Meeting Organized by Noida
Branch, on 22-03-2012
A few suggestions for conducting
bank audit for the Year Ending
31-03-2012
CA Pawan K Goel
I)
A)
Reports generally demanded by Banks
Main Audit Report.
B) Long Form Audit Report.
C) Tax Audit Report
D) Memorandum of Charges
E) Various Certificates
CA Pawan K Goel
II) Important Provisions regarding Advances (with reference
to IRAC Norms)
Prudential Norms on Income Recognition, Asset
Classification and Provisioning pertaining to Advances,
as applicable for the Statutory audit of bank branches
for the year ended 31.03.2012.
Advances are broadly categorized in two categories:


Performing Assets i.e. Standard Assets
Non Performing Assets
CA Pawan K Goel
The NPA classification system was
introduced w.e.f. the year ending
31.03.1993.
An asset, including a leased asset, becomes non-performing
when it ceases to generate income for the bank. A ‘nonperforming asset’ (NPA) was defined as a credit facility in
respect of which the interest and/ or installment of principal
has remained overdue (past due up to 31.03.2001) for a
specified period of time.
CA Pawan K Goel
The specified period was reduced in a phased manner as
under:
Year ending March 31
Specified period
1993
four quarters
1994
three quarters
1995 onwards
two quarters
2001 onwards
180 days
2004
90 days
CA Pawan K Goel
Accordingly, with effect from March 31, 2004, a non
performing asset (NPA) shall be a loan or an advance
where;
• Interest and/ or installment of principal remain overdue
for a period of more than 90 days in respect of a term loan,
(thus NPA if overdue since /before 31-12.2011)
CA Pawan K Goel
‘Overdue’
Any amount due to the bank under any credit facility is ‘overdue’
if it is not paid on the due date fixed by the bank.
• The account remains ‘out of order’ in respect of an
Overdraft/Cash Credit (OD/CC), (thus NPA if Out of order
during 01.01.2012 – 31.03.2012)
CA Pawan K Goel
‘Out of Order Status’
A Cash credit / Overdraft account will be considered as out of
order in the following circumstances:

If the outstanding balance remains continuously in
excess of the sanctioned limit / drawing power; or

There are no credits continuously for 90 days, as on
the date of balance sheet or credits are not enough to cover the
interest debited during the same period.
CA Pawan K Goel
• the bill remains overdue for a period of more than 90 days
in the case of bills purchased and discounted, (thus NPA
if overdue since /before 31.12.2011)
CA Pawan K Goel
Agricultural Advance:
(i) With effect from September 30, 2004 the following revised
norms are applicable to all direct agricultural advances
a) A loan granted for short duration crops will be treated as
NPA, if the instalment of principal or interest thereon remains
overdue for two crop seasons.
b) A loan granted for long duration crops will be treated as
NPA, if the instalment of principal or interest thereon remains
overdue for one crop season.
CA Pawan K Goel
(ii) For the purpose of these guidelines, "long duration" crops
would be crops with crop season longer than one year and crops,
which are not "long duration" crops would be treated as "short
duration" crops.
(iii) The crop season for each crop, which means the period up to
harvesting of the crops raised, would be as determined by the State
Level Bankers' Committee in each state.
(iv) Depending upon the duration of crops raised by an
agriculturist, the above NPA norms would also be made applicable
to agricultural term loans availed of by him. In respect of
agricultural loans, other than Direct Agriculture Loan and term
loans given to non-agriculturists, identification of NPAs would be
done on the same basis as non-agricultural advances which, at
present, is the 90 days delinquency norm.
CA Pawan K Goel
- Where natural calamities impair the repaying capacity of
agricultural borrowers, banks may decide on their own as a
relief measure - conversion of the short-term production loan
into a term loan or re-schedulement of the repayment period;
and the sanctioning of fresh short-term loan, subject to various
guidelines contained in RBI circulars RPCD. No. PLFS.BC.6/
05.04.02/2004-05 dated July-1,2005.
CA Pawan K Goel
- In such cases of conversion or re-schedulement, the term
loan as well as fresh short-term loan may be treated as current
dues and need not be classified as NPA. The asset
classification of these loans would thereafter be governed by
the revised terms & conditions and would be treated as NPA if
interest and/or instalment of principal remains unpaid, for two
harvest seasons but for a period not exceeding two half years.
CA Pawan K Goel
In respect of corporate agricultural loans i.e.Agricultural loans
exceeding Rs. 1 crore granted to Corporates, Partnership Firms
and other Institutions, Loan amount will be bifurcated in two parts,
one third portion will be treated as agriculture advance on which
NPA Norms applicable to Agriculture Advances will apply and on
balance two third portion 90 days Norms as applicable to general
advances will apply.
CA Pawan K Goel
Categories of NPAs
a) Sub-standard Assets
b) Doubtful Assets
c) Loss Assets
Sub-standard Assets
With effect from 31 March 2005, a sub-standard asset would be
one, which has remained NPA for a period less than or equal to
12 months
CA Pawan K Goel
Doubtful Assets
With effect from March 31, 2005, an asset would be classified
as doubtful if it remained in the sub-standard category for 12
months.
CA Pawan K Goel
Loss Assets
A loss asset is one where loss has been identified by the
bank or internal or external auditors or the RBI inspectors
but the amount has not been written off wholly.
CA Pawan K Goel
Other Points
1) Accounts with temporary deficiencies :
The treatment of an asset as NPA should be based on the record of
recovery. Banks should not treat an advance as NPA merely due to
existence of some deficiencies which are of temporary in nature
such as non-availability of adequate drawing power, balance
outstanding exceeding the limit, non-submission of stock
statements and the non-renewal of the limits on the due date, etc.
Where there is a threat of loss, or the recoverability of the
advances is in doubt, the asset should be treated as NPA.
CA Pawan K Goel
In respect of accounts with such deficiencies following
guidelines
must
be
taken
into
consideration:
a) An account where the regular/ ad hoc credit limits have
not been reviewed/ renewed within 180 days from the due
date/ date of ad hoc sanction will be treated as NPA.
b) A working capital borrowal account will become NPA if
irregular drawings are permitted in the account for a
continuous period of 90 days even though the unit may be
working or the borrower's financial position. The
outstanding in the account based on drawing power
calculated from stock statements older than three months,
would be deemed as irregular. Thereby if the stock
statements have not been submitted for more than 3
months the account can be classified as NPA.
CA Pawan K Goel
2)
Treatment of NPAs – Borrower-wise and not Facility-wise
In respect of a borrower having more than one facility with a
bank, all the facilities granted by the bank will have to be
treated as NPA and not the particular facility or part
thereof which has become irregular.
CA Pawan K Goel
3) Upgradation of NPAs:
If arrears of interest and principal are paid by the borrower in
the case of NPA account, the account should no longer be treated
as non-performing and may be classified as ‘standard’ accounts.
CA Pawan K Goel
4) A/c regularized near balance sheet date :
The asset classification of borrower accounts where a solitary or a
few credits are recorded before the balance sheet date should be
handled with care and without scope for subjectivity. Such credits
should be from genuine sources and not from sanction of fresh /
enhance limits.
CA Pawan K Goel
5) Devolvement of LC/Invocation of BG
If the debits arising out of devolvement of letters of credit or
invoked guarantees are parked in a separate account, the
balance outstanding in that account also should be treated as a
part of the borrower’s principal operating account for the
purpose of application of prudential norms on income
recognition, asset classification and provisioning.
CA Pawan K Goel
6) Advances under consortium arrangements :
Asset classification of accounts under consortium should be
based on the record of recovery of the individual member
banks and other aspects having a bearing on the recoverability
of the advances. Even if the remittances by the borrower under
consortium lending arrangements are pooled with one bank
and/or where the bank receiving remittances is not parting with
the share of other member banks, the account will be treated as
not serviced in the books of the other member banks and
therefore, be treated as NPA.
CA Pawan K Goel
7) Accounts where there is erosion in the value of security :
A NPA need not go through the various stages of classification
in cases of serious credit impairment and such assets should be
straightaway classified as doubtful or loss asset as appropriate.
• Erosion in the value of security can be reckoned as significant
when the realizable value of the security is less than 50 per cent
of the value assessed by the bank or accepted by RBI at the
time of last inspection, as the case may be. Such NPAs may be
straightaway classified under doubtful category
CA Pawan K Goel
•If the realizable value of the security, as assessed by the
bank/ approved valuers/ RBI is less than 10 per cent of the
outstanding in the borrowal accounts, the existence of
security should be ignored and the asset should be
straightaway classified as loss asset. It may be either
written off or fully provided for by the bank.
CA Pawan K Goel
8) Advances against Term Deposits, NSCs, KVP/IVP, LIC etc
Advances against term deposits, NSCs eligible for surrender,
IVPs, KVPs and Life Policies are exempt from Assets
Classification & Provisioning Norms. However advances
against gold ornaments, government securities and all other
securities are not covered by this exemption.
CA Pawan K Goel
9) Loans with moratorium for payment of interest :
• In the case of bank finance given for industrial projects or for
agricultural plantations etc. where moratorium is available for
payment of interest, payment of interest becomes 'due' only
after the moratorium or gestation period is over.
• In the case of housing loan or similar advances granted to
staff members where interest is payable after recovery of
principal, interest need not be considered as overdue from the
first quarter onwards.
CA Pawan K Goel
10)
Government guaranteed advances :
The credit facilities backed by guarantee of the Central
Government though overdue may be treated as NPA only when
the Government repudiates its guarantee when invoked.
Advances sanctioned against State Government
guarantees should be classified as NPA in the normal course, if
the guarantee is invoked and remains in default for more than
90 days.
CA Pawan K Goel
11)
Take-out Finance :
Under this arrangement, the institution/the bank financing
infrastructure projects will have an arrangement with any
financial institution for transferring to the latter the
outstanding in respect of such financing in their books on a
pre-determined basis. In view of the time-lag involved in
taking-over, the possibility of a default in the meantime cannot
be ruled out.
CA Pawan K Goel
The norms of asset classification, income recognition &
provisioning will have to be followed by the concerned
bank/financial institution in whose books the account stands as
balance sheet item as on the relevant date. Further if at the
time of takeover the a/c is NPA in other bank books than the
same will be classified as NPA after takeover in the later
books.
CA Pawan K Goel
12)
Post-shipment Supplier's Credit :
In respect of post-shipment credit extended by the banks
covering export of goods to countries for which the ECGC’s
cover is available, EXIM Bank has introduced a guaranteecum-refinance programme whereby, in the event of default,
EXIM Bank will pay the guaranteed amount to the bank within
a period of 30 days from the day the bank invokes the
guarantee after the exporter has filed claim with ECGC.
Accordingly, to the extent payment has been received from the
EXIM Bank, the advance may not be treated as a nonperforming asset for asset classification and provisioning
purposes.
CA Pawan K Goel
13)
Export Project Finance :
In respect of export project finance, there could be instances where
the actual importer has paid the dues to the bank abroad but that
bank in turn is unable to remit the amount due to political
developments such as war, strife, UN embargo, etc.
In such circumstances, if the lending bank is able to establish
through documentary evidence that the importer has cleared the
dues in full by depositing the amount in the bank abroad before it
turned into NPA in the books of the bank, but the importer's
country is not allowing the funds to be remitted due to political or
other reasons, the asset classification may be made after a period
of one year from the date the amount was deposited by the
importer in the bank abroad.
CA Pawan K Goel
14) Advances under rehabilitation approved by BIFR/ TLI :
Banks are not permitted to upgrade the classification of any
advance in respect of which the terms have been re-negotiated
unless the package of re-negotiated terms has worked
satisfactorily for a period of one year. While the existing credit
facilities sanctioned to a unit under rehabilitation packages
approved by BIFR/term lending institutions will continue to be
classified in the same status, in respect of additional facilities
sanctioned under the rehabilitation packages, the Income
Recognition, Asset Classification norms will become applicable
after a period of one year from the date of disbursement.
CA Pawan K Goel
Provisioning
Standard assets :
i) Bank should make general provision for standard assets at the
following rates:a) Commercial Real Estate Sector
-
1.00%
b) Direct Advances to Agricultural and SME Sectors -
0.25%
c) For all other loans and advances not covered above -
0.40%
CA Pawan K Goel
-
The provisions on standard assets should not be reckoned for
arriving at net NPAs.
-
The provisions towards Standard Assets need not be netted
from gross advances but shown separately as 'Contingent
Provisions against Standard Assets' under Other Liabilities
and Provisions - Others' in Schedule 5 of the balance sheet.
CA Pawan K Goel
Sub-standard assets :
A general provision of 10 percent on total outstanding should
be made without making any allowance for DICGC/ECGC
guarantee cover and securities available.
The unsecured exposure which are identified as substandard
would attract additional provision of 10% i.e. a total of 20%
on the outstanding balance.
Unsecured Exposures is where the realizable value of the
security as assessed by the bank / approved valuers / RBI
inspectors is not more than 10%, ab-initio, of the
outstanding exposure.
CA Pawan K Goel
In order to enhance transparency and ensure correct
reflection of the Unsecured Advances in Schedule 9 of
Balance sheet, the following would be applicable from FY
2009-10 onwards
•
The rights, Licenses, authorizations etc charged to the
bank as collateral in respect of the project (including
infrastructure projects) should not be reckoned as
tangible security. Hence such advances shall be
reckoned as unsecured.
•
The banks should disclose under a separate head in
‘Notes to Accounts’ the total amount of such
abovementioned advances along with the estimated
value of such intangible collateral.
CA Pawan K Goel
Doubtful assets :
-
100 percent of the unsecured portion.
-
In regard to the secured portion, provision may be made on
the following basis :
Period
Provision
Up to one year
20%
One year to 3 years
30%
More than 3 years
100%
CA Pawan K Goel
a) Outstanding stock of NPAs as on 31.03.2007



60% w.e.f. 31.03.2008
75% w.e.f. 31.03.2009
 100% w.e.f. 31.03.2010
b) advance classified as ‘doubtful more than three years’ on
or after April 1, 2007 – 100 %
CA Pawan K Goel

- Valuation of Security for provisioning purposes
With a view to bringing down divergence arising out of
difference in assessment of the value of security, in cases of
NPAs with balance of Rs. 5 crore and above stock audit at
annual intervals by external agencies appointed as per the
guidelines approved by the Board would be mandatory in
order to enhance the reliability on stock valuation. Collaterals
such as immovable properties charged in favour of the bank
should be got valued once in three years by valuers appointed
as per the guidelines approved by the Board of Directors.
CA Pawan K Goel
Loss assets :
The entire asset should be written off. If the assets are
permitted to remain in the books for any reason, 100 percent
of the outstanding should be provided for.
CA Pawan K Goel
Floating provisions :
Some of the banks make a 'floating provision' over and above
the specific provisions made in respect of accounts identified
as NPAs. Till the year 2008-09, the floating provisions,
wherever available, could be set-off against provisions
required to be made as per above stated provisioning
guidelines. However from 2009-10, the floating provisions
cannot be netted off from Gross NPA’s to arrive at Net NPA’s.
CA Pawan K Goel
The Floating provision can only be reckoned as part of
Tier- II Capital subject to the overall ceiling of 1.25% of
total Risk Weighted Assets. Considering that higher loan
loss provisioning adds to the overall financial strength of
the banks and the stability of the financial sector, banks are
urged to voluntarily set apart provisions much above the
minimum prudential levels as a desirable practice.
CA Pawan K Goel
INCOME RECOGNITION
The policy of income recognition has to be objective and
based on the record of recovery. Internationally income
from non-performing assets (NPA) is not recognised on
accrual basis but is booked as income only when it is
actually received. Therefore, the banks should not
charge and take to income account interest on any NPA.
CA Pawan K Goel
- However, interest on advances against term deposits,
NSCs, IVPs, KVPs and Life policies may be taken to
income account on the due date, provided adequate
margin is available in the accounts.
-
Fees and commissions earned by the banks as a result of
re-negotiations or rescheduling of outstanding debts
should be recognised on an accrual basis over the period
of time covered by the re-negotiated or rescheduled
extension of credit.
CA Pawan K Goel
-
If Government guaranteed advances become NPA, the
interest on such advances should be taken to income account
on actual recovery.
-
With effect from 31.03.2005 a State Government guaranteed
advance, where interest and/or instalment of principal / or
any other amount due to the bank remains overdue for a
period more than 90 days shall become a non performing
advance. The interest due on such advance should not be
taken to income account, unless it has been realized.
CA Pawan K Goel
Reversal of income:
-
If any advance, including bills purchased and discounted,
becomes NPA as at the close of any year, interest accrued
and credited to income account in the corresponding
previous year, should be reversed or provided for if the same
is not realised. This will apply to Government guaranteed
accounts also.
- In respect of NPAs, fees, commission and similar income that
have accrued should cease to accrue in the current period
and should be reversed or provided for , if uncollected.
CA Pawan K Goel
Appropriation of recovery in NPAs :
-
Interest realised on NPAs may be taken to income account
provided the credits in the accounts towards interest are not
out of fresh/ additional credit facilities sanctioned to the
borrower concerned.
-
In the absence of a clear agreement between the bank and the
borrower for the purpose of appropriation of recoveries in
NPAs (i.e. towards principal or interest due), banks should
adopt an accounting principle and exercise the right of
appropriation of recoveries in a uniform and consistent
manner.
CA Pawan K Goel
III) Provisions relating to long form
Audit Report
1)
A)
B)
Cash Department
By whom are the keys of the cash safe held?
Is the cash safe being opened and closed by
the key holders themselves?
CA Pawan K Goel
C) What is the average cash on hand maintained by the
branch since the previous audit? Is it adequate for day
to day requirements or is it excessive?
D) Is all cash received during the day’s operations sorted,
stitched and transferred to double lock (wherever
applicable) on the same day?
E) If the branch has TT/DD discounting limit with
RBI/State Bank of India etc. Is the limit adequate?
CA Pawan K Goel
F)
Are instructions for keeping only minimum
required cash at the cash counter during
business hours being followed strictly?
G)
Is the cash on hand checked number of times
a month as per guidelines in the bank’s
manual of instructions?
H)
Are there frequent excesses or shortages in
cash?
I)
Mention the amount of soiled notes to be
exchanged, pending with the branch if
accumulated since more than 3 months.
CA Pawan K Goel
J)
Is decoy money planted & recorded properly.
K)
Is the list of token exhibited with the paying
cashier.
L)
Is the loss of token (if any) reported to Higher
Authorities?
M)
Whether the safe is placed in a strong room?
CA Pawan K Goel
N)
If not, is it embedded in RCC enclosures?
O)
Is the cash safe kept away from public view?
P)
State whether the branch has implemented
Pre-Scrolling system.
CA Pawan K Goel
Q)
State whether the branch has been reporting entries
of cash above Rs.10.00 lacs to the Higher
Authorities regularly?
R)
Whether the branch has reported all transaction of
suspicious nature to the appropriate law
enforcement authorities designated under the
relevant law governing such activities.
CA Pawan K Goel
2) Balances with Banks
Bank’s
A)
With which
account/s?
does
the
branch
B)
What is the average balance maintained in these
accounts?
C)
Are the accounts reconciled regularly with the
passbook/statement of accounts and with the general
ledger? Are balance confirmation certificates being
obtained regularly and balances have been reconciled.
CA Pawan K Goel
maintain
D)
If there are entries outstanding for more than 3
months give details and reasons as to why they
are outstanding?
E)
What efforts are made to rectify error and to
square off old entries.
F)
See whether any revenue effecting entry is
outstanding in the reconciliation statement. If
yes, please give the same in your MOC.
CA Pawan K Goel
3) Books & Records /
Balancing of Books
A) Does the branch maintain the accounts in the general ledger
only under the heads specified in general ledger balance
statement or in HO circular? If not specify which additional
accounts are being maintained and under whose authority they
are being maintained.
B) Verify the correctness of reversal of suspense receipt/payment
entries and report in entries that have been incorrectly
/unauthorizedly reversed.
C) Are the clearings and transfer register properly maintained and
balanced with daybook?
CA Pawan K Goel
D)
Is the branch maintaining a register specimen signature
and initials of officers working in the branch? Is the
register up to date?
E)
Are initials/signatures on vouchers etc. are as per the
specimen records in the above register.
F)
Check debit entries in income accounts like interest
received, commission received etc. and ascertain
correctness of such entries.
CA Pawan K Goel
G)
All the debits to current/Saving Bank accounts
(Except debit by way of interest/commission/
incidental /service charge) duly authorized by the
account holder?
H)
Are the appropriate date stamps of receipt/
payment / transfer etc. affixed on voucher?
I)
Whether allocation of work for balancing the
ledgers is regularly made weekly/monthly as per HO
guidelines? Are records of allocation of work
maintained and subsequent follow up is done in the
matter?
CA Pawan K Goel
J) Whether allocation for clearing the backlog in balancing
of ledger is made and recorded? Comment on whether or
not efforts have been made by the Branch
Manager/Accountant to clear off old arrears and to
prevent arrears from accumulating?
K) Whether balancing of books are in arrears?
CA Pawan K Goel
4)
Computer Audit
A) Whether password parameters is set at 15 days.
B) Whether all users are given passwords?
C) Whether user-ID register is maintained?
D) Whether important password like, DBA Branch Manager
should be kept in sealed cover and be in dual control?
E) Whether daily monthly backups are taken.
F) Whether backups are write protected and kept away from
magnetic media?
CA Pawan K Goel
G) Whether the backup media is stored in fireproof cabinet
secured with lock and key?
H) Whether off-site backups are to be preserved?
I) Whether labelling of the media is properly done?
J) Whether the reports generated by the system are checked
and signed by the officer?
K) Whether hardware/software problems are noted in details
in register?
L) Whether asset register containing details of all computer
and peripherals are maintained at the branch and
whether the terminals, PCs are numbered?
CA Pawan K Goel
M) Whether hardware devices are in working condition?
N) Whether manuals, IT department guidelines are readily
available?
O) Whether audit trails reports are printed and checked by
Branch Manager?
P) Whether exceptional reports are signed by the Branch
Manager?
Q) Whether insurance policy of computers is on record?
R) Whether AMC of UPS/Computers are renewed on due
date?
CA Pawan K Goel
S) Whether preventive maintenance is done by the vendor?
T) Whether branch parameters are properly set?
U) Whether random checking of interest, commission is done
periodically?
V) Whether logs are printed and checked after the vendors
performs his job?
W) Whether random checking of interest, commission is done
periodically?
CA Pawan K Goel
X) Whether access to the computer room is restricted to
authorised person only?
Y) Whether server room is Air Conditioned?
Z) Whether UPS is placed in proper location and whether it
is able to take the load of the server/terminals.
CA Pawan K Goel
AA)Whether terminals/keyboard/server are placed
cleaned environment and covered after day’s work?
in
BB)Are there any idle terminals/printers in the branch?
CC)Whether anti virus software of latest version is installed
in servers/PCs of Branches to prevent data corruption?
DD) Does operator put the transaction number and initial on
the vouchers.
EE) Whether any data entry job is entrusted to third party
and whether agreement to that effect exits?
CA Pawan K Goel
FF) Has proper training on the system as well as application
given to the staff and are there recorded to support this?
GG) Whether users log out when they leave the terminal?
HH) Whether all modules in the software are implemented?
II) Whether teller-banking system is functioning?
JJ) Whether the IBRDDR floppies are generated after day
end?
KK) Whether MBB is in working condition at the branch?
CA Pawan K Goel
LL) Whether the MBB reports are printed and checked with
GL transactions.
MM) Are fire fighting and fire alarm installed outside the
server room?
NN) Whether all the registers such as daily system log
register, complain/vendors access register, user-ID
register of books/manuals, asset register, register for
software
licenses,
backup
register,
preventive
maintenance register, register of consumables etc. are
maintained?
CA Pawan K Goel
5)
Inter Branch Accounts
A) Does the branch forward on a daily basis to the Head
Office a statement of debit/ credit transactions in relation
to other branches?
B) Does the balance in the Head office account at the end of
the year as shown in the said statement is in agreement
with the General Ledger.
C) Does the branch expeditiously comply with/respond to the
communications as regard to unrealised transactions.
D) Are there any old/large outstanding transaction/entries at
debits as at year-end which are unexplained?
CA Pawan K Goel
6)
Audit / Inspections
Is the branch covered by the Concurrent Audit/any other
audit/inspection during the year. Go through the latest
reports of these audits and consider the major adverse
comments pointed out in these reports.
CA Pawan K Goel
7) Frauds
Furnish particulars of frauds discovered during the
year under audit at the branch together with
suggestions to minimize the possibilities of their
occurrence. Also verify the fraud register maintained
by the branch. If no register is being maintained at the
branch, specifically mention the same in your Long
Form Audit Report.
CA Pawan K Goel
8) Other Assets
Stationery & Stamps
Does the system of bank ensure adequate internal control
over issue and custody of stationery comprising security
items? Whether the system is being followed by the branch.
Any deficiency found should be reported. It is also to be
seen that whether any obsolete stationery is being
maintained at the branch and if yes, the same should be
reported through MOC.
CA Pawan K Goel
9) Suspense Account/Sundry Assets
Items debited to the suspense account are cleared with a
reasonable time limit. Details of old outstanding entries
together with reasons for delay in adjustment should be
reported in Long Form Audit Report. In many of the cases,
it has been seen that item of revenue nature are being
debited in suspense account just to inflate the audit. If any
such instance is noticed, the same should be reported in
MOC .
CA Pawan K Goel
11)
Deposits
A) Whether the branch is following the prescribed guidelines
with respect to conduct and operations of inoperative
account?
B) Are there any undesirable accounts where cheques are
issued frequently without maintaining sufficient balance or
unremunerated accounts where there are heavy cash
withdrawals/withdrawals against clearing.
C) Are TOD’s granted often and the interest on TOD’s
recovered regularly.
CA Pawan K Goel
D)
Are incidental charges recovered as per service
charges circular.
E)
Are term deposits not renewed/paid on maturity/
transferred to overdue deposit account. Details of
such amount should be given?
F)
Interest on deposits is being calculated as per HO
guidelines.
G)
Whether there are unusual large movements in the
deposits figure after the balance sheet date and till the
date of audit.
CA Pawan K Goel
11) Bills payable/Sundry Deposits
A) Verify whether any unusual entries are outstanding under
above head
B) The number of items, amount and age-wise classification
should be given in Long Form Audit Report.
CA Pawan K Goel
12) Profit & Loss Accounts
A) Whether the branch has a system to compute discrepancies
in the interest and for timely adjustment
B) Has the branch complied with the income recognition
norms prescribed by the RBI? .
C) Does the bank have a system of estimating and providing
interest accrued on overdue/matured term deposits
CA Pawan K Goel
13)
I)
Other Matters
Window Dressing
In many of the cases, it has been seen that window
dressing is being done in deposits/ advances/profits by
the branches to show a better and rosy picture. The
position as on 31st March 2010 should be verified with
the next two week position and see the downward trend in
this regard to verify the same.
CA Pawan K Goel
14)
A)
B)
C)
D)
Question of LFAR related to specialised
branches
Branches dealing in foreign exchange transaction.
Branches dealing in very large advances.
Assets recovery branches.
Branches dealing in clearing house operations.
CA Pawan K Goel
Thank
You