Auditing International Trade Transactions
Explore the fundamental principles of auditing international trade transactions, essential for auditors, trade departments, and CBN examiners. Gain insights into the nature of international trade, FX markets, and auditing procedures in this informative presentation by Asegun Olufolahan of Ecobank Nigeria Limited.
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Presentation Transcript
CAPACITY DEVELOPMENT PROGRAMME FOR AUDITORS FUNDAMENTAL PRINCIPLES OF AUDITING INTERNATIONAL/TRADE DEPARTMENTS AND CBN EXAMINERS EXPECTATIONS PRESENTATION BY: ASEGUN OLUFOLAHAN PRESENTATION BY: ASEGUN OLUFOLAHAN (ECOBANK NIGERIA LIMITED) (ECOBANK NIGERIA LIMITED) 1
INTRODUCTION: INTRODUCTION: Due to the sensitive nature of international trade transactions and its attributable risks, Auditors requires the right technical knowledge and skills to review the transactions and the entire process of the International/Trade Operations Department. In addition to the above, due to the impact of international trade on the national reserve, the Government through the Central Bank also place high premium in regulating and examining the Banks (Authorized Dealers). This presentation will review the various principles to be adopted in auditing Trade transactions and its processes in Banks. It will also help to buttress the expectations of CBN Examiners in the course of their FX Examination of Money Deposit Banks. 2
NATURE OF INTERNATIONAL TRADE TRANSACTIONS NATURE OF INTERNATIONAL TRADE TRANSACTIONS Visible and Invisible Trade Goods and services Exchange of goods and services for value The trading activities The trading parties The nations of the world (through her citizens) Buying and Selling The zero sum game (the gain of one is loss to another) Currency conversion The need for currency trading (Foreign Exchange) Payment and receipt The concept of inflows and outflows
NATURE OF INTERNATIONAL TRADE NATURE OF INTERNATIONAL TRADE TRANSACTIONS/2 The official FX market Eligible and non-eligible trade transactions The blotter management Records of all Foreign Exchange trading. Net open position Aggregate of all currency and foreign exchange transactions, net of all inflows and outflows of the foreign exchange activities of a Bank within a period. Reserve Aggregate of all inflows and outflows of the foreign exchange activities of a country within a period. 4 TRANSACTIONS/2
PRINCIPLES OF AUDITING INTERNATIONAL TRADE PRINCIPLES OF AUDITING INTERNATIONAL TRADE Review of trade policies and guidelines including current regulatory provisions (both local and global) Review of the eligibility, completeness of underlining documents required for transaction processing (note the transactions discussed in the previous paper under overview of Foreign Operations). Review of the various process manuals (desk manuals, product manuals, standard operations manuals etc). correctness and 5
PRINCIPLES OF AUDITING INTERNATIONAL TRADE/2 PRINCIPLES OF AUDITING INTERNATIONAL TRADE/2 Evaluate the various risks embedded in the processes and test the likelihood of its occurrence or otherwise. Where the risk occurs, determine its mitigant and advise as appropriate. Evaluate the degree of risk embedded in the processes and advise as appropriate. Note: Audit of International Trade is not fraud seeking, but with good audit program the chances of uncovering fraudulent transaction is very high. 6
EXPECTATION OF CBN/NDIC EXAMINERS EXPECTATION OF CBN/NDIC EXAMINERS The Banking Supervision Department (BSD) of the Central Bank of Nigeria in conjunction with Examiners from the Nigerian Deposit Insurance Corporation (NDIC) carry out the Foreign Exchange examination of Money Deposit Banks twice every year with the following expectations: Ascertain that all Foreign Exchange (FX) purchased from the official market including the Central Bank are utilized for eligible trade transactions. 7
EXPECTATION OF CBN/NDIC EXAMINERS/2 EXPECTATION OF CBN/NDIC EXAMINERS/2 Ensure correct and complete documents are in place for all eligible Trade transactions as stipulated in the Foreign Exchange Manual of the Central Bank of Nigeria. Ensure Money Deposit Banks operates within their Open Position Limits (OPL). Ensure adequate operational framework and strong internal controls are in place from Bank to Bank with clear policy and operational guidelines 8
EXPECTATION OF CBN/NDIC EXAMINERS/3 EXPECTATION OF CBN/NDIC EXAMINERS/3 Ensure Money Deposit Banks complies with the extant policy guidelines and circulars of the Regulator at all times. Review all NOSTRO accounts of Banks and confirm that they are being fully reconcile from time to time. Ensure that all regulatory reports are delivered on timely basis. Look out for unusual and suspicious transactions for escalations. 9
THANK YOU! 10
