WIRC of ICAI

Audit Planning & Audit Certification including Gosh-

Jilani Report

Presentation By

CA. Nitant Tri lokekar

Email: nitanttrilokekar @yahoo.comInternet: nptbanking.blogspot.com

Expected shortly

BY FAILING TO PREPARE YOU ARE PREPARING TO

FAIL

Plan your work and work your plan

Benjamin Franklin

Why Plan

Well planned activity is well done

Well planned activity is well done

Time available does not match the scope and riskTime available does not match the scope and risk

Channel increase & computerisation has permitted manifold increase in business of the Bank

Channel increase & computerisation has permitted manifold increase in business of the Bank

5

‘Specialist’Branches

‘Regular’ Branches

Types of Branches

Type of branch 1 st Step of planning

Requisite staff to match the Branch profi le

Requisite staff to match the Branch profi le

Brushing up certain areas like Foreign ExchangeBrushing up certain areas like Foreign Exchange

Time to go through the RBI Master and subject relevant circulars

Time to go through the RBI Master and subject relevant circulars

HRPlan HR

Plan

Documents - the start and end

Appointment letter 1 st Document Appointment letter 1 st Document

Letter of requirements Letter of requirements

Minute your discussion with full identification of person

Minute your discussion with full identification of person

Working papers (next slide) Working papers (next slide)

Working notes different from Corporate sector

Signed Final Accounts

Signed Final Accounts

Trial balance Trial balance

Scroll of each department – Advances – New advances, sticky advances

Scroll of each department – Advances – New advances, sticky advances

Important Extracts of other Audit Reports incl previous year’s

Important Extracts of other Audit Reports incl previous year’s

Start before the year end

Acclimatize to the Branch profi le, Staff, Tea etc.

Acclimatize to the Branch profi le, Staff, Tea etc.

Health of majority borrowers not likely to changeHealth of majority borrowers not likely to change

Study thoroughly 1.Previous report2.Concurrent Audit report3.Revenue Audit report (if any)4.System Audit report (Jalani Committee)5.Unit/stock Inspection reports

Study thoroughly 1.Previous report2.Concurrent Audit report3.Revenue Audit report (if any)4.System Audit report (Jalani Committee)5.Unit/stock Inspection reports

Co-ordinate plans with Bank Branch

Request for sit t ing on Sundays and Bank Holidays

Request for sit t ing on Sundays and Bank Holidays

Unit visits chosen by you – especially for outstation location

Unit visits chosen by you – especially for outstation location

Sharing your strategy will ensure staff and physical accomodation

Sharing your strategy will ensure staff and physical accomodation

Meeting the Concurrent Auditor with Branch Manager to discuss serious pending issues

Meeting the Concurrent Auditor with Branch Manager to discuss serious pending issues

Planning for different elements of Audit

Planning for Branch Health incl Fraud/leakages Planning for Branch Health incl Fraud/leakages

Planning for Health determination of borrowers Planning for Health determination of borrowers

Planning for Computer related issues Planning for Computer related issues

Planning for Branch health

Ratio analysis – same year & ComparisonRatio analysis – same year & Comparison

Books to tally Books to tally

Revenue accuracy Revenue accuracy

Top 10/20 borrowers Top 10/20 borrowers

Planning for health determination of borrowers

Branch returns--half year/monthly Branch returns--half year/monthly

Cash Credit--Account Turnover 10 times the sanctioned limit

Cash Credit--Account Turnover 10 times the sanctioned limit

Planning for Computer related issues

Identify application brand and available reports Identify application brand and available reports

Obtain sufficient number of User ID Obtain sufficient number of User ID

TXT file to Excel TXT file to Excel

Read Jalani Committee recommendations Read Jalani Committee recommendations

RBI site must be in your book mark AT THE TOP

Credit conversion factor (CCF) Credit conversion factor (CCF)

Financial guarantees are direct credit substitutes ( CCF of 100 per cent )

Financial guarantees are direct credit substitutes ( CCF of 100 per cent )

Performance guarantees (CCF of 50 per cent )(i) Bid bonds; (ii) Performance bonds and export performance guarantees; (iii) Guarantees in lieu of security deposits / earnest money deposits (EMD) for participating in tenders; (iv) Retention money guarantees; (v) Warranties, indemnities and standby letters of credit related to particular transaction.

Performance guarantees (CCF of 50 per cent )(i) Bid bonds; (ii) Performance bonds and export performance guarantees; (iii) Guarantees in lieu of security deposits / earnest money deposits (EMD) for participating in tenders; (iv) Retention money guarantees; (v) Warranties, indemnities and standby letters of credit related to particular transaction.

Off B/S items CAR

Upfront disbursal of sanctioned individual housing loans to the buildersUpfront disbursal of sanctioned individual housing loans to the builders

No link to stages of construction of housing project No link to stages of construction of housing project

EMI & interest serviced by the builders during theconstruction period/specified periodEMI & interest serviced by the builders during theconstruction period/specified period

Indirect f inancing

Disputes/non service by builders lower credit rating/scoring of such borrowers by credit information companies (CICs)

Disputes/non service by builders lower credit rating/scoring of such borrowers by credit information companies (CICs)

WIRC of ICAI

Certification including Gosh-Jilani Report

Presentation By

CA. Nitant Tri lokekar

Email: nitanttrilokekar @yahoo.comInternet: nptbanking.blogspot.com

What is a Certif icate

Annexures Annexures

LFAR LFAR

PMRY etc. PMRY etc.

Final AccountsFinal Accounts

Certif icates

• Certificate relating to DICGC transactions in respect of Credit Guarantee scheme

•PMRY Certificate

•Certificate relating to cash and Bank Balances

• Certificate relating to investments held

• Certificate in respect of segment Reporting (AS 17)

• Certificate on risk weighted assets for BASEL-II CRAR

• Certificate of NPAs at the Branch

• Interest subvention claim (short term crop loans, Kisan Credit card, Warehouse receipt to small and marginal farmers)

• Central interest subsidy scheme for Education loan to students belonging to economically weaker section (EWS)

• Utilization certificate under the scheme of 1% interest subvention on Housing Loans (upt 10 lacs and upto 15 lacs)

• Certificate for having given effect of MOCs suggested during the previous year.

•The audit report/ certificate should be printed on the letterhead of the auditor firm.

•It should be dated not earlier than the date on which the financial statements/ certificates are signed by the Branch Manager.

•The audit report/certificate should be signed in the personal name of the partner and on behalf of the firm.

•Firm registration number of ICAI should be invariably mentioned in the audit report along with the firm’s seal.

Protocol for issuing a Certif icate

Jilani committee recommendation status

May be held accountable under ICAI disciplinary process.May be held accountable under ICAI disciplinary process.

25 questions to be answered. Implemented/not implemented25 questions to be answered. Implemented/not implemented

Some of the Recommendations are to be implemented at Branch Level and some of them at RO/ZO LevelSome of the Recommendations are to be implemented at Branch Level and some of them at RO/ZO Level

Mere replica of previous reports. Mere replica of previous reports.Complaint

re:Auditors

Complaint re:

Auditors

Sr.no

Recommendation no.

Nature of Recommendation Implimentat ion status at Br.

1 39 Follow up on major/serious irregularities detected duringconcurrent audit immediately taken up with the HO. A timebound action programme for rectification to be drawn up andclosely monitored. Fraudulent transactions to be reported toVigilance/Chief of Inspection/Audit etc.

2 44 Auditors to get majority of irregularities rectified during theirstay at the branches concerned and guide them as well.

3 45 Immediate action to be taken to plug gaps in serious irregularities/revenue leakages which have surfaced due to loopholes in existing procedures, abnormal deviations from laid down procedures/ norms in consultation with the departments concerned by issue of fresh guidelines.

4 53 Appropriate control measures should be devised anddocumented to prevent the computer system from attacks ofunscrupulous elements. All aspects of security, reliability, andaccessibility are ensured before introduction of EDP applicationin place of manual system by having pilot parallel runs.

5 54 Various tests to be carried out to ensure that EDP applicationshave resulted in consistent and reliable system for inputting,processing and generation of output of data.

Jilani committee recommendation status

Ghosh committee recommendation status

Branch Management is required to prepare this reportBranch Management is required to prepare this report

“YES” or “NO” Format “YES” or “NO” Format

Branch Auditor is required to verify the answers Branch Auditor is required to verify the answers

Mere replica of previous reports. Mere replica of previous reports.

Committee formed to review the causes of frauds and malpractices in Banks and give recommendations on minimising the same.

Committee formed to review the causes of frauds and malpractices in Banks and give recommendations on minimising the same. Complaint

re:Auditors

Complaint re:

Auditors

Objective

a. Safety of assets,

b. Compliance of laid down procedures,

c. Accuracy and completeness of accounting

and other records,

d. Proper segregation and rotation of duties and

responsibilities of staff and,

e. Measures for the prevention of frauds.

f. Timely detection of frauds and malpractices

and taking corrective actions

Sr.no

Recommendation no.

Nature of Recommendation Implementat ion status at Br.

1 3.3 Joint custody and dual responsibility of cash and othervaluables.

2 3.4 Transactions in the currency chest to be reported to RBIon the same day.

3 3.5 Adhering to the prescribed norms and safeguards issuedby RBI on issue and payment of high value drafts,depositing large amounts in new accounts without verifying antecedents, opening of benami accounts, etc. to prevent misuse of banking channel.

4 8.10 a. System of exclusive scrutiny of credit portfolio with focus on larger advances and group exposures.

b. Special scrutiny of high value accounts shifted to the bank along with executives and account transferred from

other branches along with officials. The observations of RBI Inspections should be promptly and effectively followed up by banks.

Ghosh Committee Recommendations

Thank you

Q & A?