Credit Audit is an independent examination of the credit function of a bank or financial institution. It evaluates the quality of the credit appraisal process, documentation standards, post-sanction monitoring and recovery mechanisms to assess the effectiveness of credit risk management.
Scope of Credit Audit
The review typically includes:
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Examination of credit appraisal notes and sanction processes
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Verification of loan documentation and security creation
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Assessment of post-disbursement monitoring and follow-up
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Review of asset classification and provisioning
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Evaluation of recovery and resolution processes
Key Focus Areas
Particular attention is given to:
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Large and stressed exposures
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Compliance with internal credit policy and regulatory guidelines
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Quality of collateral and valuation
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Early warning signals and monitoring systems
Reporting
The credit audit report highlights process gaps, documentation deficiencies and risk management observations for the consideration of management and the board.