- Normally, the global Insurance Policy for cash- in-custody or cash-in-transit is taken at the head office level. The head office of the bank normally sends confirmation to that effect to the branches.
- The branch should hold cash in joint custody of the cashier and the Branch Manager. The Branch Manager is also expected to verify the cash periodically and put his signature to that effect. The auditor should report whether these directions are followed properly or not.
- Apart from answering the questions in the LFAR format the auditor should comment on identification and disposal of soiled notes, counterfeit notes, stapling of notes, use of ultra violet lamps, Note counting machines,
Balances with RBI, SBI and Other Banks
- In case the branch maintains the account with RBI, SBI or any other bank, the auditor should see whether the reconciliation statement for the year-end balances is prepared or not.
- He should peruse the reconciliation statement and find out the long outstanding entries in the statement. An explanation from the branch for pending entries should be obtained. In case any revenue item is required to be adjusted or written off in the accounts, the same should be reported in the LFAR.
- The auditor should give the details of entries outstanding in the Reconciliation statement which are outstanding for more than six months, with specific details of outstanding entries for more than one year. The auditor may ask the bank to compile such information and verify the same before giving it in the LFAR.
- The continuous failure of the branch to obtain the balance confirmation certificates and/or preparing reconciliation statements should also be reported in the LFAR.
Money at call and short Notice
- Normally, money at call and short Notice are accounted for at the treasury department, Headoffice. However, in case such transactions are located at the branch, the auditor should examine the balances held at the branch with reference to the general or specific authority and instructions/ guidelines from the controlling authority. The cases of non-compliance of relevant instructions should be reported, including unauthorised deposits or deposits in excess of authorised limit.
- It is also important to see whether the income has been booked properly or not.
- The yearend balance should be confirmed with the third party confirmation.
- There are separate questionnaires for the branches in India and for branches outside India. Though the reporting is to be done separately, the points to report are more or less the same.
- The auditor should obtain a certificate from the branch regarding investments held by the branch on behalf of the head office. The auditor should verify the security physically. In case the security is not available physically, the holding certificate/ confirmation to that effect should be obtained. The income on investment should be reported to the head office. The auditor should see that accounting of such income is done properly.
- The matured investments should be encashed and the RBI guidelines for valuation should be followed properly. In case of any deviation, the auditor should report the same. For valuation of investment, the auditor should refer to the master circular on “Prudential Norms for Classification, Valuation and Operation of Investment portfolio by banks” issued by the RBI.
- The auditor should find out the unserviced investment and report the same, whether it could be considered as non performing investment (NPI).
The reporting under advances is to be done under four broad categories viz. Credit Appraisal, Sanctioning and Disbursement, Documentation, Review/ Monitoring and Supervision. Since this topic is dealt separately, the aspects of verification and reporting on Advances are not elaborated in this article.
- The Balance Sheet of the bank contains residual items about the assets which are not specified above, such as Stationery and Stamp, Sundries, Suspense A/c