Page 286 - CA Final PARAM Digital Book.

• Examine extension and cancellation of forward contracts for purchase and sale of foreign
currency. Ensure that they are duly authorized and necessary charges have been
recovered.
• Ensure that balances in Nostro accounts in different foreign currencies are within the limit
as prescribed by the bank.
• Ensure that the overbought/oversold position maintained in different currencies is
reasonable considering the foreign exchange operations.
• Ensure adherence to the guidelines issued by RBI/HO of the bank about dealing room
operations.
• Ensure verification/reconciliation of Nostro and Vostro account transactions/ balances

QNO Verification of bills payable Old Course – (N19M)
483.050 TITANIUM CNO—BA.540
INDO Bank appointed your firm of Chartered Accountants as a branch auditor for the financial year 2018-
19. Being head-in-charge of the assignment, while planning, you distributed the work among your team

members and assigned Mr. Pary for verification of bills payable. However, Mr. Pary, being fresh to the
bank audits, needs your guidance. Kindly guide.
Answer Bills Payable: Evaluate the existence, effectiveness and continuity of internal controls over bills payable.
Such controls should usually include the following-

• Drafts, mail transfers, traveller’s cheques, etc. should be made out in standard printed forms.
• Unused forms relating to drafts, traveller’s cheques, etc. should be kept under the custody of a
responsible officer.
• The bank should have a reliable private code known only to the responsible officers of its
branches, coding and decoding of the telegrams should be done only by such officers.
• All the telegraphic transfers and demand drafts issued by a branch should be immediately
confirmed by advices to the branches concerned. On payment of these instruments, the paying
branch should send a debit advice to the originating branch.
• The signatures on a demand draft should be checked by an officer with the specimen signature
book.

Examine an appropriate sample of outstanding items comprised in bills payable accounts with the relevant
registers. Reasons for old outstanding debits in respect of drafts or other similar instruments paid without
advice should be ascertained.

Correspondence with other branches after the year-end (e.g., responding advices received from other
branches, advices received from other branches in respect of drafts issued by the branch and paid by the
other branches without advice)should be examined specially in so far as large value items outstanding on
the balance sheet date are concerned.
Author’s Note

ICAI has taken answer of this question directly from module. Question is only about Bills payable but
unfortunately answer is a mixed bag covering bills payable, DD, and telegraphic transfer.

QNO Contingent Liability- Old Course – (PM17, M17R, N19R, SM21)
485.000 TITANIUM CNO—BA.560 New Course – (SM23)
While auditing APNA Bank, you observed that a lump sum amount has been disclosed as contingent
liability collectively. You are, therefore, requested by the management to guide them about the
disclosure requirement of Contingent Liabilities for Banks. Kindly guide.
Answer ➢ Contingent Liabilities

• Guarantees given on behalf of constituents
• In India
• Outside India
• Acceptances, endorsements and other obligations
• Liability on account of outstanding forward exchange contracts.

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