What makes concurrent audit different
Unlike statutory or internal audit, which review transactions after the fact on a periodic basis, concurrent audit examines transactions close to real time, as they occur — the objective is to identify errors, irregularities, or deviations from prescribed processes quickly enough to correct them, not just report on them months later.
What concurrent auditors typically examine
- Loan sanctioning and disbursement processes, checking adherence to approval authority and documentation requirements
- Compliance with RBI's NBFC directions and prudential norms as transactions happen
- Cash and forex transactions, where applicable, for adherence to internal limits and regulatory requirements
- NPA classification and provisioning, checked on an ongoing basis rather than only at period-end
Why RBI emphasises this for certain NBFCs
NBFCs handle public funds and extend credit at scale, and the risk of a control failure compounding before it's caught in a periodic audit is meaningfully higher than in many other business types. Concurrent audit is designed specifically to shrink that detection gap.
What a well-functioning concurrent audit process looks like
- Findings communicated promptly to management, not batched up for a quarterly report
- A clear process for tracking whether identified issues are actually remediated, not just noted
- Coordination with the internal audit and statutory audit functions, so findings inform rather than duplicate each other
A note for smaller NBFCs
Even where concurrent audit isn't mandatory based on your specific classification, the underlying discipline — near-real-time review of loan processing and compliance — is worth considering voluntarily, given how directly it connects to asset quality and regulatory standing.
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