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STATUTORY BANK BRANCH AUDIT-2016-2017
INDEX
1 Planning at office
2 Minimum things to do in statutory audit
3 Role of senior and junior
4 3day programme
5 Location of npa (tips)
6 Cash verification procedure
7 Handling mutilated notes - exchange of mutilated notes from public
8 Timely deduction and remittance of tds
9 Compliance of rbi/concurrent audit reports
10 Insurance of assets of the branch
11 Validity of the lease deed of the branch-
12 Audit of clearing account/transactions:
13 Window dressing in deposits and advances as on 31st march
14 Short review/ tech review
15 Adhoc loan/ temp loan
16 Irregularities in respect of debtors
17 Irregularities in respect of stock and creditors
18 Irregularities in respect of insurance
19 When restructured substandard asset can be upgraded to standard asset?
20 When restructured standard asset to be classified as npa ?
21 Documentation
22 Intelligent scrutiny of operations in accounts
23 Extent of checking & materiality level:
24 Fraud issues
25 Frms alerts
26 Analytical review
27 Revenue leakage
28 Taxaudit
29 27-key finacle menus and their uses
30 Master file - check parameters
31 DUPLICATE CUST-ID
32 SRM
CA Y.CHAKRAVARTHY FCA FACULTY FOR FINANCIAL REPORTING, DIRECTTAX FOR CA FINAL FBID [email protected] 9246500223,9849832544 P
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SALIENT TIPS FOR CONDUCTING STATUTORY BRANCH AUDITS OF BANKS
1. PLANNING AT OFFICE
1. Receipt of appointment
2. Acceptance
3. Plan for execution
4. Travel plan
5. Communication with previous auditor
2. MINIMUM THINGS TO DO IN STATUTORY AUDIT
1. User ID & Password 2. Cash
Verification(Including
ATM cash)
3. Securities Verification 4. Fixed asset register/
verification
5. TDS compliance
6. Service tax compliance
7. Depreciation calculation
8. Documentation
9. NPA Identification
10. LFAR
11. Tax Audit
12. Branch auditor report
13. User ID & Password
14. Cash Verification(Including
ATM cash)
15. Securities Verification
16. Fixed asset register/
verification
17. TDS compliance
18. Service tax compliance
19. Depreciation calculation
20. Documentation
21. NPA Identification
22. LFAR
23. Tax Audit
24. Branch auditor report
25. Certificates
26. Attendance sheet
27. Bill for remuneration/Reimbursement of
expenses
28. Expense Provisioning (year end)
29. Daybook(TB) to P&L & B/S
30. Suspense account analysis 31. Income/expense variance of all
nominal accounts
32. Acceptance letter/Introduction
letter/Appointment letter
33. Stamping/handover/taking office
copy
34. Revenue leakage 35. Examine interest trends as
compared to average annual
deposits/average advances 36. Larger deposits placed at the end
of the year (possible
window dressing) 37. Soft/hard copy of loan jotting
38. BRS/confirmation for balance
with other banks
39. Cash retention limit 40. Sanction powers of branch
head
41. Stock statement analysis 42. List of accounts where
insurance expired
43. List of accounts where stock
statement are not received
44. List of accounts overdue for
renewal/review
45. Status of suit filed accounts
46. Status of lease agreement 47. Ghosh & Jilani committee
reports
48. Report on large borrowal
accounts
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3. ROLE OF SENIOR AND JUNIOR
SENIOR ROLE JUNIOR ROLE
1) User ID & Password 2) Report study
3) TDS compliance
4) Service tax compliance
5) Depreciation calculation
6) NPA Identification
7) Branch Auditor’s report
8) LFAR-preparation
9) Tax audit report preparation
10) Certificates
11) Expense provisioning 12) Examine interest trends as compared to average
annual deposits/average advances
13) Larger deposits placed at the end of the year
(possible window dressing)
14) Stock statement analysis
15) Status of lease agreement
16) Report on large borrowed accounts 17) Ledger scrutiny
1) Cash verification (including ATM cash) 2) Security verification
3) Fixed asset register/ verification
4) Documentation
5) LFAR-Observation
6) Attendance sheet
7) Bill for remuneration
8) Daybook(TB) to P&L & B/S
9) Suspense account analysis
10) Income/expense variance report 11) Acceptance letter/Introduction letter/Appointment
letter/ Travel Arrangement
12) Stamping/handover/taking office copy
13) Revenue leakage
14) Soft/hard copy of loan jotting
15) BRS/confirmation for balance with other banks
16) Cash retention limit
17) Sanction powers of branch head
18) List of accounts where insurance expired
19) List of accounts where stock statement are not
received
20) List of accounts overdue for renewal/review
21) Status of suit filed accounts 22) Ghosh & Jilani committee reports
4. 3DAY PROGRAMME
Day-1 Day-2 Day-3
1. User ID & Password
2. Cash/Security verification
3. Report study 4. List of advance to be checked
for NPA
5. List of documents to be verified
6. Suspense analysis
7. TDS/Service tax
8. Depreciation
9. Expense provisioning
10. Daybook(TB) to P&L & B/S
11. Interest trends 12. Revenue leakage
13. Larger deposits at the end of the
year
14. Loan jotting
1. NPA
2. Documentation 3. Report on big borrowal
accounts
4. Insurance lapse
5. Stock statement pending
6. Overdue/renewal
7. Status of suit filed
8. Status of lease agreement
9. Large Borrowal accounts
report
1. Typing of LFAR
2. TAX audit
3. Branch Auditors report
4. MOC
5. Signing / Stamping
6. Attendance sheet
7. Bill
8. Takeover / handover
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5. LOCATION OF NPA (TIPS)
CHECK
1. All accounts specified in RBIA(central office inspection)
2. PNPA/SMA accounts as on 31/12/2016, 31/3/2017
3. CCOD a/c where DP is made NIL
4. Stock statements pending for more than 6 months
5. Renewal pending for more than 6 months
6. Restructured accounts during the year
7. Downgraded NPA during the current year
8. Different customer ID for NPA borrowers for borrower wise classification
9. Possibility of start date of installment being changed in system
10. Advances accounts where recovery is made during last few days
11. Overdue (or) CADU / Installment > 3
12. All accounts subjected to stock audit (Refer stock audit report comments also)
13. All take over loans from other banks
Identification of Advances for documentation (Tips)
1. Prepare list of model documentation defects from RBIA (cross verify with non
complied accounts)
2. Do 100% loan documents for loans granted in Feb & March
3. All major loans renewed/sanctioned during the year(25 lakhs & above)-100%
4. Loans identified in concurrent audit report
6. CASH VERIFICATION PROCEDURE
The Statutory Auditors are required to verify the branch cash as at the end of 31st March. But as we
cannot reach at every auditee branch before opening the cash on 2nd April (1st April being bank
holiday), we have to check the cash of the day opening/ closing and arrive at the balance as on 31st
March by adding and subtracting the transactions as per branch records. Besides, we are required to
verify the following security aspects also –
1) Whether the cash vault & FRFC / cash safe are opened by the joint custodians.
2) Whether any unrecorded security items(including undelivered cheques/returned
deliverables) / important documents/ valuables are kept inside the vault /vault room
3) Whether Burglary alarm system is working properly.
4) Whether cash is carried out in a locked box from the cash room to the counter
5) Whether U V Lamps and counting machines are operational at the branch.
7. HANDLING MUTILATED NOTES - EXCHANGE OF MUTILATED NOTES FROM PUBLIC.
1) Whether branch is maintaining records for acceptance of currency from the Public),
(Register of mutilated notes received, paid & rejected), (Claim on mutilated notes) &
mutilated note register.
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2) Whether branch is maintaining counterfeit note register in the format prescribed & the
details of counterfeit notes are recorded & notes are held in joint safe custody with BM being
one of the custodians.
8. TIMELY DEDUCTION AND REMITTANCE OF TDS
1) Whether tax is deducted at appropriate rates on monthly payments made by the branch
towards interest debited on deposits, rent, payments to contractors, Professionals etc.
2) Whether tax deducted is paid within stipulated time?
3) Whether challans for TDS paid are maintained by the branch?
4) Whether Quarterly ETDS return has been filed?
5) Whether 15G & 15H forms collected are sent to IT Dept. within time
6) Whether TDS certificates are issued? Ensure periodical adjustment from the advance rent
has been done at the time of monthly payment of rent (If adjustable in future monthly rent
as per agreement)
7) Verify advance payment of rent details with the lease deed or advance payment of
contract payment with contracts.
8) Whether TDS has been deducted at the time of advance payment of rent/contract
payments Compliance of Service Tax, Trade Tax, other duties and taxes
9. COMPLIANCE OF RBI/CONCURRENT AUDIT REPORTS
1) Whether any RBI audit has been conducted during the audit period, if yes, whether the
same has been closed and the comment on the quality of compliance to be seen.
2) If the branch is under concurrent audit, comment on the quality of compliance
3) Whether pending issues are regularly complied with and compliance certificate is
submitted in time. Whether any pending issues beyond 60 days are observed at the time of
statutory audit.
10. INSURANCE OF ASSETS OF THE BRANCH-
Whether a copy of the Insurance policy obtained by corporate office is held at the branch.
11. VALIDITY OF THE LEASE DEED OF THE BRANCH-
Whether the lease deed of the branch is still in force and the rent of the premises is being paid
according to the terms and conditions mentioned in the lease deed.
12. AUDIT OF CLEARING ACCOUNT/TRANSACTIONS:
1) Whether or not the branch has taken balance confirmation from other Banks in which it is
maintaining the account.
2) Whether or not the branch is doing Periodical reconciliation of clearing account. If there is
any whether the same has been adjusted or not.
3) Is there is any delay in debit to party account- Check reason for delay/Approval for TOD if
required/recovery of leakage of income if any
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4) Whether the branch has debited the clearing house charges for the current year. Whether
there is any entry outstanding in System Suspense Account.
5) Whether or not the Branch has paid the amount of Bank Guarantee invoked, if any, to the
beneficiary, if yes, is there any entry relating to Bank Guarantee invoked outstanding for
more than 3 months.
6) Whether or not the Branch has paid the amount of LC devolved to the concerned bank, if
yes, is there is any entry outstanding for more than 3 months.
7) Whether or not all the overdue usance bills (including foreign bills purchased/ negotiated)
have been crystallized by the branch on due dates, if yes, is there any entry outstanding for
more than 3 months.
8) Whether there is any loan account at the Branch in which the security documents have
expired and the account is still being treated as standard.
13. WINDOW DRESSING IN DEPOSITS AND ADVANCES AS ON 31ST MARCH
1) We can verify the General Ledger Balance statements as on the preceding Friday of annual
closing and as on 2nd or 3rd April (these statements are available on the system on daily
basis) and ensure that there is no sharp rise or fall in deposits/advances at the branch
otherwise it will be a case of window dressing which need be looked into deeply.
2) Similarly, in system suspense accounts, BG invoked, L.C. devolved etc., the branches adjust
the long outstanding entries just one day before the annual closing and these entries
reappear on the next working day to avoid the notice of the Statutory Auditors.
14. SHORT REVIEW/ TECH REVIEW
1) Check Application from Borrower
2) Reason for Short Review and not full Renewal
3) Limited Financial Documents submitted
4) Credit Appraisal Sanction up to 90 days
5) Another 90 days by Higher Authority
6) Report if the process is not followed
7) Example - Natural Calamity, Contingency,
8) Typical at Year End
15. ADHOC LOAN/ TEMP LOAN
1) Check Application from Borrower
2) Reason - Seasonal, Contingency, Festival, etc.
3) Examine Documents Submitted
4) Credit Appraisal Sanction up to 90 days
5) Another 90 days by Higher Authority
6) Report if the process is not followed
7) Example - Agriculture / Garments / Umbrella / Contingency
16. IRREGULARITIES IN RESPECT OF DEBTORS
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1) Long pending debtors classified as current debtors
2) Receivable from sister concerns included in debtors
3) The bank required that the book debt statement should be certified by a Chartered
Accountant at quarterly intervals. We have to check on random basis whether this is being
done or not.
4) If the book debt statement in any account is in default for more than six months that
account may be treated as NPA subject to other conditions, explained elsewhere in this
note.
17. IRREGULARITIES IN RESPECT OF STOCK AND CREDITORS
1) Stock book not updated
2) Obsolete stock not excluded
3) Stock turnover ratio not maintained
4) Year end stock statements does not match with financial statements
5) Goods received against unpaid LC should not be treated as paid stock instead be treated
as unpaid stock, like creditors.
18. IRREGULARITIES IN RESPECT OF INSURANCE
1) Under insurance of stock
2) Insurance not renewed
3) Policy not on record
4) Policy without bank clause
5) All risks not covered as per sanction letter
6) Wrong coverage of items in policy
19. WHEN RESTRUCTURED SUBSTANDARD ASSET CAN BE UPGRADED TO STANDARD ASSET?
It can be upgraded to Standard Asset only when there is a satisfactory performance in the
said account and is operated regularly for one year as per schedule after first payment of
Interest / Principal as due.
20. WHEN RESTRUCTURED STANDARD ASSET TO BE CLASSIFIED AS NPA ?
1) It is to be classified as NPA in case of non satisfactory performance for one year from the
date of restructuring. NPA date here to be as per restructuring repayment schedule.
2) In case of Project Loans, Date of Commencement of Commercial Operations(DCCO) is very
important and should be understood by the Auditors. DCCO as per sanction letter and if
revised subsequently, the said date be interpreted properly while classifying NPA
3) In case Project is delayed for various reasons like legal and extraneous reasons, or pending
Govt. approvals beyond control of the borrower, then restructuring / rescheduling is done.
4) Two categories of Projects - Infra and Non-Infra for which similar criteria is applicable except
the period from DCCO till NPA classification.
21. DOCUMENTATION - Auditor should verify whether
1) Signature and acceptance from the borrower has been obtained including the sanction
letter.
2) Creation of charge – ROC site Pag
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3) Board resolutions – authorizing signatory
4) Borrower and Guarantors papers
5) Verification of security – (title and valuation)
6) NOC from previous banker – Take Over Advances
7) Title clearance – search report – legal clearance
8) All the terms of sanction are complied (quotations / proforma invoices )
9) Direct disbursements to vendor/third party
10)Verification of own contribution
11)In case of draw down facility – stage of completion to be verified
12)Follow up with original documents, registration etc.
13) Verification of end-use of the funds- Whether they are utilized for intended purpose with
a certificate from a CA.
14) NPA A/cs- Valuation report for all immovable properties mortgaged to the bank at least
once in 3 years
15) In case of Immovable property offered as security:
a) Mortgage has created & registered.
b) Valuation report, Legal opinion report, Latest encumbrance certificate has been
obtained.
c) Creation of charge & lien
d) Insurance
22. INTELLIGENT SCRUTINY OF OPERATIONS IN ACCOUNTS
a) Transfer from/transfer to other accounts
b) Frequent cheque returns, excessive withdrawal
c) Turnover in account is disproportionate to sale in business
d) Transfer of funds to group concern
e) Comparison of sales and purchase with the month wise stock statement submitted
by the borrower
f) Computation & Recomputation of DP limits on the basis of Stock statement by the borrower
23. EXTENT OF CHECKING & MATERIALITY LEVEL:
1) New Sanctions during Financial Year
2) All Large Advances (Lower of 5% of Advances or 2crs )
3) Adverse Remarks in
Concurrent Audit/IA Report
PY LFAR & Audit report
RBI Inspection
Internal Inspection
4) Major movements (upgrades & down grades) in NPA /
5) Restructured advances
24) FRAUD ISSUES
a) Operations in dormant accounts
b) Cancellation of Demand draft & pay in new currencies
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c) Opening fake accounts and laundered money
d) Check the STR generated on all new accounts
25) FRMS ALERTS
a) Cash transactions > 50,000 in a day
b) Transaction in an inactive a/c
c) Txn > 1 lac in newly opened a/c
d) Intersol Txn – staff A/c
e) Dr Txn in other office A/c
f) Txn in Dormant A/c
g) Cash Txn in sensitive office A/c
h) Cr > 50000 in staff A/c
26) ANALYTICAL REVIEW
1) Obtaining the Profit or Loss account of the Branch under audit for the year and
comparing with the previous year – Variances over 20% under any head subject to a
materiality threshold fixed for any income or expense head fixed by the auditor to be
marked for detailed checking –
2) Obtaining the Profit and Loss account for each of the 4 quarters over the year to verify
any abnormal deviations under any Income or Expense head in any quarter –
3) Testing key ratios as Average Cost of Deposits / Return on Advances and comparing them
quarter on quarter or Previous year or with the Bank Average to arrive at a first level
divergence for additional checks.
27)REVENUE LEAKAGE 1) Commission from Letters of Credit / Guarantees which as per bank policy consistently adopted would be accounted upfront and duly amortized monthly or quarterly as the case may be. Auditor to ensure that the Income pertaining to future periods which if collected is amortized correctly. 2) Commitment charges for unutilized sanctions / draw downs
3) Stock inspection charges or reimbursements of stock audits done as per accepted
sanction terms
4) Processing Fees – Care should be taken to ensure that processing fees are collected for
the entire year and no miss outs happen for delayed renewal of advances.
5) Penal Interest on over drawings / violation of sanction terms – Non or delayed
submission of stock statements or renewals or Insurance – Auditor should note that
incorrect calculation of funding eligibility as per draw power calculated from submitted
stock statements may impact the penal charges if the same is below sanctioned limit.
28) TAXAUDIT Pag
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1. Books of Accounts/ Reports examined. 2. Method of Accounting. 3. Capital expenditure debited to profit & loss Account.
4. Revenue expenditure payment made by cash in Excess of Rs.20,000.
5. Repayment of deposits including interest Exceeding Rs.20,000 by way of cash.
6. Locker Rent.
7. Commission on LCs/Guarantees.
8. Details of Tax deducted at sources-
8(a)Interest on Term Deposits.
8(b)Vendor payment.
9. Details of payment on which TAX NOT DEDUCTED on Interest, Rent, Professional fee, Legal fee,
Commission etc. which attract TDS provision.
10. Details of payment on which tax is SHORT DEDUCTED on Interest, Rent, Professional fee, Legal
fee, Commission etc.
10A: Additional information to be collected in tax audit report:-
(a) Delay in remittance
(b). Tax deducted but not yet remitted
11. Expenditure by way of penalty on Interest for violation of any law for the time being force,
including Income tax provision
12. Details of payment on which tax was not deducted before the financial year(Preceding
year)(Only specified Branch)
12(A):Tax has been deducted & remitted during the year before 31/03/20xx.
12(B):Tax not deductible at all.
13. Details of e-TDS Returns
14. Income from long term loans & advances where repayment period is more than five years
(Information required for the purpose of deduction u/s 36(1)(viii) of the Income Tax Act,
1961)
RATE OF TDS
Section For Payment of On Payments Exceeding Individual/ Others
HUF
192 Salary Minimum Amount not
Chargeable to TAX
AS per Slab
Rate
AS per
Slab
Rate
193 Interest on Debentures Rs. 5000/- 10% 10%
194 Deemed Dividend No minimum 10% 10%
194 A Interest other than on securities by banks Rs. 10000/- 10% 10%
194 A Interest other than on securities by others Rs. 5000/- 10% 10%
194 B Winnings from Lotteries / Puzzle / Game Rs. 10000/- 30% 30%
194 BB Winnings from Horse Race Rs. 5000/- 30% 30%
194 C (1) Payment to Contractors Rs. 30000/- for single
payment Rs. 75000/- for
aggregate payment during
Financial Year
1% 2%
194 C (2) Payment to Sub-Contractors / for
Advertisements
194 D Payment of Insurance Commission Rs. 20000/- 10% 10%
194 EE Payment of NSS Deposits Rs. 2500/- 20% NA
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194 F Repurchase of units by Mutual Funds / UTI Rs. 1000/- 20% 20%
194 G Commission on Sale of Lottery tickets Rs. 1000/- 10% 10%
194 H Commission or Brokerage Rs. 5000/- 10% 10%
194 I Rent of Land, Building or Furniture Rs. 180000/- 10% 10%
Rent of Plant & Machinery Rs. 180000/- 2% 2%
194 IA Transfer of Immovable Property (w.e.f. Rs. 50 lacs 1% 1%
194 J Professional / technical services, royalty Rs. 30000/- 10% 10%
194 J (1) Remuneration / commission to director of the – 10% 10%
194 J (ba) Any remuneration / fees / commission paid to a
director of a company, other than those on
which tax is deductible u/s 192.
– 10% 10%
194 L Compensation on acquisition of Capital Asset Rs. 100000/- 10% 10%
194 LA Compensation on acquisition of certain
immovable property
Rs. 200000/- 10% 10%
Notes:
(1) No surcharge or education cess is deductible / collectible at source on payments made to
residents {Individuals / HUF / Society / AOP / Firm / Domestic Company) on payment of
incomes other than salary or wages.
(2) TDS at higher rate of 20% or TDS rate, whichever is higher, has to be deducted if the
deductee does not provide PAN to the deductor. (section 206AA)
All persons who are required to deduct tax at source or collect tax at source on behalf of
IncomeTax Department are required to apply for and obtain Tax Deduction or Tax Collection
Account Number (TAN).
Point of Deduction of TDS
Salary: At the time of payment
Other Payments: When income paid or credited including credit to “Payable” or “Suspense”
account.
DUE DATES FOR DEPOSITING TDS
Month Salary Payments
April to February 7th of next month
March 30th April
Consequences of default : Interest payable u/s 201(1A):
@ 1% of tax not deducted from date of tax deductible to date of TDS;
@1.5% of tax not deposited from date of TDS till payment;
Forms for submitting Quarterly Statements of Tax Deducted at Source (Rule 31A)
(a) Statement of deduction of tax under section 192 in Form No. 24Q
(b) Statement of deduction of tax under sections 193 to 196D in :
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Form No. 27Q in respect of the deductee who is a non-resident not being a company or a
foreign company or resident but not ordinarily resident; and Form No. 26Q in respect of all
other deductees.
DUE DATES FOR RETURN FILING
Quarter ending
Due date, if deductor is an office of
the Government
Due Date for others
30th June 31st July of the financial year 15th July of the financial year
30th September 31st October of the financial year 15th October of the financial year
31st December 31st January of the financial year 15th January of the financial year
31st March 15th May of the financial year immediately
following the financial year in which deduction
is made
15th May of the financial year immediately
following the financial year in which deduction
is made.
ISSUE OF TDS CERTIFICATE
1. Section 192 (TDS on Salary) :The certificate on Form No. 16 should be issued by the
deductor by 31st day of May of the financial year immediately following the financial year in
which the income was paid and tax deducted.
2. In all other cases :
The certificate on Form No. 16A should be issued within fifteen days from the due
date for furnishing the "statement of TDS" under rule 31A.
Penalty on Failure to Issue TDS Certificate: Rs. 100/- every day for the period failure
continues subject to a maximum of TDS amount.
29) KEY FINACLE MENUS AND THEIR USES 1. ACLI (Account Ledger Inquiry)
- This menu is generally used to check the transactions in any account. However, it also provides a
wide range of information of a particular account.
- An Auditor can verify the accounts of Fixed assets, Depreciation, TDS remittance pending, Service
Tax payable etc. and check if the branch is charging depreciation properly or is it remitting statutory
dues on time in order to avoid interest and penalty.
- Sensitive accounts such as Suspense Account, Clearing Adjustments account, Sundry Creditor
account can be verified from this menu.
- For finding out revenue leakage, charges debited in accounts can be checked from this menu
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. - For customer accounts, after entering the account number in the field, press Ctrl + E keeping the
curser in that very box.
Type “I” in the general details of the account will be displayed.
- In the options field, press F2 to see the list of options available.
- From such options “Limit History Maintenance” can be used for checking the increase or decrease
of sanction limit and drawing power of a particular advance account. (It is exactly similar to the
menu option ACLHM.) It also shows the last review date and expiry date of the account.
- Option “Asset Classification Details” can be selected to see if a particular asset is classified as NPA
in the system. Auditor can verify if RBI norms are followed in asset classification or not.
2. ACLPCA & ACLPOA (Customer Account Ledger Print & Office Account Ledger Print)
- A soft copy of any account statement cannot be generated from ACLI menu. - For that purpose,
ACLPCA & ACLPOA menus can be used.
- ACLPCA generates soft copy of customer accounts (e.g. Saving Accounts, Overdrafts, CC etc.) while
ACLPOA gives office accounts (e.g. Block of Fixed Assets, Cash on Hand, Sundry Expenses etc.)
- Report generated from these menus can be viewed and exported in soft copy from PR menu.
- These menu options can be very useful to Auditors as they can have a copy of transactions of any
account for future reference and verification.
3. AFI (Audit File Inquiry)
- This menu is typically useful to Concurrent Auditors who verify transactions on a daily basis.
- AFI generates a list of critical transactions which are required to be monitored closely, such as
premature closure of an FD to check charges thereon or transactions in accounts having balance
below minimum limit.
- There are numerous such transactions in one day and hence they should be monitored regularly.
4. AVGBAL (Average Balance)
- As the name suggests, this menu gives the average balance maintained in a particular customer’s
account for given range of time.
- This menu is useful when commitment charges are taken on OD/CC accounts for under utilization
of sanctioned limit.
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- Average Balance for a quarter of OD/CC accounts can be found out and checked if commitment
charges are applicable on them as per bank’s norms. Thus revenue leakage can be identified.
5. BCREPORT (Bankers Cheque Report)
- To generate a list of Banker’s Cheque Outstanding for payment, following commands should be
entered in Finacle: BCREPORT --> Report To: M --> Self: Y --> Data Centre: N --> Other than Home: N -
-> Data Centre Icl. Self: N --> Paid Only: N --> From Date: --> To Date: --> F4.
- This will generate a list of Banker’s Cheques issued between the given time period which are
outstanding for payment. - As per RBI circular No. RBI/2013-14/69 dated 01/07/2013; banks should
not make payments of Banker’s Cheques which are presented after three months of the date of
instrument. However, many banks have BC outstanding over a year.
- Such irregularities should immediately be reported.
6. CUMI (Customer Master Inquiry)
- This menu option searches accounts of one particular customer from the Customer ID. - It is better
than the search option available in menu option ACLI, as it shows Non Fund Based borrowing details
also.
- As per RBI master circular on asset classification, if one account of any customer is classified as
NPA, all the advance accounts of such customer should be classified as NPA.
- It can be checked from this menu option whether the bank has classified all the accounts of one
defaulter as NPAs or not. 7. DCEXPLST ( Report on Expiring Documentary Credits)
- This is an easy menu option which quickly generates the list of Letter of Credits (LCs) expired but
not closed.
- Bills are drawn under every LC, but if the LC is expired then such Bills hold no assurance. In addition
to that, expired but not closed LCs create unnecessary contingent liabilities for the bank.
- Such LCs should be closed before the Balance Sheet date to avoid misrepresentation. 8. DCQRY (
Query on Documentary Credit)
- This menu generates the list of all inland/foreign LCs issued during the given period. - The
documents regarding all such LCs and the commission charged thereon can be easily verified from
this menu.
- Auditor can also check if the details entered in the system are as mentioned in the documents.
- This menu is easy because it shows the list of both Inward and Outward Documentary Credits, thus
the Auditor does not have to verify one by one LC from IDCM or ODCM menu options. Each LC can
be verified from this menu.
7. DCEXPLST ( Report on Expiring Documentary Credits)
- This is an easy menu option which quickly generates the list of Letter of Credits (LCs) expired but
not closed.
- Bills are drawn under every LC, but if the LC is expired then such Bills hold no assurance. In addition
to that, expired but not closed LCs create unnecessary contingent liabilities for the bank. - Such LCs
should be closed before the Balance Sheet date to avoid misrepresentation.
8. DCQRY ( Query on Documentary Credit)
- This menu generates the list of all inland/foreign LCs issued during the given period.
- The documents regarding all such LCs and the commission charged thereon can be easily verified
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- Auditor can also check if the details entered in the system are as mentioned in the documents.
- This menu is easy because it shows the list of both Inward and Outward Documentary Credits, thus
the Auditor does not have to verify one by one LC from IDCM or ODCM menu options. Each LC can
be verified from this menu.
9. EXCPRPT (Exception Report)
- This is a very interesting menu. Many banks have zero tolerance norms regarding generation of
Exception Report everyday in their branches.
- As the name suggests, it generates the list of exceptional financial and non-financial transactions
during the given period. Exceptional transactions such as activities in accounts which are due for
review, advance balance greater than the Sanctioned Limit, accounts opened without introducers,
system generated commission changed manually etc.
- Auditor should verify such transactions and report any material irregularity observed.
10. GR (Generate Report)
- This menu generates the balance sheet and profit and loss account of the bank branch on a given
date.
- This menu can effectively be used to figure out daily balance of advances and deposits of the bank.
Major expenses can also be checked and provision of interest accrued and Non Performing Asset can
be verified. - Sudden increase in advances and deposits just before the balance sheet date should be
verified to check any window dressing done by the branch.
11. FTI (Financial Transaction Inquiry)
- It allows searching the details of a transaction by its Transaction ID. - List of transactions between
ranges of amounts can also be generated from this menu.
- High value transactions which suddenly increased the advance or suspicious transactions such as
cash deposit of Rs. 49,999/- or Rs. 99,999/- can be seen and verified from this menu.
12. ACDREV (Accounts Due for Review)
- As per RBI master circular RBI/2013-14/62 dated 01/07/2013, accounts where the regular/ ad hoc
credit limits have not been reviewed/ renewed within 180 days from the due date/ date of sanction
should be treated as NPA.
- ACDREV generates the list of accounts pending due for review as on a given date.
- It should be checked by the Auditor that no account is due for review over 6 months on a given
date.
13. IRM/ ORM (Inward/ Outward Remittance Maintenance)
- A branch having foreign business will obviously have Inward and Outward remittances in foreign
currencies.
- The charges upon those remittances can be checked from these menus; moreover it generates the
actual list of transactions the branch has entered into. Auditor can verify supporting documents for
such transactions.
14. MSGOIRP (Outstanding Items Report) P
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- The branches may have long outstanding entries in sensitive accounts such as
Suspense Account, Special Debit Account, Pension Payment Account, Sundry Deposits, Sundry
Creditors etc. - MSGOIRP gives day wise break up of balances in such accounts, indicating how old
one particular entry is. - Long outstanding entries can be reversed for better presentation in financial
statements; however same should be discussed thoroughly with Bank Management.
15. NPARPT (NPA Report)
This menu simply generates the list of accounts classified as NPAs in Finacle.
- Auditor should verify that the balance sheet shows the exact amount of NPAs as Finacle.
- Discrepancies, if any, should immediately be reported.
NPA identification- Loans Overdue Position Inquiry : LAOPI ,Loan Overdue Details : LOANODUE
16. LADRPT (LAD Report)
- The bank collects Letter of Acknowledgement of Debt (LAD) time to time from its borrowers to
avoid the debt becoming “Time Barred”
- Ideally Banks should obtain LADs in applicable cases every 3 years.
- LADRPT gives the list of LADs expiring in given period.
- LADs which are to be expired should immediately be reported and Auditor should ensure that
branch takes proper steps to obtain fresh LADs from such borrowers.
17. LAOPI (Loan Overdue Position Inquiry)/ TODRP (Temporary OD Report)
- These menu options generate lists of Loan accounts which are overdue.
- Such accounts should closely be monitored, because there are high chances of them becoming
NPAs.
18. PR (Print Reports)
Through this menu, various reports generated in Finacle can be printed or a softcopy of such reports
can be taken on hard drive.
19. GILR ( Guarantee Issued Liability Register)
- Guarantees which are expired but not cancelled can be checked from this menu.
- The branch should cancel all the expired BGs for better presentation in Financial Statements.
- Guarantees invoked can also be seen from this menu and Auditor can verify recovery in such cases.
20. POVDPC (Party wise Overdue Packing Credit)]
- This menu option lists the Packing Credits disbursed to various customers which are overdue as on
date.
- Recovery process should be done by the bank in all such cases.
- Auditor should also verify that the due date of Packing Credit is decided according to the Sanction
Letter. Finacle has hundreds of menu options but of course not all of them are useful to Auditors.
This is only an exhaustive list of Finacle menu options which can be useful in the process of a Bank
Audit. Although Bank Audit is much more than just knowing the Core Banking Software, a proper
understanding of such softwares ensures a smooth and result oriented Audit Procedure.
22. ACSP (Account Selection Print)
- It is one of the most crucial menus, which was not discussed in previous article. ACSP is same as
menu option ACS, but it provides an additional facility to take a soft copy of report generated.
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- Although Finacle generates Balance Sheet and P&L account of any given date, most of the banks
have additional software (such as D2K or CLORETS) to generate financial statements. However, these
financial statements will obviously not have the account numbers of every account head which can
be checked from ACLI menu.
- By following method, we can generate a list of all office accounts as on a particular date with their
account no. and balances.
ACSP > A/c Ownership- “O” > F4 > Scheme type – press F2 and select “office accounts” or a similar
option > Shift + F4 > F4 > F4 > F10.
(The same procedure can be used to generate list of all Saving, Current, CC-OD, or Term Loan
Accounts)
Now you should have a list of all assets, liabilities, provisions, suspense accounts, income-expense
accounts etc. in your PR menu, with their current balance! You can scrutinize entries in all these
accounts by ACLI menu. You can even compare this list from previous month’s list to check major
changes. Auditor should look for balance in Suspense A/c or Special Debit A/c or any other
suspicious account and demand explanation about the same from the management.
The breakup of long outstanding entries in certain accounts, such as Proxy A/c, can also be obtained
from menu MSGOIRP. This list will also have details of Balance with RBI/SBI, reconciliation of which
can be verified. This list can be of tremendous help for scrutinizing financial statements.
Auditor can check expense accounts and verify if expenses debited are subject to TDS. If proper TDS
is not deducted, the same can be reported in Form 3CD.
Apart from that, Auditor can verify debit entries in fixed asset accounts and check if branch has
obtained proper authority to purchase such assets.
- ACSP also has an option to generate list of accounts opened during a given time period. A list of
such accounts under various schemes (SBA, CC, TL) can be generated and KYC documents, Interest
Rate entered in the system etc. can be verified on random selection basis.
- ACSP can also generate list of Dormant Accounts (enter “D” in A/c Status > F4), accounts which are
frozen (enter “D” or “C” or “T” for Debit Freeze, Credit Freeze or Total Freeze respectively in Freeze
Code > F4) any many more criteria based reports.
23. AINTRPT (Interest Report for Accounts)
- AINTRPT generates the calculation of interest charged in a particular account till date!
- To generate the report, SOL ID- XXXX > Report to- M > Scheme Type- LAA > From A/c ID & To A/c
ID- Enter same ID only > Dr./Cr. Int-D > To date- dd/mm/yyyy > MRT file
– intDetRep.mrt > F4 - This should generate a report in PR menu which will give you the exact
balance of account during the period, number days and rate at which interest is calculated as well as
the actual amount of interest charged to that particular account.
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- Now if during the course of Audit you observe an account on which interest rate is not applied as
per Sanction Letter or latest circulars (It can be verified from menu INTTI), you can generate this
report and calculate the amount of interest which should have been charged. This report simplifies
the calculation for Short Recovery.
24. LAODR (Loan Overdue Reminder)
- It is a generally prevailing (mis)conception that an account is classified as an NPA if 3 consecutive
monthly installments are not received. However, RBI master circular on Asset Classification states
that “A Non Performing Asset (NPA) is 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.” The term
“overdue” is defined as follows: “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.” - It means if even a single rupee is not paid to the
bank within 90 days from the date of demand of such rupee, the advance account should be
classified as an NPA.
- Menu LAODR generates the list of overdue accounts as on the given date. We also get to choose
the age of overdue accounts! This means, if we are only interested in accounts overdue for a period
beyond 90 days, this menu lets us have exactly the same.
It should be checked whether all such accounts which are overdue beyond 90 days in LAODR, are
classified as NPAs by the branch. If not, the Auditor should get figure of NPA rectified. Accordingly,
provisioning and profit also get changed. MOCs can be given if Asset Classification is not proper.
- However care should be observed as this report generates the list of each and every overdue
account including Loan Against Bank’s Own Deposit (LABOD), Loans against NSC/KVP and Agriculture
Loans. Such loans have different classification norms.
- If Bank has classified any Term Loan as an NPA, which does not appear in the list of overdue
accounts beyond 90 days in the report generated by this menu; explanation can be sought for the
same as well.
- This menu can also be useful to Concurrent Auditors as they can get a list of overdue accounts
beyond 60 days and inform management about such Potential NPAs, and help in overall credit
monitoring.
- For report generation, following criteria are to be given: LAODR > Report To-M > As on date –
dd/mm/yyyy > Overdue greater than- 60/90 > F4 >Background-B > Print-N >F10. - LAODR focuses on
Term Loans. For overdue in CC/OD accounts, menu option TODRP can be used.
25. LAOPI (Loan Overdue Position Inquiry)
- Once we have got the list of overdue accounts from LAODR, we can generate a report showing
how much principle and interest is demanded by the system in that particular account and how
much is settled by the borrower till date.
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- This report can be generated for one account at a time, however it works pretty fast. You just have
to enter: Account No. From/To- > F4 > Ctrl + E > F4 > Background/Foreground-B > Print Req-N> F10
The report will be available in PR menu.
The account is said to be overdue from the date on which principle/interest collected amount is less
than principle/interest demanded amount given in the report.
26. ISIA (Inventory Status Inquiry)
- LFAR requires Auditor to comment upon the internal control over security forms such as Cheque
Books, FDRs, Drafts, and Banker’s Cheque etc.
- The current status of such security forms can be seen from this menu and the same has to be
verified with actual quantity available on hand. Discrepancy, if any, should be promptly reported.
- To generate the list from system: ISIA > Function-I > Sol ID- XXXX > F4. (Inventory Class should be
selected from list by pressing F2)
27. LADGEN (Loan Demand Generation Process)
- A simple menu option which generates “Interest Failure Detailed Report” and “Demand Creation
Failure Report” - To generate the report: LADGEN > Report To: M > F4.
- Auditor needs to if interest/demand failure report consists of any account which is not classified as
NPA.
- If interest/demand is not charged/generated in any account which is not an NPA, clarification
should be asked from the management.
Now after this much discussion, I’d like to enumerate points of LFAR questionnaire for which Finacle
can be used to generate/verify information. It doesn’t contain each and every point of LFAR, but only
those for which we can find information from Finacle. It is intended to help not only Statutory
Auditors of the branch, but also the Concurrent Auditors who can keep a check upon these issues
throughout the year.
30. MASTER FILE - CHECK PARAMETERS
1) Repayment Schedule: Loans Repayment Schedule Report : LARSH
2) EMI’s
3) Interest Rate
4) Drawing Power
5) Penal Interest
6) Overdue Principal and Interest (LAOPI)
7) Asset Classification
8) Account Inquiry (ACI)
31.DUPLICATE CUST-ID
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32.SRM To check whether values of various securities are updated promptly and drawing powers are
allowed on current value of such securities. Security Register (SRM)
1) value of securities,
2) date of inspection,
3) date of valuation. CA Y.CHAKRAVARTHY FCA FACULTY FOR FINANCIAL REPORTING, DIRECTTAX FOR CA FINAL FBID [email protected] 9246500223,9849832544
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