Page 315 - CA Inter Audit PARAM

CA Ravi Taori
 Every banking company needs to comply with the disclosure requirements under the various
Accounting Standards, as specified under section 133 of the Companies Act, 2013, read with Rule
7 of the Companies (Accounts) Rules 2014, in so far as they apply to banking companies or the
Accounting Standards issued by the ICAI.

QNO— Type of Credit Facility New Course – (SM25)
BA.02.70 Bhaskar CNO - BA.190
Ranjana Ceramic Private Limited is sanctioned a cash credit facility of ₹ 100 lacs from a branch of LMO
Bank. Besides, branch has also sanctioned a one-time bank guarantee of ₹ 10 lacs on behalf of the
company in favour of a statutory authority. Discuss, what type of credit facilities have been sanctioned
by branch of LMO bank to the company along with probable purpose for each of credit facility.
Answer  Cash credit facility sanctioned by bank to company is in nature of funded credit facility.
Funded loans are those loans where there is an actual transfer of funds from the bank to the
borrower. Its purpose is to meet working capital requirements of business. Cash credit
accounts, by their very nature, are running accounts and their utilization depends upon needs
of business. Limit of withdrawal is calculated using Drawing Power.
 Bank guarantee sanctioned to the company is in nature of non-funded credit facility. Non-
funded facilities are those which do not involve such transfer. Its probable purpose could be
requirement of a guarantee by a statutory authority in exchange of company fulfilling some
statutory obligations.

QNO— Bank Auditor Cannot Accept Other Assignments New Course – (N23M)
BA.02.90 Bhaskar CNO - BA.140
CA X is acting as concurrent auditor of a branch of KLT Bank (a nationalized bank) located in Delhi during
the year 2022-23. The assignment started from 1st October 2022 and is for a period of one year. By virtue
of this assignment, he is required to issue monthly reports on different aspects of the functioning of branch
including deposits, advances and housekeeping to controlling authorities of Bank.

At the end of March 2023, he has got an offer to conduct statutory audit of two branches of KLT Bank located
in the State of Rajasthan for the year 2022-23. Can he accept the above offer? Discuss.
Answer In the given situation, CA X has undertaken concurrent audit assignment of KLT Bank which is in the nature of
internal assignments.

In accordance with RBI guidelines, statutory audit assignments should not be undertaken by auditors while
being associated with internal assignments in bank during the same year like concurrent audits (Internal audits
of banks conducted monthly during the year).

As CA X is associated with KLT Bank as concurrent auditor, he should not accept statutory audit assignment of
same bank even though it relates to different branches of the bank.

QNO Engagement Team (Discussion) Old Course --
BA.03 Bhaskar CNO - BA.160 N19E/SM20/SM21/M21E/N21R)
(SM17/M18M/M19M/M19E/
New Course -- (SM25)
The engagement team of FRN & Co.- Auditors of Bank of Baroda held discussions to gain better
understanding of the bank and its environment, including internal control, and also to assess the potential
for material misstatements of the financial statements. The discussion between the members of the
engagement team and the audit engagement partner are being done on the susceptibility of the bank’s
financial statements to material misstatements. These discussions are ordinarily done at the planning stage
of an audit. Analyse and advise the matters to be discussed in the engagement team discussion.

OR

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