Page 177 - CA Inter Audit PARAM

CA Ravi Taori

5) The following information is also required to be disclosed: -
Trade receivables shall be sub-classified as:
a) Secured, considered good
b) Unsecured, considered good
c) Doubtful.

6) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately.

7) Debts due by
• directors or other officers of the company or any of them either severally or jointly with any
other person or
• firms or private companies respectively in which any director is a partner or a director or a
member should be separately stated.

QNO B/S (Bank Balance, Confirmation) Old Course – (N20R)
AIFS.40 Bhaskar CNO - AIFS-P2.100
A significant and important audit activity is to contact banks/ financial institution s directly and ask them
to confirm the amounts held in current accounts, deposit accounts, EEFC account, cash credit accounts,
etc. as at the end of the reporting period under audit. Explain the audit procedure in this context.
➢ A significant and important audit activity is to contact banks/ financial institutions directly and ask
them to confirm the amounts held in current accounts, deposit accounts, EEFC (Exchange Earners
Foreign Currency) account, cash credit accounts, restrictive use accounts like dividend, escrow
accounts as of the end of the reporting period under audit. This should necessarily be done for all
account balances as at the period-end.
➢ The auditor should emphasize for confirmation of 100% of bank account balances. In remote
situations were no reply is received, the auditor should perform additional testing regarding the
balances. This testing could include:
Agreeing the balance to bank statement received by the Company or internet/ online login to
accounting auditor’s personal presence;
Prepare a final summary of the results of the circularization and draw the final conclusion
➢ The Company should be asked to investigate and reconcile the discrepancies, if any including seeking
written explanations/ clarifications from the banks/ financial institutions on any unresolved queries.
➢ In addition to the procedures performed above, the auditor should ensure that all bank account
holding foreign currency have been restated at the closing exchange rates.

QNO-- Bank Balance - BRS Examination New Course – (S24M)
AIFS.40.500 Bhaskar CNO – AIFS-P2.100

While verifying cash and cash equivalents of a company, CA D engagement partner, is very particular that
Bank reconciliation statement (BRS) prepared by the management in respect of bank account maintained
by the company is proper to rule out misstatements in cash and cash equivalents reflected in the financial

statements of the company. The company does not use net banking and prefers to issue cheques to its
creditors and receives substantial payments locally through account payee cheques. Which aspects need
to be taken care of and verified by CA D in respect of BRS?
Answer CA D should ensure that BRS is signed by the authorized personnel so that he is able to assign responsibility
in case of any errors. Verification of BRS shall entail the following: -

• Tallying the balance as per bank book to the bank confirmation/ statement.

• Checking of all material reconciling items included under cheques issued but presented for
payment to the underlying bank book forming part of books of account. In addition, the auditor
should request for bank statements of subsequent period and should verify if the cheques issued
have subsequently been cleared by the bank. For all cases where cheques have become stale i.e.
3 months or more have lapsed since the issue date, the same should not appear in the BRS and
should instead be taken back to liabilities.

• Checking of all material reconciling items included under cheques deposited but not credited by
bank by requesting for bank deposit slips, duly acknowledged by bank and verifying if the balances

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