Page 285 - CA Final PARAM Digital Book.

QNO Verification of Balances (Foreign Country) Old Course – (PM17, N17R, M20M)
479.000 UNIQUE
NAYASA Bank appointed your firm of Chartered Accountants as a branch auditor for the financial year
2016-17. Being head-in-charge of the assignment, while planning, you distributed the work among your
team members and assigned Mr. Hary for verification of Balances in account of the bank situated in
foreign country. However, Mr. Hary, being fresh to the bank audits, needs your guidance. Kindly guide.
OR
As an auditor of a nationalised bank, how would you verify the following?
Balances in account of a bank situated in a foreign country.
OR
M/s CAS & Associates have been appointed as one of the statutory central auditors of FDMH Bank., for
the Financial Year 2019-20. During the course of the audit, the auditor found that the bank has a balance
with a Zurich based bank. The auditor understands that such balance is a matter of important
consideration in the audit of the bank. Being head-in-charge of the assignment, while planning, you
distributed the work among your team members and assigned Mr. Ansh for verification of Balances in
account of the bank situated in foreign country. However, Mr. Ansh, being fresh to the bank audits,
needs your guidance. Kindly guide.
Answer ➢ Balances in Account of a Bank situated in a Foreign Country: The following procedure may be
followed while verifying balances in account of a bank situated in a foreign country-

• Verify the ledger balances in each account with reference to the bank confirmation
certificates and reconciliation statements as at the year-end.

• Review the reconciliation statements and pay particular attention to the following.
• Examine that no debit for charges or credit for interest is outstanding and all the
items which ought to have been taken to revenue for the year have been so
taken. This should be particularly observed when the bills collected, etc., are
credited with net amount and entries for commission, etc. are not made
separately in the statement of account.
• Examine that no cheque sent or received in clearing is outstanding. As per the
practice prevalent among banks, any cheques returned unpaid are accounted for
on the same day on which they were sent in clearing or on the following day.
• Examine that all bills or outstanding cheques sent for collection and outstanding
as on the closing date have been credited subsequently.

• Examine the large transactions in inter-bank accounts, particularly towards the year-end,
to ensure that no transactions have been put through for window dressing.

• Check original deposit receipts in respect of balances in deposit accounts in addition to
confirmation certificates obtained from banks in respect of outstanding deposits.

• Check whether these balances are converted into the Indian currency at the exchange
rates prevailing on the balance sheet date and ensure compliance with relevant
Accounting Standard.

QNO Foreign Exchange Transaction- Old Course – (N18E, N19E SM21, N21E)
479.010 TITANIUM CNO—AOB.620 New Course – (SM23)
You are the Concurrent Auditor of a Branch of Nationalized Bank which deals in foreign exchange
transactions. Give focus areas of your checking in this respect.
OR

You have been appointed as Concurrent Auditor of a nationalized bank branch. The main business at the
branch is dealing in foreign exchange. Suggest the main areas of coverage with regard to foreign
exchange transactions of the said branch under concurrent audit
Answer ➢ Focus Areas in case of Foreign Exchange Transactions:
• Check foreign bills negotiated under letters of credit.

• Check FCNR and other non-resident accounts whether the debits and credits are
permissible under rules.
• Check whether inward/outward remittance have been properly accounted for.
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