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Bank Branch Audit
An Integrated Work Paper Model
Updated : 2017
Prepared by CA Sripriya Kumar
A Smart CA Initiative
Views expressed are those of the author. This is an indicative template. Users are advised to exercise
discretion in the use of this model work paper template
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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
BANK BRANCH AUDIT
INTEGRATED WORK PAPER FILE
Bank Name
Branch
Year 2016-17
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
Circle Office Contact
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TABLE OF CONTENTS
1. APPOINTMENT ........................................................................................................................................ 5
2. KEY REPORTS AND CERTIFICATES .................................................................................................... 5
3. AUDIT INSTRUCTIONS AND TEAM ...................................................................................................... 5
4. REPORT, RETURNS AND CERTIFICATES ............................................................................................ 6
5. FINAL NOTES FOR ATTENTION OF PARTNER ................................................................................ 10
6. GUIDANCE DOCUMENTATION ........................................................................................................... 13
7. KEY RISKS............................................................................................................................................... 17
8. BRANCH OVERVIEW ............................................................................................................................ 18
9. PHYSICAL VERIFICATION................................................................................................................... 25
10. AUDIT STRATEGY ................................................................................................................................. 27
11. ADVANCES AND INCOME .................................................................................................................... 30
12. NPA REVIEW AND MOC ........................................................................................................................ 37
13. VERIFICATION OF DEPOSITS ............................................................................................................. 38
14. PROFIT AND LOSS ACCOUNT – ANALYTICAL REVIEW PROCEDURES ..................................... 39
15. INCOME RELATED PROCEDURES ..................................................................................................... 39
16. SPECIAL ASPECT OF DEMONETISATION ......................................................................................... 41
17. MAINTENANCE OF WORKING PAPERS ............................................................................................ 49
1. CERTIFICATION RELATED WORKING PAPERS .............................................................................. 49
2. TAX AUDIT WORKINGS ........................................................................................................................ 49
3. OTHER WORKING PAPERS ................................................................................................................. 49
4. REFERENCES ......................................................................................................................................... 49
5. LFAR CHECKLIST – OTHER THAN ADVANCES ............................................................................... 50
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Part A – Basics
Acceptance
Engagement Scope
Key Deliverables
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1. Appointment
a) Branch Assigned for Audit
We have been appointed as the Statutory Auditors of the ……………………… Branch of
……………………………………….. ……………………………… Bank for the year 2016-17
b) Audit Acceptance Letter
The audit acceptance letter has been provided to the CO and a copy is kept for our records. 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
c) Engagement Letter
An engagement letter has been issued and kept in Appendix 2
d) 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
2. Key Reports and Certificates
a) The following key reports / certificates are required to be issued by us
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
3. Audit Instructions and Team
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a) 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
b) The audit was commenced on ……………. and completed on …………………. By the following
team
Name Designation Days From To
Partner
Qualified Paid Assistant
Audit Assistant
Articleship trainee
c) The details of Bank Staff from whom data / records / information and explanations were solicited
/ obtained for the purpose of this audit are as under
4. Report, Returns and Certificates
a) Auditors report
b) Long Form Auditors Report
c) Returns
d) Certificates
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
S No Index No o
f co
pie
s
Com
ple
tio
n
Sta
tus
RETURNS
Designation Name Grade
Branch Manager
Loans Officer
Deposit Officer
Other Officers
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S No Index No
of
copie
s
Co
mp
leti
on
Sta
tus
1 BS - 1 Liabilities
2 BS - 2 Assets
3 BS - 3 Expenditure for the half year ended 31-03-17
4 BS - 4 Income for the half year ended 31-03-17
5 Final A & L as on 31-03-17
6 Final P & L for the year 31-03-17
7
BS 7 – STATEMENT OF CLAIMS MADE AGAINST THE BANK NOT
ACKNOWLEDGED AS DEBT
8 BS 8 – DETAILS OF RESTRUCTUTRED A/C (EXCLUDING CDR)
9
BS 9 – DETAILS OF COUNTRYWISE, RISK CATEGORY WISE
EXPOSURE
B Supplementary to BS Schedules
10 SUPP. B – BREAK UP OF LCS, GUARANTEES, ETC.
11 SUPP. C – CLASSIFICATION OF ADVANCES
12 Supp D - Break iup of sundry receivables and sundry depsoits
13 SUPP. E1 & E2 – EXPOSURE TO SENSITIVE SECTOR
14 Supp F - information relating to DSB 1 and additional information
15 SUPP. G – CASH & BANK BALANCE FOR SELECT NON-FRIDAYS
16 Supp H - Residual maturity pattern of forex advances / deposits
17
SUPP. K - PARTICULARS OF EXPENDITURE AND INCOME
RELATING TO PREVIOUS YEARS
18
SUPP. M – BREAK UP OF PAYMENTS TO AND PROVISIONS FOR
EMPLOYEES
C LA General and LA Suit Filed as at 31-03-17
19 Loan Analysis Summary
20 Recoveries made in Select Borrowal accounts from 01-04-16 to 31-03-17
21
Control Sheet for NPA, Income Recognition, Movement of NPA and Interest
reversal of NPA
22 BS - 3 Expenditure for the half year ended 30-09-16
23 BS - 4 Income for the half year ended 30-09-16
24 Supp M - 30-09-16
25 SFVM inventory statement
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S No Index No
of
copie
s
Co
mp
leti
on
Sta
tus
CERTIFICATES
26 Branch Audit Report
27 Annexure A to E ( Memorandum of Changes )
28 Questionnaire in addition to Branch Audit report
29 Special Deposit Scheme 1975
30 Compulsory Deposit scheme 1974
31 PMRY scheme
32
Form of Certificate on sharing of recoveries in claim settled accounts under
SLGS 1971/SLGS(SSI) 1981
33 Interest Subvention claim
34 Interest relief on Rupee Export credit
35 Compliance of Accounting Standard 11 as per Annual Closing Circular
36 Technology upgradation fund scheme
37 Capital subsidy scheme for processing machinery
38 Long Form Audit report
39 Tax audit report
40 SLR / CRR
41 Ghosh Committee Report
42 Jhilani Committee Report
43 Statement of Capital Adequacy
44 Statement of Risk Weight Assets
45 Certificate of passing previous year MOC
46
Certificate of Compliance with Income recognition, Asset Classsification and
provisioning norms
47 Provision for sacrifice under NPV method for restructured advances
48 Provision held on upgraded restructured advances for two years
49 Sector wise, security wise and asset classification wise statement
50 Certificate of Lending to Sensitive Sector
51 Certificate of Cash Margin held
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Part B – Finalisation
Final Audit Notes
Scope Limitations
Representation Letter
Final Copies of Signed / Audited Documents
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5. Final Notes for Attention of Partner
a) Scope Limitations, if any
The following scope limitations have been appropriately dealt with in the Audit report of the branch /
LFAR and suitably highlighted as matters of emphasis .The Branch management has not been able to
furnish the following details / records / explanations in connection with the audit
The
follo
win
g
unit
visit
s
requested by us could not be undertaken due to the following reasons
b) Significant Audit Notes
The following matters have been observed during the audit. These matters have been classified as
Qualification in audit report
MoC Prepared
Discussion pending for attention of partner
Taken to LFAR
Ignored due to immateriality
Any other
Information requested
and not provided
Amount Impact on audit,
if any
Management Comments
Information
requested and not
provided
Amount Impact on audit, if any Management Comments
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Matters for Consideration Impact Final
Resolution
c) Representation letter
Management Representation letter has been obtained and kept in Appendix 4
d) Schedules initialed for Identification Purposes
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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Part C – Audit Planning
Guidance Documentation
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6. Guidance Documentation
a) RBI Master Circular
RBI issues master circulars every year on July 1 of the year. These circulars lay down the compliance
requirements on a ―refreshed‖ basis and supercedes earlier circulars. These are available on the RBI
website. The specific circulars for the components to be audited need to be reviewed . Check under the
segment called Notifications in rbi.org.in
b) Audit Guidance provided by the bank
All major banks provide a CD containing the Audit instructions which would include a description of the
key risks, components, lists of returns and certificates and the target dates. This data needs to be reviewed
before the commencement of the audit
c) Audit reports of the previous year
Signed copies of the financial statements and Audit reports of the previous year need to be obtained
d) Various Audits / review reports / inspections conducted by the bank / RBI
e) Guidance Note on Bank Audits
The ICAI has published a detailed guidance note on Bank Audits. Specific segments of this guidance note
may be referred for the components under audit. This is available on
The Auditing and Assurance Standards Board of the Institute of Chartered Accountants of India has
issued the Guidance Note on Audit of Banks 2017 edition. For the benefit of members, complete text of the
Guidance Note and the contents of accompanying CD can be downloaded at:
Please note that the soft copy of accompanying CD as uploaded on website contains only the list of Master
and other relevant Circulars of RBI. However, the CD that will come with the book will contain the
complete text of Master Circulars as well as other relevant Circulars.
To download ZIP file of text of Guidance Note and contents of accompanying CD, please click on the
below link:
f) 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
SA reference Description
SA 200 OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR AND THE
CONDUCT OF AN AUDIT IN ACCORDANCE WITH STANDARDS ON
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SA reference Description
AUDITING.
SA210 AGREEING THE TERMS OF AUDIT ENGAGEMENTS.
SA220 QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS.
SA230 AUDIT DOCUMENTATION.
SA240 THE AUDITOR’S RESPONSIBILITIES RELATING TO FRAUD IN AN AUDIT
OF FINANCIAL STATEMENTS.
SA250 CONSIDERATION OF LAWS AND REGULATIONS IN AN AUDIT OF
FINANCIAL STATEMENTS.
SA260 COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE.
SA265 COMMUNICATING DEFICIENCIES IN INTERNAL CONTROL TO THOSE
CHARGED WITH GOVERNANCE AND MANAGEMENT.
SA299 RESPONSIBILITY OF JOINT AUDITORS.
SA300 PLANNING AN AUDIT OF FINANCIAL STATEMENTS.
SA315 IDENTIFYING AND ASSESSING THE RISK OF MATERIAL MISSTATEMENT
THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT.
SA320 MATERIALITY IN PLANNING AND PERFORMING AN AUDIT.
SA330 THE AUDITOR’S RESPONSES TO ASSESSED RISKS.
SA402 AUDIT CONSIDERATIONS RELATING TO AN ENTITY USING A SERVICE
ORGANISATION.
SA450 EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT.
SA500 AUDIT EVIDENCE.
SA501 AUDIT EVIDENCE—SPECIFIC CONSIDERATIONS FOR SELECTED ITEMS.
SA505 EXTERNAL CONFIRMATIONS.
SA510 INITIAL AUDIT ENGAGEMENTS—OPENING BALANCES.
SA520 ANALYTICAL PROCEDURES.
SA530 AUDIT SAMPLING.
SA540 AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUE
ACCOUNTING ESTIMATES, AND RELATED DISCLOSURES.
SA550 RELATED PARTIES.
SA560 SUBSEQUENT EVENTS.
SA570 GOING CONCERN.
SA580 WRITTEN REPRESENTATIONS.
SA600 USING THE WORK OF ANOTHER AUDITOR.
SA610 USING THE WORK OF INTERNAL AUDITORS.
SA620 USING THE WORK OF AN AUDITOR’S EXPERT.
SA700 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.
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SA reference Description
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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Part D – Branch and Risk Understanding
Internal Control Framework
Audit Risk and Focus Areas
Understanding of the Branch
7. Key Risks
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The key risks in Bank Branch Audits are as under . All our audit procedures should be directed at
minimizing these audit risks
Material Misstatement of income, expenses, Assets or Liabilities.
Unrecorded liabilities and contingent liabilities
Asset Classsification 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 frauds
Wrong certification
8. Branch Overview
a) Products dealt by the bank branch
Fund based Asset
products
Fee based Asset
Products
Asset
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b) Key data
c) Target Vs Accomplishment
d) Advances Overview - top 10 advance categories of the branch
Cash credit Bank Guarantees
Overdraft Letters of credit
Home loans Money transfers
Personal loans
Vehicle Loans
Jewel loans
Description 2016-17 2015-16
Rs . lakhs Rs . lakhs
Total Assets
Total liabilities
Total Advances
Total Deposits
Income
Expenditure
Profit / Loss
Description 2016-17 2015-16
Target
Rs . lakhs
Actual
Rs . Lakhs
Total Advances
Total Deposits
Rating of the Branch
S No Category of advances 2016-17 2016-17 2015-16 2015-16
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e) 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
Rs . lakhs No of
accts
Rs . lakhs No of
accts
1 Cash Credit
2 Overdraft
3 Term loans
4 Crop loans
5 Housing loans
6 Jewel loans
7 Personal loans
8..
10 Other advances
Total Advances
S No Account reference / name 2016-17 2016-17 2015-16 2015-16
Rs . lakhs No of
accts
Rs . lakhs No of
accts
1
2
3
4
5
6
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f) 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
g) A
dvan
ce
profil
ing
by
value
S No Customer Name Facilities 2016-17
Rs . lakhs
1 1
2
3
2 1
2
3
3 1
2
3
S No Slab - Rs Lakhs outstanding 2016-17 2015-16
Rs . lakhs No of accts
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
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h) Deposit profiling
i) 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
j) Interest rate and other charges on major advances ( specify range )
Advances Type Interest % Charges % Charges % Charges %
k) Interest rate on deposits
S No Category of deposit accounts 2016-17 2016-17 2015-16 2015-16
Rs . lakhs No of
accts
Rs . lakhs No of
accts
1
2
3
4
5
6 Others
Total Deposits
S No Account reference / Name During
2016-17
Upto
2015-16
2016-17
Rs . lakhs Rs. Lakhs Rs . lakhs
1
2
3
4
5
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Deposit type Days Interest %
l) Any frauds reported
Note on frauds reported at the branch in the last few years
m) Information in the public domain
We have scanned the public domain for information pertaining to the Bank and we report as under :
n) Asset Classification as of date of audit
o) NPA Movement
Account ref Pre Audit NPA 2016-17
Opening NPA
Add : Additions
Add : Additions MoC Nil
Less : Repayments
Add : Legal Costs etc
Closing NPA
S No Category 2016-17 2016-17 2015-16 2015-16
Rs . lakhs No of
accts
Rs . lakhs No of
accts
1 Standard
2 Substandard
3 Doubtful
4 Loss
Total advances
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Details of NPA Accounts
Account ref NPA – 2015-16 NPA 2016-17
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9. Physical Verification
i. Cash
Complete the physical verification of cash and ensure that the same is tallied denomination wise
and agree to GL as at the closing date
ATM cash should also be covered
Document the physical verification in a cash count format
Obtain a cash certificate from the branch management
Any excess / shortage / difference must be reported in the Statutory Audit report itself
ii. Gold
Complete the physical verification of jewels pledged for gold loans
Document the physical verification in a count format
Obtain a certificate from the branch management
Any excess / shortage / difference must be reported in the Statutory Audit report itself
iii. Investments
Physical verification of Investments
Obtain certificate from bank manager for the same).
If investment is held /done by the Branch
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Part E – Performing the Audit
Audit Strategy
Previous Years Audit Reports
Concurrent, Revenue Audits,Inspections
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10. Audit Strategy
a) Top Down Approach
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. - 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
Top Down Approach to audit
Understanding of the internal control framework
Utilisation of Other Audit reports – Revenue, Inspection and Concurrent audit reports
Review of previous years audit reports
Identification of high risk areas which are also material
Focus on Advances and Income
Focus on revenue leakages and non fund based products
Unit visits
b) Internal Control Framework
Discuss with the manager on the following elements of the Internal Control Framework and
ensure that these are in place
Detailed Operating Procedure manuals
Delegation of powers and Authorisation of transactions
Segregation of duties and Independent Checks and balances
Controlled Maintenance of records and documents
Elaborate system of Accountability for assets of the bank
Extensive computerization and procedure standardization
c) Review Notes of Concurrent, RBA, Inspection Reports and Stock audit reports of borrower
accounts
Reports Conducted / Report date
Previous year audit report
Internal Audit under Companies Act 2013
Risk based Internal Audit
Revenue Audit
Inspection
Concurrent Audit
Stock Audit
Vigilance Audit
Systems Audit
RBI inspection
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S No /
report
Account reference / nature of
issue / date of report
Amount Present Status
– Rectified,
LFAR, MoC,
Unadjusted
Impact, if any
on audit
strategy
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Part F – The Audit
Advances and Income
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11. Advances and Income
a) Overall Audit Approach
The approach for Audit of advances envisages the following important phases
Understanding the large types of advances
Understanding the large value accounts where deficiencies will have a material impact
Internal Controls – follow the questions in the LFAR and check samples against checklists so that
each advance type can be checked with reference to its unique requirements
Review of NPA
b) Planning for Audit of Advances ( from the GN on Bank Audit of ICAI )
i. Obtain largest accounts of the branch.
ii. Obtain the list of Specially Mentioned Accounts or irregular accounts, These are published by the
bank as daily exception reports . These are accounts which are most likely to slip to NPA
iii. Obtain the list of restructured accounts: as these require separate additional provisioning.
c) Summary of advances of the branch ( as per Balance Comparison report)
Advance Category Current year Previous Year
d) Review of Top Advances
Top accounts > = Rs 2 Crs / 5% advance ) should be checked 100% to cover all accounts. This is a
requirement in the LFAR also
Ensure that the review
o All loan balances >Rs 2 Crs
o All disbursements during the year >Rs 2 Crs
o Near to Rs 2 Crore balances where repayments have happened in the last few weeks
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The bank needs to provide the particulars of the top accounts in the prescribed format kept at the
end of the LFAR
The broad principles in relation to Appraisal, Sanctioning, Documentation and post disbursement
review shall be adhered to
Any deficiencies in the above accounts need to be viewed seriously and reported in the LFAR. In
case the audit opinion is likely to be impacted, attention should be drawn to Matters of Emphasis
paragraphs etc of the Auditors report
e) Restructured Advances
Obtain a list of restructured advances
Review the sanction of the restructuring
Restructured advances to be reviewed with reference to revised terms of sanction properly
approved by the relevant sanctioning authority
Ensure compliance for the terms of restructuring ( any non compliance will be regarded as a
slippage )
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
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
f) Advances Verification – Cash Credit and overdraft accounts
For CC and OD accounts selected, check for the following :
Financial Statements and solvency / capability of borrower / limit
Unaudited financial statements have been furnished for balances <Rs XX lakh
Audited financial statements have been furnished for balances >Rs XX lakh
Audited financial statements have been furnished for corporate borrowers
Income tax returns have been furnished
Credit Appraisal has been done on merits of business / profession and not based on collaterals
offered
Limit fixation and approval
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Proposal for assessment of Working capital needs is available
Sanction as per limits of branch
Interest / Charges is as per the policy of the bank
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 XX years
Others
Monitoring Actions
Submission of stock statements on a monthly basis
Maintenance of drawing limit based on Working capital statements
Quarterly book debts Certified 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
Debit and Credit summation to be reviewed 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
Interest is updated correctly as per base documents
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Test of repayments done
Test of interest accrual done
Test of accuracy of processing charges
g) Advances Verification – Housing loans
Obtain the sample of housing loans as selected by you
If samples are not provided report to the partner under Scope Limitation segment
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 - CMDA
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
Test of repayments done
Test of interest accrual done
h) Advances Verification – Term loans
Obtain the sample of Term loans as selected by you
If samples are not provided report to the partner under Scope Limitation segment
Loan application is available
Loan application is signed and properly executed
Sanction letter is available
Loan proposal indicating projections etc as well as financial / audited financial statements
Title deeds lodged with bank
Assessment of repayment capability
LTV ratio is maintained
If release against Proforma , then final invoice has been received
If final invoice has not been received and time has elapsed, physical verification needs to be done
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In final invoice and proforma check for parameters such as TIN number, supplier particulars etc
Obtain installation certificate , if loan is for machinery
If for any other purpose, check proof of end use
Latest audited financials as per norms
In case of restructuring, check for the same
Loan details recorded correctly in CBS
Test of repayments done
Test of interest accrual done
i) Advances Verification – Educational loans
Obtain the sample of loans as selected by you
If samples are not provided report to the partner under Scope Limitation segment
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
j) Advances Verification – Vehicle loans
Obtain the sample of loans as selected by you
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If samples are not provided report to the partner under Scope Limitation segment
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
k) Advances Verification – Jewel Loans
Obtain the sample of loans as selected by you
If samples are not provided report to the partner under Scope Limitation segment
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
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l) Advances Verification – Loans against Own Deposits
Obtain the sample of loans as selected by you
If samples are not provided report to the partner under Scope Limitation segment
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
m) Advances Verification – Loans against financial assets
Obtain the sample of loans as selected by you
If samples are not provided report to the partner under Scope Limitation segment
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
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12. NPA Reviewand MoC
a) NPA Overview and movement
Account ref NPA 2016-17
Opening NPA
Add : Additions
Add : Additions MoC
Less : Repayments
Add : Legal Costs etc
Closing NPA
b) NPA review
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
c) 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
Reclassification of Loans
and Advances where done
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S
No
Nature of Issue Debit
Account
Credit
Account
Amount Remarks
differently by the branch
Assets put to use and not
capitalized
d) NPA Movement statement
Obtain the NPA movement statement from the branch
Check opening NPA with reference to the previous year audited financial statements
Check additions
Check deletions
Closing balance should tie to the closing NPA report
All cases of deletions should be verified for payment by the borrower or for restructuring
13. Verification of Deposits
Obtain the list of deposit samples to be verified
If samples are not provided report to the partner under Scope Limitation segment
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)
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14. Profit and Loss Account – Analytical review procedures
Description 2016-17 2015-16 2015-16 2015-16
Amount
Rs . lakhs
Amount
Rs . Lakhs
% Change 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
15. Income Related Procedures
These procedures are in addition to the procedures performed at time of audit of loan files
Obtain the break up of fund based ( loans , CC, OD ) and Fee based ( Guarantees, LC etc )
Fund based
Obtain the schedule of charges and interest rates for different categories of liability products
Prepare a schedule of total income of the bank
The checking of interest of large loan accounts will be completed in the above audit procedures
Tabulate the value checked against the total income
Extend verification if the value of interest verified if necessary
Fee based
Discuss with the manager and obtain an understanding of the various fee based products
Obtain the schedule of charges and interest rates for different categories of fee based liability
products
Check the guarantees register and verify accuracy of computation of income
Obtain a list of all packing credit and other facilities and verify accuracy of computation of
income
Extend verification if the value of interest verified if necessary
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Part G – The Audit
Demonetisation
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16. Special Aspect of Demonetisation
Consequent to the announcement made by the Honourable Prime Minister, Shri. Narendra Modi on 8th
November, 2016 regarding the withdrawal of the existing currency notes of denomination of Rs. 500 and
Rs. 1,000, there have been a series of announcements and notifications by the RBI.
For each of the below categories, please select samples and confirm compliance
a) Restrictions on Exchange
Date Date to Event description Samples / Exceptions
Nov 8 Nov 13 The Specified Bank Notes of
aggregate value of 4000/- or below
were exchanged for any
denomination of Bank notes having
legal tender, with a requisition slip in
the format specified by RBI and
proof of identity as declared in the
Notification
Nov 14 Nov 17 The limit for exchange of Specified
Bank Notes, over the counter was
increased from Rs. 4000/- to Rs.
4500/- w.e.f 14th Nov 2016, vide
notification no. DCM (plg) No.
272/10.27.00/2016-17 dated
November 13, 2016
Nov 18 Nov 24 The limit was again revised from Rs.
4500/- to Rs. 2000/- w.e.f November
18, 2016, vide RBI notification no.
DCM (plg) No. 1302/10.27.00/2016-
17 dated November 17, 2016
Nov 24 The Exchange Facility was finally
withdrawn and permitted only till the
end of business hours on November
24, 2016 as mentioned by
Government of India in the
Notification earlier. However, the
exchange facility has not been
withdrawn from RBI Offices
b) Restrictions on Deposits
Date Date to Event description Samples / Exceptions
Nov 8 Nov 24 The Notification stated that no
limit was specified on the quantity
or value of the Specified Bank
Notes to be credited to the account
maintained with the branch by a
person, provided the Specified
Bank Notes were tendered in
accordance with standard banking
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Date Date to Event description Samples / Exceptions
procedure and on production of
valid Proof of Identity
However, where compliance with
extant KYC norms was not
complete in an account, maximum
value of specified bank notes to be
deposited was restricted to Rs.
50,000/-.
c) Restrictions on physical withdrawals ( general accounts )
Date Date to Event description Samples / Exceptions
Nov 8 Nov 13 Cash withdrawal from a bank account
over the counter was restricted to Rs.
10,000/- per day subject to a weekly
overall limit of 20,000/- as per the
Notification
Nov 14 Nov 24 From 14th November, 2016, the
weekly limit of Rs. 20,000/- for
withdrawal was increased to Rs.
24000/- vide notification
RBI/201617/129 DCM (plg) No.
1272/10.27.00/2016-17 dated
November 13, 2016.
Nov 25 Notification no. RBI/2016-17/158
DCM (Plg) No.1424/10.27.00/2016-
16 dated November 25, 2016
instructed banks to continue allowing
their existing customers to withdraw
cash from their accounts uptoRs.
24000/- in a week, till further
instructions are given.
d) Special concessions for CC / OD holders
Date Date to Event description Samples / Exceptions
Nov 21 .. RBI vide notification no. RBI/2016-
17/142 DCM (Plg)
No.1317/10.27.00/2016-17 dated 21st
November, 2016 allowed the
current/overdraft/cash credit account
holders (operational for the last 3
months or more) to withdraw cash up to
Rs. 50,000/- in a week subject to certain
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Date Date to Event description Samples / Exceptions
terms and conditions.
The same facility was extended to
traders registered with APMC markets
via notification no. RBI/201617/146
DCM (Plg) No.1323/10.27.00/2016-17
dated 21st November, 2016.
Nov 29 .. However, withdrawals of deposits made
in current legal tender notes on or after
November 29, 2016 was allowed
beyond the current limits preferably in
the new legal tender notes i.e. Rs.
2000/- and Rs. 500/- as per circular
RBI/2016-17/163
DCM.No.1437/10.27.00/2016-17 dated
November 28, 2016.
e) Restrictions on physical withdrawals ( Jandhan Accounts )
Date Date to Event description Samples / Exceptions
Nov 29 Certain limits as a matter of
precaution were set on the
operations of PMJDY accounts by
RBI vide notification RBI/2016-
17/165 DCM(plg) No
1450/10.27.00/ 2016-17 dated
November 29, 2016 which allowed
Fully KYC compliant account
holders to withdraw Rs. 10,000/-
from their accounts, in a month.
Branch managers may allow
withdrawals beyond Rs. 10,000/-
only after ascertaining the
genuineness of such withdrawals
Non-KYC compliant account
holders to withdraw Rs. 5,000/- per
month from amount deposited
through Specified Bank Notes after
November 09, 2016 within the
overall ceiling of Rs. 10,000
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f) Restrictions on physical withdrawals ( NRI / NRO accounts )
NRI/NRO accounts: Specified bank notes were allowed to be deposited in the NRO accounts. If
someone is not in India then written authorization to enable another person to act on their behalf was
accepted
g) Restrictions on physical withdrawals ( Marriage )
Date Date to Event description Samples / Exceptions
Nov 22 Notification RBI/2016-17/145
DCM(plg) No. 1320/10.27.00/21-17
dated November 21, 2016
empowered the account holders to
withdraw a maximum of Rs.
2,50,000/- from a single account if
there is a marriage in the house on
or before December 30, 2016 on
providing sufficient KYC
documents
h) Restrictions on physical withdrawals ( farmers )
Date Date to Event description Samples / Exceptions
FAQ updated
upto Dec 1,
2016
Farmers were allowed cash
withdrawals of Rs. 25,000/- per
week from their loan or deposit
accounts, which were KYC
compliant (clarified by FAQs last
updated on December 1, 2016).
i) Restrictions on ATM withdrawals
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Date Date to Event description Samples / Exceptions
Nov 9 Nov 10 All ATMs and other machines used
for receipt and payment of cash
were shut on 9th and 10th
November, 2016 as instructed via
the Notification. They were re-
configured to disburse banknotes
of Rs. 100/- and Rs. 50/-
denomination prior to reactivation
of machines on November 11,
2016.
Nov 11 Nov 18 In the Notification withdrawal
from ATM was restricted to Rs.
2000/- per day per card
Nov 19 Important :In the Notification
withdrawal from ATM was
restricted to Rs. 2000/- per day per
card up to November 18, 2016
which was raised to Rs. 4000/- per
day per card from November 19,
2016. However there was no such
clarification by RBI on the
increment of limit to Rs. 4000/-
on November 19, 2016 and so the
limit stood the same as before i.e.
Rs. 2000.
Nov 10 Nov 30 Vide RBI Press Release - 2016-
17/1199 dated November 14, 2016
all charges of ATM usage were
waived from November 10, 2016
till November 30, 2016.
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j) Bank branch working days
Date Date to Event description Samples / Exceptions
Nov 9 Nov 9 November 9, 2016(Wednesday) was
declared to be a non-business
working day for all banks to carry
out preparations for implementing
the scheme as per this circular.
Nov 12 Nov 13 Banks were advised to keep all the
branches open on November 12 and
13, 2016 as referred by RBI in the
Press release: 201617/1161 dated
November 9, 2016.
k) Reporting
Date Date to Event description Samples / Exceptions
Nov 8 Every banking company and every
Treasury had to complete and
forward a return (Annex - 1) in the
prescribed format, showing the
details of the cancelled notes held
by it at close of business on
November 8, 2016 and recalled by
it, by 13:00 pm on November 10,
2016, to the concerned Regional
Office of RBI, under whose
jurisdiction the Head Office of the
bank is located
Nov 10 Dec 30 Each bank branch exchanging
Bank notes in the denomination of
Rs. 500/- and Rs. 1000/- to report
at the close of each business day
starting from November 10th, 2016
till the closure of the scheme on
December 30th, 2016 by email or
Fax to Controlling Office, a
statement (as per Annex - 6)
showing details of specified bank
notes exchanged by it. Controlling
Offices will aggregate these
statements and report in Annex -
6A to Department of Currency
Management, RBI
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l) Incremental CRR
Date Date to Event description Samples / Exceptions
Nov 26 As per circular RBI/2016-17/159
DBR.No.Ret.BC.41/12.01.001/2016-17
dated November 26, 2016, a directive was
issued under section 42(1A) of the
Reserve Bank of India Act, 1934
requiring all Scheduled Commercial
Banks/ Regional Rural Banks / all
Scheduled Primary (Urban) Co-operative
Banks / all Scheduled State Co-operative
Banks to maintain with the Reserve Bank
of India, effective from fortnight
beginning November 26, 2016 an
incremental CRR of 100 per cent on the
increase in NDTL between September 16,
2016 and November 11, 2016. The
incremental CRR being a temporary
measure was to be reviewed by RBI on
December 9, 2016 or earlier.
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m) Deposits of SBN by banks
Date Event description Samples / Exceptions
As per RBI circular no.
RBI/2016-17/153 DCM
(Plg)
No.1383/10.27.00/201617
dated November 24,
2016;
Banks may deposit SBNs directly
with the offices of RBI under whose
jurisdiction they are located. These
SBNs will remain, in the vaults of
RBI, under the lock and key of the
depositing banks till taken up for
examination
For the SBNs deposited by banks,
RBI will afford credit to their current
accounts maintained with RBI.
Thereafter, if any shortage,
counterfeit note, mutilated note, etc.
is detected during detailed processing
at RBI, the value of the same will be
recovered from the bank concerned.
As per RBI/2016-17/160
DCM (Plg)
No.1430/10.27.00/2016-
17 dated November 27,
2016
it has been decided to introduce a
new scheme for depositing SBNs
with designated currency chest at the
district level, under guarantee
agreement similar to the current
facility available at RBI offices.
As per RBI/2016-17/162
DCM (Plg)
No.1438/10.27.00/2016-
17 dated November 28,
2016
with a view to expand the ambit of
the Chest Guarantee Scheme for
Specified Bank Notes (SBN) -
(CGSS), it has been decided that
banks operating currency chests may
be allowed to operate CGSS if they
have additional space in their
existing currency chest or additional
storage space at the same centre
which is nearly as safe and secure as
that of a currency chest. Requisite
approval for the above will be
granted by the concerned Regional
Office (RO) of RBI, on receipt of
request from any bank subject to the
terms and conditions laid down in the
above mentioned circular
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17. Maintenance of Working Papers
1. Certification Related Working papers
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
Other Certificates
2. Tax Audit Workings
1.1. Tax audit report
1.2. Audit program
1.3. Samples
3. Other Working papers
Any other relevant information
4. References
Branch Audit guidance document as received from the HO / CO
Bank Authority levels for sanction limits for loans and advances
IRAC norms relevant for this audit
RBI master circular – July 1, 2016
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 reporting
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5. LFAR Checklist – Other than advances
As attached
A.ASSETS:
1 Cash
- Obtain a schedule of denomination of cash
- Physically verify the existence of cash and tally with the (and tally
with the) above schedule
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- 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.
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.
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.
- Ensure whether BRS is prepared periodically.
- Verify BRS on a test check basis.
- Check for unresponded credits/debits found in the BRS and report the
same.
3 Investments - Obtain the schedule of investment held by the branch.
- Check for appropriate authorization issued by H.O/ Controlling
Authority
- Conduct physical verification of investments and tally with the above
schedule
4 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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Other Assets
Stationery/Stamps
- Obtain schedule of Stationery Stocks
- Ensure that the physical balance tallies with the above schedule.
- Suspense Accounts/Sundry Assets.
- Obtain anschedule/return of suspense account and verify the items
for long outstanding items.
- Report unusual/long outstanding items.
- 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/ writeoff.
B. LIABILITY:
Bills payable, Sundry deposits etc.,
- 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
- Check unidentified deposits e g. Excess cash found in the branch etc.,
C. PROFIT AND LOSS ACCOUNT
- Ensure that the branch has followed the income recognition norms
stipulated by RBI
- Test check calculations of interest on deposits for excess/short credit of
material amount if so give details thereof.
- 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.
- Verify whether the branch maintains the books and records properly in
accordance with the H.O guidelines.
- Ensure that the balances are duly linked and properly authenticated by
responsible official /authorised signatories?
- Report the lapses in balancing procedures
- Report differences in crystallised balances lying unattended
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- 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.
- Are there any frauds discovered during the year under audit and report
if any.
- Does the examination of the accounts indicate possible window
dressing?
- Are there any matter ,which you as branch auditors would like to bring
to the notice of the management or the central statutory auditor.
- Tax Audit U/s 44AB ofI.TAct,1961
- Audit Report to be made in form3CA
- Obtain verify and certify particulars required in form3CD
- Other Certifications
- 1. PMRY, SEEUY and SEPUP scheme certification
Ensure that correct claim/subsidy is calculated
- 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.
- 3 Ensure that the certificates required are within the scope of audit
e g. Certification that the debts are fully secured.