FAQ'S ON STATUTORY AUDIT OF BANK BRANCHES

INDEX SR.NO. 1 2 3 4 5 6 7 8 9 10 11 i. ii. iii. iv. v. vi. vii. viii. ix. x.

NPA GENERAL

SUBJECT

NPA AGRICULTURAL ADVANCES LFAR CBS GHOSH JILANI DEPRECIATION GUARANTEES MOC TAX AUDIT STOCK AUDIT GENERAL TAXES COLLECTED GENERAL - D.P. CALCULATION INTEREST SUB-VENTION CLAIMS AUDIT PROGRAMME & DOCUMENTATION EXTENSION OF TIME FOR AUDIT DUE TO HIGH VOLUME RRB'S MORTGAGE & ELIGIBILITY FOR LOAN D.P. CALCULATION DISCLOSOURE ACCOUNTING POLICY NEGATIVE LIEN

There is an instruction from the H.O. to branches to reverse the liability entries in the case of guarantees whose validity date has expired as on 31st March 2008 . This is being done irrespective of the fact that the discharged original guarantees have not been received by the branch. The branch has written a letter to the beneficiary informing that as the guarantee is expired and is not renewed, they are canceling the guarantees. But if one goes by the wording of the guarantees issued, it appears that the liability of the bank will continue till it receives back the discharged guarantee from the beneficiary and the validity period restricts only the usability of the guarantee after the expiry period. Of course bank may do it keeping in view the requirements of Basel II norms. What should be the approach of the branch auditors in this case ?

As per bank policy, the bank is correct if it reverses bank st guarantee as of 31 March because technically there is no liability after that date. However one key point is to be remembered that the liability lapses as on 31st March only at the closing hours of the day and it would be more prudent if the liability is reversed on 1st April. The point of receiving the original guarantee is procedural and in no way affects the liability. However if there is a claim on the guarantee before 31st March and it would at least take a few days for the bank to know whether the guarantee has been invoked or not. Thus once again it would be more prudent to wait for sometime and in this case a months time is very reasonable. However since there is the bank policy to reverse of the contingent liability immediately he may have to follow that. However we ought to state that the same is not prudent and at least the months wait is necessary. This matter may be bought to the notice of Central Statutory Auditors.

The bank has charged depreciation on Computers @ 33.33% following SLM method. The asset was purchased at the fag end of the year, i.e., in December, 2007.

Depreciation Computers under RBI instructions, SLM method are followed. Therefore depreciation @ 33.33% should be charged even if used for less than 180 days in a year. Computer software not forming integral part of hardware. Where the aggregate cost of individual items of plant and machinery costing Rs.5,000 or less constitutes more than 10% of total actual cost of plant and machinery rate of depreciation applicable to such items shall be the rates as specified in item II of the schedule. As per Income Tax Act, "computer software" means any computer program recorded on any disc, tape, perorated media or other information storage devise. No rates of depreciation on fixed assets have been prescribed by the Banking Regulations Act, 1949. The provisions of the Companies Act, 1956 should therefore be kept in mind in this respect especially in so far as the banking companies are concerned. RBI has directed that in respect of computers and data processing equipments, depreciation be provided over three years period. The Banking Regulations Act, 1949 requires, in the case of other bank, the auditor should examine whether the rates of depreciation are appropriate in the context of the expected lives of the respective assets. Rate of depreciation as per companies Act and Income Tax Act. Description of the Asset WDV SLM Method Method 13.91% 4.75% I Tax Act For Less than 180 days use 50% of normal rate 50% of normal rate

Plant and Machinery Data Processing Machines including computers

15%

40.00% 16.21%

60%

As per the provisions of Companies Act, 1956 "Where during any financial year, any addition has been made to any asset or where an asset has been sold, discarded, demolished or destroyed, the depreciation on such asset shall be calculated on a pro-rata basis from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed. There is no specification as to the computer software that is not forming integral part of the hardware. Kindly advise if the bank's policy to write off the entire cost of software and 33.33% of computers purchased in December, 2007 and not put to use for the entire year.

If during the audit of FY 07-08, we found that one of the asset has wrongly been taken in 10% block instead of 15% block since FY 03-04 and it was overlooked by management and previous auditors. Then how present statutory auditor should dealt with this issue.

Bank branch is charging depreciation on the items used at home being provided to its staff. The depreciation is allowed fully on this items.

The bank can claim depreciation for the full year regardless of the date of purchase. Do not let the depreciation policy under other statutes confuse you. Since you have mentioned that the audit booklet also contains similar instruction, you can keep that as backing for your action.

You need to calculate the depreciation from F.Y.2003-04 at 15%. Difference in depreciation till last year need to be provided for by the management. You could give MOC to this effect and also give a note in your LFAR /main audit report If the amount involved is material, suggest memorandum of change and report that as prior period item.

The auditor is not clear about the fact whether depreciation in question is allowable under which act. Whether Income Tax Act or any other Act. So far as the depreciation on Items used at home being provided by the bank and they are as per the approved policy of the bank, the depreciation shall be charged at appropriate applicable rates prescribed by the bank. The depreciation shall be charged to the profit and loss account. Regarding disallowance under the Income Tax Act, the same shall be dealt with by the bank at the time of filing of Income Tax Return at the Head Office. Auditor can mention the amount of depreciation on such items whether used for personal purposes and mention the same in form No. 3 CD which will be consolidated at the Regional / Zonal Office level.

Also the auditor can refer this point along with amounts of depreciation in Long Form Audit Report.

RRB'S

Kindly update me with the special points to be considered in central statutory audit of RRB.

EXTENSION OF TIME FOR AUDIT DUE TO HIGH VOLUME

We are planning for the audit from 3rd April to 8th April, 2008 which is the deadline given by the Bank for completion of audit and submission of report. This time span is very little and it is very difficult to cover all areas in the bank branches. So i request for some planning to cover important areas without leaving any area while conducting the branch audit. Kindly advice me, how to complete the audit within time frame or can I extend time some more days.

We have been appointed to carry out branch audit of 15 branches of XYZ Bank and the said letter has been given st today, i.e., 31 March, 2008 and just after that they started pressurizing to immediately start and we want to have report of all the branches latest by 6th as Board meeting has been fixed th for 11 April, 2008. How it is possible to do it and justify the work.

AUDIT PROGRAMME & DOCUMENTATION

My query is "what important documents we possess for the documentation purpose or can you provide audit programme so that we can do accordingly.

INTEREST SUB-VENTION CLAIMS

RBI passes on 2% interest subvention to banks on crop loans where banks are required to charge interest @ 7% P.A. for crop loans disbursed up to Rs.3 lacs.

We have noticed that one of our branches has been charging higher rate of interest say 11 to 12% till September-October and thereafter it has started charging interest at 7%.

As u know that we have to give certificate for interest subvention for claiming the same from RBI. Moreover this subvention amount is worked at zonal office and they provide us list for certificate. We only test check because of bulk volume.

In this particular case, we have asked manager to pass on interest subvention amount of 2% for kharif, i.e., April to September in stead of directly crediting to interest income and for rabi i.e., October to March to be credited to interest income account. On account of large no of accounts, it is not possible for us to verify higher interest charged by bank in each and every case. Hence, we have worked out this short cut.

Whether this is right and what level of responsibility comes in providing certificate to RBI for claiming interest subvention in such case.

MORTGAGE & ELIGIBILITY FOR LOAN

What is the difference between Mortgage, Pledge and Lien

Who can avail facility of Overdraft and Cash Credit (CC a/c).

D.P. CALCULATION

1. The bank which we are auditing has got the practice of not to deduct the sundry creditors while calculating the drawing power in the Cash Credit Account. According to the circulars issued by the Head Office only the creditors which are above the estimated level of creditors are to be excluded (which information is never available with the branch at the time of allowing monthly drawing power). Our opinion of allowing Drawing Power only against the paid stock as prescribed by the Reserve Bank of India is not acceptable to the bank.

TAXES COLLECTED

The bank has included the amount of BCTT collected under "Miscellaneous Income" in the P & L account of the branches. It is specifically mentioned in "Others" of Miscellaneous Income column of the banks pre-printed P & L format. I feel that BCTT is a liability and can not be classified under income under any circumstances. What stand should I take in this regard. The amount involved is material.

The Branch has accounted for all service charges received gross (inclusive of Service Tax). No provision for Service tax is made at the branches because it is done at the HO level. But this has resulted in the overstatement of the branch income and under statement of liabilities to the extent of the amount of service tax. What stand should be taken in this regard?

As per my information, the Institute has not issued any separate guidelines for Statutory Audit of RRBs. In my view there are no special points, as such and our normal procedure for bank audit should be followed. You may refer to Guidance Note issued by the Institute on Audit of Banks. (including para 1.11 of Chapter 1 on RRBs of 2008 edition of the Guidance Note)

At the end of the audit, the auditor has to give the reports and certificates. The report is a reasonable assurance and has two parts (mainly), the statement of facts and the expression of opinion. The auditor has to plan his audit in such a fashion that he is comfortable in expressing his opinion. If the auditor gives the certificate without carrying out proper audit checks, it may lead to professional negligence. Thus the auditor may put in additional manpower to complete the audit properly. The need be he may talk to the bank about extension of time. Please give written representation to Bank. Please keep details of the work done so as to enable you to justify the work done and the time required. At the same time please have a suitable team to assist you. Finally you must keep in mind that inadequate time is no justification for dilution of quality.

There is no standard audit program. One may refer to the Guidance Note on Audit of the Banks issued by the ICAI. The ICAI has come out with the CD on bank audit which has certain check points in the bank audit. Moreover one may use LFAR as the guideline for carrying out the checking activities.

On documentation one may refer to the Auditing Standards on Documentation to build up the working paper file.

Whether accounting of Interest Subvention claim should be made at the branch or at Zonal Office of the Bank, will depend upon the policy of the Bank under audit. In my opinion, passing of entries of subvention claim will depend upon this policy. 2. As per the RBI circular dated 10th May 2007 on extension of subvention scheme for the year 2007-08, subvention shall be available to the public sector bank, on the condition that short term credit is made available to the farmers @ 7% p.a. If this condition is not followed by any branch of a bank, subvention shall not be available. In the cases cited by you, since interest is charged at the rates higher than the stipulated rate of 7%, such accounts shall not be eligible for subvention. In my opinion, these accounts should be excluded from subvention claim. 3. The test check to be applied for verification of no. of accounts shall be a matter of judgment & decision of the individual auditor. An auditor may enquire whether data of rates of interest charged on all such accounts can be made available in electronic form. In such a case he can use Microsoft Excel tools to find out all such cases of incorrect rate of interest charged. He may decide to suitably qualify the certificate to be issued, based on the circumstances.

A mortgage is a conveyance or contract that pledges real or personal property as security for the performance of an obligation, usually the payment of a debt. The term comes from the Old French "dead pledge," apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure. In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than other property (such as ships) and in some cases only land may be mortgaged. Arranging a mortgage is seen as the standard method by which individuals and businesses can purchase residential and commercial real estate without the need to pay the full value immediately. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property. In many countries, it is normal for home purchases to be funded by a mortgage. In countries where the demand for home ownership is highest, strong domestic markets have developed, notably in Spain, the United Kingdom, and the United States. In law, a lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the lienor and the person who has the benefit of the lien is referred to as the lienee . In the United States, the term lien generally refers to a wide range of encumbrances and would include other forms of mortgage or charge. In the U.S., a lien characteristically refers to non-possessory security interests (see generally: Security interest - categories).

In other common law countries, the term lien refers to a very specific type of security interest, being a passive right to retain (but not sell) property until the debt or other obligation is discharged. In contrast to the usage of the term in the U.S., in other countgries it refers to a purely possessory form of security interest; indeed, when possession of the property is lost, the lien is released, However, common law countries also recognise a slightly anomalous form of security interest called an "equitable lien" which arises in certain rare instances. In the U.S. and Canada the word is usually pronounced lien, whereas in other countries (the UK) is more normally enunciated as lien. Despite their differences in terminology and application, there are a number of similarities between liens in the U.S. and elsewhere in the common law world. Cash credit Account This account is the primary method in which Banks lend money against the security of commodities and debt. It runs like a current account except that the money that can be withdrawn from this account is not restricted to the amount deposited in the account. Instead, the account holder is permitted to withdraw a certain sum called "limit" or "credit facility" in excess of the amount deposited in the account. Cash Credits are, in theory, payable on demand. These are, therefore, counter part of demand deposits of the Bank. Overdraft The word overdraft means the act of overdrawing from a Bank account. In other words, the account holder withdraws more money from a bank account than has been deposited in it.

How does this account then differ from a Cash Credit Account? The difference is very subtle and relates to the operation of the account. In the case of Cash Credit, a proper limit is sanctioned which normally is a certain percentage of the value of the commodities/debts pledged by the account holder with the Bank. Overdraft, on the other hand, is allowed against a host of other securities including financial instruments like shares, units of mutual funds, surrender value of LIC policy and debentures etc. Some overdrafts are even granted against the perceived "worth" of an individual. Such overdrafts are called clean overdrafts. There are many ways in which finance can be raised Cash Credit is one of the many ways of raising finance (i.e. it is a type of loan account). Meaning : Cash credit is an arrangement under which a customer of a bank or financial institution is allowed an advance up to certain limit against credit granted by bank. That means a loan may be granted say for Rs. 1 Lakh however the customer/borrower of the loan may take the amount of loan to the extent required by him but not exceeding the limit of Rs. 1 Lakhs.

Purpose : The purpose for which loan is required is essential to ascertain, as for different purposes different types of loan can be taken. E.g., In case the loan is required to purchase fixed assets like plant and machinery, term loan must be taken as plant and machinery are long term assets it will take time in repayment of the loan and repayment can be done in EMIs (Equated Monthly Installments). Where as a loan required for working capital needs a long term loan is not required as repayment does not require long period, hence cash credit may be availed. Explanation of Cash Credit loan facility : If for e.g., a person is having a business. To carry on this business he needs to purchase raw material, and sell the goods. For this he needs working capital to run his daily business. Working capital means current assets minus current liabilities. Where current assets comprise of investment in stock, sundry debtors, cash, etc., current liabilities comprise of sundry creditors, suppliers of stock (incase of sto are short to address the repayment of the term loan over the sanctioned tenure?

This working capital that is required to run the business can be either funded by the businessman himself or if he does not have the money he can take a loan i.e. Cash credit. In Cash Credit facility an amount of loan is given to the borrower/businessman for his working capital needs. The entire amount of working capital required is not funded by the bank, some small amount will have to be funded by the businessman and the balance amount will be funded by a bank as a loan. This is as per RBI rules. The amount of loan to be given is decided on the basis of different types of methods like MPBF (Maximum Permissible Bank Finance) suggested by Tandoon Committee or other methods. These methods use formulas which take into consideration actual working capital required.

The amount so worked out is given as loan and is called as limit this is because under this kind of loan the borrower may not take up the entire amount of loan as working capital requirement every day is not the same. Any entity which is in a position to offer the sound security and undertakes to maintain financial discipline can avail of the overdraft/cash credit facility.

If the drawing power calculated from paid stocks is significantly lesser than the outstanding on a continuous basis, the account can be classified as an NPA. The same can be done taking the fall in drawing power as not temporary. Further, the shortfall in draw power due to reduction in creditors could imply fund divergence, which should be brought out. However most of the banks do not deduct creditors to arrive at paid stocks and thus calculate drawing power ignoring creditors. This issue has also not been qualified by RBI till date. Many Chartered Accountants have also ignored this fact and classified the same as Standard. However in my opinion, you can classify the same as an NPA & if the branch head is not agreeing to sign the MOC, leave it to the Central Statutory Auditor to decide giving the MOC & bringing out all facts clearly.

Check the closing guidelines of the bank. If it states (or any other circular issued at the time of commencement of BCTT) that BCTT has to be accounted as "Income", then you need to report in the statutory audit report about the same and quantify it.

This is the usual method of accounting by many of the banks. Yes, you should report it in the statutory audit report about overstatement of income to that extent.

ISSUE

NPA AGRICULTURAL ADVANCES:1) As regards Agricultural advances, they become NPA when the principal and interest remains overdue for two crop seasons. For the area covered by the branch they are contending that Paddy cultivated comes under one cropping Pattern(One cultivation & Harvesting for each year). The normal period of cultivation and harvesting for paddy is six months. In the above situation the branch is of the opinion that the two crop seasons refers to two years (not one year as assumed by us) and the accounts become NPA if the principal & interest remains overdue for two & half years. Is the contention put forth by the bank is in accordance with RBI guidelines? If it is correct, What is the sort of evidence I should obtain to conform that the above crop comes under one cropping pattern? Please elucidate.

2) Agricultural Tractor advances are given under Annual Installments and for lands under paddy cultivation (Single Cropping). In the above situation the branch is of the opinion that the two crop seasons refers to two years (not one year as assumed by us) and the accounts become NPA if the principal & interest remains overdue for three years. Is the contention putforth by the bank is in accordance with RBI guidelines?

In respect of Agriculture Advances, the bank management says that fresh NPAs identified during the audit are covered by Waiver scheme announced by the Honourable Finance Minister in the budget speech. Kindly advise whether to go without classifying them as NPA in the absence of any circular from RBI.

I want to know about NPA classification of discounted export bills guaranteed by ECGC. Bill discounted by bank is of 120 days maturity and generally paid after long overdue period. The bank management has not classified them NPA because they are covered by guarantee of ECGC, i.e., Central Government. I have gone through the RBI master circular but failed to get reply in clear terms. Please guide.

Sub: Statutory audit of banks 07-08 Agricultural advances are usually re-scheduled in certain districts in the month of March as drought affected area and not classified as NPA. Since there is a proposal in the budget for debt relief to farmers, the banks cannot reschedule such accounts as the applicants fear that they may be out of the relief programme because of such reschedulement. The Branch Managers are in a difficult situation as they cannot re-schedule such accounts at their own risk without obtaining application as the proposed scheme may exclude such accounts. Whether all agricultural advances not re-scheduled in time are to be classified as NPA?

Please guide me regarding treatment of loan waiver recently announced by the government. What will be treatment of NPA agricultural loans waived?

As per declaration in budget, Agricultural loans are to be waived upto a certain limit. Now on 31st March, 2008, banks can not waive the same and even can not re-schedule. So st whether same should be considered as NPA as on 31 March 2008 or not. Please clarify

The branch is granting, besides crop loans, Term loans to agriculturists for purchase of Tractors, Housing and Cash Credit for Business under Agro Mortgage Scheme. The interest is charged at monthly rests but the instalment collected is at the end of the year. The guidelines clearly say that the interest not serviced for more than 90 days is to be classified as NPA. The guidelines are as follows: Page 1.132 Para 6.166-167-170-172:

In line with the international best practices and to ensure greater transparency, the Reserve bank of India has directed the banks to adopt the "90 days overdue" norm for identification of NPAs from the year ending March 31, 2004. Banks have been charging interest at monthly rests, from April 1, 2002. However the banks were advised that the date of classification of an advance as NPA would not be changed on account of charging interest at monthly rests. Banks should, therefore, continue to classify an account as NPA only if the interest charged during any quarter is not serviced fully within 90 days from the end of the quarter. 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 season and a loan granted for long duration crops will be treated as NPA, if the instalment of principal and interest thereon remains overdue for one crop season. As per guidelines, "long duration" crops would be crops with crop season longer than one year crop, which are not "long duration" crops would be treated as short duration" crops. 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. Depending upon the duration of crops raised by an agriculturist, the above NPA norms would also be made applicable to agricultural term loans availed by him.

The above norms should be made applicable to all direct agricultural advances as listed in the Master Circular on Lending to Priority Sectors (RPCD.No.Plan. BC. 84/04/09.01/2006-2007 dated 30th April 2007.) In respect of all other agricultural loans, identification of NPAs would be done on the same basis as non-agricultural advances, which, at present is the 90 days delinquency norm. I am suggesting to classify all the loans (except those sanctioned against crops) granted for business or purchase of assets and housing etc., as NPAs for which the bank is resisting. Kindly advise as to the classification of such loans whose interest is not serviced in 90 days.

REPLY

Both your queries are in respect of agricultural advances and issue in both the queries is common .i.e. nature of crop whether it is long duration or short duration. As I understand from your query, in your view the crop in question is short duration crop but in view of the Bank, the crop is long duration crop. In such situation what is the recourse available to you as auditor? I invite your attention to para 4.2.12 of Master Circular dated 2nd July 2007 issued by Reserve Bank of India. In sub para (i) of this para it is very clearly mentioned as under. 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. 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 my opinion, if you have any different view on duration of crop as stated by the Bank management, then you can definitely insist for the State Level Bankers' Committee report for determination of crop season for the crop in question and accordingly classify the advance as NPA or otherwise.

The agriculture loans scheme is a budget proposal submitted by the Hon. Finance Minister in House (Parliament). The proposal is yet to be approved and become effective. RBI has also not issued any communication amending the existing instructions regarding NPA(Agricultural Advances). As such, all the agricultural advances, including those which are likely to be covered by the budget proposal, will have to be classified and provided for as per the existing guidelines of RBI.

Classification of NPA is based on record of recovery. The same is not dependent on availability of security. In the above case, the advance is an NPA, if it is overdue for more than 90 days after the due date of payment. Availability of ECGC cover will only affect the security status for provisioning if it is to be classified as doubtful.

If any advance is not rescheduled as per the scheme, the same shall be required to be classified as NPA, if it fulfills all other conditions of a NPA under IRAC norms prescribed by RBI.

Till today, no circular in this regard has been issued by RBI and hence there is no modification in the Master Circular on nd IRAC issued by RBI on 2 July, 2007. 2. If any internal circular / guideline has been issued by the respective bank, the auditor should take cognizance of the same. 3. If no such circular / guideline is issued, the branch auditor should make a reference of the same in his statutory audit report with a request to the Statutory Auditors to deal with it appropriately at the central level.

Income Recognition and Asset Classification norms in respect of advances given by Banks as per Reserve Bank of India Master circular dated 2nd July, 2007 are required to be applied to agricultural advances also. Therefore an agricultural advance will have to be classified as NPA, if by virtue of the above referred norms it has become NPA.

I agree with your view regarding the term loans to the agriculturists for purchsase of equipments and other mortgage loans, etc.

However, if these loans are granted to agriculturists and if the repayment of these loans are dependant upon the cropping pattern of the area and accordingly the repayment schedule has been prepared as per loan document and if the terms of repayment have been finalized accordingly, then the accounts shall continue to remain standard , if the repayment is as per scheduled terms. It shall depend upon the contract terms , which would depend upon the cropping pattern and cash flows of the agriculturists.

ISSUE

To conduct stock audit the borrower should enjoy limit of Rs. 5 cores. This limit is only OD limit or consolidated limit enjoyed by the borrower in a bank?

REPLY

The limit will mean the OD limit. The limit referred by RBI are all working capital limits.

LFAR Q5. LFAR certification requires lot of time to be spent for verifying the correctness of the controls and procedures. However due to deadline of completing 3 branch audits by 7th of April, how to tackle the situation.

1. Should we need to check and verify all the account opening forms for accounts opened during the year under audit to comment on KYC norms, more particularly when the branch is not covered by concurrent audit and no internal inspection took place at the branch during the period under audit?

2. The branch (not a branch dealing in large advances / assets recovery branch) has one account with exposure (FB & NFB together) in excess of 300 lacs, should we obtain the Annexure to the LFAR prepared by the branch in such a case?

DOCUMENTATION

When documents, like, D.P Note, Agreement for Hypothecation of Stock/Book debt and Acknowledgement of Debt, etc., are time barred, i.e,, they are more than 3 years old. Whether it is compulsory to get each and every such documents to be renewed or there is any other single document that can increase the validity of all such documents.

SENSITIVE STATIONERY

Register showing receipt, issue and balance stock of stationery comprising of security items (Term Deposit Receipts, Drafts, Pay Orders, cheque books, Travelers Cheques, Gift Cheques, etc.) is not maintained. Only partial details about issue of such stock are available. Shall I qualify main audit report or LFAR only?

FRAUD

During the course of a Branch audit, we noticed the occurrence of a fraud during the year. This was identified by the branch and reported to the immediate higher authorities. However, a criminal case is filed against the bank officials also along with other accused persons by the aggrieved person and an FIR is filed for the same. We need to report it under LFAR. We need clarification whether the same should be reported by us to RBI, since our appointment order requires us to report any occurrence of frauds below Rs. 100.00 Lakhs to RBI, Regional Office. Whether report to RBI is only for a fraud discovered under audit or all frauds already identified and reported to Vigilance department of the respective bank? We are not informed about status of information submitted to RBI by the bank. Please clarify whether reporting under LFAR will suffice or we should also report it to RBI also?

Please ensure that you have adequate number of assistants to conduct the audit. Having accepted the audit, it is the duty of the auditor to ensure that the audit is completed within the agreed time period. But lack of time is not a justification for dilution in the quality of the audit. Full compliance needs to be made with all the applicable SAs. Read the Guidance Note on Bank Audit. There is no specific circular/ instructions either from RBI or the Head Office of the Banks requiring 100% checking of account opening forms by the statutory auditor. The concurrent audit scope definitely requires checking of 100% accounts opened during the year. The statutory auditor can do it on test check basis, however, the sample size is dependent on number of factors, such as, volume of new accounts opened, internal control in the branch etc. Accordingly, the sample size can be increased. Further, as the Branch is not under concurrent audit and internal inspection, the size of the branch might be small, therefore, the auditor can take decision of sample size. Annexure to the LFAR viz., questionnaire applicable to specialised branches is required in respect of branch dealing in very large advances, such as, corporate banking branches and Industrial finance branches with advances in excess of Rs.100 crore or Asset Recovery branch.

Every individual docs. Need to be renewed.

From the query, it appears that this is a routine shortcoming in the branch. There is no indication in the query that the auditor feels that there is some sort of shortage of stock, which could lead to some fraud. In that case, it would only be reporting in the LFAR. However, if there appears to be a theft in the security items, indicating an intention to defraud the bank, then this would need to be highlighted in the main report.

Any fraud detected during the audit should be brought in to the notice of the CMD, CSA and RBI. Earlier frauds reported must have been already brought in to the notice of competent authorities.

Whether beside writing No / Yes in Ghosh / Jilani Committee reports, we can attach our detailed observed to these reports?

Yes, you can certainly attach your detailed observation and in the questionnaire at the end you could mention subject to your observation in a separate annexure or read with separate annexure. it is advisable to prepare a detailed report giving negative assurance on the lines of limited review and also stating scope and limitation. Just saying yes or no is not in the interest of the auditor.

OUR DOUBT REGARDING CLASIFYING THE NPA.

ACCOUNT DETAILS : NAME : XYZ LTD.

LIMITS : OCC : 200 LACS PRESENT O/S.280 LACS LC : 100 LACS O/S. NIL

EXCESS OVER LIMIT SINCE OCT.,2008 LCs devolved and paid by the bank by debiting OCC during sept07 to mar08. Interest is also not serviced during last 6 months. Security : II charge over factory building and machinery along with XYZ bank (I charge) fire accident occurred in the company premises on 28/03/2007 and part of the unit damaged and effect the major part of the production. Bank referred this account to CDR for restructuring along with bank. CDR Committee accepted this account for consideration but not yet given the restructuring details. Branch not classified this as NPA. There version is when the case is pending with CDR, status required to be maintained i.e. required to be continued as standard. Please give your opinion regarding this account.
2

Please explain about the treatment to be given to the following type of account :"A C/C account of trading firm where monthly credits in the account are just equivalent to the monthly interest debited to it." The balance is within the DP.

Facts of the case: Term Loan Sanctioned in April 2005- 8.90 lacs; Moratorium- 6 months; Tenure - 84 months; EMI - Rs. 16646/- Rate of Interest BPLR +12.5% (presently 14%p.a.) Borrower has requested the bank for re-schedulement of EMI (in November 2005) to Gradually (increasing) monthly installments such that initially the EMIs would match the monthly interest and gradually increase over the third year to seventh year, such that the term loan could be repaid in full. Bank has accepted the request and accordingly allowed re-schedulement. Borrower has till date repaid the committed EMIs as per re-schedulement. During April 2007, bank migrated from old software to core banking. While doing so, the re-schedulement sanctioned earlier has not migrated nd effectively. EMIs of 2 year alone are reflected in the system during the year under audit. Meanwhile, the concerned officers, re-calculated the repayment profile upto 2012 (covering 84 months) and have reported that the rescheduled EMIs would not be adequate to square off the term loan in 2012. Hence, computed the desired outstanding balance as at 31-03-2008 (from the repayment profile) and compared the same with the balance shown by the system and reported in October 2007 that the term loan would slip in to NPA category if the difference is not made good by the borrower.

Meanwhile, the borrower has deposited aggregate amount during the 12 months which is more than the re-scheduled EMIs and also cover the interest debited during the year. The bank has not given any written intimation to the borrower about the shortfall as at 31st March 2008. The borrower has deposited the amounts rather not as per schedule but has taken care to deposit more than the given EMIs. The bank has marked the account as NPA in December 2007. Now, the borrower has been called for and has been asked to deposit an amount equal to the difference between the system balance and the desired balance. The borrower has argued that if he has paid an amount equal to 12 EMIs (rather more than 12 EMIs taken together) during the year, how could be his account be classified as NPA? Query: Kindly advice as to how do we look at the account. Whether it would fall into NPA? And whether the action taken by the bank is justified? Is it not the banks' responsibility to communicate with the borrower that the rescheduled EMIs are short to address the repayment of the term loan over the sanctioned tenure?

My query is about classification of NPA. A Term loan account is sanctioned with the stipulation that interest and principal to be serviced annually. According to a RBI Circular, I heard, banks should provide interest only on monthly basis. Accordingly, if the interest is paid once in a year, does the account become NPA?

The bank has got a Loan Scheme by the name of Traders Easy loans. Under this category of loan, Cash Credit limit is allowed to the party against the Property mortgaged. No condition of arriving at the periodic drawing power through monthly stock and book debt statement is being prescribed. Even the parties with negative working capital keep enjoying working capital facility as the same is being allowed against the property mortgaged and not against the Working Capital Requirement.

The Bank is having another loan scheme of Channel Financing, where limit is sanctioned to a dealer of a reputed manufacturer at his recommendation( without any guarantee or comfort). The limit is allowed by making direct payment to the manufacturer to the extent of the limit without having any condition of maintaining the net working capital justifying such limit. Even the dealer having negative working capital is enjoying working capital limit.

Facts of the case: Particulars of advance made by a bank branch. Nature of Industry Sugar Manufacture Nature of Advance : Working Capital Term Loan 3. Nature of Security: Primary security: Book Debts Collateral Security: Immovable Properties

1. 2.

4. Account Performance : Current. Well serviced (although it is apparent that the party is doing kite-flying viz ., borrowing from one financier to fulfil current loan commitments.) 5. Book debt statements not submitted for a long time more than a year. 6. Collateral adequately covers the loan exposure.

Query: Does non-submission of book debt statement merit the account to be classified as NPA. If it was a CC/OD account it is clear that non-submission of stock / bookdebt statements for more than 3 months would necessitate the account to be treated as out of order. Would like to know the position if it was an exposure in the nature of a WORKING CAPITAL DEMAND LOAN since DP is not drawn based on latest stock/book-debt statements in this case.

1. In a trading account, deficits were observed in the OCC account for a period of two months and subsequently the bank sanctioned Working capital demand loan (WCDL) and the deficit portion was culled out from OCC and absorbed in the WCDL. After that the OCC accounted was operated within the drawing power availability and the repayment in the WCDL was regular. My question is whether the bank can sanction one credit facility to regularise the irregularity and to avoid the account becoming irregular. (Sanctioning of a loan is a management decision, but the thing is to regularise the account the new credit facility can be utilised) Can I classify the account as NPA in view of making the account evergreen.

2. After the implementation of the nursing programme, the unit responded well and the account was upgraded as performing after watching one year satisfactory performance of the unit. As a part of the nursing programme, interest sacrifice made by the bank till the date of implementation of the nursing programme, was kept in the mirror account and instructions were given to recover the mirror balance every month at a specified quantum and the recovery was credited to P & L account every month. Now my question is, as the account has become performing, whether entire interest portion in the mirror account can be recognised by transfer to P & L A/C credit and debiting the Loan A/C in the year of upgradation of the account as performing.

1. If one account is become NPA during F.Y.07-08 and it has unrecovered interest of Rs.10000/- in FY 07-08 and beside this, there is unrecovered interest of Rs.3000/- in FY 06-07. Then reversal of interest during the year would of Rs.10000/- or 13000/-

2. If one the account should have been NPA in the FY 05-06 but it was not done by the management as well as auditors of FY 05-06 and 06-07. Then in FY 07-08 how statutory auditor should dealt with such account.

The loan was sanctioned in 1998 for doing medicine in Russia and as per the original scheme the loan repayment was to commence from 2004 June onwards. since the Russia degree was not recognised, the student was to take one more course in India and the repayment did not commence in 2004. The branch deferred the recovery of loan to 2008, I. e., till the completion of the new course.

Now the issue is, as per the original scheme, the loan is to be repaid within one year from the end of the first course or within 6 months from the date of employment and in this case the loan was for the first course and any other degree subsequent to the first degree amounts to taking up other degree and in my opinion the loan repayment is to commence as per the earlier schedule. But the bank differs with our views and did not has not classified the account as NPA on the ground that the course is not completed.

It is very encouraging for the members that the Institute has started the facility for online reply to the queries relating to bank audits. There are some confusions which I request be cleared. Please clarify the role and the course of action in the following situations :1. A CC account in which Rs 31000 is the interest debited for Q4 2007-08. There is only one solitary credit entry of Rs 26000 cash deposit on 31.3.2008. The branch manager is adamant for not classifying it as NPA since only half months interest is in arrears. Please clarify. 2. It has been mentioned in the Guidance Note to be careful about those loans in which there is only a single credit entry about the year end. Suppose there is a credit in the CC account around the end of the year by a contra debit in another CC account with the assertion that the latter is a relative of the former and has verbally consented for the transfer of money in the formers account. What is the remedy if after the completion of the audit the amount is reversed back. 3. What is the NPA status of a CC account in which there is no credit during the last quarter of 2008 and on 1.4.2008 there is a cash deposit of double the amount of interest debited during the fourth quarter . The Manager is adamant to transfer it to NPA. 4. A borrower is enjoying various credit facilities in the branch. One of his accounts is CC against mortgage of building & is a small account. Ignorantly there is no credit in the account for the last 180 days. The managers assertion is that if you classify this account as NPA, all other accounts many of which form a substantial part of the banks advances will turn NPA. Please clarify. 5. A CC account where the balance is in excess of the sanctioned limit st during the entire year except 31 March, 2008 when it is brought within sanctioned limit

An housing advance was classified as NPA on 31.03.07 , details of the same are as follows: Date of sanction: 10.05.2005 Moratorium Period: 6 months

First installment date/Due Date: 10.12.2005 Amount Sanctioned: Rs. 6.50 Lacs O/s as on 31.03.2007: 6.47 Lacs During year 2007-08 (till 23.02.08) there were credits of Rs. 49,000/-(which as per branch/system) were enough to convert the account from NPA to Performing Asset. After the same the system charged the due interest from 01.04.2007 till February 2008, which debited the account by Rs. 61900/-(out of which 51,273 pertain to period 1.4.07 to 31.12.07 which was levied on 10.03.08). Against interest levied till 31.12.2007 only Rs. 6,000/- have been received on 27.03.2008.Now as on 31.03.2008 the outstanding amount is Rs. 6.55 Lacs. Now my questions are:1. Was the system/branch correct in converting the account from NPA to Performing Asset? 2. What should be classification of advance as on date?

The borrower is running Poultry business whose loan was sanctioned in 2005 enjoying Term loan and CC limits of Rs 1 Crore. The repayments are not satisfactory. The Branch has the practice of re-scheduling the loan when it is on the verge of becoming an NPA. Two re-schedulements have already taken place and a third has been done on 27.03.08 wherein the limit has been reduced to Rs 20 lacs and the balance has been asked to be repaid out of sale proceeds of few securities released for sale. The time permitted for sale is June 2008. The Branch argues that in view of the re-schdulement the account is standard. The Master Circular on classification released by RBI is silent on re-schedulement of loans other than project loans. Does it mean that the 90 days norm has to be adopted for the original sanction terms? If the argument of the branch is to be accepted then it can be ensured by the bank that no account becomes an NPA by merely re-scheduling all loans when they are about to become NPAs.

I request you to please clarify how an advance (C/C) should be classified when it has become NPA as on 31-3-2008 and again on 05-04-08 (before audit completion), the Assets has become performing. Will it be correct to classify the asset as Standard in view of the fact that the same has become a performing asset within the audit period.

As per RBI Master Circular dated 2/7/2007, even if an account is approved for restructuring, classification as Standard or NPA will be done as per the status of the account when it goes/is approved for restructuring. In this case even if account is approved for CDR, if at the time of submission of the proposal for restructuring the account was Sub Standard, then it has to be classified as NPA. You need to examine in detail sequence of event on these lines and also the status of account when it was sent for restructuring. If at the time of submission of proposal, if an account was NPA then it has to be classified as NPA. Thus if at the time of submission of proposal if an account was out of order for more than 90 days then it has to be classified as NPA. As per the RBI Master Circular, there are certain timelines specified for the whole CDR process, it is not clear from the query as to at which stage the whole process is and moreover the statement that CDR Committee accepted this account for consideration but not yet given the restructuring details does not convey the stage or progress. Please refer paragraph (iv) on Stand Still clauses on page 18 which states that, during pendency of the case with the CDR system, the usual asset classification norms would continue to apply. The process of re-classification of an asset should not stop merely because the case is referred to the CDR cell.

Please refer to Master Circular - Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated July 2, 2007 issued by RBI (can be viewed on RBI site - www.rbi.org.in) 1. Please refer to para 2.2 for the definition of 'out of order'. Under this definition, the account is technically not 'out of order'

2. Please refer to para 4.2.5. The account should now be examined in light of this para, which says that 'a account with few credits only needs to be handled with care' . Since this is a trading concern and if this is the only account being operated by the borrower, then absence of debit and credit entries for purchase and sale of goods prima facie denotes that the business is not operative. The auditor should examine other available documentary evidence like stock statements, inspection reports, stock audit reports, etc. as well as enquiry with the bank officials as to the reason why there is no operation in the account, to come to the conclusion that the account has 'inherent weakness', on the basis of which the account can be classified as NPA. 3. Knowing the reason for non-operation is very necessary since the borrower may be having two accounts - one for stock and other for book debts or may be having an actual operating account in some other branch of the same bank or at times may be routing his transactions through the current account of the firm and not the cash credit account. In all such cases, the non-operating account cannot be considered as NPA.

At one place it is stated that the bank has accepted the request and has allowed reschedulement, whereas at other place it is stated that the re-schedule EMI would not be sufficient to square off the loan by 2012. There seems to be some technical error on the part of the bank. Assuming that the reschedulement has been accepted in writing by the bank, the borrower cannot be penalized for shortfall, if any, detected later on. The shortfall can be explained to the borrower and can be recovered separately. In my opinion, pending that, if the borrower has paid EMI as per the rescheduled terms till December 2007, the account cannot be treated as NPA as on 31 March 2008.

The definition of due date is defined in paragraph 2.4 of the RBI Master Circular. It defines due date as date fixed by the bank. In the given case, it is appears that the bank has fixed annual date for servicing interest and accordingly it has to be considered for NPA classification.

Many banks especially private/foreign have the concept of overdraft against property which is also financed as a working capital product without obtaining Stock/Book debt statements. The bank is in order of doing the same. The account can be classified as NPA only based on record of recovery. Stock statement non receipt or negative working capital is a non issue in this case.

NPA Classification is based on record of recovery. In this case, even though it is a faulty appraisal, the same can be brought out in the LFAR. However classification as NPA can only be done only if there are overdues for more than 90 days.

From the facts given, it appears that there are apparent credit weaknesses such as absence of primary security, dependence on collateral security for the purpose of recovery in case of default in servicing the loan as also obvious kite flying operations such as borrowing from other financiers for the purpose of servicing the present loan. All the factors indicate that the borrower is in difficulties and may not be able to service the loan for long. In such a scenario, you may take a call on the situation and ask the branch management to classify the advance as NPA. At the same time, if the quantum of advance is substantial, it would be better to confirm your decision by making a visit to the borrowers' factory to verify the present position of the production, sales, etc. as also whether his factory is really in operation. You may also verify whether he is operating any account with some other bank and diverting his business to that bank. Since mere non-submission of book debt statement may not be enough to classify the account as NPA particularly when he is otherwise servicing the loan properly, it need to corroborate the decision you arrive at by evaluating the risk to the advance from other evidence.

My replies to your queries are as under: 1) In the instant case account was irregular and WCDL was given before the account really became NPA. Your observation is correct that the account is regularised by sanction of WDCL. In your case after sanction of WCDL not only that the OCC is account is within the limit but also that the WDCL account is also serviced. In my opinion it appears to be a case of genuine need of the borrower and therefore in my opinion the account can be classified as Standard. However you need to satisfy yourself by verifying the appraisal documents and satisfy yourself about the genuineness of the additional loan.

In this case even the account is doing well after nursing, in my opinion, it would be prudent not to recognise the entire income in mirror account, but account the same as income as and when realised.

Reversal of interest during the year would be Rs.13,000/As per paragraph 3.2.2 on page 5 of the RBI Master circular the words used are fee, commission and other similar income and it does not specifically say interest or discount for the purpose of reversal for the preceding previous year. Logically it should also include interest and discount. In any case the matter should be referred to the HO and Central Auditors for necessary clarification as the treatment could differ from bank to bank. As Statutory Auditor ,you have to examine the account independently for the F.Y.2007-08. If in your view account is NPA ,it has to be classified as NPA.Moreover you have to reverse unrealised interest for the year 2007-08 as well as for the previous year depending on the classification. If is was due to error or omission in the earlier year it must be corrected retrospectively this year but it was a conscious decision of the branch and the branch auditors and there is enough documentation to prove that, it may not be treated as error or omission.

It is not clear from your query, whether the borrower has completed first degree in Russia or not; however from language , we presume that he has completed the same & loan is utilised for said course.

In such circumstances, the first installment is due on original date & determination of NPA date starts from that date only depending on repayment. In our opinion, course is recognised or not is irrelevant & pursuing another course is also irrelevant. Hence you may determine NPA accordingly & if bank disagrees, you have a option of MOC.

1 In case the interest for 90 days is not recovered by the credits in the account, the account becomes NPA. In the present case the partial interest is not recovered therefore it is not NPA 2 RBI suggests to scrutinize the solitary entry at the year end to find out the genuinely of the transaction. Thus the auditor has to scrutinize the source of the credit entry and take appropriate view.

3.Technically the position as on 31st March should be considered.

4 The IRAC Norms are objective norms and there is very little scope for the sentiments.

5. Technically the position as on 31st March should be considered.

An account in the nature of term loan once classified as NPA will be a standard asset only if all arrears are cleared. In this case, it appears that arrears are not cleared since interest from 1.4.2007 to Feb 2008 is only charged afterwards. Thus branch is not correct in classifying the account as standard in Feb. 2008 and account is an NPA on 31.3.2008 with date of NPA as 31.3.2007. Account status will be doubtful as on 31.3.2008.

Apparently the loan appears to be a case of evergreening, i.e., frequent reschedulement. RBI, in Master Circular has clarified that frequent re-schedulement is not permissible, You could argue with the bank management on these lines and classify the account as NPA. One thing is not quite clear from your query as to how tha repayable amount is only Rs.20 lacs instead of Rs. 1 cr which was the original loan amount.

The position of non performing asset is as on 31st March. Hence technically the position as on that date is valid. However on practical side some people take a view on the basis of the subsequent recovery. The auditor should take a overall view of the operations in the account to determine whether the concession can be given.

Request you to please clarify on the following : Previous year MOCs The previous auditor has classified certain standard assets as sub- standard and has suggested provisions & interest reversal. However the branch has not made those changes in their records as they feel they are still standard assets. While drafting MOCs for current year, I am going to show these as Sub-standard. My queries in relation to above are as follows: Q1. Whether the prudential norms are to be strictly adhered to in framing our MOCs. For example, in term loans which were classified by previous auditor as Sub-standard and not re-classified by branch, there have been some substantial collections during the current year however interest and or principal are still overdue for more than 90 days. Branch argument is that the account is still operating as substantial amounts have been collected and should not be classified as NPA. In relation to this, whether we have to go strictly by the prudential norms (90 days concept) or we can be little liberal to accept their argument.

Q2. If I show these accounts in MOCs and classify as Substandard, whether apart from current year interest reversal, should I also insist on interest reversal for previous year interest suggested in previous year MOCs the accounts of which have already been signed.

Q3. Whether security can be a criteria for not showing an advance as NPA say in case of housing loans backed by security of house property, if the defaults fall in NPA category should I show it as NPA or not show because it is backed by security of house property whose current market value can be more than the outstanding amount. Q4. Once MOC is created last year and for the same accounts if MOC is created in current year as the same has not been re-classified by branch, will it not lead to double provision at HO level for the same account in two different years.

The Prudential Norms are to be strictly adhered to. The date of the NPA will not change. After 12 months from the date of the NPA, the account will have to be classified as Doubtful. The interest credited to the account but not realized has to be reversed.

As mentioned above, if the account is NPA for more than 12 months, it should be classified as Doubtful. The date of the NPA will be the original date as ascertained by the previous auditor, assuming that the classification carried out by the previous auditor is correct as per the RBI Circular. Once a credit facility is classified as NPA, the interest accrued and credited to the income account in the corresponding previous year which has not been realized should be reversed or provided for. Accordingly the unrealized interest of 2005-06 and 2006-07 will have to be reversed or provided for in 2007-08. This will now be classified as prior period interest and accordingly reflected in the financial statements or shown so by way of MOC. Attention is also invited to para 11 of SA 710. Reference be made to the Appendix II to this SA for the method of reporting, if you find the same to be applicable.

The security is not a criterion while classifying an advance as a NPA.

As a branch auditor ensure that suitable disclosures are made in the audit report. The Central Statutory Auditor and the Head Office will ensure regarding the double provision.

As per section 145 of Income Tax Act that hybrid accounting method is not acceptable but I found that many bank have following hybrid accounting system. Example : 1) All revenues are accounted for on accrual basis except the following items, which are accounted for on cash basis :- Income from merchant banking operations, - overdue locker rent, - interest for overdue period on bills purchased 2) All cost are accounted for on accrual basis except the following items: - interest payable on overdue deposits is recognised at the time of renewal / payment thereof. Should I qualify my report, is it material deviation?

The bank audit is guided by Banking Regulation Act and Reserve Bank of India Act. There is no question of qualifying your report on branch audit as the Bank is free to have their policy subject to consistency and disclosure as per AS 1.

ISSUE

I would like to know the meaning of, 'Check whether negative lien is created in case immovable assets are not registered with cooperative societies.'

REPLY

"Letter / Undertaking for Negative Lien" is an undertaking given by the borrower to the bank stating that at present he has not created any lien / charge on the concerned assets and that in future, he will not create any lien / charge on these assets without the permission of the bank. This Undertaking is on a stamp paper, but not registered anywhere.

A form 3CD is provided by bank to me for branch statutory audit wherein Annexures including annexure for FBT is not provided. Shall a branch auditor has to certify the annexures forming part of Tax Audit Report?

In case the Bank has not provided for the Annexure II, Value of Fringe Benefits in terms of Section 115WC read with section 115WB, the auditor need not on his own furnish it. However it will be advisable that in Form No 3CA in Para no 2 and 3, suitable disclosure is made that the said Annexure II is not being filed.

Please give us the procedure to convert the data of test format (note pad) to excel. Branch has given the loan particulars in test format. We need to convert it into excel to analyse the data.

What is Core Banking System & how it working?

How I have to operate the same system?

Which report I have to ask from bank in Core Banking System?

How I can generate the various report from CBS? There is no such information give in our institute reference book also.

I have been alloted a branch which has converted into a CBS branch in the 3rd week of March 08. The migration audit has not been carried out for this branch. I would like to know what kind of qualification I should make in my audit report.

This is a matter of Information Technology Possibly, the system administrator will be of some help to you. It is advisable to take permission of the branch management to covert the data in such fashion.

In core Banking, there is a centralised server. All the Branches are connected to this node. Effectively, the Banking modules are from a single server for all branches. Data also is stored in one place. As auditor you have the advantage that critical functions of back-up and even installation of latest rates of interest are from a central place. However, many issues like concession and 'adjustment of rates' are at branch level. You will find details of this in the current and previous year's issue of background material of the WIRC. Other Regions may have this but I am not aware.

The Bank will give you a user ID and password. If not, insist on it. This gives you access to reports and 'view' screens only and no transactions can be passed. As auditor you need this and only system tolerance in terns of software audit is not permitted to you. Thus you can take our reports you want to compare with the schedules needed to be signed by you.

This is your perogative. From the trial balance to Balance sheet and even installments in arrears are the normally asked reports by auditors. Depth is your right to exercise.

Go to the reports menu and select the report and press print or screen display. Each Bank and software has different methods of negotiation in the software.

There is no such information give in our Institute reference book also. What you are seeking is 'hands on' experience for which there is no book. The institute's book has sufficient details built if you are seeking audit checklist, etc., you need to look at private publications.

U may add ".....subject to any adjustment arising out of reconciliation of figures after migration to CBS..." in your audit report. However in any case, the central statutory auditors will take care of this.