Page 269 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
• Examine compliance by the bank with the guidelines of the RBI relating to valuation of investments.
• Verify that investments are classified as non-performing investments (NPI) as per applicable RBI
guidelines. (Nonperforming investments are those where interest/principal is in arrears and remains
unpaid for more than 90 days). In such cases, banks have not to reckon income on securities and are
required to make provisions for depreciation in value of investment.

Other Special Points
Examination of classification and shifting:
• Examine that entire investment portfolio of bank is classified under three categories i.e.HTM, HFT and
AFS and shifting of securities is as per regulatory norms and laid down policy.
• Examine whether the shifting of the investments from ‘available for sale’ to ‘held to maturity’ is duly
approved by the Board of Directors of the bank.
Dealings in Securities on Behalf of Others
• Examine whether prior approvals for carrying out such dealings have been obtained.
• Examine whether bank’s income from such activities has been recorded and is fairly stated in the
bank’s financial statements.
• Consider whether the bank has any material undisclosed liability from a breach of its fiduciary duties,
including the safekeeping of assets.
Special purpose Certificates Relating to Investments
• 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.
Audit, Review and Reporting
• Banks should undertake half-yearly reviews (as of 30th September and 31st March) of their investment
portfolio. These half yearly reviews should not only cover the operational aspects of the investment
portfolio but also clearly indicate amendments made to the investment policy and certify the
adherence to laid down internal investment policy and procedures and RBI guidelines.
• The internal auditors are required to separately conduct the concurrent audit of treasury transactions
and the results of their report should be placed before the CMD once every month. Banks need not
forward copies of the internal audit report to RBI. However, major irregularities observed in these
reports and position of compliance thereto may be incorporated in the half yearly review of the
investment portfolio.

(CNO-BA.380) Advances
Audit Procedures
In carrying out audit of advances, the auditor is primarily concerned with obtaining evidence about the
following:
Evaluation of Internal Controls over Advances
Loan Policy and RBI Norms: Ensure compliance with Bank's Loan Policy and RBI's prudential norms.
Credit Appraisal Procedures: Verify adherence to procedures for credit appraisals and borrower
creditworthiness checks.
Sanctioning Authority: Confirm advances align with delegated authority.
Security Evaluation: Check the existence, enforceability, and valuation of securities.
Loan Documentation: Ensure proper execution of loan documents prior to disbursals.
Terms of Sanction and Usage: Ensure alignment with sanction terms and fund usage.
Validity of Recorded Amounts: Confirm accuracy of recorded loan amounts.
Account Operations Review: Monitor accounts for adverse operations like unauthorized overdrawing.
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