Page 268 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
• Check the segregation of duties within the bank staff in terms of executing trades, settlement and
monitoring of such trades, and accounting of the same (generally termed as front office, middle office
and back office functions’ segregation).
• Examine whether the bank is maintaining separate accounts for the investments made by it on their
own Investment Account, on PMS clients’ account, and on behalf of other constituents (including
brokers).
• As per the RBI guidelines, banks are required to get their investments under PMS separately audited by
external auditors.
Examination of Documents
• Ascertain whether the investments made by the bank are within its authority.
• Ensure that any other covenants or conditions which restrict, qualify or abridge the right of ownership
and/or disposal of investments, have been complied with by the bank.
• The acquisition/disposal of investments should be verified with reference to the broker’s contract note,
bill of costs, receipts and other similar evidence.
Earnings from Investments
• Examine whether income from investments is properly accounted for. This aspect assumes special
importance in cases where the bank has opted for receipt of income through the electronic/on line
medium.
• Verify that there is a proper system for recording and maintenance of TDS certificates received by the
bank.
• Examine whether the profit or loss on sale of investments has been computed properly.
Physical Verification
• Verify the investment scrips physically at the close of business on the date of the balance sheet.
• Verify investments held with public debt office of RBI, custodians and depository with the statement of
holdings as on date of balance sheet. Independent balance confirmation requests can be made in
accordance with SA-505. In case independent confirmations are not received back, alternative audit
procedures like getting bank personnel to download investment statement from E-Kuber for
government securities (E-Kuber is CBS platform of RBI) in auditor’s presence can be designed.
• In respect of BRs issued by other banks and on hand with the bank at the year-end, the auditor should
examine confirmations of counterparty banks about such BRs. Where any BRs have been outstanding
for an unduly extended period, the auditor should obtain written explanation from the management
for the reasons thereof. The auditor should examine the reconciliation of BRs issued by the bank. BRs
should not be issued in respect of transactions in government securities for which SGL facility is
available.
• If certain securities are held in the names of nominees, the auditor should examine whether there are
proper transfer deeds signed by the holders and an undertaking from them that they hold the securities
on behalf of the bank.
Examination of Reconciliation
• Examine the reconciliation of the investment account, physically verify the securities on hand, obtain
confirmations from counterparty banks for BRs issued by such banks and on hand, obtain
confirmation of SGL balances with the PDO, and examine the control and reconciliation of BRs issued
by the bank.
Examination of Valuation
• Examine whether the method of accounting followed by the bank in respect of investments, including
their year-end valuation, is appropriate.
• Verify whether adequate disclosure of any change in method of valuation of investment is made.
• Examine whether the investments have been properly classified into the three categories at the time of
acquisition based on such intention as evidenced by the decision of the competent authority such as
Board of directors, ALCO or Investment Committee.
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