Bank Audit - A Ready Reckoner

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Description
•    Relevant for Statutory and Concurrent Audit - 2019
•    Banking Financial & Transactions simplified with Journal Entries & Examples
•    Audit Checklist given as per Financial Statements and GST
•    Illustrative Audit Checklist as per Advances given by Bank
•    Illustrative Checklist on Audit considerations in Computerized (CIS) Environment
•    Audit Considerations related to System Software Control and Automatic Teller Machine
•    Key Points and Checklists for Statutory (Including Branch) and Concurrent Audit
•    Illustrative Formats for Reporting & Letters for Auditors
•    Key Considerations covered from - Guidance Note on Bank Audit - 2019
•    Covered Latest Circulars and Notifications
•    Includes Important Menu Commands for Auditing Through CBS
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Contents
Division I
Banking Accounts & Audits, Transactions, Capital Adequacy Norms and Concurrent Audit etc.
Chapter 1   Financial Statements of Banking Companies
1.1 Meaning of Banking
1.2 Prohibition of Trading (Section 8
1.3 Disposal of Non-Banking Assets (Section 9
1.4 Management (Section 10)
1.5 Capital and Reserve
1.6 Reserve Funds (Section 17
1.7 Restriction as to Payment of Dividend (Section 15)
1.8 Cash Reserve (Section 18)
1.9 Licensing of Banking Companies (Section 22)
1.10 Liquidity Norms (Section 24)
1.11 Restriction on Acquisition of Shares in Other Company
1.12 Restriction on Loans and Advances
1.13 Prohibition of Charge on Unpaid Capital and Floating Charge on Assets
1.14 Unclaimed Deposits
1.15 Accounts and Audit
Chapter 2   Books of Accounts, Returns and Forms of Financial Statements
2.1 Main Characteristics of A Bank's Book-Keeping System
2.2 Principal Books of Accounts
2.3 Subsidiary Books
2.4 Other Subsidiary Registers
2.5 Departmental Journals
2.6 Other Memorandum Books
2.7 Statistical Books
2.8 Forms of Balance Sheet and Profit and Loss Account
2.9 Notes on Accounts
2.10   Disclosure of Accounting Policies
Chapter 3  Capital Adequacy Norms
3.1 Capital Framework of Banks Functioning in India
3.2 Capital Funds
3.3 TIER-I and TIER-II Capital for Indian Banks
3.4 Ratio of TIER II Capital to TIER I Capital
3.5 TIER I and TIER II Capital for Foreign Banks
3.6 Risk-Adjusted Assets
3.7 Reporting for Capital Adequacy Norms
Chapter 4   Income Recognition, Classification of Assets and Provisions
4.1     Income Recognition
4.2     Classification of Bank Advances on Basis of Performance
4.3     Provisions
4.4     Classification of Investments
4.5     Shifting Among Categories of Investments
4.6     Valuation of Investments
4.7     Investment Fluctuation Reserve
4.8     Disclosure Requirements on Advances Restructured by Banks and Financial Institutions
Chapter 5   Special Transactions of Banks
5.1     Discounting, Collection & Acceptance of Bills
Chapter 6   Preparation of Financial Statements of Banks
6.1     Introduction
Summary
Let's Recapitulate
Chapter 7   Bank Audit - Features at a Glance
7.1     Income recognition in the case of 'non-performing' assets of bank
7.2     Drafts paid without advice
7.3     Branch Adjustment Account
7.4     Statutory Liquidity Ratio
7.5     Verification of Contingent Liabilities
7.6     Concurrent Audit
7.7     Evaluation of internal control system in the area of credit card operations
7.8     Non-performing Assets — Exemptions
7.9     Vostro and Nostro Accounts
7.10   Corporate Debt Restructuring and Sacrifice Element
7.11   Scheme for Sustainable Structuring of Stressed Assets (S4A)
7.12   RBI's revised framework for resolution of stressed assets - RBI Circular Dated 12th February, 2018
7.13 Donations by Banks
7.14 Investments by Banks
7.15 Accounting Standard 17 - Segment Reporting
7.16 CAMELS ratings
7.17 LFAR
7.18 MOC - Memorandum of Changes
7.19 Requirements of risk management process/ system in a Bank
7.20   Audit Programme for Demonetisation Activities undertaken by the Banking Companies
7.21   Basic responsibilities of auditor in CBS [core banking solution] environment of a Banking Company
7.22   Discontinuance of Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for Trade Credits
7.23   Enforcement action framework in respect of statutory auditors for the lapses in the statutory audit of
           commercial banks - RBI Circular June 29, 2018
Chapter 8   Concurrent Audit System in Commercial Banks - Revision of RBFs Guidelines
Division II Illustrative Formats of Reporting & Letters and Audit Checklist
Unique Document Identification Number (UDIN)
1.       Introduction
1       Mandatory requirement for UDIN
Illustrative Formats
    Illustrative Format of Report of the Auditor of a Nationalised Bank
    Illustrative Format of Report of the Auditor on the Standalone Financial Statements of a
    Banking Company    
    Illustrative Format of Report of the Branch Auditor of a Nationalised Bank
    Illustrative Format of Report of the Branch Auditor of a Banking Company
    Illustrative Format of Engagement Letter in case of a Nationalised Bank
    Illustrative Format of Engagement Letter to be sent to the Appointing Authority of the Nationalised
    Bank by Branch Auditor
    Illustrative Format of Engagement Letter to be sent to the Appointing Authority of the Banking Company
    Illustrative format of Engagement Letter to be Sent to the Appointing Authority of the Banking Company
    (Separate only for Internal Financial Control u/s 143(3)(i) of Companies Act, 2013)
    Illustrative Format of Written Representation Letter to be obtained from the Branch Management
Illustrative Audit Checklist
    Illustrative Checklist on Audit Considerations in CIS environment
    Illustrative Checklist on Bank Audit in Computerised Environment
    Illustrative Audit Checklist for Capital Adequacy
    Illustrative Audit Checklist for Goods and Services Tax
    Illustrative list for Basis of Selection of Advance Accounts in case of Bank Branch Audit
    Illustrative Bank Branch Audit Programme for the Year ended March 31, 2019
    Illustrative Audit Checklist for the verification of the aspects of the Treasury/Investments of the Bank
    in Statutory Audit
Division III Relevant RBI Master Circulars and Notifications
1.       Loans and Advances - Statutory and Other Restrictions
1.1     Filing of Security Interest Relating to Immovable (Other than Equitable Mortgage), Movable and
           Intangible Assets in CERSAI
1.2     Incorporation of Name of Purchaser on Face of Demand Draft
1.3     Linking of Swift to Core Banking System
2.       Master Direction-Regional Rural Banks-Priority Sector Lending-Targets and Classification
3.       Guarantees and Co-Acceptances
4.       Export Credit Refinance Facility
5.       Lending to Micro, Small & Medium Enterprises (MSME) Sector
5.1     Micro, Small and Medium Enterprises (MSME) Sector - Restructuring of Advances
5.2     Micro, Small and Medium Enterprises (MSME) sector- Restructuring of Advances
6.       Exposure Norms
6.1     Capital Requirements for Banks' Exposures to Central Counterparties
7.       Interest Rates on Advances
8.       Interest Rates on Deposits Held in FCNR(B) Accounts
9.       Interest Rates on Rupee Deposits Held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident
           (External) (NRE) Account
10.     Guidelines for Issue of Certificates of Deposit
11.     Call / Notice Money Market Operations
12.     Section 24 of the Banking Regulation Act, 1949 - Maintenance of Statutory Liquidity Ratio (SLR)
13.     Para-Banking Activities
14.     Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks
14.1   Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks -
           Spreading of MTM losses and creation of Investment Fluctuation Reserve (IFR)
14.2   Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks -
           Spreading of MTM losses and creation of Investment Fluctuation Reserve (IFR)
14.3   Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks -
          Spreading of MTM losses and creation of Investment Fluctuation Reserve (IFR) by Co-operative banks
14.4   Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by banks -
           Valuation of State Development Loans
15.     Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances
15.1   Revised Framework of Resolution of Stressed Assets
16.     Disclosure in Financial Statements - Notes to Accounts
16.1   Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks -
          Spreading of MTM Losses and Creation of Investment Fluctuation Reserve (IFR)
17.     Frauds - Classification and Reporting
17.1   Customer Protection - Limiting Liability of Customers in Unauthorised Electronic Payment
          Transactions in Prepaid Payment Instruments (PPIS) Issued by Authorised Non-Banks
17.2   Wilful Defaulters
18.     Gold Monetization Scheme, 2015 (updated as on 9.1.2019
19.     Introduction of Legal Entity Identifier for Large Corporate Borrowers
20.     Payments Bank and Small Finance Banks - Access to Call/Notice/Term Money Market
21.     Enforcement Action Framework in Respect of Statutory Auditors for Lapses in Statutory Audit of
           Commercial Ban
22.     Appointment of Statutory Central Auditors (SCAS) Modification of Rest Period
Division IV
Auditing Through CBS
1.    List of Important Menu Commands in Finacle, Bancs and Flex Cube
2.    Manual Updation in CBS and its Verification Aspects
References
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Author Details
Kamal Garg is an associate member of the institute ofCharteredAccountants of India. He is first class graduate from DeenDayalUpadhyaya College, University of Delhi. His areas of interestincludeaccounting and auditing. He has contributed articles forStudents'Newsletter of ICAI and other professional journals. He hasparticipatedat Seminars as a speaker and is an eminent faculty onauditing. He hasaddressed innumerable workshops on Accounting Standardsand IFRS acrossIndia including alomost all the metros. He is also a guestspeaker at Pristene's Knowledge Group (PKG), Mumbai. He has tohiscredit several books for the professionals and students whicharewidely acclaimed...
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