1 b ank a udit l f a r presented by: ca. shashi gupta, fca [email protected]

11

BBANK ANK AAUDITUDIT

L F A R L F A R

Presented by:Presented by:

CA. Shashi Gupta, FCACA. Shashi Gupta, [email protected]@gmail.com

CA. Shashi Gupta, FCA2

LFARLFAR

• Introduction • Assets• Liabilities• Profit and Loss Account• General• Important Reports from System


INTRODUCTION INTRODUCTION • Two Reports – Branch Audit & LFAR• LFAR - Questionnaire form• Answers - Clear, Precise, Relevant • May be Elaborated • Questions - Indicative not exhaustive• Not a substitute or Part of Br. Audit Report• No cross reference to Br Audit Report• Adverse comment may find qualification in main report, but not necessarily• Branch management response


ASSETSASSETS


ASSETSASSETS

2.Balance with Banks

5.Advances

4.Investments

3.Money at Call &Short Notice

1.Cash

6. Other Assets


• Cash Retention Limit• Global Insurance Cover – In Custody; In Transit• Joint Custody• Checking at periodical interval• Soiled Notes • Counterfeit notes • Stapling• Ultra Violet Lamps• Note Counting Machines


2. Balances with RBI, SBI & Other 2. Balances with RBI, SBI & Other Banks Banks • Balance confirmation • Reconciliation•Cash transactions remaining un-responded•Other items requiring adjustments•Old outstanding balances remaining unexplained / unadjusted. Details for:

• Outstanding between 6 months & 1 year;

• 1 year and above


3.3. MMONEY ONEY AAT T CCALL ALL & S& SHORT HORT NNOTICEOTICE

• Managed by Treasury Department, HO• At Branch - Instructions of HO

• Booking of Income• Balance Confirmations


4. I4. INVESTMENTSNVESTMENTS

• Managed by Treasury Department, HO• At Branch - Instructions of HO

• Certificate of Investments held• Physical Verification• Booking of Income• Matured Investment• Un-serviced Investments• Balance Confirmations


5. A5. ADVANCESDVANCES

• Credit Appraisal• Sanctioning• Documentation• Disbursement• Review/Monitoring/Supervision



• Stock / Book debt statements• DP calculations • Periodic operational data • Financial statements• Audit Report of Corporate borrower• Tax Audit of Non-Corporate borrower - limit beyond Rs 10.00 lac

• Balance Confirmations



• Inspection / Physical Verification • Valuation of securities• Charge on Securities• Insurance Cover• Frequent / unauthorized overdrawing

beyond limits



• Previous Branch Audit Report• Concurrent Audit Reports• Revenue Audit Report• RBI Inspection Report• Stock Audits (Annual Stock Audit in case of NPA where

outstanding Rs 5.00 cr and above)


5. A5. ADVANCES – Asset ClassificationDVANCES – Asset Classification

• Standard • Sub-standard• Doubtful• Loss



• Accounts with claims for DICGC / Export Credit Guarantee / Insurance / subsidies

• Rehabilitation of accounts• Recalled Advances• Accounts where Legal action to be

taken / already taken• Compromise / Settlement / write-off

accounts (details of cases in excess of Rs 50.00 lacs)


5. A5. ADVANCES - NPADVANCES - NPA

valuation reports once in three years



• Major deficiencies in credit review, monitoring and supervision


5. A5. ADVANCES – BG & LCDVANCES – BG & LC

• Guarantee invoked, paid but not adjusted

• Guarantee invoked, but not paid

• Letter of Credit and Co-Acceptances funded


6. O6. OTHER THER AASSETSSSETS

Stationery and Stamps Term Deposit Receipts, Drafts, Pay orders, Cheque Books, Traveler’s Cheques, Gift Cheques, etc.

• Control on Custody and Issue

Sundries & Suspense Accounts• Age-wise analysis of pending entries• Unusual items• Squared up entries


LIABILITIESLIABILITIES


LIABILITIESLIABILITIES

1. Deposits

2.Other Liabilitie

s

3.Contingent Liabilities


1. D1. DEPOSITSEPOSITS

• Application of Interest• Inoperative Accounts• Unusual large movement in

accounts• Overdue/matured term deposits


2. O2. OTHERTHER L LIABILITIESIABILITIES-Bills Payable, Sundry Deposits etc.-Bills Payable, Sundry Deposits etc.

• Old Outstanding items - Age wise details;

• Scrutiny


3. C3. CONTINGENTONTINGENT L LIABILITIESIABILITIES

• Items not acknowledged by Branch

(other than constituents’ liabilities such as BG, LC, co-acceptances, endorsement, etc.)

(obtain certificate from manager that all contingent liabilities have been disclosed; none will result in LOSS)


PROFIT & LOSS A/CPROFIT & LOSS A/C


1. Income – 1. Income – Interest & DiscountsInterest & Discounts

• Test checking• Income Recognition norms prescribed by RBI• Interest on overdue / matured term deposits• divergent trends in major items of income and expenditure


2. Expenditure2. Expenditure

• Test checking of interest• Booking of Expenses• Depreciation• Divergent trends in major items of expenditure


GENERALGENERAL


1.1. BBOOKS OOKS && RRECORDS – ECORDS – Manual RecordsManual Records• Properly maintained • Balances inked • Authentication by authorized

signatory


1.1. BBOOKS OOKS && RRECORDS – ECORDS – Computerized BranchesComputerized Branches• Printing of hard copies

• Extent of computerization • Areas of operation covered• Data security• Creation on new logins• Change of Pass words• Control on access of files/reports• Maker/Checker System• Updation of Master Record • Regular back-ups• Contingency and disaster recovery plans• Suggestions


2. Reconciliation of Control & 2. Reconciliation of Control & Subsidiary RecordsSubsidiary Records

• last date up to which such figures reconciled

(certificate to the effect that there was no difference in migration of data from manual to computerization)


3.3. INTER BRANCH ACCOUNTS INTER BRANCH ACCOUNTS • Reconciliation • Scrutiny of Outstanding entries• Debit entries in HO accounts• Double response in HO accounts• Report Old/large outstandings


4.4. AUDIT/INSPECTIONS AUDIT/INSPECTIONS

• Major adverse observations pending for corrections in:

• Previous Branch Audit Report• Concurrent Audit Reports• Revenue Audit Report• RBI Inspection Report• Stock Audits


5.FRAUDS5.FRAUDS

• frauds discovered during the year • suggestions to minimize the possibilities of their occurrence


6. MISCELLANEOUS6. MISCELLANEOUS

• Window dressing

• Record of Fixed Assets

• Depreciation

• Impairment of assets

• Other important matters


SPECIALIZED BRANCHESSPECIALIZED BRANCHES


SOME IMPORTANT REPORTSSOME IMPORTANT REPORTS


Exception ReportsException Reports

• Inactive accounts reactivated.Inactive accounts reactivated.• Debits to Income head accounts.Debits to Income head accounts.• Overdue bills. (Overdue Interest).Overdue bills. (Overdue Interest).• Bills returned.Bills returned.• Withdrawal against clearings.Withdrawal against clearings.• Deposits accounts with Dr balance.Deposits accounts with Dr balance.• Temp O/D beyond sanction limit. (Penal)Temp O/D beyond sanction limit. (Penal)• Matured deposits not renewed. (Interest)Matured deposits not renewed. (Interest)


Balance Sheet and Profit Balance Sheet and Profit & Loss Account& Loss Account

► Age-wise & head-wise classification of A/cs.► Advances disbursed by transfer to deposit A/cs. ► Abnormal transactions in Term Deposit A/cs.► GL Error Report.► Loan A/cs with Zero interest rate.► Accounts having minimum interest rate.► Interest Applied/ Failed Report for Deposits.► Interest Applied /Failed Report for Advances.


LFAR ProceduresLFAR Procedures

► Overdue stock/book-debts/QIS statements.► Overdue reviews /renewals of credit limits.► Expired insurances/under-insurances of ► securities.► Overdue inspection of securities.► Overdue renewal of loan documents.► TDRs where lien has been lifted.► Loans against TDR where lien Not marked.► Cash balance above retention limit.► Accounts having sanction limit 5 cr.


Compliance AuditCompliance Audit

► A/cs where moratorium period expired.► Sub standard a/cs restructured during year.► Standard a/cs rescheduled during year.► Turnover of Transaction in CC accounts.► Report on overdue EMIs & interest in loan a/cs. ► A/cs where value of securities is less than DP.► A/cs out of order for more than 90 days.► Sub-standard NPA upgraded during the year.


Tax AuditTax Audit

►Interest paid on Term Deposit above limit without TDS.

► TDS not remitted within 7 days.


THANKSTHANKS

1 b ank a udit l f a r presented by: ca. shashi gupta, fca [email protected]

Documents

shashi gupta

assets slide

limits slide

system slide

management response

main report

dvances major deficiencies

branch instructions