circular 2015 / 02 determination under the …icancpd.net/ftp/public/circulars/circulars 2015/2015...

The premier professional qualification in accounting, tax and business matters. Does a chartered accountant service your organisation?

CIRCULAR 2015 / 02 DETERMINATION UNDER THE BANKING INSTITUTIONS ACT,1998 (ACT NO 2 OF 1998), AS AMENDED: APPOINTMENT, DUTIES AND RESPONSIBILITIES OF AN INDEPENDENT AUDITOR OF A BANKING INSTITUTION (BID 10)

ICAN has in the past, issued a circular to establish a standard professional accountant’s interpretation of the BID 10: Appointment, Duties and Responsibilities of an Independent Auditor of a Banking Institution as issued by the Bank of Namibia.

The need has arisen to issue a new ICAN circular to account for the changes in the reporting requirements brought about by the implementation of the amended BID 10 by the Bank of Namibia with effect from financial year ends commencing after 31 December 2012. At the same time, developments in International Standards on Auditing (ISA) have necessitated a review of the current proposed forms of auditor’s reports on Banking Institution Returns (BIR).

This document sets out the revised reports in Appendix 1 to be issued by the auditors of banks. The circular was presented to the Bankers Association and Bank of Namibia after which it was presented to the ICAN technical committee and approved by the ICAN Council, before being issued as a circular.

This document also sets out the basis of conclusion for proposing the relevant report on the different returns.

DETERMINATION ON CONSOLIDATED SUPERVISION - BANKING DETERMINATION 24 (BID-24)

The need has arisen to i s s u e a n I CAN circular to account for consolidated reporting requirements brought about by the implementation of BID-24 by the Bank of Namibia. The requirements of this circular will be effective from financial year ends ending on or after 31 December 2014. In a joint meeting of representatives of the Bank of Namibia (BON) and representatives from the Bankers Association of Namibia (BAN) facilitated by the Institute of Chartered Accountants in Namibia (ICAN), BON confirmed the requirement for consolidated returns to be subjected to external scrutiny and confirmed that Agreed Upon Procedures performed at year-end and one other quarter in each financial year would be sufficient for their purposes. This document sets out in Appendix 1 the report to be issued by the auditors of banks related to consolidated returns. This document also sets out the basis of conclusion for proposing the relevant report on the different returns.

The premier professional qualification in accounting, tax and business matters. Does a chartered accountant service your organisation?

Transitional arrangements

A bank’s year-end may not coincide with the period in which new revised returns are applicable. The transitional arrangements are that from the beginning of the financial year of the bank after 31 December 2013, the new returns and reporting requirements will apply. For example: 31 December year ends. The revised returns for the year-end and the monthly returns will be applicable for 31 December 2014 year ends. 30 June year ends. The Revised returns for the year-end and the monthly returns will be applicable for the 30 June 2015 year ends.

J de la Rey du Toit CA(Nam) Chief Executive Officer Institute Of Chartered Accountants of Namibia 25 March 2015, Windhoek, Namibia

3

Guidance notes

Random selection

When selecting a sample of items to test, random selection techniques should be used. This implies the use of statistical modelling techniques, rather than using a haphazard approach.

The use of the random number generator function with an excel spreadsheet is considered sufficiently random, hence there is no need to develop other statistical modelling techniques to generate a randomly selected population.

Revised returns

On occasion, returns may be subject to revision after initial submission to Bank of Namibia. In these circumstances, the revised returns must clearly indicate that they have been revised and the report by the independent auditor must clearly indicate that the report is issued in connection with the revised return.

Differentiating audit, review and agreed upon procedures

A distinction had been drawn on audit reports prepared in terms of ISA 800: Special Considerations—Audits Of Financial Statements Prepared In Accordance With Special Purpose Frameworks, review reports prepared in terms of ISRE 2410 Review Of Interim Financial Information Performed By The Independent Auditor Of The Entity and agreed upon procedures reports prepared in terms of ISRS 4400 Engagements To Perform Agreed-Upon Procedures Regarding Financial Information, in order to comply with the auditing standards issued under International Standards on Auditing and to provide the various levels of assurance or factual findings as required by the revised BID 10 in an efficient manner.

These reports have been designed in order to provide different levels of assurance or factual findings on whether the returns subject to that report, have been prepared in compliance with the requirements of the Determination covering that return. Therefore some line items may be subject to review in certain reports, while subject to audit in other reports.

To avoid confusion arising on the level of comfort or factual findings presented in a report, no reference is made to a line item subject to audit, review or agreed upon procedures in a different report.

4

Format of reporting

We considered the audit reports available under various IFAC pronouncements, and concluded as

follows:

Number Description Comment Conclusion ISA – specifically ISA 700

Deals with audit opinions on a full set of general purpose financial statements, prepared in accordance with accounting framework.

Full set – each return is not a full set of financial statements

General purpose – these returns are not general purpose, and are prescribed by BoN, for banking supervision purposes

These returns are prepared in accordance with BoN directives, and not necessarily in accordance with IFRS

Not applicable

ISA 800 Special considerations — audits of financial statements prepared in accordance with special purpose frameworks

A special purpose framework is defined (amongst others) as “financial reporting provisions established by a regulator to meet the requirements of that regulator”

Applicable due to special purpose framework

ISA 805 Special considerations — audits of single financial statements and specific elements, accounts or items of a financial statement

Applies ISA 100-700 to audit of specific element ISA 800 also applies if using special purpose framework.

Used as a template for reporting.

ISA 810 Engagements to report on summary financial statements derived from financial statements audited in terms of ISA by the same auditor.

This applies to summary financial statements derived from audit financial statements and is not applicable to the returns required by the BID 10 since the requirements of the BID 10 are based on a special purpose framework.

Not applicable

ISAE 3000 Assurance engagements other than audit or review of historical financial information

As some returns contain information that is not historical financial information, but some assurance is required.

Applies to returns with information that is not historical financial information.

5

Number Description Comment Conclusion ISAE 3400 Prospective financial

information Not required Not

applicable

ISAE 3402 Third party service organisations

Not required Not applicable

ISRS 4400 Engagements to perform agreed upon procedures

This will be the best match for certain requirements of BID10.

Applies to all returns not audited

ISRS 4410 Engagements to compile financial statements

Not required Not applicable

ISRE 2400 Engagements to review financial statements

Returns are being reviewed by auditors of the banks, thus this standards is not applicable

Not applicable

ISRE 2410 Review of interim financial information performed by the independent auditor of the entity

This ISRE is directed towards a review of interim financial information by an entity's auditor. However, it is to be applied, adapted as necessary in the circumstances, when an entity's auditor undertakes an engagement to review historical financial information other than interim financial information of an audit client.

Is applicable

6

Summary of applicable returns and reporting requirements (BID 10)

Section 49 (5) of the Act requires the Auditor to report on the

following returns submitted by a

bank in terms of Section 49 of the

Act.

8.3 (a) requirements

Type of report

required by 8.3

(a)

8.3 (b) requirements

Type of report

required by 8.3

(b)

8.3 (c) requirements

8.3(c) (other

reports)

Regularity of submission of the return

8.3 (c) reporting

requirements

Applicable BID

Dealing with the return

BIR 101 Balance sheet or Statement of financial position

Year-end Audit n/a n/a Reports other than at year-end

Agreed upon procedures

Monthly One return per calendar

quarter – i.e. 3 additional

returns to the year-end return

-

BIR 111 Off balance sheet or Off Statement of Financial Position Return

n/a n/a Year-end Review Reports other than at year-end


Monthly One return per calendar quarter

-

BIR 201 Income statement or Statement of Comprehensive Income




-

BIR 401 Consolidated Return on Capital Adequacy Ratio



Quarterly Any one return for any other

calendar quarter

5

7

Section 49 (5) of the Act requires the Auditor to report on the

following returns submitted by a

bank in terms of Section 49 of the

Act.

8.3 (a) requirements

Type of report

required by 8.3

(a)

8.3 (b) requirements

Type of report

required by 8.3

(b)

8.3 (c) requirements

8.3(c) (other

reports)

Regularity of submission of the return

8.3 (c) reporting

requirements

BID

BIR 501 Return on Credit risk




calendar quarter

2

BIR 511 Single borrower and concentration risk return




calendar quarter

4

BIR 621 Liquidity risk return




BIR 610 Minimum liquid assets return




6

MRR1 Minimum reserve requirements return




-

8

Summary of Applicable Returns and Reporting Requirements BID (24):

Return Code (Return submitted by a Bank in terms of Section 47 of the Act)

Return Name Type of Report to be Issued

Regularity of Return Submission to BoN

Auditors’ Procedures and Reporting

BCR-001 Consolidated Balance Sheet Agreed upon procedures report

Quarterly Year-end return in addition to one quarterly return BCR-002 Consolidated Off-Balance Sheet Agreed upon

procedures report Quarterly Year-end return in

addition to one quarterly return

BCR-003 Consolidated Income Statement Agreed upon procedures report

Quarterly Year-end return in addition to one quarterly return

BCR-004 Consolidated Capital Adequacy Requirements

Agreed upon procedures report


BCR-005 Credit Risk Weighted Assets Agreed upon procedures report


9

Summary of Applicable Returns and Reporting Requirements (continued):

Return Code (Return submitted by a Bank in terms of Section 47 of the Act)

Return Name Type of Report to be Issued

Regularity of Return Submission to BoN

Auditors’ Procedures and Reporting

BCR-006 Risk-Weighted Assets for Market Risk Return



BCR-007

Risk-Weighted Assets for Operational Risk



BCR-008 Large Exposures (Group Wide) Agreed upon procedures report


BCR-009 Intra-Group Exposures and Transactions


Semi-annual Year-end return in addition to one semi-annual return

BCR-010 Group Members Agreed upon procedures report

Semi-annual Year-end return in addition to one semi-annual return

APPENDIX 1

Pro-Forma Independent Auditors’ Report to the Bank of Namibia on the Statutory Banking

Institution Returns in Compliance With Regulations Relating to Banks in Terms of the

Banking Institutions Act No. 2 Of 1998 (As Amended).

10

COVER LETTER

The Director

Banking Supervision Department

Bank of Namibia

P.O. Box 2882

WINDHOEK

Dear Sir,

REPORT OF THE INDEPENDENT AUDITORS OF [NAME OF BANK] TO THE DIRECTOR OF BANKING SUPERVISION OF THE BANK OF NAMIBIA (“THE DIRECTOR”), ON THE STATUTORY RETURNS OF THE BANK IN TERMS OF THE BANKING INSTITUTIONS ACT, 1998 (ACT NO. 2 OF 1998) AS AMENDED AND DETERMINATIONS 10 AND 24 UNDER THE BANKING INSTITUTIONS ACT1 2

We have completed our audit of the <consolidated> Annual Financial Statements of [Name of Bank] (the Bank) for the year ended <insert year-end date> on which we issued an unmodified opinion on <insert date auditor’s report was signed>. Our audit was performed in accordance with International Standards on Auditing. We have drawn on evidence obtained in the course of our audit where appropriate, and performed such additional year-end procedures considered necessary in order to complete our examination of the Statutory Returns (the returns) of the Bank submitted to the Director of Banking Supervision of the Bank of Namibia (the Director) as at the financial year ended on <insert year-end date> and enclose our report.

Directors’ responsibility for the returns

The directors are responsible for compliance with the Banking Institutions Act, 1998 (the Act) and BID 10 and BID 24, including the preparation and submission of the relevant Annual Financial Statements and returns to the Director during the year ended <insert year-end date>.

1 While the auditor’s report on the statutory returns is to be submitted directly to the Bank of Namibia by the auditor,

a copy of the auditor’s report is also provided to the directors / audit committee of the Bank. 2 Where the auditor considers a modified opinion is required on any section of the report, whether a qualified

opinion, adverse opinion, or disclaimer of opinion, or where an emphasis of matter or other matters paragraph is

considered appropriate, the auditor should follow the guidance in the reporting standards contained in the

International Standards on Auditing and modify the wording of the audit or review report accordingly. Given the

nature of the returns, it may be appropriate for any such modifications to be presented in a separate annexure to the

report, in a tabular or narrative format, that might include the following recommended headings:

BIR return number

Line number

Column number

Observation providing the basis for the modified opinion

Recommendation

Amount of error

Potential impact of error / material misstatement on other returns

Management response (completed by management)

Date of resolution (completed by management)

APPENDIX 1




11

Auditors’ responsibility

Our responsibility is to express our respective audit opinions, review conclusions or to state our factual findings on the respective returns based on our audit, review, other assurance or agreed-upon procedures engagements, performed in accordance with International Standards on Auditing (ISA's), International Standards on Review Engagements (ISRE's) and International Standards on Related Services (ISRS's), and to report on such additional matters as required by the Director and as set out in the respective Parts A to D of our report.

Opinions, conclusions and factual findings

Our respective audit opinions, review conclusions and factual findings are expressed in the individual Parts A to D of our reports attached. Should you wish to discuss the contents of our reports in any further detail, please contact [Partner/s Name/s].

Restriction on use and distribution

The returns are prepared in accordance with the Act and BID 10 and BID 24 on the basis indicated in the respective Parts of our report for the purpose of reporting to the Director and the

<Directors, Board, Sub-Committee Chairpersons, Management, Regulatory Reporting3> of

the Bank, consequently the respective returns and our related reports may not be suitable for another purpose and are not to be distributed to or used by any other parties other than as provided for in the Act4.

Yours faithfully

[PARTNER NAME] Partner

[FIRM] Cc: [Board, Sub-Committee Chairpersons], [Management], Regulatory Reporting]

3 Delete whichever is not applicable 4 Section 64 of the Act provides for Confidentiality and Secrecy

APPENDIX 1




12

PART A – AUDIT REPORT ON BANKING INSTITUTION RETURNS Audit Report of the Independent Auditors of <insert name of Bank> (“Bank”) to the Director of Banking Supervision of the Bank of Namibia (“The Director”), in accordance with the Banking Institutions Act 1998 (Act No 2 of 1998) (“The Banking Institutions Act”) and paragraphs 8.3(a) and 8.3(d) of Determination 10 under the Banking Institutions Act in respect of the following year-end returns: BIR 101 (Balance Sheet or Statement of Financial Position), BIR 201 (Income Statement or Statement of Comprehensive Income), BIR 401 (Consolidated Return on Capital Adequacy) We have completed our audit of the year-end BIR 101 Balance Sheet or Statement of Financial Position (lines: 1-50 columns 1- 4 and lines 51 – 114 column 1), BIR 201 Income Statement or Statement of Comprehensive Income (lines: 1-79 column 2) and BIR 401 Consolidated Return on Capital Adequacy (Risk-Weighted Capital return lines (1 – 30 and lines 37 – 50; lines 51 – 106 and lines 297 – 315) (the returns) of the Bank as submitted to the Director, for the month of [insert month and year] prepared in accordance with the Banking Institutions Act and Determination 10 under the Banking Institutions Act (“BID 10”). We have initialled the attached returns for identification purposes. Directors’ responsibility for the returns The directors are responsible for ensuring that the year-end returns are prepared in accordance with the Banking Institutions Act and BID 10, and in all material respects:

(i) reasonably reflect the information contained in the statutory financial statements or management accounts presented to the board of directors;

(ii) reflects that in the management accounts;

(iii) are complete in so far as all relevant information contained in the accounting and other records at the reporting date has been extracted therefrom and recorded in the returns;

(iv) are accurate in so far as they correctly reflect the information contained in, and extracted from, the accounting and other records at the reporting date;

(v) are prepared using the same accounting policies as those applied in the management accounts and the statutory financial statements; and

(vi) are prepared in accordance with the rules and guidelines set out in the applicable determinations issued under the Banking Institutions Act.

This responsibility includes designing, implementing and maintaining such internal control as the directors determines is relevant to the preparation and presentation of the returns that are free from material misstatement, whether due to fraud or error, using the same accounting policies as those applied in the management accounts and Annual Financial Statements, and in accordance with the directives and instructions of the Act and the Determinations.

APPENDIX 1




13

Auditors’ responsibility Our responsibility, in accordance with the Banking Institutions Act and BID 10, is to express and opinion on whether the year-end returns have been prepared in all material respects in accordance with the requirements specified in the BID 10 based on our audit. We conducted our audit of the above returns in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the returns are free of material misstatement. An audit involved performing procedures to obtain audit evidence about the amounts and disclosures in the returns. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the returns, whether due to fraud or error. In making those risk assessments, the auditor considers evidence obtained during the audit of the Annual Financial Statements regarding internal controls relevant to the entity’s preparation and fair presentation of the financial statements, in order to design such additional audit procedures regarding internal controls relevant to the preparation of the above statutory returns that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes obtaining evidence that the returns have been prepared using the same accounting policies as those applied in the management accounts and Annual Financial Statements and in accordance with the rules and guidelines set out in the applicable Determinations issued under the Banking Institutions Act and BID 10. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our opinion. [Basis for Qualification] [Detail if required] [Qualified] Opinion [Except as indicated in the paragraph above], In our opinion, the returns as defined above of the Bank as at <insert year-end date> are prepared in all material respects in accordance with the requirements specified in BID 10.5

5 Where the auditor considers a modified opinion is required, whether a qualified opinion, adverse

opinion, or disclaimer of opinion, or where an emphasis of matter (other matters) is considered

appropriate, the auditor should follow the guidance in the reporting standards contained in the

International Standards on Auditing and modify the wording of the audit report accordingly. Any such

modifications may be presented in a separate Annexure and follow the format suggested in Footnote 2.

APPENDIX 1




14

[Emphasis of Matter] [Detail if required] Basis of Accounting and Restriction on use and distribution Without modifying our opinion, we draw attention to the fact that the returns of the Bank are prepared in accordance with the Banking Institutions Act and BID 10 on the basis indicated above for the purpose of reporting to the Director and the <Directors, Board, Sub-Committee Chairpersons, Management, Regulatory Reporting6> of the Bank, consequently, the returns and our report may not be suitable for another purpose and is not to be distributed to or used by any other parties other than as provided for in the Banking Institutions Act7. Chartered Accountants (Namibia) Registered Accountants and Auditors Per: Name of partner Partner Place Date

6 Delete whichever is not applicable 7 Section 64 of the Banking Institutions Act provides for Confidentiality and Secrecy

APPENDIX 1




15

PART B – REVIEW REPORT ON BANKING INSTITUTION RETURNS Review Report of the Independent Auditors of <insert name of Bank> (“the Bank”) to the Director of Banking Supervision of the Bank of Namibia (“The Director”), in accordance with the Banking Institutions Act, 1998 (Act No 2 of 1998) as amended (“Banking Institutions Act”) and paragraphs 8.3 (b) and 8.3(d) of Determination 10 under the Banking Institutions Act (“BID 10”) in respect of the following year-end returns: BIR 101 (Balance Sheet or Statement of financial position), BIR 111 (Off-Balance Sheet), BIR 401 (Risk-Weighted Capital return) lines 31-36 and 107-296, [BIR 500 or BIR 501 as needed] (Credit Risk), BIR 511 (Single Borrowers and Concentration Risk), BIR 621 (Liquidity Risk), BIR 610 (Minimum Liquid Assets), and MRR 1 (Minimum Reserve Balances).

We have reviewed the information contained in the year-end BIR 101 Balance Sheet or Statement of Financial Position (lines 1 – 50 column 5 -6) and lines 51 – 114 column 2 – 3), BIR 111 Off-Balance Sheet (lines 1 – 22), BIR 401 Risk-Weighted Capital return lines 24 – 335) and tables 1-9, BIR 501 Credit Risk (whole return), BIR 511 Single Borrowers and Concentration Risk (whole return), BIR 621 Liquidity Risk (whole return), BIR 610 Minimum Liquid Assets (whole return) and MRR 1 Minimum Reserve Balances (whole return) returns (“the returns”) of the Bank submitted to the Director for the month of [insert month and year] prepared in accordance with the Banking Institutions Act and BID 10. We have initialled the attached returns for identification purposes.

Directors’ responsibility for the returns The directors are responsible for ensuring that the year-end returns are prepared in accordance with the Banking Institutions Act and BID 10, and in all material respects:

(i) reasonably reflect the information contained in the statutory financial statements or management accounts presented to the board of directors;

(ii) reflects that in the management accounts;

(iii) are complete in so far as all relevant information contained in the accounting and other records at the reporting date has been extracted therefrom and recorded in the returns;

(iv) are accurate in so far as they correctly reflect the information contained in, and extracted from, the accounting and other records at the reporting date;

(v) are prepared using the same accounting policies as those applied in the management accounts and statutory financial statements; and

(vi) are prepared in accordance with the rules and guidelines set out in the applicable Determinations issued under the Banking Institutions Act.

This responsibility includes designing, implementing and maintaining such internal control as the directors determine is relevant to the preparation and presentation of the returns that are free from material misstatement, whether due to fraud or error, using the same accounting policies as those applied in the management accounts and Annual Financial Statements, and in accordance with the directives and instructions of the Act and the Determinations. Auditors’ responsibility Our responsibility, in accordance with BID 10, is to state whether, based on our review, anything has come to our attention that causes us to believe that the year-end returns specified above are not prepared in all material respects in accordance with the requirements specified in the Act and BID 10. We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, “Review of Interim Financial information performed by the Independent Auditor of the Entity” which standard has been applied and adapted as necessary in our review of the financial information contained in the above returns. A review consists of making inquiries primarily of persons responsible for financial and accounting matters and regulatory returns and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become

APPENDIX 1




16

aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.

Conclusion

Based on our review nothing has come to our attention that causes us to believe that the returns of the Bank as at <insert year-end date> are not prepared in all material respects in accordance with BID-108.

Basis of Accounting and Restriction on use and distribution

The returns of the Bank are prepared in accordance with the Banking Institutions Act and BID 10 on the basis indicated above for the purpose of reporting to the Director and the <Directors, Board Sub-Committee Chairpersons, Management, Regulatory Reporting9> of the Bank, consequently, the returns and our review report may not be suitable for another purpose and is not to be distributed to or used by any other parties other than as provided for in the Banking Institutions Act10.

Chartered Accountants (Namibia) Registered Accountants and Auditors Per: Name of partner Partner Place Date

8 Where the auditor considers a modified opinion is required, whether a qualified opinion, adverse

opinion, or disclaimer of opinion, or where an emphasis of matter (other matters) is considered

appropriate, the auditor should follow the guidance in the reporting standards contained in the

International Standards on Auditing and modify the wording of the audit report accordingly. Regard

should also be had to the “Materiality Considerations by External Auditors for Reporting on the BA

Returns” for the basis agreed by the Task Group of ICAN and the Bank of Namibia for reporting

modified opinions. Any such modifications may be presented in a separate Annexure and follow the

format suggested in Footnote 2. 9 Delete whichever is not applicable 10 Section 64 of the Banking Institutions Act 1998 provides for Confidentiality and Secrecy

APPENDIX 1 Independent Auditors’ Report to the Bank of Namibia on the Consolidated Statutory Banking Institution Returns in Compliance With Regulations Relating to Banks in Terms of the Banking Institutions Act No. 2 of 1998 (as amended)

17

PART C – AGREED UPON PROCEDURES REPORT ON BANKING INSTITUTION RETURN

Report of the Independent Auditors of <insert name of Bank> (“Bank”) to the Director of Banking Supervision of the Bank of Namibia (“Director”) on matters arising from procedures performed in respect of returns completed for months other than year-end to enable the Director to evaluate the compliance by the Bank with the requirements specified in paragraph 8.3 (c) of the Determinations (“BID 10”) under the Banking Institutions Act, 1998 (Act No. 2 of 1998) (“Banking Institutions Act”) We have performed the procedures agreed with the Director, as set out below with respect to the BIR returns specified below, for the months other than that ended [insert date], submitted to the Director and prepared in compliance with BID 10. Our engagement was undertaken in accordance with International Standard on Related Services ISRS 4400 – Engagements to perform Agreed-Upon Procedures Regarding Financial Information. Our procedures were performed solely to assist the Director in evaluating whether any instances of non-compliance with the requirements of BID 10 were identified. The responsibility for determining the adequacy or otherwise of the procedures agreed to be performed is that of the Director and Management of the Bank. We have initialed the attached monthly returns for identification purposes.

Directors’ responsibility for the statutory returns The directors are responsible for ensuring that the statutory returns for months other than year-end are prepared in accordance with the requirements specified in BID 10 and in all material respects: (i) reasonably reflect the information contained in the management accounts presented to

the board of directors; (ii) reflects that in the management accounts; (iii) are complete in so far as all relevant information contained in the accounting and other

records at the reporting date has been extracted therefrom and recorded in the returns; (iv) are accurate in so far as they correctly reflect the information contained in, and extracted

from, the accounting and other records at the reporting date; (v) are prepared using the same accounting policies as those applied in the management

accounts and last statutory Annual Financial Statements; and (vi) are prepared in accordance with the rules and guidelines set out in the applicable

Determinations issued under the Banking Institutions Act.

This responsibility includes designing, implementing and maintaining such internal control as the directors determine is relevant to the preparation and presentation of the returns that are free from material misstatement, whether due to fraud or error, using the same accounting policies as those applied in the management accounts and last Annual Financial Statements, and in accordance with the rules and guidelines set out in the applicable Determinations issued under the Banking Institutions Act.

APPENDIX 1

Independent Auditors’ Report to the Bank of Namibia on the Consolidated Statutory Banking

Institution Returns in Compliance With Regulations Relating to Banks in Terms of the Banking

Institutions Act No. 2 of 1998 (as amended)

18

Agreed-upon procedures in respect of Banking Institution Returns for months other than year-end General Procedures – All Returns

Procedures Factual Findings

1. For each monthly return, select three returns other than at year-end and for each quarterly return one additional return.

Record the returns selected.

2. For months selected, enquire from the management whether the return has been prepared on a consistent basis during the year and at year- end and record any inconsistencies noted by the statutory reporting officer.

3. Enquire from the statutory reporting officer whether the same sources of information for the preparation of the return were used during the year and at year-end and record any inconsistencies noted by the statutory reporting officer.

4. Confirm the mathematical accuracy of each selected return by re-computing the recorded totals and subtotals and inspect the return for evidence that it balances.

5. Compare the months selected to the year-end returns. Obtain explanation from management for items appearing in the year-end return, not in other returns, and for items appearing in other returns, but not at year end and record any exceptions.

6. For items selected for testing, inspect whether the underlying records to which items were traced, are consistent with the underlying records used for year-end returns and note any exceptions.

7. Inspect the preceding year’s management letter and audit committee document from the external auditors as well as the prior year financial statements, setting out any qualification, emphasis of matter, interpretive and housekeeping matters reported.

For those matters affecting returns for months other than the year-end, through discussion with management, enquire from management as to the actions taken to correct these matters.

Record any discrepancies noted as well as the months from which, according to management the matters noted were rectified.

APPENDIX 1




19


8. Inspect the current year’s management letter and audit committee document from the external auditors as well as the current year financial statements, setting out any qualification, emphasis of matter, interpretive and housekeeping matters reported.

For those matters potentially affecting returns for months other than the year-end enquire of management and inspect the returns for months other than year end, to confirm whether or not, other months are affected.

Record any discrepancies noted.

9. Obtain from management copies of all correspondence between the Bank and the Bank of Namibia regarding BIR reporting interpretations and errors and confirm through discussion with management and inspection of the selected returns that the matters identified have been addressed.

Record the date on which corrective action was taken, any matters not yet corrected as well as any discrepancies noted.

10. Obtain all resubmitted returns during the year from management and perform the following procedures:

a) Enquire of management and document their reasons for the resubmission.

Where the resubmitted return validates (i.e. cross-references) to other returns in accordance with the Bank of Namibia validation rules, re-perform the validation check to confirm that it continues to reconcile with the other returns.

APPENDIX 1




20

BIR 101 – Balance Sheet or Statement of Financial Position Return


1. For the returns selected compare the data included in the BIR 101, to the management accounts for the bank by randomly selecting a total of 10 line items and tracing the selected items to the underlying financial records. List the line items selected and record any exceptions noted.

BIR 111 – Off-Balance Sheet Return


1. For each return selected compare the data included in the BIR 111, to the management accounts for the bank by randomly selecting 5 line items, and tracing the selected items to supporting documentation. List the line items selected and record any exceptions noted.

BIR 201 – Income Statement or Statement of Comprehensive Income Return


1. For each return selected compare the data included in the BIR 201, to the management accounts for the bank by randomly selecting a total of 10 line items and tracing the selected items to the underlying financial records. List the line items selected and record any exceptions noted.

2. For each return selected, agree the retained earnings amount (line item 79) to the retained earnings amount in BIR 101 (line item 42).

APPENDIX 1




21

BIR 401 – Capital Adequacy


1. For the return selected, compare the data included in the BIR 401, to the management accounts for the bank by randomly selecting a total of 10 line items and tracing these items to the underlying financial records. List the line items selected and record any exceptions noted.

2. For the selected r e t u r n , agree the off-balance sheet exposure amounts to BIR 111

BIR 401

line

BIR 111

line

159 13

184 6

192 2

200 4

208 5

216 14

224 8

Record any exceptions noted.

[BIR 500 or BIR 501as needed] – Credit Risk


1. For the selected return, compare the data included in the [BIR 500/501], to the management accounts for the bank by randomly selecting a total of 5 line items and tracing these items to the underlying financial records. List the line items selected and record any exceptions noted.

2. Agree the amounts in the total column to the corresponding total amounts in BIR 101.

3. Recalculate the minimum provisioning amounts required as per BID 2 for a sample of any 2 categories of advances and note any instance of non-compliance.

APPENDIX 1




22

BIR 511 – Return on Single Borrower and Concentration Risk


For the selected return:

1. Agree the ‘Total Capital Funds computed in

terms of the Determination on Capital

Adequacy (BID-5)’ line 8 to the ‘Total

Qualifying Capital’ (line 36) in BIR 401.

2. Re-Compute 30% of the ‘Total Capital Funds’

and compare this amount to the selected return. Record any group exposure exceeding this amount.

3. Obtain the non-performing loan lists supporting the non-performing loan general ledger accounts from management. Re-compute 10% of the Total Capital Funds and compare this amount to the non-performing loan list. Record any exposure exceeding this amount.

4. Randomly select 10 line items and trace these items to the following supporting documentation:

Approved limit, approval and expiry date to the client file from the credit department

Amount outstanding to underlying

financial records

List the line items selected and record any

exceptions noted.

5. Compare BIR 511 sheet BIR511C totals to BIR500 or BIR501 as applicable and record any discrepancies.

BIR 511

Column/line

BIR 500

Column/line

BIR 501 Column/line

15/1 6/84 H/98

15/2 Sum(3,4,5)/84 (3+4+5)/76

15/3 Sum(3,4,5)/85 (3+4+5)/77

15/4 Sum(3,4,5)/88

(3+4+5)/80

APPENDIX 1




23

BIR 610 – Minimum Liquid Assets


1. For each selected return, re-compute line 5 as 10% of line 4 and compare to line 6, noting that this amount does not exceed line 6 (i.e. line 6 is in excess).

2. For each selected return, compare line 5, 6 and 17 respectively to the liquid asset statutory requirement, average daily amount of liquid assets held over the compliance period and excess/deficiency supporting calculation recorded in the ALCO (assets and liabilities committee) minutes and record any discrepancies.

3. For each selected return, agree line items 7-16

to the supporting calculation prepared by the

bank and record any discrepancies noted.

4. For each selected return, select 2 dates and agree the minimum liquid asset line items on the supporting calculation to the bank’s relevant supporting schedules.


APPENDIX 1




24

BIR 621 – Liquidity Risk Return


1. For the return selected, compare the data included in the BIR 621, to the data from which management compiled the return by randomly selecting a total of 5 line items and tracing these items to the underlying financial records. List the line items selected and record any exceptions noted.

2. Compare BIR 621 to BIR101 and record any discrepancies.

BIR 621

Column/line

BIR 101

Column/line

Sum(1-8)/1 1/111

Sum (1-2)/2 1/33

Sum(3-8)/2 Sum(2-3)/33

Sum(1-2)/32 1/15

Sum(3-8)/32 Sum(2-3)/15

3. Compare BIR 621 to BIR 111 and record any discrepancies.

BIR 621

Column/line

BIR 111

Line

Sum(1-8)/10 12

Sum(2-8)/11 6

Sum(1-8)/12 8

APPENDIX 1




25

MRR 1 - Return on Minimum Reserve Balances


For the selected return:

1. Agree the ‘Required Minimum Balance’ to the

balance on the Bank of Namibia account and

inspect that the requirements for the holding

period are met (15th of month subsequent to

month to which return relates up until the 14th

of the month following).

2. Inspect the selected returns to ensure that for

Sundays and Public Holidays the amounts

agree to the amounts at the end of the

previous working day (per BON-D 1/2005).

3. Agree the ‘Average Daily Amount of Total

Liabilities to the Public’ to the average total

liabilities to the public per the bank’s supporting

calculation sheet.

4. Randomly select 3 days for each selected

return and agree the amounts per the return to the bank’s supporting calculation.

List the days selected and record any exceptions noted.

5. Agree the total of MRR1 to BIR610, and where the totals do not agree, inspect the reconciliation, obtained from management, to identify whether any items other than collateral and term deposits have been included. Record any reconciling items other than collateral and term deposits.

APPENDIX 1




26

Because the agreed upon procedures above and our factual findings reports above do not constitute either an audit or a review or other assurance engagement made in accordance with International Standards on Auditing, International Standards on Review Engagements or International Standards on Assurance Engagements, we do not express any assurance on the compliance of the BIR Returns for the months other than at year end with the requirements of BID 10. Had we performed additional procedures or had we performed an audit or review, or other assurance engagement other than an audit or review of historical financial information, other matters might have come to our attention that would have been reported to you.


Our factual findings report above in respect of the BIR returns of the Bank for the months other than that ended [insert date] are prepared solely for the purposes indicated above and for the purpose of reporting instances of non-compliance to the Director and the <Directors Board, Sub-Committee Chairpersons, Management, Regulatory Reporting > of the Bank, consequently, the returns and our report may not be suitable for another purpose and is not to be distributed to or used by any other parties other than as provided for in the Act .

Chartered Accountants (Namibia) Registered Accountants and Auditors Per: Name of partner Partner Place Date

APPENDIX 1




27

PART D – AGREED UPON PROCEDURES IN RESPECT OF CONSOLIDATED BANKING INSTITUTION RETURNS FOR YEAR-ENDS AND QUARTERS (OR HALF-YEARS) OTHER THAN YEAR-END:

Report of the Independent Auditors of <insert name of bank> (“Bank”) to the Director of Banking Supervision of the Bank of Namibia (“Director”) on matters arising from procedures performed in respect of consolidated statutory banking institution returns to enable the Director to evaluate the compliance by the Bank with the requirements of the Determinations (“BID 24”) under the Banking Institutions Act, 1998 (Act No. 2 of 1998) (“Banking Institutions Act”) We have performed the procedures agreed with the Director, as set out below with respect to the returns specified below, submitted to the Director and prepared in compliance with BID 24. Our engagement was undertaken in accordance with International Standard on Related Services ISRS 4400 – Engagements to perform Agreed-Upon Procedures Regarding Financial Information. Our procedures were performed solely to assist the Director in evaluating whether any instances of non-compliance with the requirements of BID 24 were identified. The responsibility for determining the adequacy or otherwise of the procedures agreed to be performed is that of the Director and Management of the Bank. We have initialed the attached returns for identification purposes. Directors’ responsibility for the statutory returns The directors are responsible for ensuring that the statutory returns for months other than year-end are prepared in accordance with the requirements specified in BID 24 and in all material respects: (i) reasonably reflect the information contained in the management accounts presented to

the board of directors; (ii) reflects that in the management accounts; (iii) are complete in so far as all relevant information contained in the accounting and other

records at the reporting date has been extracted therefrom and recorded in the returns; (iv) are accurate in so far as they correctly reflect the information contained in, and extracted

from, the accounting and other records at the reporting date; (v) are prepared using the same accounting policies as those applied in the management

accounts and last statutory Annual Financial Statements; and (vi) are prepared in accordance with the rules and guidelines set out in the applicable

Determinations issued under the Banking Institutions Act. This responsibility includes designing, implementing and maintaining such internal control as the directors determine is relevant to the preparation and presentation of the returns that are free from material misstatement, whether due to fraud or error, using the same accounting policies as those applied in the management accounts and last Annual Financial Statements, and in accordance with the rules and guidelines set out in the applicable Determinations issued under the Banking Institutions Act.

APPENDIX 1




28

General Procedures – All Returns


1. For each of the quarterly consolidated returns, select one return – other than at year-end along with the year-end consolidated return. Record the returns selected.

Where returns are resubmitted, obtain the resubmitted returns.

2. Agree the group structure of the bank holding company to entities included in the regulatory consolidation. Obtain and document management’s explanations for any entities excluded from the regulatory consolidation.

3. Select the two largest and one other entity included in the regulatory consolidation (noting that total assets, liabilities and profit before tax of the entities selected should exceed 80% of that of the regulatory consolidation total).

List the entities selected here.

4. Enquire from the management whether the consolidated returns have been prepared on a consistent basis during the year and at year-end and record any inconsistencies noted by the statutory reporting officer.

5. Enquire from the statutory reporting officer whether the same sources of information for the preparation of the consolidated return were used during the year and at year-end and record any inconsistencies noted by the statutory reporting officer.

6. Test the mathematical accuracy of each selected consolidated return by re-computing the recorded totals and subtotals and inspect the consolidated return for evidence that it balances.

APPENDIX 1




29

General Procedures – All Returns (continued)

7. Agree the consolidated returns for the non-year end quarter selected to the year-end consolidated returns. Obtain explanations from management for items appearing in the year-end consolidated return, not in other consolidated returns, and for items appearing in other consolidated returns, but not in the year end consolidated returns and record any exceptions.

8. For items selected for testing, test whether the underlying records to which items were traced, are consistent with the underlying records used for year-end consolidated returns and note any exceptions.

9. Obtain the preceding year’s management letter and audit committee document from the external auditors as well as the prior year consolidated annual financial statements, setting out any qualification, emphasis of matter, interpretive and housekeeping matters reported.

For those matters affecting consolidated returns, through discussion with management, enquire from management as to the actions taken to correct these matters.

Record any discrepancies noted as well as the quarters from which, according to management, the matters noted were rectified.

10. Obtain the current year’s management letter and audit committee document from the external auditors, if available, as well as the current year consolidated annual financial statements, setting out any qualification, emphasis of matter, interpretive and housekeeping matters reported.

For those matters potentially affecting consolidated returns, enquire of management and inspect the consolidated returns to confirm whether or not any item in the consolidated returns selected would be affected.


11. Obtain from management copies of all correspondence between the Bank and the Bank of Namibia regarding BIR reporting interpretations and errors and test through discussion with management and inquiry of the selected consolidated returns that the matters identified have been addressed.

Record the date on which corrective action was taken, any matters not yet corrected as well as any discrepancies noted.

APPENDIX 1




30

BCR-001 – Consolidated Balance Sheet Return (Quarterly)


1. Randomly select 10 line items from each consolidated return selected and list the items selected.

2. For the line items selected agree the data included in the BCR-001 to the management accounts of the selected subsidiaries. Record any exceptions noted.

BCR-002 – Consolidated Off-Balance Sheet Return (Quarterly)




APPENDIX 1




31

BCR-003 – Consolidated Income Statement Return (Quarterly)



2. For the line items selected agree the data included in the BCR-003 to the management accounts of the selected subsidiaries. For the quarter other than year-end selected, preceding quarters for the year should be added to arrive at the amounts that would correspond to the management accounts of the selected subsidiaries. For year-end returns, the results for each of the four quarters should be added to arrive at the amounts that would correspond to the year-end management accounts for the subsidiary selected. Record any exceptions noted.

3. For the consolidated income statement returns, combine and agree the retained earnings amounts (line item 63), for the four quarters, to the year-end retained earnings amount in BCR-001 (line item 82).

APPENDIX 1




32

BCR-004 – Consolidated Capital Adequacy Requirements Return (Quarterly)




3. For the selected consolidated return, agree retained earnings per line 4 to the amount included in the latest audited financial statements.

4. For the selected consolidated return agree the following balances in column 1 to the corresponding balance in column 1 of BCR-001:

BCR-004 line

BCR-001

line

1 76

2 77

3 78

5 81

6 83

7 83

8 40

27 23

28 83

29 40

70 84 + 23 + 24


APPENDIX 1




33

BCR-005 – Credit Risk Weighted Assets Return (Quarterly)




3. For the selected consolidated returns agree the off-balance sheet exposure amounts to BCR-002:

BCR-005

line

BCR-002

line

117 and 125 12

205 22

List and record any exceptions noted.

4. Agree the amounts in the total column of BCR-005 to the corresponding total amounts in BCR-001.

APPENDIX 1




34

BCR-006 a – f – Risk-Weighted Assets for Market Risk Return (Quarterly)



2. For the line items selected agree the data included in the BCR-006 a – f to the management accounts of the selected subsidiaries. Record any exceptions noted.

BCR-007 – Risk-Weighted Assets for Operational Risk (Quarterly)


1. For banks using the basic approach, agree the

current year BCR-007 to the current year BCR-

003 and the prior year BCR-007 to the prior year

BCR-003.


2. For banks using the standardised approach, agree the total of the BCR-007 to the BCR-003. Record any exceptions noted.

3. For banks using the standardised approach, randomly select one line item in the BCR-007 and agree this to the management accounts of the selected subsidiaries. Record any exceptions noted.

APPENDIX 1




35

BCR-008 – Large Exposures (Group Wide) (Quarterly)


1. For the selected consolidated returns, test through inquiry of underlying records and with management, that the maximum amount of exposure which the banking group is incurring towards a single person or group of related persons does not exceed 30% of the consolidated group’s capital.

2. Test, through recalculation, that the limit on large exposures in relation to the consolidated group’s capital base is limited to a maximum of 800%.

3. For the selected consolidated return, agree the data included in the BCR-008 to the management accounts of the selected subsidiaries by randomly selecting a total of 5 line items and tracing these items to the underlying financial records. Record any exceptions noted.

BCR-009 – Intra-Group Exposures and Transactions (Semi-annual)


1. For the year-end consolidated return, randomly select 5 line items and for these items agree the data included in the BCR-009 by the bank controlling company to the management accounts of the selected subsidiaries. Record any exceptions noted.

BCR-010 – Group Members (Semi-annual)


1. Inspect the year-end consolidated return and agree the data included in the BCR-010 to the year-end group structure of the banking group and compare all the group companies’ names, nature of activities and magnitude of the bank controlling company’s shareholding therein. List and record any exceptions noted.

APPENDIX 1




36

Because the agreed upon procedures above and our factual findings reports above do not constitute either an audit or a review or other assurance engagement made in accordance with International Standards on Auditing, International Standards on Review Engagements or International Standards on Assurance Engagements, we do not express any assurance on the compliance of the consolidated regulatory returns for the year-end or for the quarter, other than at year-end, with the requirements of BID-24.

Had we performed additional procedures or had we performed an audit or review, or other assurance engagement other than an audit or review of historical financial information, other matters might have come to our attention that would have been reported to you.


Our factual findings report above in respect of the consolidated BIR returns of the Bank for the year-end and for the quarters selected, are prepared solely for the purposes indicated above and for the purpose of reporting instances of non-compliance to the Director and the <Directors Board, Sub-Committee Chairpersons, Management, Regulatory Reporting> of the Bank.

Consequently, the consolidated returns and our report may not be suitable for another purpose and are not to be distributed to, or used by, any other parties other than as provided for in the Act.

<Name of firm> Chartered Accountants (Namibia) Registered Accountants and Auditors Per: <Name of partner> Partner <Place> <Date>

circular 2015 / 02 determination under the …icancpd.net/ftp/public/circulars/circulars 2015/2015...

Documents