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.

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) Reports generally demanded by Banks

A)   Main Audit Report.

B) Long Form Audit Report.

C)   Tax Audit Report

D) Memorandum of Charges

E) Various Certificates

CA Pawan K Goel

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 ‘non-performing 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.

• 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

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.

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

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 guarantee-cum-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 non-performing 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.

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

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.

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

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.

III) Provisions relating to long formAudit Report

1) Cash Department

A) By whom are the keys of the cash safe held?

B) 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

A) With which Bank’s does the branch maintain account/s?

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

CA Pawan K Goel

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.

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 in cleaned environment and covered after day’s work?

AB)Are there any idle terminals/printers in the branch?

AC)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) Other Matters

I) 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) Question of LFAR related to specialised branches

A)   Branches dealing in foreign exchange transaction.

B) Branches dealing in very large advances.

C)   Assets recovery branches.

D) Branches dealing in clearing house operations.

CA Pawan K Goel

Thank You