Bank Audit Work Paper

Bank Branch Audit
An Integrated Checklist
2019
Bank Branch Audit Working Paper Manual
BANK BRANCH AUDIT
INTEGRATED WORK PAPER FILE
Bank Name
Branch
Year 2018-19
Date of Commencement
Date of Completion
Partner In Charge
File reference
Advances Value
Address of the Branch
Name of the Manager
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A Quick Checklist
S No Task Done By Reviewed by

1.Representation Letter
2.Branch Auditors Report
3.Memorandum of Changes
4.Certified financial statements & Schedules
5.Long Form Audit Report
6.Certificates as per index attached
7.Tax Audit report Sec 44AB of Income tax Act
8.Audit team and time spent
9.Scope Limitations, if any
10.
Significant audit notes
11.
RBI circulars
12.
Bank Circulars
13.
Standard Operating Procedure Manual
14.
Guidance Note of ICAI
15.
Audit reports of the previous year
16.
Concurrent, Revenue Audit & Inspection
reports
17.
Stock audits of borrower accounts
18.
Frauds reported in previous & present years
19.
Suspense Accounts
20.
Adverse information in public domain
21.
Physical verification of cash and stationery
22.
Audit working papers – Advances
23.
Audit working papers – Interest Income
24.
Audit working papers – Deposits
25.
Audit working papers – Interest Expenses
26.
Audit working papers – Other Income
27.
Audit working papers – Guarantees
28.
Audit working papers – Suspense accounts
29.
Audit working papers – Tax audit
30.
Independent Valuation details
31.
Forex transactions
32.
Large advances checklist as audited
33.
Special review of Loan accounts
34.
Any other Working papers
35.
36.
37.
38.
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39.
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1. Key Reports and Certificates
a) The following key reports / certificates are required to be issued by us
 Branch Auditors report

 Memorandum of Changes if any
 Certified / Attested financial statements including Schedules
 Long Form Audit Report
 Certificates as per index attached in the next segment
 Tax Audit report under Section 44AB of the Income tax Act
2. Audit Instructions and Team
a) The Branch audit instructions as received from the Head / Circle office in a CD / hard
copy have been duly cognised for in the preparation of this integrated work paper
document. This is kept in Appendix 5
b) The audit was commenced on ……………. and completed on …………………. By the

following team
Name Designation Days From To
Partner
Qualified Paid Assistant
Audit Assistant
Articleship trainee
c)
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a) Significant Audit Notes

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The following matters have been observed during the audit. These matters have been
classified as
 Qualification in audit report

 MoC Prepared
 Discussion pending for attention of partner
 Taken to LFAR
 Ignored due to immateriality
 Any other
Matters for Consideration Impact Final

Resolution
b) Signed Copies of Financial Statements
The final set of financial statements, reports , certificates etc as provided by us is kept in
Appendix 6
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Part C – Audit Planning
Guidance Documentation
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Auditing Review and Other Standards
The work has been planned and performed in accordance with the following Auditing, Review
and Other Standards as prescribed by the Institute of Chartered Accountants of India to the
extent applicable for the engagement
SA reference Description
SA 200 OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR AND THE
CONDUCT OF AN AUDIT IN ACCORDANCE WITH STANDARDS ON
AUDITING.
SA210 AGREEING THE TERMS OF AUDIT ENGAGEMENTS.
SA220 QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS.
SA230 AUDIT DOCUMENTATION.
SA240 THE AUDITOR’S RESPONSIBILITIES RELATING TO FRAUD IN AN
AUDIT OF FINANCIAL STATEMENTS.
SA250 CONSIDERATION OF LAWS AND REGULATIONS IN AN AUDIT OF
FINANCIAL STATEMENTS.
SA260 COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE.
SA265 COMMUNICATING DEFICIENCIES IN INTERNAL CONTROL TO
THOSE CHARGED WITH GOVERNANCE AND MANAGEMENT.
SA299 RESPONSIBILITY OF JOINT AUDITORS.
SA300 PLANNING AN AUDIT OF FINANCIAL STATEMENTS.
SA315 IDENTIFYING AND ASSESSING THE RISK OF MATERIAL
MISSTATEMENT THROUGH UNDERSTANDING THE ENTITY AND
ITS ENVIRONMENT.
SA320 MATERIALITY IN PLANNING AND PERFORMING AN AUDIT.
SA330 THE AUDITOR’S RESPONSES TO ASSESSED RISKS.
SA402 AUDIT CONSIDERATIONS RELATING TO AN ENTITY USING A
SERVICE ORGANISATION.
SA450 EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE
AUDIT.
SA500 AUDIT EVIDENCE.
SA501 AUDIT EVIDENCE—SPECIFIC CONSIDERATIONS FOR SELECTED
ITEMS.
SA505 EXTERNAL CONFIRMATIONS.
SA510 INITIAL AUDIT ENGAGEMENTS—OPENING BALANCES.
SA520 ANALYTICAL PROCEDURES.
SA530 AUDIT SAMPLING.
SA540 AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUE
ACCOUNTING ESTIMATES, AND RELATED DISCLOSURES.
SA550 RELATED PARTIES.
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SA560 SUBSEQUENT EVENTS.

SA570 GOING CONCERN.
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SA reference Description
SA580 WRITTEN REPRESENTATIONS.
SA600 USING THE WORK OF ANOTHER AUDITOR.
SA610 USING THE WORK OF INTERNAL AUDITORS.
SA620 USING THE WORK OF AN AUDITOR’S EXPERT.
SA700 FORMING AN OPINION AND REPORTING ON FINANCIAL
STATEMENTS.
SA705 MODIFICATIONS TO THE OPINION IN THE INDEPENDENT
AUDITOR’S REPORT.
SA706 EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER
PARAGRAPHS IN THE INDEPENDENT AUDITOR’S REPORT.
SA710 COMPARATIVE INFORMATION— CORRESPONDING FIGURES AND

COMPARATIVE FINANCIAL STATEMENTS.
SA720 THE AUDITOR’S RESPONSIBILITY IN RELATION TO OTHER

INFORMATION IN DOCUMENTS CONTAINING AUDITED
FINANCIAL STATEMENTS.
SA800 SPECIAL CONSIDERATIONS—AUDITS OF FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH SPECIAL PURPOSE
FRAMEWORKS.
SA805 SPECIAL CONSIDERATIONS—AUDITS OF SINGLE FINANCIAL
STATEMENTS AND SPECIFIC ELEMENTS, ACCOUNTS OR ITEMS OF
A FINANCIAL STATEMENT.
SA810 ENGAGEMENTS TO REPORT ON SUMMARY FINANCIAL
STATEMENTS.
SRE2400 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS.
SRE2410 REVIEW OF INTERIM FINANCIAL INFORMATION PERFORMED BY

THE INDEPENDENT AUDITOR OF THE ENTITY.
SAE3400 THE EXAMINATION OF PROSPECTIVE FINANCIAL INFORMATION.
SAE3402 ASSURANCE REPORTS ON CONTROLS AT A SERVICE

ORGANISATION.
SRS4400 ENGAGEMENTS TO PERFORM AGREED-UPON PROCEDURES
REGARDING FINANCIAL INFORMATION.
SRS4410 ENGAGEMENTS TO COMPILE FINANCIAL INFORMATION.
a) Accounting Standards
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Accounting Standards as may be relevant to banks to be considered

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Part D – Branch and Risk Understanding
Internal Control Framework
Audit Risk and Focus Areas
Understanding of the Branch
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3. Key Risks
The key risks in Bank Branch Audits are as under . All our audit procedures should be directed
at minimizing these audit risks
 Material Misstatement of Income, Expenses, Assets or Liabilities.

 Unrecorded liabilities and Contingent liabilities
 Asset Classsification and NPA provisions not adequate for impaired assets
 Asset Classification and Income Recognition especially for restructured assets
 KYC / AML norm compliance related issues
 Internal control failures over banking operations including potential / undetected
frauds
 Wrong certification
 Transactions not authorized or adequately authorized
 Transactions not in compliance with Bank / RBI guidelines
 Misapplication of advances not for intended end use
 Account level frauds and impact on Audit Opinion
 Non identification of NPA accounts
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a) Key data
Description 2018-19 2017-18

Rs . lakhs Rs . lakhs
Total Assets
Total liabilities
Total Advances
Total Deposits
Income
Expenditure
Profit / Loss
b) Restructured advances
The following are the advances restructured by the branch and to be reviewed for compliance
with restructuring terms and conditions as per revised sanctions. Repeated restructured
accounts will also be reviewed
S No Account reference / Name During 2017-18 2018-19

2018-19
Rs . lakhs Rs. Lakhs Rs .
lakhs
1
2
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4. Physical Verification
i. Cash
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 Complete the physical verification of cash and ensure that the same is tallied
denomination wise and agree to GL as at the closing date
 ATM cash should also be covered
 Document the physical verification in a cash count format
 Any excess / shortage / difference must be reported in the Statutory Audit report itself
 If verification is conducted before or after March 31, 2018, roll forward or roll back testing
needs to be done
 Obtain a cash certificate from the branch management
ii. Gold
 Complete the physical verification of jewels pledged for gold loans

 Document the physical verification in a count format
 Reconcile to the records maintained for such loans
 Obtain a certificate from the branch management
 Any excess / shortage / difference must be reported in the Statutory Audit report itself
 No bullion stock should be held by the branch
 Check if any branches deal with gold coins sale and check controls in relation to the same
iii. Investments
 Generally branches will not hold investments

 Physical verification of Investments
 Reconcile to the register maintained in CBS
 Obtain certificate from bank manager for the same)
 In case of investments held at branch , the same needs to be reported to the Central office
of the bank
iv. Stationery
 Obtain book stocks of pre numbered stationery

 Physical verification
 Reconciliation
 Review for any adverse movements
 Review internal controls regarding receipts, issues and custody
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Performing the Audit
Audit Strategy
Previous Years Audit Reports
Concurrent, Revenue Audits, Inspections
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5. Audit Strategy
a) Overall Approach
Based on our high level review of the branch data, loans and deposits CBS files and based on
discussions with the Branch manager the following is proposed as the audit strategy. - The audit
strategy will envisage a top down approach which involves understanding the Balance Sheet and
P & L and a drill down to perform compliance and substantive procedures at a component /
transaction level
 Top Down Approach to audit

 Understanding of the internal control framework
 Utilisation of Other Audit reports – Revenue, Inspection and Concurrent audit reports
 Review of previous years audit reports
 Identification of high risk areas which are also material
 Focus on Advances , Income , provisions and KYC for deposits
 Focus on revenue leakages and non fund based products
 Focus on foreign exchange transactions if any, by authorized branches
 Unit visits to confirm existence, End use of advances
 Compliance with Auditing Standards, including SA in reference to Documentation
b) Internal Control Framework
Discuss with the manager on the following elements of the Internal Control Framework
and ensure that these are in place
 Detailed Operating Procedure manuals

 Delegation of powers and Authorisation of transactions ( Maker – Checker controls )
 Segregation of duties and Independent Checks and balances
 Controlled Maintenance of records and documents
 Elaborate system of Accountability for assets of the bank
 Extensive computerization and procedure standardization
 Basic IT General Controls compliance , including passwords , access restrictions etc
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c) Review Notes of Concurrent, RBA, Inspection Reports and Stock audit reports of
borrower accounts
Reports Conducted / Report

date
Previous year audit report
Internal Audit under Companies Act 2013
Risk based Internal Audit
Revenue Audit
Inspection
Concurrent Audit
Stock Audit
Vigilance Audit
Systems Audit
RBI inspection
S No / Account reference / nature of Amount Present Status Impact, if any

report issue / date of report / Page – Rectified, on audit
number LFAR, MoC, strategy
Unadjusted
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Part F – The Audit
Advances and Income
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6. Advances and Income
a) Identifying NPA
It is important to appreciate that NPA’s are not caused only on account of payment defaults but
advance impairment can also be caused on account of reasons such as
o Non renewal of limits

o CC / OD Account not in order or in operative except for some sporadic
transactions
o Non submission of stock statements
o Inappropriate sanctions
o Inappropriate end use ( diversion of funds )
o Non compliance with terms of sanction
b) Overall Audit Approach
The approach for Audit of advances envisages the following important phases
 Understanding the large types of advances

 Understanding the large value accounts where deficiencies will have a material impact
 Internal Controls – follow the questions in the LFAR and check samples against checklists
so that each advance type can be checked with reference to its unique requirements
 Adherence to IRAC norms
 Review of NPA and provisions for the same in accordance with RBI guidelines
c) Planning for Audit of Advances ( from the GN on Bank Audit of ICAI )
i. Obtain largest accounts of the branch.
ii. Obtain the list of Specially Mentioned Accounts or irregular accounts, These are
published by the bank as daily exception reports . These are accounts which are most
likely to slip to NPA
iii. Obtain the list of restructured accounts: as these require separate additional provisioning
iv. List of RBI commented accounts, if any
v. List of borrowers referred and cases admitted or filed under the Insolvency and
Bankruptcy Code 2016
vi. Document the extent of reliance placed on third party experts such as valuers who have
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conducted the valuation of property , assets etc. If you have reasons to believe that these
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are not reliable, request the bank to obtain another valuation of the assets offered as
security to the bank. Document all cases of such reliance separately
d) Review of Top Advances
 Top accounts > = Rs 2 Crs / 5% advance ) should be checked 100% to cover all accounts.
This is a requirement in the LFAR also
 Ensure that the review
o All loan balances > Rs 2 Crs

o All disbursements during the year > Rs 2 Crs
o Near to Rs 2 Crore balances where repayments have happened in the last few
weeks
 The bank needs to provide the particulars of the top accounts in the prescribed format
kept at the end of the LFAR
 The broad principles in relation to Appraisal, Sanctioning, Documentation and post

disbursement review shall be adhered to
 Any deficiencies in the above accounts need to be viewed seriously and reported in the
LFAR. In case the audit opinion is likely to be impacted, attention should be drawn to
Matters of Emphasis paragraphs etc of the Auditors report
e) Restructured Advances
 Obtain a list of restructured advances
 Review the sanction of the restructuring
 Restructured advances to be reviewed with reference to revised terms of sanction

properly approved by the relevant sanctioning authority
 Ensure compliance for the terms of restructuring ( any non compliance will be regarded
as a slippage )
 Obtain a general understanding of the type of advance which has been restructured –
project / non project advances, prior to or after Commencement of Commercial
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production etc as per the RBI master circular which deals in detail on manner and mode
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of treatment of restructured advances

 All terms of revised sanction are complied with ( including but not limited to revision in
commercial production, interest rate revision, rescheduling of repayments, additional
security cover, promoters contribution enhancements, escrow requirements etc ). In
case of non compliance, appropriate reclassifications have been considered
f) Advances Verification – Cash Credit and overdraft accounts
For CC and OD accounts selected, check for the following :
Financial Statements and solvency / capability of borrower / limit

Unaudited financial statements have been furnished for balances < Rs XX lakh
Audited financial statements have been furnished for balances > Rs XX lakh
Audited financial statements have been furnished for corporate borrowers
Income tax returns have been furnished
Credit Appraisal has been done on merits of business / profession and not based on
collaterals offered
Limit fixation and approval
Proposal for assessment of Working capital needs is available
Sanction as per limits of branch
Interest / Charges is as per the policy of the bank
If immovable property has been offered as security
EC for continuous period is available and is clear
Title Deeds have been deposited with the bank
If immovable property , EM regn > Rs 25 lakhs
Legal opinion is available and indicates clean title deeds
Valuation report is present and is commensurate
Valuation report is less than three years old
Insurance policy available, adequate and comprehensive
Security of stock and book debts / other collaterals
 Demand Promisory note has been furnished
 Hypothecation agreement for stocks and Drs
 Guarantee Agt has been executed properly
 ROC regn of charge for cos for hyp of stock and book debts - Form 8
 ROC regn of charge for cos for hyp of immov property
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 ROC search report once in XX years

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 Others
Monitoring Actions
 Submission of stock statements on a monthly basis
 Maintenance of drawing limit based on Working capital statements
 Quarterly book debts Certified by CA
 Stock audit once a year by CA for > Rs 1 cr
 Godown visit by banker - monthly or qtrly
Repayments / TOD / One off credits
 Debit and Credit summation to be reviewed to ensure continuous operation

 Review of accounts featuring in Irregular report as per CBS
 One off credits to be investigated
 Drawing in excess of sanctioned limit on a continuous basis
 Consistent excess over drawing power as per sanction
CBS Updation
 Loan details recorded correctly in CBS
 Interest is updated correctly as per base documents
 Test of repayments done
 Test of interest accrual done
 Test of accuracy of processing charges
g) Advances Verification – Housing loans
 Obtain the sample of housing loans as selected by you

 If samples are not provided report to the partner under Scope Limitation segment
 Loan application is available

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Loan application is signed and properly executed

 Sanction letter is available
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 Loan proposal indicating projections etc

 Title deeds lodged with bank

 Assessment of repayment capability - Sal cert / it returns / pl acct etc
 Margin at XX% ( Land cost + constrn cost )
 EC available
 Legal opinion
 Approved Building plan - CMDA
 Insurance policy
 Pledge deed
 All documents refer to the same survey number
 EM creation by deposit of title deeds
 EM registered for Rs 25 lakhs
 Direct payment to vendor of land / contractor
 If client own construction, stage payment subj to original bills cert by civil engg for work
done
 Inspection of property by bank
 Final valuation cert for completed properties
 Valuation report is less than three years - available from expert
h) Advances Verification – Term loans
 Obtain the sample of Term loans as selected by you

 Loan application is signed and properly executed
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 Loan proposal indicating projections etc as well as financial / audited financial

statements
 Title deeds lodged with bank
 Assessment of repayment capability
 LTV ratio is maintained
 If release against Proforma , then final invoice has been received
 If final invoice has not been received and time has elapsed, physical verification needs to
be done
 In final invoice and proforma check for parameters such as TIN number, supplier
particulars etc
 Obtain installation certificate , if loan is for machinery
 If for any other purpose, check proof of end use
 Latest audited financials as per norms
 In case of restructuring, check for the same
i) Advances Verification – Educational loans

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 Obtain the sample of loans as selected by you

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 Loan appln is signed and properly executed

 Loan for Grad / PG
 Loan - Inland – Foregin
 Plus 2 pass proof
 Asst of repayment of parent
 For loan to minor , parent should sign the application and all documents for self and
on behalf of
 Where minor > 18 yrs after disbursement, AOD and LOU counter signed by parent
 Parent IT return
 Parent Salary certificate / PL acct profit
 Ceiling based on course
 Not given for capitation fee
 Margin maintained at X%
 Less than max ceiling
 , Rs 25K no sec
 Rs 25 - 50K - surety apart from parent
 > Rs 100 K – collateral
 EM creation by deposit of title deeds
 EM registered for . Rs 25 lakhs
 All documents refer to the same survery number
 Approved plan
 Inspection of property by bank, if collaterial
 Interest to be serviced before completion of course for loans to employed Persons
j) Advances Verification – Vehicle loans

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 DPN
 Hypothecation agreement
 Loan proposal indicating projections etc
 Financials of the borrower prior to loan date
 IT returns for period before loan sanc. Date
 RC book - certified true copy
 RC endorsed in favour of bank - Hypothecation endorsement
 Loan is sanctioned net of margin for 'Cost and Accessories" not for charges
 Disbursement amount , tenure and tenor as per sanction
 Duplicate keys
 Original invoice
 Direct payment to dealer for vehicle
 Guarantor signature
 Comprehensive insurance - live now and bank clause in fav of Ind Bank
 For second hand vehicle - valn report from approved valuer
 Higher margin requirement for second hand vehicle
k) Advances Verification – Jewel Loans

 Loan agreement is available and properly executed

 Jewel packet verified for weight and purity
 Letter of pledge is available
 Rate of interest updated properly
 Test of interest accrual done 28
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l) Advances Verification – Loans against Own Deposits

 Letter of pledge is available

 Nature of security - RD / FD
 Lien is marked in system against the FD
 Deposit receipt is available with bank and discharged
 Loan closed after due date of deposit
m) Advances Verification – Loans against financial assets

 Loan amount original sanctioned is within powers
 Securities in the name of the borrower
 In case security not in the name of the borrower , consent letter is available
 Shares - demat and pledged noting in demat
 LIC - Assignment in favour of bank and regd
 Govt instruments tfd as "Sec to Ind Bank " - NSC / KVP
 Loan is within margin limits of surr. Value
 Loan is within margin limits of mkt. Value for shares
 Loan is within margin limits of face value for govt notified instmts
 Shares erosion in market value
 LIC erosion in surr. Value due to unpaid premium has been cognised for
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n) Bank Guarantees
 Obtain a list of all guarantees issued and pending during the year
 Request letter from party
 Sanction within overall approved sanction limits of the borrower
 Guarantee executed in prescribed format
 Documentation is complete
 Approval by a higher authority
 Margin money as stipulated has been maintained
 BG confirmed by the beneficiary
 Income received and accounted as per norms
 Collateral security collected as per terms of sanction
 Reversal of guarantee on the expiry date
 Reconciliation with BGL Trial Balance
 List of guarantees invoked by the counterparty and paid by the bank to be recorded
as a liability and not as contingent
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7. NPA Review and MoC
a) NPA Overview and movement
Account ref NPA 2018-19

Opening NPA
Add : Additions
Add : Additions MoC
Less : Repayments
Add : Legal Costs etc Not permitted
Closing NPA
b) NPA review
 The NPA file was obtained from CBS as at date of audit

 The Specially Marked Accounts files were obtained
 The irregular files were obtained
 The files were cross referenced to the loan balance and CCOD file
 Clean loans – top value were test checked to ensure that there are no impairments
 Loans featuring in any of the above reports – NPA / SMA and IRR were considered
for the review
 The accounts were reviewed individually with the Branch manager to determine the
extent of slippage, possibility of recovery and the need for reclassification
 Additionally, accounts identified as potential NPA based on documentation /
security lapses were also considered for the review and rectification before the
Balance Sheet date
 Restructured accounts listing was obtained and reviewed in detail
c) Details of MoC’s
S Nature of Issue Debit Credit Amount Remarks

No Account Account
Rectification of Income
recognition
Reclassification of NPA’s
( fresh )
Change in the status of

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Old NPA’s
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S Nature of Issue Debit Credit Amount Remarks

No Account Account
Account reclassifications
within P&L: and A&L
Reclassification of Loans
and Advances where
done differently by the
branch
Assets put to use and not
capitalized
d) NPA Movement statement
 Obtain the NPA movement statement from the branch

 Check opening NPA with reference to the previous year audited financial statements
 Check additions
 Check deletions
 Closing balance should tie to the closing NPA report
 All cases of deletions should be verified for payment by the borrower or for
restructuring
8. Verification of Deposits
 Obtain the list of deposit samples to be verified

 If samples are not provided report to the partner under Scope Limitation
segment
 Date of deposit
 If SB acct holder, give SB ref
 Application form and complete
 Photograph
 ID proof and age proof
 Address Proof
 Introducer
 Pan copy
 Pan related documentation
 Rate as per norm
 CBS updation done correctly
 Interest Computation is accurate
 Deposit file has been reviewed for interest rates on a substantive basis (sanity
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checks)
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9. Profit and Loss Account – Analytical review procedures
Description 2018-19 2017-18 2017-18 2017-18

Amount Amount % Change Nos Nos % Change
Rs . lakhs Rs . Lakhs
Total Advances
Total Deposits
Interest on
advances
Interest on
deposits
Other Incomes
Profit / Loss
NPA Amount
Ratios
Interest to
advances
Interest to
deposits
10. Income Related Procedures
These procedures are in addition to the procedures performed at time of audit of loan files
Obtain the break up of fund based ( loans , CC, OD ) and Fee based ( Guarantees, LC etc )
Fund based
 Obtain the schedule of charges and interest rates for different categories of liability
products
 Prepare a schedule of total income of the bank
 The checking of interest of large loan accounts will be completed in the above audit
procedures
 Tabulate the value checked against the total income
 Extend verification if the value of interest verified if necessary
Fee based
 Discuss with the manager and obtain an understanding of the various fee based products
 Obtain the schedule of charges and interest rates for different categories of fee based
liability products
 Check the guarantees register and verify accuracy of computation of income
 Obtain a list of all packing credit and other facilities and verify accuracy of computation
of income
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 Extend verification if the value of interest verified if necessary

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Part G – The Audit
Forex Transactions
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11. Forex Transactions
CHECK LIST FOR AUDITORS FOR ALL OUTWARD SWIFT MESSAGES PERTAINING TO
LC/SBLC/LOU/LOC – Courtesy : CA T R Chandrasekaran
BRANCH : ____________________________
MONTH : __________________________
Sr.No. PARTICULARS YES/NO. If NO

details thereof.
1 Whether corresponding Contra Entries for
LC/SBLC/LOU/LOC have been passed in FX 24 or not
2 Whether the issuance of LC/SBLC/LOU/LOC is within the
sanctioned limit for the customer or not ?
3 Whether the amount mentioned in the Swift messages matches
with those mentioned in customer’s application for
LC/SBLC/LOU/LOC or not ?
4 Whether commission in accordance with Central Office Circular
has been recovered for the issuance of LC/SBLC/LOU/LOC ? If
not, details thereof.
5 In case of amendment whether appropriate contra entries have
been passed ?
6 In respect of amendments for enhancing any value whether
appropriate contra entries have been passed or not and whether
proper commission/charges have been recovered from the
customer or not ?
7 Whether Branch Manager’s sanction has been recorded or not
before issuance of all the LC/SBLC/LOU/LOC.
8 Whether the branch has incorporated two working days prior
notice condition in the swift messages pertaining to
LC/SBLC/LOU/LOC in reimbursement clause or not ?
9 Whether all terms and conditions of sanction, for issuance of such
LC/SBLC/LOU/LOC have been complied with or not ?
10 Whether the LC/SBLC/LOU/LOC has been issued through a
bank which is our bank’s correspondent Bank or not ? (Please
verify from the foreign correspondent’s Bank’s List )
11 In respect of LCs/SBLC/LOU/LOC having a tolerance clause in
respect of amount/quantity. Whether contra entries for
maximum possible liability of the bank has been passed or not ?
12 Whether in respect of LCs/SBLCs/LOU/LOC as mentioned
under Para 11 above, commission, margin as per sanction terms
and conditions on the entire liability value has been recovered or
not ?
35
Page
Part H – The Audit
Areas other than Advances and Forex
36
Page
12. Other Audit areas
Description of Procedure Work Paper Ref

A.ASSETS:
Cash
- Obtain a schedule of denomination of cash
- Physically verify the existence of cash and tally with the (and tally with
the) above schedule
- Tally physical balance with Cash Scroll and the General Ledger as on the
date of verification
- Ascertain the retention limit of cash fixed by the head office. In case the
balance exceeds the Retention Limit the same may be reported in the
following format:
Cash Balance in excess of Rs.
Date: Amount Rs.
- Verify the insurance cover taken on transit cash.
- Verify whether cash is maintained in effective joint custody of two or
more persons
- Ensure that are responsible official verifies physical cash on a daily basis.
- Check whether the cash balance has been verified periodically by the
Branch Manager in addition to the Head cashier.
Balances with other Banks
- Verify whether the branch has any balances with other banks.
- Obtain confirmatory letter from the bank or branch wherever applicable.
- Ensure whether BRS is prepared periodically.

- Verify BRS on a test check basis.
- Check for unresponded credits/debits found in the BRS and report the
same.
Investments
- Obtain the schedule of investment held by the branch.
- Check for appropriate authorization issued by H.O/ Controlling
Authority
- Conduct physical verification of investments and tally with the above
schedule
Advance
37
Page

- Ensure that monitoring of slippage of accounts from standard to sub-
standard/doubtful is done and reported promptly to the Controlling
Authority.
- Ensure that recovery measures are promptly taken.
-
Other Assets
Stationery/Stamps
- Obtain schedule of Stationery Stocks
- Ensure that the physical balance tallies with the above schedule.
- Suspense Accounts/Sundry Assets.

- Obtain an schedule/return of suspense account and verify the items for
long outstanding items.
- Report unusual/long outstanding items.
- Verify transfer to H.O during the year
- Does the scrutiny of accounts under various sub-heads reveal balances,
which in your opinion are not recoverable and would require provision/
write off.
B. LIABILITY:
Bills payable, Sundry deposits etc.,
- Does the scrutiny of account sunder various sub-heads reveal odd

balances?
- Report the number of items and aggregate of amount of old outstanding
item spending for 3 or more years
- Check amount received against suite filled accounts
- Check unidentified deposits e g. Excess cash found in the branch etc.,
C. PROFIT AND LOSS ACCOUNT

- Ensure that the branch has followed the income recognition norms
stipulated by RBI
- Test check calculations of interest on deposits for excess/short credit of

material amount if so give details thereof.
- Study preceding 2 years half year returns for divergent trends in major
items of income and expenditure and report those which are not
satisfactorily explained by the branch
Indicate the effect of changes if any in accounting policies on the items

38
-
of income and expenditure.
Page
D. GENERAL

House keeping
- Ensure whether the branch is regular in furnishing a house keeping
return to the Controlling Authority.
- Verify whether the branch maintains the books and records properly in
accordance with the H.O guidelines.
- Ensure that the balances are duly linked and properly authenticated by
responsible official /authorised signatories?
- Report the lapses in balancing procedures
- Report differences in crystallised balances lying unattended
- Ensure that the control and subsidiary records have been reconciled at
the year-end or at the prescribed intervals
- Inter Branch Accounts
- Are there any double responses or wrong responses in H.O A/c.
- Indicate the outstanding entries in the inter branch accounts together

with a statement of reasons for their remaining outstanding and the steps
taken by the management in respect thereof.
- Are there any frauds discovered during the year under audit and report
if any.
- Does the examination of the accounts indicate possible window
dressing?
- Are there any matter ,which you as branch auditors would like to bring
to the notice of the management or the central statutory auditor.
- Tax Audit U/s 44AB ofI.TAct,1961

- Audit Report to be made in form3CA
- Obtain verify and certify particulars required in form3CD
- Other Certifications
- 1. PMRY, SEEUY and SEPUP scheme certification
Ensure that correct claim/subsidy is calculated
- 2.DICGCscheme
Verify whether the information furnished is correct according to the
books/records maintained by the Branch.
39
Page
- Verify whether the recoveries effected in the Claims Received A/c have
been proportionately remitted to the corporation.
- 3 Ensure that the certificates required are within the scope of audit
e g. Certification that the debts are fully secured.
40
Page
Fraud Risk Review of Loan Accounts
41
Page
13. Fraud Risk Review
For the top 10 - 20 Accounts of the Branch, review Advance accounts with reference to the below
mentioned parameters and report any unusual or suspicious trends
In case of very large accounts of the branch which may be systemically important to the branch
due to the large value of exposure , check for the following
a. Address / phone number / Mail id

b. Last AGM date
c. Last financial statements as filed
d. Director names ( perform further search on other companies where they are directors)
e. Obtain the last three years of financial statements and auditors reports as well as charges
which have been created
f. Perform a Review of the account as well as the financial statements for any important
aspects set out in the below matrix. In case there is a predominance of any of the below
mentioned indicators in any loan accounts and these are continued to be classified as
Standard Accounts, then appropriate inquiries need to be made by the auditor
Warning Indicators
1. Non submission of reports to the bank on time and evasive replies
2. Movement of an account from one bank to another
3. Request received from the borrower to postpone the inspection of
the godown for flimsy reasons.
4. Adverse industry regulations
5. Adverse industry performance
6. Emerging trends threatening the industry ( example -
aggregators )
7. Decline in share price if listed entity
8. Material discrepancies in the annual report
9. Significant inconsistencies within the annual report (between
various sections)
10. Poor disclosure of materially adverse information and no
qualification by the statutory auditors
11. Increase in borrowings, despite huge cash and cash equivalents in
the borrower's balance sheet
12. Decline in share price if listed entity
13. Frequent change in accounting period and/or accounting policies
14. Claims not acknowledged as debt high
15. Substantial increase in unbilled revenue year after year.
16. Inflated Balance Sheets evidenced by significant year over year
42
change as compared to past data

Page
Warning Indicators
17. Qualifications and Significant Matters of emphasis in the audit
report
18. Any Key Audit Matters in the Audit Report
19. Any significant matters reported in the Auditors Report on
Internal Financial Controls over Financial Reporting
20. CARO qualifications by the auditor / No CARO at all ?
21. Non maintenance / proper updation of books of accounts
22. Frequent changes in auditors ( average tenure would ideally be 5
years after the Companies Act 2013 )
23. AGM not held , Financial Statements not approved
24. Financial Statements not prepared / not audited and filed with
Income Tax and Companies Act before the relevant due dates
25. Financial statements not approved by the BoD / Delays
26. Significant disclosures under the head of Pending litigation in the
Auditors report
27. Any instances of misplaced / accounting and other records
destroyed
28. Audits not performed although they are mandated by law
29. Non compliances with General laws and regulations as evident
from the audit report
30. Default in undisputed payment to the statutory bodies as declared
in the Annual report.
31. Raid by Income tax /sales tax/ central excise duty officials
32. Non registration under relevant laws such as GST although the
thresholds have been exceeded
33. Foreign bills remaining outstanding with the bank for a long time
and tendency for bills to remain overdue.
34. Delay observed in payment of outstanding dues.
35. Frequent invocation of BGs and devolvement of LCs.
36. Under insured or over insured inventory.
37. Funds coming from other banks to liquidate the outstanding loan
amount unless in normal course.
38. In merchanting trade, import leg not revealed to the bank.
39. Funding of the interest by sanctioning additional facilities.
40. Critical issues highlighted in the stock audit report.
41. Frequent request for general purpose loans.
42. Frequent ad hoc sanctions.
43. Significant movements in inventory, disproportionately differing
vis-a-vis change in the turnover.
44. Significant movements in receivables, disproportionately differing
vis-à-vis change in the turnover and/or increase in ageing of the
receivables
43
45. Disproportionate change in other current assets

Page
Warning Indicators
46. Significant increase in working capital borrowing as percentage of
turnover
47. Increase in Fixed Assets, without corresponding increase in long
term sources (when project is implemented).
48. Bouncing of high value cheques
49. Significant pile up of slow moving / non moving inventory
50. Delayed or missed employee payroll payments
51. Payment defaults in other banks by the borrower
52. Payment defaults by group concerns to other banks by the
borrower
53. Onerous Clause in issue of BG / LC / Standby LC
54. Increased need for LC / Guarantees / supplier advances as
compared to past indicating a decline in the credit worthiness of
the borrower
55. Bill of entry reference not updated for Outward remittances made
for import transactions within a reasonable time
56. Frequent Roll over of Packing credit
57. Dispute on title of collateral securities.
58. Exclusive collateral charged to a number of lenders without NOC
of existing charge holders.
59. Concealment of certain vital documents like master agreement,
insurance coverage.
60. Liabilities appearing in ROC search report, not reported by the
borrower in its annual report
61. Same collaterial charged to a number of lenders
62. Heavy cash withdrawal in loan accounts.
Invoices devoid of TAN and other details.
63. LCs issued for local trade I related party transactions without
underlying trade transaction
64. Non production of original bills for verification upon request.
65. No internal auditor appointed although the Company is covered
under Section 138 of the Companies Act
66. Any matters reported as required under Section 143(12) of the
Companies Act for Fraud Reporting
67. Any significant matters reported under Sec 138 Vigil Mechanism
68. Significant control issues reported in Internal Audit report
69. Financing the unit far away from the branch
70. Not routing of sales proceeds through consortium / member
bank/ lenders to the company.
71. High value RTGS payment to unrelated parties.
72. Frequent change in the scope of the project to be undertaken by
the borrower
44
73. Costing of the project which is in wide variance with standard cost
of installation of the project
Page
Warning Indicators
74. Significant Aging of balances in Capital advances / Work in
Progress
75. Assets not purchased / installed as per Plan submitted to bank for
credit appraisal
76. Significant reduction in scale of operations
77. Reduction in stake of promoters / directors
78. Resignation of the key personnel and frequent changes in the
management
79. Significant reduction in manpower
80. Resignations of independent directors
81. Independent directors / KMP not appointed although required by
law
82. Significant reduction in the stake of promoter /director or increase
in the encumbered shares of promoter/director.
83. Large number of transactions with inter-connected companies and
large outstanding from such companies
84. Substantial related party transactions
85. Floating front / associate companies by investing borrowed
money
45
Page
Maintenance of Work Papers and Reference
46
Page
14. Maintenance of Working Papers
 Asset Liability Management

 Jilani committee and Ghosh committee
 Capital adequacy ratio
 PMRY / SEEUY
 SLR / CRR – 12 odd dates
 Compliance with RBI Norms on IRAC
 DICGC / ECGC
 Interest subvention schemes
 TUF schemes
 Certification of Provision for Restructured Accounts
 Certificate of Sensitive Sector and CRE
 Other Certificates
 Tax audit report
 Audit program
 Samples
 Any other relevant information
15. References
 Branch Audit guidance document as received from the HO / CO

 Bank Authority levels for sanction limits for loans and advances
 IRAC norms relevant for this audit
 RBI master circular – July 1, 2016
 Other RBI Circulars relevant for the purpose of this audit
 Feb 12, 2018 Circular of RBI
 Guidance Note on Bank Branch audit as issued by the ICAI
 Revised SA700, 705 and 706 for reporting 47
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Bank Branch Audit

BANK BRANCH AUDIT

INTEGRATED WORK PAPER FILE

Address of the Branch

Name of the Manager

S No Task Done By Reviewed by

1. Key Reports and Certificates

a) The following key reports / certificates are required to be issued by us

 Branch Auditors report

2. Audit Instructions and Team

b) The audit was commenced on ……………. and completed on …………………. By the

Name Designation Days From To

Qualified Paid Assistant

a) Significant Audit Notes

 Qualification in audit report

Matters for Consideration Impact Final

b) Signed Copies of Financial Statements

Part C – Audit Planning

Auditing Review and Other Standards

SA560 SUBSEQUENT EVENTS.

SA710 COMPARATIVE INFORMATION— CORRESPONDING FIGURES AND

SA720 THE AUDITOR’S RESPONSIBILITY IN RELATION TO OTHER

SRE2410 REVIEW OF INTERIM FINANCIAL INFORMATION PERFORMED BY

SAE3400 THE EXAMINATION OF PROSPECTIVE FINANCIAL INFORMATION.

SAE3402 ASSURANCE REPORTS ON CONTROLS AT A SERVICE

SRS4410 ENGAGEMENTS TO COMPILE FINANCIAL INFORMATION.

Accounting Standards as may be relevant to banks to be considered

Part D – Branch and Risk Understanding

Internal Control Framework

Audit Risk and Focus Areas

Understanding of the Branch

 Material Misstatement of Income, Expenses, Assets or Liabilities.

Description 2018-19 2017-18

S No Account reference / Name During 2017-18 2018-19

 Complete the physical verification of jewels pledged for gold loans

 Generally branches will not hold investments

 Obtain book stocks of pre numbered stationery

Performing the Audit

Previous Years Audit Reports

Concurrent, Revenue Audits, Inspections

 Top Down Approach to audit

b) Internal Control Framework

 Detailed Operating Procedure manuals

Reports Conducted / Report

S No / Account reference / nature of Amount Present Status Impact, if any

Part F – The Audit

Advances and Income

6. Advances and Income

o Non renewal of limits

b) Overall Audit Approach

 Understanding the large types of advances

c) Planning for Audit of Advances ( from the GN on Bank Audit of ICAI )

i. Obtain largest accounts of the branch.

iv. List of RBI commented accounts, if any

d) Review of Top Advances

 Ensure that the review

o All loan balances > Rs 2 Crs

 The broad principles in relation to Appraisal, Sanctioning, Documentation and post

 Obtain a list of restructured advances

 Review the sanction of the restructuring

 Restructured advances to be reviewed with reference to revised terms of sanction

of treatment of restructured advances

f) Advances Verification – Cash Credit and overdraft accounts