THE AUDITING DEPARTMENT Qualifications of Bank Auditor An auditor is a person or firm appointed and authorized to audit or examine an account or accounts, compare the charges with the vouchers, examine the parties and witnesses, allow or reject charges, and state the balance. The audit may be made by an auditor (or auditing department) who is a regular em ployee, or by an independent auditing firm of public accountants. In a hank, as in other businesses, the auditor or auditing depart ment has as its essential function the verification of, and systema tic control over, disbursements. It is not an earning department, and to a large degree, except as it may co-operate with other departments, is not an operating unit of the bank; it may be constructive, however, for while performing its routine or periodic duties it is in a position to suggest changes tending to reduce errors to a minimum and to improve the system in general.
The auditor comes into intimate contact with every depart ment of the bank, and must, therefore, be conversant with the technique, practices, and functions of every department; he must be an experienced bank man, preferably one who has risen from the ranks and who knows the bank. It is also essential that he be a highly competent accountant, whose analytical skill detects and brings to light frauds, errors, and improprieties and whose constructive genius enables the accounting of the bank to reach a maximum of efficiency with a minimum of cost. If the bank has a chief accountant and accounting department, the auditor is relieved of much of this constructive accounting work. No less important is it that he be a man of high moral rectitude and courage, as the final arbitrament of the propriety of a charge against the bank, its officers, or customers, is made by him, or at least the decision whether to report and reprove and correct irregularities rests with him. An auditor with these virtues is a tower of strength to any bank.
Duties of Auditing Department The general duties of the auditing department may be divided into two groups: (r) those concerned with the daily routine of investigation and verification, and (2) those concerned with the periodic general examination of departments. The
first group embraces, among others, the reconciling of accounts; the adjustment of errors; the supervision of the handling of re quests for information by the national and state bank examiners; the making of special investigations and the compiling of statisti cal information for the official staff of the bank; the checking to the accounts current sheets and the filing of paid checks drawn on the bank itself; the copying of statements of accounts; the investigation of overdrafts; the checking of cables and telegrams in which an authenticating symbol is used; the checking of letters of instruction and requesting clean payments of any description, including currency shipments; the checking, by means of the stubs, of all cashier's checks, redemption checks, certificates of deposit, letters of advice, letters of credit and drafts drawn on foreign banks, and acceptances by the bank; the recording and filing of all stubs; the destruction of records which are more than, say, six years old; the auditing of expense bills and purchase requisitions; devising of systems to care for routine work; the passing upon changes in the bank records; etc. The second group embraces the activities connected with the thorough examination of the departments from time to time, and likewise of the branches of the bank, if any.
The organization of the auditing department is built on four principles of division: z. That some accounts are domestic and some foreign, and that the foreign accounts may be "our" accounts with foreign customers or "their" accounts with the bank.
2. That the work to be done is the daily routine or the periodic examinations.
3. That the daily routine may be grouped under such heads as reconcilements, investigations, verifications, pass books, filing, checking, etc.