Page 121 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(b). Ask for the matter to be disclosed in the Board’s Report by the BOD..
(c). Forward the reply received from the BOD to the Central Government along with his report and
his comments upon the reply received.
(d). Forward his Report with a Note to the Central Govt. stating the non-receipt of any observations
from the BOD."
V. "The Bank’s major advances constitute a specific type of Loan product. What according to you
must have been the most common form of Security Creation in the Bank against such types of
Loans?
(a). Mortgage
(b). Pledge
(c). Hypothecation
(d). Charge

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"Kwatra & Co. is a CA firm based at New Delhi. They were appointed as the Statutory Auditors of
Mannalaxmi Bank Ltd. For the Financial year 2019-20. After having a good discussion with the
Engagement team , CA Vikas , the Engagement Partner , started the Bank audit with his team and made
the following observations during the course of the audit:-
• One of the borrowers , Mr. Rakesh Verma has availed a Machinery Loan from the Bank but has
not paid the EMI since the past 100 days. However, his business is going good and the Bank
Manager is of the view that such loan need not be classified as NPA as they have his Factory
building available with them as Mortgaged Security against the Machinery Loan and good
amount could be realized by its auction in the case of default by Mr. Verma.
• Mrs. Lata , one of the prime customers of the Bank has availed a CC facility for her Garment
business , a Car Loan for her personal purpose and an Education loan for her son’s higher studies
, all from the Bank branch under audit. She has been regular in meeting the EMI obligations of
all the loans except for the Car loan where she has not been able to pay the EMI since the past
4 months.
• Mr. Kapoor has been sanctioned a Cash Credit Limit of INR 55 lakhs by the Bank and the
outstanding balance in his CC account is INR 55 lakhs since the past 3 months. There are no
credits continuously for 90 days as on the date of Balance Sheet
• Sakhi Cooperative Society’s Term Loan of INR 10 lakhs has been guaranteed by the Central
Government and is overdue since the past 120 days . The CG guarantee has not been invoked
or repudiated till now.
• Similarly , Vishwas NGO’s loan of INR 7 lakhs has been guaranteed by the State Government,
but it is overdue since the past 105 days, but the Bank manager is of the view that this not be
categorized as NPA as it has been guaranteed by the State Government and the guarantee has
not been invoked/repudiated.
• The RBI inspection team had identified a KCC Loan given to Mr. Khara , a farmer as a Loss in its
RBI Report but the Bank has not provisioned it accordingly as the manager is hopeful of recovery
from such loan.
• There is a Term Loan advance by the Bank as a Lead Bank together with two other major banks
under a specific agreement to a big Corporate house in the city."
I. "Mr. Verma’s Loan account in the above case should be categorized as-
(a). NPA because of no recovery for more than 90 days.
(b). Loss asset as there are minute chances of recovery.
(c). Standard asset as per the Manager as security is available against this loan and also the net worth
of the borrower is strong.
(d). SMA 02 Loan."
II. "Which of the following Loan facilities given to Mrs. Lata be categorized as NPA by the Bank
(a). Cash Credit Facility
(b). Education Loan
(c). Car Loan
(d). All loans advanced

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