Page 283 - CA Final PARAM Digital Book.

carefully. Credit should be stopped by informing the merchants through periodic
bulletins, as early as possible, to avoid increased losses.

Authors Note
Points are rearranged for ease of understanding and memorising

QNO SLR Old Course – (PM17, M17R, SM17, N17M, M18M, SM21,)
475.000 TITANIUM CNO—BA.300 New Course – (SM23)
You have been appointed as a statutory central auditor of APNA Bank, a Nationalized bank. What special
points would be borne in mind while conducting the audit of compliance with "Statutory Liquidity Ratio"
(SLR) requirements?
Answer ➢ Statutory Liquidity Ratio (SLR) Requirements –
The Reserve Bank of India requires statutory central auditors of banks to verify the compliance

with SLR requirements of 12 odd dates in different months of a financial year not being Fridays.
The resultant report is to be sent to the top management of the bank and to the Reserve Bank.
The report of the statutory auditors in relation to compliance with SLR requirements has to
cover two aspects:
• correctness of the compilation of DTL (Demand and Time Liabilities) position; and
• maintenance of liquid assets.

➢ Audit approach and procedure:
• Obtain an understanding of the relevant circumstances of the RBI, particularly regarding
composition of items of DTL.
• Require the branch auditors to send their weekly trial balance as on Friday and these are
consolidated at the head office. Based on this consolidation, the DTL position is
determined for every reporting Friday. The statutory central auditor should request the
branch auditors to verify the correctness of the trial balances relevant to the dates
selected by him. The branch auditors should also be specifically requested to examine the
cash balance at the branch on the selected dates.
• Review the relevant returns received from un-audited branches to identify any obvious
errors or omissions or inconsistencies.
• Examine, on a test basis, the consolidations regarding DTL position prepared by the bank
with reference to the related returns received from branches. The auditor should
examine whether the valuation of securities done by the bank is in accordance with the
guidelines prescribed by the RBI.
• While examining the computation of DTL, specifically examine that the following items
have been excluded from liabilities-
RIL-Mobile
• Part amounts of Recoveries from the borrowers in respect of debts considered
bad and doubtful of recovery. (Recovery of Bad Debts is not a liability)
• Amounts received in Indian currency against import bills and held in sundry
deposits pending receipts of final rates. (Such money is not returnable hence not
liability)
• Un-adjusted deposits/balances lying in Link branches for agency business like
dividend warrants, interest warrants, refund of application money, etc., in respect
of shares/debentures to the extent of payment made by other branches but not
adjusted by the link branches. (Link branch of bank deals with RBI and other
Banks, if money is received by such branches but not yet used or adjusted)
• Margins held and kept in sundry deposits for funded facilities. (Money deposited
in bank before giving loan)
• Similarly, specifically examine that the following items have been included in
liabilities –
o Net credit balance in branch adjustment accounts including these
relating to foreign branches.
o Interest on deposit as at the end of the half year reversed in the
beginning of the next half-year.
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