Bank Branch Audit – Managing Risk
An Integrated Work Paper Model
CA Sripriya Kumar
Member – SIRC of ICAI
Bank Branch Audit Working Paper Manual
A FOREWORD
Dear Professional Colleague
This model working paper on Audit planning, Audit Program and a template of a Working Paper
Document file has been designed to assist Small and Medium Practitioners in the performance and
documentation of our Bank Branch audit engagements and to enable Peer review processes
There are 2 key risks associated with Bank Audits. One, the Audit risk that a material misstatement
could go undetected and two, a professional risk which may arise due to non-performance of
appropriate and relevant audit procedures or maintenance of working papers to demonstrate the work
done. This Standard template of work paper document will minimise, if not eliminate such risks
This is intended to ensure process standardization that will assure a base line quality in the work we
do as well as Common Minimum Standard that we will be able to display as a profession to mitigate
the above risks. This is an indicative document that helps us to approach the work we do on a Top
down basis as well as to ensure that we comprehensively cover and document the engagement
correctly and consistently. User discretion is recommended to modify this document to suit the needs
to the entity you are auditing
There is a tremendous amount of published data on Bank Branch Audits and I have merely attempted
to consolidate and compile some of this into an integrated template. This is my personal view and does
not necessarily reflect all Best Practices in Audit Planning and Work Paper Management that are
unique to every practicing professional.
This document will also enable an acceptable level of documentation for Peer Reviews whose key
expectation in a Bank Audit Peer review process would be the ability of the working papers to
demonstrate adequate work done to ensure :




Financial statements being true and fair and free from material misrepresentations
Compliance with RBI norms including master and other circulars
Compliance with relevant Accounting Standards as relevant to Bank Branches
Compliance with Audit, Review and Other Standards of the ICAI as relevant
One of the key changes in reporting as compared to the previous year is the introduction of a new
reporting format in line with SA700, SA705 and SA706. In addition to this we are required to provide
data on the number and value of Memorandum of Changes proposed by us on the face of the Main
Audit Report, a measurable output of the branch audit exercise.
This entire document may be printed at the end of the audit and working papers be organised
and cross referenced in the respective sections for user and reviewer convenience
I have for this compilation used certain audit plan tables / appendices from a publication tilted Hand
book on Bank Branch Audit by CA P R Suresh and gratefully acknowledge the same
Page
2
CA Sripriya K
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Bank Branch Audit Working Paper Manual
BANK BRANCH AUDIT
INTEGRATED WORK PAPER FILE
Bank Name
Branch
Year
2014-15
Date of Commencement
Date of Completion
Partner In Charge
File reference
Number of Staff deployed
Advances Value
Address of the Branch
Name of the Manager
Phone Number
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3
Circle Office Contact
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Bank Branch Audit Working Paper Manual
Objective and Scope of audit _____________________________________________________________________ 6
2.
Scope Limitations, if any _________________________________________________________________________ 8
3.
Report, Returns and Certificates ________________________________________________________________ 9
4.
Auditing Review and Other Standards ________________________________________________________11
5.
Engagement documentation ____________________________________________________________________13
6.
Branch Overview _________________________________________________________________________________14
7.
General Ledger – Sub Ledger reconciliation _________________________________________________20
8.
Review Notes of Concurrent, Risk Based Audit, Inspection Reports _____________________21
9.
Audit Strategy _____________________________________________________________________________________22
10.
Key Reports from CBS to be used for audit ________________________________________________24
11.
Standard Schedules ___________________________________________________________________________25
12.
Advances and General Audit plan ___________________________________________________________28
13.
Advances Verification – Large advances ____________________________________________________30
14.
Special Note on Audit of Restructured Advances _________________________________________34
15.
Advances Verification – Cash Credit and overdraft accounts____________________________35
16.
Advances Verification – Housing loans _____________________________________________________37
17.
Advances Verification – Educational loans_________________________________________________38
18.
Advances Verification – Vehicle loans ______________________________________________________39
19.
Advances Verification – Jewel Loans ________________________________________________________40
20.
Advances Verification – Loans against Own Deposits ____________________________________41
21.
Advances Verification – Loans against financial assets __________________________________42
22.
NPA Review _____________________________________________________________________________________43
23.
Verification of Deposits _______________________________________________________________________44
24.
Interest Verification ___________________________________________________________________________45
25.
Check list for Long Form Audit Report _____________________________________________________46
26.
Profit and Loss Account – Analytical review procedures ________________________________49
27.
Certification Related Working papers ______________________________________________________49
28.
Tax Audit Workings____________________________________________________________________________49
29.
Other Working papers ________________________________________________________________________50
30.
References ______________________________________________________________________________________50
31.
Appendices _____________________________________________________________________________________50
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1.
4
TABLE OF CONTENTS
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5
Bank Branch Audit Working Paper Manual
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Bank Branch Audit Working Paper Manual
1. Objective and Scope of audit
1.1. We have been appointed as the Statutory Auditors of the ……………………… Branch of
……………………………………….. ……………………………… Bank for the year 2014-15
1.2. The appointment letter dated ………………… has been accepted by us on
……………………………………………. after due communication to the previous year auditor vide letter
dated …………………………………….
1.3. The key terms of reference is to certify the financial statements of the branch as at March 31,
2014 with reference to a True and Fair perspective
1.4. The Branch audit instructions as received from the Head / Circle office have been duly cognised
for in the preparation of this integrated work paper document
1.5. The following key reports / certificates are required to be issued by us


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
Branch Auditors report
Memorandum of Changes if any
Certified / Attested financial statements
Long Form Audit Report
Schedules and Certificates as per index attached in the next segment
Tax Audit report under Section 44AB of the Income tax Act
1.6. The audit was commenced on ……………. and completed on …………………. By the following team
Name
Designation
Days
From
To
Partner
Qualified Paid Assistant
Audit Assistant
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1.7. The key risks in Bank Branch Audits are as under

Misstatement of income, expenses, Assets or Liabilities.

Unrecorded liabilities and contingent liabilities

Asset Classification and NPA provisions not adequate for impaired assets , Asset
Classification and Income Recognition especially for restructured assets

KYC / AML norm compliance related issues

Internal control failures over banking operations including potential / undetected /
detected frauds

Wrong certification
6
Articleship trainee
Bank Branch Audit Working Paper Manual
1.8. The details of Bank Staff from whom data / records / information and explanations were
solicited / obtained for the purpose of this audit are as under
Designation
Name
Grade
Branch Manager
Loans Officer
Deposit Officer
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7
Other Officers
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Bank Branch Audit Working Paper Manual
2. Scope Limitations, if any
2.1. The following scope limitations have been appropriately dealt with in the Audit report of the
branch / LFAR and suitably highlighted as matters of emphasis
2.2. The Branch management has not been able to furnish the following details / records /
explanations in connection with the audit
Information
requested and
not provided
Amount
Impact on audit, if any
Management Comments
Refer 7. 1
2.3. The following unit visits requested by us could not be undertaken due to the following reasons
Information
requested and
not provided
Amount
Impact on audit, if any
Management Comments
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8
Refer 7.2
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Bank Branch Audit Working Paper Manual
3. Report, Returns and Certificates
3.1. Key Deliverables
9
BS 9 – DETAILS OF COUNTRYWISE, RISK CATEGORY WISE EXPOSURE
B
10
11
12
13
14
15
16
Supplementary to BS Schedules
SUPP. B – BREAK UP OF LCS, GUARANTEES, ETC.
SUPP. C – CLASSIFICATION OF ADVANCES
Supp D - Break iup of sundry receivables and sundry depsoits
SUPP. E1 & E2 – EXPOSURE TO SENSITIVE SECTOR
Supp F - information relating to DSB 1 and additional information
SUPP. G – CASH & BANK BALANCE FOR SELECT NON-FRIDAYS
Supp H - Residual maturity pattern of forex advances / deposits
SUPP. K - PARTICULARS OF EXPENDITURE AND INCOME RELATING TO
PREVIOUS
YEARS
SUPP. M – BREAK UP OF PAYMENTS TO AND PROVISIONS FOR
EMPLOYEES
LA General and LA Suit Filed as at 31-03-15
Loan Analysis Summary
Recoveries made in Select Borrowal accounts from 01-04-14 to 31-03-15
Control Sheet for NPA, Income Recognition, Movement of NPA and
Interest reversal of NPA
BS - 3 Expenditure for the half year ended 30-09-15
BS - 4 Income for the half year ended 30-09-15
Supp M - 30-09-14
SFVM inventory statement
1
2
3
4
5
6
17
18
C
19
20
21
22
23
24
25
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7
8
RETURNS
BS - 1 Liabilities
BS - 2 Assets
BS - 3 Expenditure for the half year ended 31-03-15
BS - 4 Income for the half year ended 31-03-15
Final A & L as on 31-03-15
Final P & L for the year 31-03-15
BS 7 – STATEMENT OF CLAIMS MADE AGAINST THE BANK NOT
ACKNOWLEDGED AS DEBT
BS 8 – DETAILS OF RESTRUCTUTRED A/C (EXCLUDING CDR)
Page
Index
Completion
Status
S No
No of copies
We are required to certify and complete the following individual reports / returns and certificates
( modify as necessary based on banks standard instructions ). The number of copies of each
submission, applicability and / or completion status is also as under
Index
26
27
28
29
30
31
CERTIFICATES
Branch Audit Report
Annexure A to E ( Memorandum of Changes )
Questionnaire in addition to Branch Audit report
Special Deposit Scheme 1975
Compulsory Deposit scheme 1974
PMRY scheme
32
33
34
35
36
37
Form of Certificate on sharing of recoveries in claim settled accounts under
SLGS 1971/SLGS(SSI) 1981
Interest Subvention claim
Interest relief on Rupee Export credit
Compliance of Accounting Standard 11 as per Annual Closing Circular
Technology upgradation fund scheme
Capital subsidy scheme for processing machinery
38
LFAR
39
Tax audit report
40
41
42
43
44
45
SLR / CRR
Ghosh Committee Report
Jhilani Committee Report
Statement of Capital Adequacy
Statement of Risk Weight Assets
Certificate of passing previous year MOC
Certificate of Compliance with Income recognition, Asset Classsification and
provisioning norms
Provision for sacrifice under NPV method for restructured advances
Provision held on upgraded restructured advances for two years
Sector wise, security wise and asset classification wise statement
Certificate of Lending to Sensitive Sector
Certificate of Cash Margin held
46
47
48
49
50
51
Completion
Status
S No
No of copies
Bank Branch Audit Working Paper Manual
3.2. Attach final attested report, statements and certificates to be attached to this segment
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10
3.3. In case of any schedules not audited by us ( eg. Sep 30 A/L, P/L etc) these may be signed with a
seal as “Initialled for Identification purposes only”
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Bank Branch Audit Working Paper Manual
4. Auditing Review and Other Standards
The work has been planned and performed in accordance with the following Auditing, Review and
Other Standards as prescribed by the Institute of Chartered Accountants of India to the extent
applicable for the engagement
SA210
SA220
SA230
SA240
SA250
SA260
SA265
SA299
SA300
SA315
SA320
SA330
SA402
SA450
SA500
SA550
SA560
SA570
SA580
SA600
SA610
AUDIT EVIDENCE—SPECIFIC CONSIDERATIONS FOR SELECTED ITEMS.
EXTERNAL CONFIRMATIONS.
INITIAL AUDIT ENGAGEMENTS—OPENING BALANCES.
ANALYTICAL PROCEDURES.
AUDIT SAMPLING.
AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUE ACCOUNTING
ESTIMATES, AND RELATED DISCLOSURES.
RELATED PARTIES.
SUBSEQUENT EVENTS.
GOING CONCERN.
WRITTEN REPRESENTATIONS.
USING THE WORK OF ANOTHER AUDITOR.
USING THE WORK OF INTERNAL AUDITORS.
SA620
USING THE WORK OF AN AUDITOR’S EXPERT.
Page
SA501
SA505
SA510
SA520
SA530
SA540
Description
OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR AND THE CONDUCT
OF AN AUDIT IN ACCORDANCE WITH STANDARDS ON AUDITING.
AGREEING THE TERMS OF AUDIT ENGAGEMENTS.
QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS.
AUDIT DOCUMENTATION.
THE AUDITOR’S RESPONSIBILITIES RELATING TO FRAUD IN AN AUDIT OF
FINANCIAL STATEMENTS.
CONSIDERATION OF LAWS AND REGULATIONS IN AN AUDIT OF FINANCIAL
STATEMENTS.
COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE.
COMMUNICATING DEFICIENCIES IN INTERNAL CONTROL TO THOSE
CHARGED WITH GOVERNANCE AND MANAGEMENT.
RESPONSIBILITY OF JOINT AUDITORS.
PLANNING AN AUDIT OF FINANCIAL STATEMENTS.
IDENTIFYING AND ASSESSING THE RISK OF MATERIAL MISSTATEMENT
THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT.
MATERIALITY IN PLANNING AND PERFORMING AN AUDIT.
THE AUDITOR’S RESPONSES TO ASSESSED RISKS.
AUDIT CONSIDERATIONS RELATING TO AN ENTITY USING A SERVICE
ORGANISATION.
EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT.
AUDIT EVIDENCE.
11
SA reference
SA 200
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Bank Branch Audit Working Paper Manual
Description
FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS.
SA705
MODIFICATIONS TO THE OPINION IN THE INDEPENDENT AUDITOR’S
REPORT.
SA706
EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN
THE INDEPENDENT AUDITOR’S REPORT.
SA710
COMPARATIVE INFORMATION— CORRESPONDING FIGURES AND
COMPARATIVE FINANCIAL STATEMENTS.
SA720
THE AUDITOR’S RESPONSIBILITY IN RELATION TO OTHER INFORMATION IN
DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS.
SA800
SPECIAL CONSIDERATIONS—AUDITS OF FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH SPECIAL PURPOSE FRAMEWORKS.
SA805
SPECIAL CONSIDERATIONS—AUDITS OF SINGLE FINANCIAL STATEMENTS
AND SPECIFIC ELEMENTS, ACCOUNTS OR ITEMS OF A FINANCIAL
STATEMENT.
SA810
ENGAGEMENTS TO REPORT ON SUMMARY FINANCIAL STATEMENTS.
SRE2400
ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS.
SRE2410
REVIEW OF INTERIM FINANCIAL INFORMATION PERFORMED BY THE
INDEPENDENT AUDITOR OF THE ENTITY.
SAE3400
THE EXAMINATION OF PROSPECTIVE FINANCIAL INFORMATION.
SAE3402
ASSURANCE REPORTS ON CONTROLS AT A SERVICE ORGANISATION.
SRS4400
ENGAGEMENTS TO PERFORM AGREED-UPON PROCEDURES REGARDING
FINANCIAL INFORMATION.
SRS4410
ENGAGEMENTS TO COMPILE FINANCIAL INFORMATION.
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SA reference
SA700
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Bank Branch Audit Working Paper Manual
5. Engagement documentation
5.1. Audit Acceptance Letter
The audit acceptance letter has been provided to the CO and a copy is kept in the next page.
Related documentation including Declaration of fidelity and secrecy, Declaration of full time
practice and Declaration of Indebtedness has also been attached to this section. Refer Appendix 1
for acceptance letter
5.2. Engagement Letter
An engagement letter has been issued and kept in Appendix 2
5.3. Letter of communication with previous auditor
Communication to the previous auditor M/s ………………………….. has been sent on ……………………….
Vide courier ref ……………………… dated ……………………… and response has / has not been received.
Further the previous auditor has / has not been contacted over phone / e mail. Refer Appendix 3
for Communication sent and response received. Refer Appendix 3
5.4. Representation letter
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Management Representation letter has been obtained and kept in Appendix 4
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Bank Branch Audit Working Paper Manual
6. Branch Overview
6.1. Key data
Description
2014-15
2013-14
Rs . lakhs
Rs . lakhs
2014-15
2013-14
Target
Rs . lakhs
Actual
Rs . Lakhs
Total Assets
Total liabilities
Total Advances
Total Deposits
Income
Expenditure
Profit / Loss
6.2. Target Vs Accomplishment
Description
Total Advances
Total Deposits
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Rating of the Branch
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Bank Branch Audit Working Paper Manual
6.3. Advances Overview - top 10 advance categories of the branch
S No
Category of advances
1
Cash Credit
2
Overdraft
3
Term loans
4
Crop loans
5
Housing loans
6
Jewel loans
2014-15
2014-15
2013-14
2013-14
Rs . lakhs
No of
accts
Rs . lakhs
No of
accts
7
8..
10
Other advances
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Total Advances
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Bank Branch Audit Working Paper Manual
6.4. Large Advance Profiling
List of advances greater than Rs 2 Crores or individually accounting for 5% of the total advances
whichever is lower to be covered for detailed checking are as under
S No
Account reference / name
2014-15
2014-15
2013-14
2013-14
Rs . lakhs
No of
accts
Rs . lakhs
No of
accts
1
2
3
4
5
6
6.5. Customer wise advances
Based on our discussions with the branch manager, these advances belong to the same party and are
considered for checking on a collective basis as slippage in one account could result in NPA status for
all accounts
S No
Customer Name
Facilities
2014-15
Rs . lakhs
1
1
2
3
2
1
2
3
3
1
2
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3
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Bank Branch Audit Working Paper Manual
6.6. Advance profiling by value
S No
Slab - Rs Lakhs outstanding
1
< Rs 1 lakh
2
Rs 1 – 5 lakhs
3
Rs 5 – 10 lakhs
4
Rs 10 - 50 lakhs
5
Rs 50 lakhs – Rs 1 Crore
6
Rs 1 to 2 Crores
7
Rs 2 to 5 Crores
8
Rs 5 to 10 Crores
9
> Rs 10 Crores
2014-15
2014-15
Rs . lakhs
No of accts
6.7. Deposit profiling
S No
Category of deposit accounts
2014-15
2014-15
2013-14
2013-14
Rs . lakhs
No of
accts
Rs . lakhs
No of
accts
1
2
3
4
5
6
Others
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Total Deposits
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Bank Branch Audit Working Paper Manual
6.8. Restructured advances
The following are the advances restructured by the branch and to be reviewed for compliance with
restructuring terms and conditions as per revised sanctions. Repeated restructured accounts will
also be reviewed
S No
Account reference / Name
During
2014-15
Rs . lakhs
Upto
2013-14
Rs. Lakhs
2014-15
Rs . lakhs
1
2
3
4
5
6.9. Interest rate and other charges on major advances
Interest %
Charges %
Charges %
Charges %
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Advances Type
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Bank Branch Audit Working Paper Manual
6.10.
Deposit type
6.11.
Interest rate on deposits
Days
Interest %
Any frauds reported
Note on frauds reported at the branch in the last few years
6.12.
Information in the public domain
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We have scanned the public domain for information pertaining to the Bank and we report as under :
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Bank Branch Audit Working Paper Manual
6.13.
Asset Classification as of date of audit
S No
Category
1
Standard
2
Substandard
3
Doubtful
4
Loss
2014-15
2014-15
2013-14
2013-14
Rs . lakhs
No of
accts
Rs . lakhs
No of
accts
Total advances
6.14.
Review of previous year Audit report and LFAR
A short note on any significant issues noticed in the last years audit report , LFAR, NPA provisioning
and Note on frauds / large write offs at the branch in the last few years
6.15.
Any other matters for consideration to be included
7. General Ledger – Sub Ledger reconciliation
The GL / SL reconciliation report to be obtained from CBS and differences if any have been
investigated and reported as under
Amount
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Nature of discrepancy
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Bank Branch Audit Working Paper Manual
8. Review Notes of Concurrent, Risk Based Audit, Inspection Reports
Concurrent Audit
S No
Account reference / nature of
issue / date of report
Amount
Present Status –
Rectified, LFAR,
MoC,
Unadjusted
Impact, if any
on audit
strategy
Amount
Present Status –
Rectified, LFAR,
MoC,
Unadjusted
Impact, if any
on audit
strategy
Amount
Present Status –
Rectified, LFAR,
MoC,
Unadjusted
Impact, if any
on audit
strategy
Amount
Present Status –
Rectified, LFAR,
MoC,
Unadjusted
Impact, if any
on audit
strategy
Refer 20.1
Risk Based Internal Audit
S No
Account reference / nature of
issue / date of report
Inspection Reports
S No
Account reference / nature of
issue / date of report
Previous Year LFAR / Audit report issues
Account reference / nature of
issue / date of report
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S No
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Bank Branch Audit Working Paper Manual
9. Audit Strategy
Based on our high level review of the branch data, loans and deposits CBS files and based on
discussions with the Branch manager the following is proposed as the audit strategy
9.1. Top Down Approach to audit
The audit strategy will envisage a top down approach which involves understanding the Balance
Sheet and P & L and a drill down to perform compliance and substantive procedures at a component
/ transaction level
9.2. Utilisation of Other Audit reports
The branch has been covered under Concurrent audits / Risk based internal audits as well as
Inspections. These reports will be reviewed to gain a quick understanding of the control framework
and the efficient functioning at the branch.
9.3. Sample selection
CBS reports will be downloaded converted to excel and samples selected across loan types,
accounting periods, rates , value slabs
Understand and appreciate target related pressures and potential impact on misstatements

Top accounts ( Rs 2 Crs / 5% advance ) will be checked 100% to cover all accounts

Samples of ….. accounts will be taken across all categories of advances to check sanction,
documentation, income accrual and monitoring controls

Particular attention will be paid to the following accounts based on our review of the
Concurrent / inspection reports
o ………………..
o ……………….
o ……………….

The following unit visits will be undertaken to perform inspection of books / assets held by
customers
o ………………..
o ……………….
o ……………….

All accounts with irregularities as indicated in CBS ( based on loan balance file ) will be
undertaken for review with bank manager to identify potential NPA cases. The Irregular loan
balance report will also be reviewed in detail and documented
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22
9.4. Advances
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Bank Branch Audit Working Paper Manual

Sanity checks of advances file will be undertaken for interest rate inconsistencies / sub rate /
off standard rates for the particular categories

Interest and processing charge accruals will be test checked for 10 random months across ….
Loan files and CCOD files ( periodic / daily interest computation )

Large disbursements close to year / quarter end will be reviewed in detail on a test basis

Clean loans / bullet loans to be reviewed in detail

Special emphasis on restructured advances
9.5. Deposits

Top deposit accounts will be checked to review completeness, adequacy , relevance of
documentation

Large deposits placed at year end will be reviewed in detail

Sanity checks of advances file will be undertaken for interest rate inconsistencies / sub plr /
off standard rates for the particular categories
9.6. Other items
Checklist driven approach guided by key control aspects as stated in the LFAR
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
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Bank Branch Audit Working Paper Manual
10.
Key Reports from CBS to be used for audit
The following key reports have been obtained from CBS
Balance sheet
Profit and Loss account
Loan Balance file
CC OD file
Deposit balance file
Interest ledger
NPA file
SMA file
Irregular loans file
Previous year NPA file
TDS ledgers
Guarantee Commission register
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Bank Branch Audit Working Paper Manual
11.
Standard Schedules
11.1.
Top Notes for attention of Manager / Partner
Nature of Issue
Amount
LFAR
MoC
Fraud related
Final Disposal
Status
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25
S No
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Bank Branch Audit Working Paper Manual
11.2.
Items Adjusted –Memorandum of Changes
The following MoC’s have been recommended by us based on our audit of the financial
statements and on the basis of information and explanations provided to us
S No
Nature of Issue
Debit
Account
Credit
Account
Amount
Remarks
Rectification of
Income recognition
Reclassification of
NPA’s ( fresh )
Change in the
status of Old NPA’s
Account
reclassifications
within P&L: and
A&L
Reclassification of
Loans and
Advances where
done differently by
the branch
Assets put to use
and not capitalised
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26
Any other
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Bank Branch Audit Working Paper Manual
11.3.
Minutes of discussions with Branch Manager including NPA review
Rationale for
selection for
NPA review
Inadequate
documentation
Inadequate
security cover
Irregularity in
servicing
principal and /
or interest
Repeated
restructuring
Drawing Power
related issues
Failed sanity
checks on limits
vs financial data
Solitary credits
in accounts
Inoperative
accounts
Financials
related issues
observed
Public domain
information
Suspected
Frauds
Any other
reason
Account
reference
and name
Amount
outstanding
Remarks
LFAR / MoC /
Unadjusted
Differences
Page
27
S No
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Bank Branch Audit Working Paper Manual
12.
Advances and General Audit plan
12.1.
Summary of advances of the branch ( as per Balance Comparison report)
Amt 2014-15
Amt 2013-14
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Advance Category
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Bank Branch Audit Working Paper Manual
12.2.
General Audit plan for advances
Page
29
12.2.1. Obtain the Loan listing as at the Date of Audit
12.2.2. Loans greater than Rs.2Crore limit or Rs 2 Cr balance outstanding to be taken up for
detailed review documentation for LFAR
12.2.3. Generate the following reports:
o Special Watch Report
o Restructured accounts report
o Suspended Accounts
o NPA Listing
12.2.4. Identify samples of loans to be checked.
12.2.5. Ensure 100% of files selected for samples are available to confirm that no file is lost
12.2.6. Review loans against checklist prepared category wise in relation to
o Application
o Credit appraisal
o Sanction letter
o Disbursement
o Master data updation in CBS
o Interest computation
o Principal repayment
o Fixation of drawing power
o Verification of securities
o Submission of stock and book debts
o Submission of financial statements
o Any other documentation
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
13.
Advances Verification – Large advances
13.1.
Checklist for large advances
Page
30
Obtain list of all large advances ( Rs 2 Crs / 5% ) and complete the following aspects
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
1
Name of the borrower
2
Date of Loan Application
Whether loan application is processed duly obtaining all
records / documents, Audited Financial Statements and unit
inspection
Date on which recommended by branch
Whether approved by competent authority
Date on which duly approved
Nature of Limit
Fund Based
Cash Credit
Overdraft
Term Loan
Bills purchase / discounting
Non Fund based
Letters of Credit
Bank Guarantees
Total Exposure
Classification Priority / NPS
3
4
Date of original Sanction
5
Due Date of renewal
Date of renewal / review
6
Number of days overdue since
7
Sanction terms
8
Primary security
9
Collateral security
10
Facility wise margin
11
Special terms and conditions for compliance
Documentation
Execution of Hypothecation and other documents
Registration of Charges if company
Legal opinion
Valuation report copy
Audited financial Statements
Margin requirement and additional capital infusions
others
Disbursement – is it done directly in term loan accounts
Are there bullet disbursement in Housing loan for
construction
Deficiencies in disbursements
12
Prepared By :
Remarks
Page
Number
ref
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Particulars
Page
Sl No
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Bank Branch Audit Working Paper Manual
15
16
17
32
14
Whether the Sector wise classification is correct
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Page
13
Is the operative account allowed to be utilised in single
disbursement
Ensure end use of funds
Verify and if applicable, Report diversion of funds at the point
of disbursement
Post disbursement monitoring
Is the facility operated with the limit, identify number of days
when it is beyond limit / DP
Verify adhoc and the manner of adjustment of adhoc
Deviation from sanction terms
Whether stock statements are being obtained regularly
Whether book debt statements duly certified by CA’s / as per
terms are obtained regularly
Is the Drawing power correctly marked in the system
Is there delay in obtaining the above
Whether penal interest is charged for delay in submission of
stock / book debt statements
Whether stock statement are perused and checked by branch
officials
Whether stock inspections are carried out by branch officials
/ concurrent auditors
Report of inspections / Concurrent auditors
Is the stock statement / book debt statement as at 31st March
of previous year tallying with the Audited Financial Statement
of the same date.
Deviations if any, how dealt with
If the deviation is significant whether it has any impact on the
drawing power determination and consequent
asset classification
Whether insurance cover is obtained
Is it fully insured or under insured – quantum of under
insurance
Whether RC book, Key and transfer forms obtained for vehicle
loans
Whether term loan disbursements are done directly
Whether receipts of payments made to vendors obtained
Operation in the account
Whether operation in the account is satisfactory
Whether frequent overdrawing is authorised / approved
Whether term loan repayments are regular
If overdue, number of instalments and whether any
instalment is regularised by way of additional facility or
accomodation
Any other observation / deficiency in the account
Whether processing and inspection charges are charged and
recovered
Reviewed By :
Bank Branch Audit Working Paper Manual
18
Whether the securities offered are in place to ensure
correctness of security wise classification
19
Whether asset classification is correctly made
20
Whether interest and legal charges on NPA accounts are not
debited to borrowers account.
Samples and Matters for Consideration
Page
33
13.2.
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
14.
Special Note on Audit of Restructured Advances
14.1.
Indicative Checklist

Obtain a general understanding of the type of advance which has been restructured – project
/ non project advances, prior to or after Commencement of Commercial production etc as
per the RBI master circular which deals in detail on manner and mode of treatment of
restructured advances

Restructured advances to be reviewed with reference to revised terms of sanction properly
approved by the relevant sanctioning authority

Repeated restructuring to be reviewed for NPA classification

All terms of revised sanction are complied with ( including but not limited to revision in
commercial production, interest rate revision, rescheduling of repayments, additional
security cover, promoters contribution enhancements, escrow requirements etc ). In case of
non-compliance, appropriate reclassifications have been considered
Verification and results
Page
34
14.2.
Prepared By :
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Bank Branch Audit Working Paper Manual
15.
Advances Verification – Cash Credit and overdraft accounts
15.1.
Indicative Checklist
Financial Statements and solvency / capability of borrower / limit

Unaudited financial statements have been furnished for balances < Rs 1 lakh

Audited financial statements have been furnished for balances > Rs 1 lakh

Audited financial statements have been furnished for corporate borrowers

Income tax returns have been furnished
Limit fixation and approval

Proposal for assessment of Working capital needs is available

Sanction as per limits of branch
If immovable property has been offered as security ,

EC for continuous period is available and is clear

Title Deeds have been deposited with the bank

If immovable property , EM regn > Rs 25 lakhs

Legal opinion is available and indicates clean title deeds

Valuation report is present and is commensurate

Valuation report is less than three years old

Insurance policy available, adequate and comprehensive
Security of stock and book debts / other collaterals
Demand Promisory note has been furnished

Hypothecation agreement for stocks and Drs

Guarantee Agt has been executed properly

ROC regn of charge for cos for hyp of stock and book debts - Form 8

ROC regn of charge for cos for hyp of immov property

ROC search report once in 3 years

Others
Page
35
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Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
Monitoring Actions

Submission of stock stts

Maintenance of drawing limit based on Working capital statements

Qtrly book debts certf by CA

Stock audit once a year by CA for > Rs 1 cr

Godown visit by banker - monthly or qtrly
Repayments / TOD / One off credits

Review of accounts to ensure continuous operation

Review of accounts featuring in Irregular report as per CBS

One off credits to be investigated

Drawing in excess of sanctioned limit on a continuous basis

Consistent excess over drawing power as per sanction
CBS Updation
Loan details recorded correctly in CBS

Test of repayments done

Test of interest accrual done
Sample verification and results
Page
36
15.2.
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Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
16.
Advances Verification – Housing loans
16.1.
Indicative Checklist
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Samples verified
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16.2.
Loan application is available
Loan application is signed and properly executed
Sanction letter is available
Loan proposal indicating projections etc
Title deeds lodged with bank
Assessment of repayment capability - Sal cert / it returns / pl acct etc
Margin at XX% ( Land cost + constrn cost )
EC available
Legal opinion
Approved Building plan
Insurance policy
Pledge deed
All documents refer to the same survey number
EM creation by deposit of title deeds
EM registered for Rs 25 lakhs
Direct payment to vendor of land / contractor
If client own construction, stage payment subj to original bills cert by civil engg for work
done
Inspection of property by bank
Final valuation cert for completed properties
Valuation report is less than three years - available from expert
Loan details recorded correctly in CBS
Construction not completed in 2 years
Test of repayments done
Test of interest accrual done
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
17.
Advances Verification – Educational loans
17.1.
Indicative Checklist
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Samples verified
Page
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17.2.
Loan application is available
Loan appln is signed and properly executed
Sanction letter is available
Loan for Grad / PG
Loan - Inland – Foregin
Plus 2 pass proof
Asst of repayment of parent
For loan to minor , parent should sign the application and all documents for self and on
behalf of
Where minor > 18 yrs after disbursement, AOD and LOU counter signed by parent
Parent IT return
Parent Salary certificate / PL acct profit
Ceiling based on course
Not given for capitation fee
Margin maintained at X%
Less than max ceiling
, Rs 25K no sec
Rs 25 - 50K - surety apart from parent
> Rs 100 K – collateral
EM creation by deposit of title deeds
EM registered for . Rs 25 lakhs
All documents refer to the same survery number
Valuation report is less than three years - available from expert
Approved plan
Inspection of property by bank, if collaterial
Interest to be serviced before completion of course for loans to employed Persons
Valuation report is less than three years - available from expert
Loan details recorded correctly in CBS
Test of repayments done
Test of interest accrual done
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
18.
Advances Verification – Vehicle loans
18.1.
Indicative Checklist
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Samples verified
Page
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18.2.
Loan application is available
Loan appln is signed and properly executed
Sanction letter is available
DPN
Hypothecation agreement
Loan proposal indicating projections etc
Financials of the borrower prior to loan date
IT returns for period before loan sanc. Date
RC book - certified true copy
RC endorsed in favour of bank - Hypothecation endorsement
Loan is sanctioned net of margin for 'Cost and Accessories" not for charges
Disbursement amount , tenure and tenor as per sanction
Duplicate keys
Original invoice
Direct payment to dealer for vehicle
Guarantor signature
Comprehensive insurance - live now and bank clause in fav of Ind Bank
For second hand vehicle - valn report from approved valuer
Higher margin requirement for second hand vehicle
Loan details recorded correctly in CBS
Test of repayments done
Test of interest accrual done
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
19.
Advances Verification – Jewel Loans
19.1.
Indicative Checklist
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Total packets to be tallied to total loans
All expired loans to be classified as NPA where balance is outstanding (
where such loans are bullet loans repayable at the end of the specific
tenor )
Special emphasis to be paid to expired loans
Loan to packet and packet to loan verification to be done for test cases
Say 25 both ways to ensure that wrong packets have not been redeemed
Specific
 Loan agreement is available and properly executed
 Jewel packet verified for weight and purity
 Letter of pledge is available
 Rate of interest updated properly
 Loan details recorded correctly in CBS
 Test of repayments done
 Test of interest accrual done
Samples verified
Page
40
19.2.
Prepared By :
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Bank Branch Audit Working Paper Manual
20.
Advances Verification – Loans against Own Deposits
20.1.
Indicative Checklist
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Samples verified
Page
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20.2.
Letter of pledge is available
Nature of security - RD / FD
Lien is marked in system against the FD
Deposit receipt is available with bank and discharged
Loan closed after due date of deposit
Loan details recorded correctly in CBS
Test of repayments done
Test of interest accrual done
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
21.
Advances Verification – Loans against financial assets
21.1.
Indicative Checklist
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Samples verified
Page
42
21.2.
Loan application is available
Loan appln is signed and properly executed
Loan amount original sanctioned is within powers
Securities in the name of the borrower
In case security not in the name of the borrower , consent letter is available
Shares - demat and pledged noting in demat
LIC - Assignment in favour of bank and regd
Govt instruments tfd as "Sec to Ind Bank " - NSC / KVP
Loan is within margin limits of surr. Value
Loan is within margin limits of mkt. Value for shares
Loan is within margin limits of face value for govt notified instmts
Shares erosion in market value
LIC erosion in surr. Value due to unpaid premium has been cognised for
Loan details recorded correctly in CBS
Test of repayments done
Test of interest accrual done
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
22.
NPA Review
22.1.
General Audit plan for NPA review
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22.2.
The NPA file was obtained from CBS as at date of audit
The Specially Marked Accounts files were obtained
The irregular files were obtained
The files were cross referenced to the loan balance and CCOD file
Clean loans – top value were test checked to ensure that there are no impairments
Loans featuring in any of the above reports – NPA / SMA and IRR were considered for the
review
The accounts were reviewed individually with the Branch manager to determine the
extent of slippage, possibility of recovery and the need for reclassification
Additionally, accounts identified as potential NPA based on documentation / security
lapses were also considered for the review and rectification before the Balance Sheet date
Restructured accounts listing was obtained and reviewed in detail
Details of MoC’s
S No
Nature of Issue
Debit
Account
Credit
Account
Amount
Remarks
Rectification of
Income recognition
Reclassification of
NPA’s ( fresh )
Change in the status
of Old NPA’s
Account
reclassifications
within P&L: and A&L
Page
43
Reclassification of
Loans and Advances
where done
differently by the
branch
Assets put to use and
not capitalized
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
23.
Verification of Deposits
23.1.
General Audit plan for deposits
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Details of Sample selected
Page
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23.2.
Date of deposit
If SB acct holder, give SB ref
Application form and complete
Photograph
ID proof and age proof
Address Proof
Introducer
Pan copy
Pan related documentation
Rate as per norm
CBS updation done correctly
Interest Computation is accurate
Deposit file has been reviewed for interest rates on a substantive basis ( sanity
checks )
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
24.
Interest Verification
Loan type
Interest verified
For loans, check interest computation on PNR basis as per agreement terms
For CC OD check interest by Daily balance method
Document all interest verified
Check one month interest ledger to ensure that interest is accounted for all loan accounts.
Sample if interest considered at the correct rate
Page
45
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Interest Amount
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Bank Branch Audit Working Paper Manual
25.
Check list for Long Form Audit Report
A.ASSETS:
1
Cash
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Obtain a schedule of denomination of cash
Physically verify the existence of cash and tally with the (and tally
with the) above schedule
Tally physical balance with Cash Scroll and the General Ledger as on
the date of verification
Ascertain the retention limit of cash fixed by the head office. In case
the balance exceeds the Retention Limit the same may be reported
in the following format:
Cash Balance in excess of Rs.
-
2
Balances with other Banks
- Verify whether the branch has any balances with other banks.
- Obtain confirmatory letter from the bank or branch wherever
applicable.
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Ensure whether BRS is prepared periodically.
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Verify BRS on a test check basis.
Check for unresponded credits/debits found in the BRS and report
the same.
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Check for appropriate authorization issued by H.O/ Controlling
Authority
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Conduct physical verification of investments and tally with the
above schedule
Advance
- Ensure that monitoring of slippage of accounts from standard to
sub- standard/doubtful is done and reported promptly to the
Controlling Authority.
- Ensure that recovery measures are promptly taken.
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46
4
Investments
- Obtain the schedule of investment held by the branch.
Page
3
Date:
Amount Rs.
Verify the insurance cover taken on transit cash.
Verify whether cash is maintained in effective joint custody of two
or more persons
Ensure that are responsible official verifies physical cash on a daily
basis.
Check whether the cash balance has been verified periodically by
the Branch Manager in addition to the Head cashier.
Prepared By :
Reviewed By :
5
Other Assets
Bank Branch Audit Working Paper Manual
Stationery/Stamps
-
Obtain schedule of Stationery Stocks
-
Ensure that the physical balance tallies with the above schedule.
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Suspense Accounts/Sundry Assets.
Obtain an schedule/return of suspense account and verify the
items for long outstanding items.
Report unusual/long outstanding items.
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Verify transfer to H.O during the year
Does the scrutiny of accounts under various sub-heads reveal
balances, which in your opinion are not recoverable and would
require provision/ write off.
B. LIABILITY:
Bills payable, Sundry deposits etc.,
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Does the scrutiny of account sunder various sub-heads reveal odd
balances?
Report the number of items and aggregate of amount of old
outstanding item spending for 3 or more years
-
Check amount received against suite filled accounts
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Check unidentified deposits e g. Excess cash found in the branch etc.,
C. PROFIT AND LOSS ACCOUNT
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Ensure that the branch has followed the income recognition norms
stipulated by RBI
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Test check calculations of interest on deposits for excess/short
credit of material amount if so give details thereof.
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Study preceding 2 years half year returns for divergent trends in
major items of income and expenditure and report those which are
not satisfactorily explained by the branch
Indicate the effect of changes if any in accounting policies on the
items of income and expenditure.
D. GENERAL
House keeping
- Ensure whether the branch is regular in furnishing a house keeping
return to the Controlling Authority.
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Verify whether the branch maintains the books and records
properly in accordance with the H.O guidelines.
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Ensure that the balances are duly linked and properly authenticated
by responsible official /authorised signatories?
Page
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Bank Branch Audit Working Paper Manual
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Report the lapses in balancing procedures
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Report differences in crystallised balances lying unattended
Ensure that the control and subsidiary records have been reconciled
at the year-end or at the prescribed intervals
Inter Branch Accounts
Are there any double responses or wrong responses in H.O A/c.
Indicate the outstanding entries in the inter branch accounts
together with a statement of reasons for their remaining
outstanding and the steps taken by the management in respect
thereof.
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Are there any frauds discovered during the year under audit and
report if any.
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Does the examination of the accounts indicate possible window
dressing?
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Are there any matter ,which you as branch auditors would like to
bring to the notice of the management or the central statutory
auditor.
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Tax Audit U/s 44AB ofI.TAct,1961
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Audit Report to be made in form3CA
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Obtain verify and certify particulars required in form3CD
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Other Certifications
1. PMRY, SEEUY and SEPUP scheme certification
Ensure that correct claim/subsidy is calculated
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3 Ensure that the certificates required are within the scope of audit
e g. Certification that the debts are fully secured.
Page
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2.DICGCscheme
Verify whether the information furnished is correct according to the
books/records maintained by the Branch.
Verify whether the recoveries effected in the Claims Received A/c
have been proportionately remitted to the corporation.
Prepared By :
Reviewed By :
Bank Branch Audit Working Paper Manual
26.
Profit and Loss Account – Analytical review procedures
Description
2014-15
2013-14
Amount
Rs . lakhs
Amount
Rs . Lakhs
% Change
2013-14
2013-14
Nos
Nos
% Change
Total Advances
Total Deposits
Interest on advances
Interest on deposits
Other Incomes
Profit / Loss
NPA Amount
Ratios
Interest to advances
Interest to deposits
27.
Certification Related Working papers
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Asset Liability Management
Jilani committee and Ghosh committee
Capital adequacy ratio
PMRY / SEEUY
SLR / CRR – 12 odd dates
Compliance with RBI Norms on IRAC
DICGC / ECGC
Interest subvention schemes
TUF schemes
Certification of Provision for Restructured Accounts
Certificate of Sensitive Sector and CRE
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Other Certificates
28.
Tax Audit Workings
Page
49
1.1. Tax audit report
1.2. Audit program
1.3. Samples
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Bank Branch Audit Working Paper Manual
29.
Other Working papers
Any other relevant information
30.
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31.
References
Branch Audit guidance document as received from the HO / CO
Bank Authority levels for sanction limits for loans and advances
Loan manual
IRAC norms relevant for this audit
RBI master circular – July 2, 2013
Other RBI Circulars relevant for the purpose of this audit
Guidance Note on Bank Branch audit as issued by the ICAI
Revised SA700, 705 and 706 for modification in reporting
Appendices
Appendices
2014-15
Appointment Letter
2
Engagement Letter
3
Previous Auditor Communication
4
Management representation letter
5
Checklist for advances
6
Other appendices on a need to basis
Page
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1
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