Page 282 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
Claims Against the Bank Not Acknowledged as Debts
Correspondence With Lawyers & Others: Examine the relevant evidence, e.g., correspondence with lawyers/
others, claimants, workers/officers, and workmen’s/officers’ unions.
Minutes Review: Review the minutes of meetings of board of directors/committees of board of directors,
contracts, agreements and arrangements.
Legal Cases & Tax Correspondence: List of pending legal cases, and correspondence relating to taxes, and
duties, etc. to identify claims against the bank.
Status of Claim: Ascertain from the management the status of claims outstanding as at the end of the year.
Subsequent Events: A review of subsequent events would also provide evidence about completeness and
valuation of claims.
Liability on Account of Outstanding Forward Exchange Contracts & derivative contracts
Forward Exchange Contracts Verification: Verify the outstanding forward exchange contracts with the
statement of outstanding forward exchange contracts generated from the bank’s computerised accounting
system or manual register maintained by the branch.
Physical Verification: The auditor may physically verify the underlying documents including confirmations
from merchants to test the existence of such outstanding contracts.
Derivative Contracts Verification: The auditor may verify outstanding derivative contracts like options,
interest rate swaps etc with reports generated in this regard.
Guarantees Given on Behalf of Constituents
Internal Controls Over Issuance: Ascertain whether there are adequate internal controls over the issuance of
guarantees, e.g., whether guarantees are issued under proper sanctions, whether adherence to limits sanctioned
for guarantees is ensured, whether margins are taken from customers before issuance of guarantees as per the
prescribed procedures, etc.
Controls Over Unused Guarantee Forms: Ascertain whether there are adequate controls over unused
guarantee forms, e.g., whether these are kept under the custody of a responsible official, whether a proper
record is kept of forms issued, whether stock of forms is periodically verified and reconciled with the book
records, etc.
Procedure for Expired Guarantees: Examine the guarantee register to seek evidence whether the prescribed
procedure of marking off the expired guarantees is being followed or not.
Outstanding Guarantees Check: Check the relevant guarantee registers with the list of outstanding
guarantees to obtain assurance that all outstanding guarantees are included in the amount disclosed in this
behalf.
Expired Guarantees and Verification: Examine that expired guarantees are not included in this head. Verify
guarantees with the copies of the letters of guarantee issued by the bank and with the counter-guarantees
received from the customers. The auditor should also verify the securities held as margin. If a claim has arisen,
the auditor should consider whether a provision is required in terms of the requirements of AS 29, "Provisions,
Contingent Liabilities and Contingent Assets”.

Acceptances, Endorsements and Other Obligations
LC Issuance Controls: Evaluate the adequacy of internal controls over the issuance of letters of credit (LCs)
and the custody of unused LC forms, similar to the controls for guarantees.
Security Verification: Confirm the security obtained for issuing LCs.
LC Register Verification: Verify the balance of LCs from the bank's register, which should indicate the
amounts and payments made under them. Examine customer guarantees and issued LC copies.
Letters of Comfort: Assess any potential financial obligations arising from letters of comfort and ensure
proper disclosure under contingent liabilities if applicable.

Bills for Collection
Bills Drawn on Other Branches: Ensure that the bills drawn on other branches of the bank are not included
in bills for collection.
Verification of Outward Bills: Verify outward bills for collection with reference to the corresponding register
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