control system of the audited unit, the system review method is used, starting from the review of the relevant department systems, combined with the inquiry method and observation method, to understand the details of the credit internal control system.

The archival data review method is a common audit method that identifies the authenticity, legality and validity of the data itself and the economic activities it reflects through the review of audit data, including the review of original vouchers and accounting vouchers. , review of account books and statements, review of loan file information and review of other information, etc. For example, when we conduct audit tests on newly issued loans and other credit businesses of a certain secondary branch, in order to understand the risk status of loans in the five links of granting, investigation, approval, issuance and post-loan management, we randomly check some parts according to the requirements of the audit plan. For the loan files, the review method was used to test the effectiveness and compliance of the implementation of the internal control system related to the credit business. Through the review of the file materials, it was found that there were some problems in the implementation of the internal control system for the credit business of a certain branch.

6. Reconciliation method

Reconciliation method is an audit method that examines whether the audit data of relevant departments are consistent with each other. Applied to credit business audit aspects such as credit statements, credit ledgers, credit files, credit objects, superior bank data and subordinate bank data, management bank and handling bank data, accounting and credit data, debt-repaired asset objects and accounts, Internal reconciliation of interest income and fee income, etc. At the same time, on the basis of reviewing the data of relevant departments, the connection relationship between relevant data should be used to check the same audit matters between different audit data.

7. Professional Judgment Method

Due to its unique professionalism and practicality, audit work faces the complexity and uncertainty of the environment, and highlights the ubiquitous audit risks. At present, there is no advanced audit theory and audit technology that can completely avoid audit risks. Therefore, it is particularly important to make extensive use of auditors' professional judgment in the audit process of commercial banks. The professional judgment method is for auditors to classify, analyze, summarize, and reason based on the logical relationships between things, constantly bringing related issues and phenomena into the perspective of logical analysis, and constantly eliminating non-logical factors, so as to Contradictions between phenomena are related to substantial causal relationships, inferring some inevitability, and discovering and revealing clues to important issues.

8. Analytical review method

Analytical review is the auditor’s analysis of important indicators, ratios, trends and related data of the audited object, including the investigation of abnormal changes and these Significant differences between important ratios or trends and expected amounts and related information to understand the reasons for the material differences. Commonly used methods for analytical review include comparative analysis, ratio analysis, trend analysis, structural analysis, etc.

Comparative analysis is a technical method to obtain audit evidence by comparing accounting statement items with established standards. It includes actual numbers and planned numbers, book numbers and auditors' calculation results, comparisons between actual numbers and industry standards, etc. For example, compared with the average situation of the entire bank, the amount of non-performing loans of a certain branch showed a sudden decrease at the end of the year and a sudden increase at the beginning of the year, indicating that there may be artificial adjustments to non-performing loans.

Ratio analysis is a technical method that analyzes the ratio of an item in an accounting statement to another related item to obtain audit evidence. It requires calculating various relevant ratios and then comparing them with corresponding reference standards to obtain audit trails or audit evidence. For example, if the calculated bank acceptance bill handling fee income charging rate for a certain branch for six months is 0.3/10,000, which is lower than the People's Bank of China listed rate of 0.5/10,000, then there may be no or undercharged bank acceptance bill handling fees.

Trend analysis is a method of comparing and analyzing the amount and changes of a certain item in the accounting statements for several consecutive periods. By analyzing the trend of a certain item in the accounting statements, we can understand the increase or decrease in the item and its change range to obtain audit clues or audit evidence. For example, by examining the changing trend of the non-performing loan ratio, if there are sudden highs and then lows, especially at the end of the year and the beginning of the year, it can basically be judged that there is artificial adjustment of the non-performing loan ratio.

Structural analysis is a method of analyzing the proportions of different components contained in a certain data. First calculate the percentage of each component to the relevant total, and then conduct comparative analysis to understand the situation or discover anomalies. For example, when analyzing the structure of new non-performing loan balances of a certain unit, if the non-performing balance of a certain loan accounts for a large proportion of the total non-performing loans, the on-site audit should focus on the credit business of this loan type. ;