Page 278 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
methods of determining regulatory capital and ensuring efficient use of capital.
Basel III accord strengthens the regulation, supervision and risk management of the banking sector. It
is global regulatory standard on capital adequacy of banks, stress testing as well as market liquidity risk.
The Basel III accord, aims at:

(a) improving the banking sector's ability to absorb shocks arising from financial and economic stress,
irrespective of reasons thereof;
(b) improving risk management and governance practices; and

(c) strengthening banks' transparency and disclosure standards.
Stress Testing
RBI has required that all commercial banks (excluding RRBs and LABs) shall put in place a Board approved
‘Stress Testing framework’ to suit their individual requirements which would integrate into their risk
management systems. Stress tests are designed to understand whether a bank has enough capital to survive
plausible adverse economic conditions and to maintain enough buffer to stay afloat under extreme scenarios.
Audit Approach and Procedures
(CNO-BA.500) Deposits
Current and saving accounts
KYC Norms & Account Types
- Sample verification of accounts for KYC adherence.
- Saving accounts criteria: Individuals, HUF, approved Institutions.
- Business transactions in current accounts; open for companies, individuals, and firms.
Balances Verification: Sample-based verification of individual account balances.
Interest Calculations
- Test-check interest calculations.
- Note: Current accounts usually don't earn interest.
Balance Confirmation
- Assess consistent balance confirmation procedures.
- Sample-based examination of received confirmations.
Debit Balances in Current Accounts: Ensure appropriate categorization of debit balances.
Inoperative Accounts & Fraud Risk
- Monitor inoperative accounts for fraud risks.
- RBI guidelines: 2 years of inactivity deems account inoperative.
- Sample check on revived/closed inoperative accounts and verify authority.
- Scrutinize significant balance reductions and withdrawal authorizations.
Term deposits
Deposit Receipts & Cash Certificates: Examine whether the deposit receipts and cash certificates are issued
serially and all of them are accounted for in the registers.
Bulk Deposits Verification: Verify in case of bulk deposits (Rs 2 crore and above for scheduled commercial
banks presently), correct rate of interest has been offered.
Sample Recurring Deposits: Verify on sample basis some of recurring deposit accounts opened during the
year.
Interest Rate on Term Deposits: Verify correctness of rate of interest on term deposits on sample basis.
Closure of Term Deposit: In case of closure of term deposit, test check whether required foreclosure penalty
has been deducted from applicable rate of interest payable.
Deposits designated in foreign currencies
Foreign currency non-resident deposits (FCNR) are accounts which are opened by Non-resident Indians in
form of fixed deposit only.
FCNR Account Opened Verification: Verify some of FCNR accounts opened during the year on sample basis

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