Page 326 - CA Inter Audit PARAM

CA Ravi Taori
S. No. Particulars Amount (In ₹
Crores) rounded
off
1. Bills Purchased and Discounted 50.00
2. Cash credits, overdrafts and loans repayable on demand 150.00
3. Term Loans 75.00
Total 275.00

In carrying out audit of above advances as part of statutory audit of branch, a statutory auditor would
obtain evidence about certain matters. State those matters.
Answer  Advances generally constitute the major part of the assets of the bank. There are large number of
borrowers to whom variety of advances are granted. The audit of advances requires the major
attention from the auditors. In carrying out audit of advances, the auditor is primarily concerned
with obtaining evidence about the following:
 Amounts due to the bank are appropriately supported by Loan documents and other
documents as applicable to the nature of advances.
(Partnership Deed, NOC of all partners, project report, income tax returns, application
forms etc.)

 There are no unrecorded advances.
(Like finance lease, of balance sheet financing or shown as investments)

 Advances represent amount due to the bank.
(In consortium, take out finance, restructuring, rescheduling etc.)

 Amounts included in balance sheet in respect of advances are outstanding at the date of the
balance sheet.
(Match balance in balance sheet to advance schedule, which is matched to subsidiary
ledgers and control accounts, loan should not be time barred)

 The advances are disclosed, classified and described in accordance with recognized
accounting policies and practices and relevant statutory and regulatory requirements.
(Secured, Unsecured etc.)

 Appropriate provisions towards advances have been made as per the RBI norms,
Accounting Standards and generally accepted accounting practices. The stated basis of
valuation of advances is appropriate and properly applied, and that the recoverability of
advances is recognized in their valuation.

QNO-- Documents which Contain Observation / Comments About Advances New Course – (S24M)
BA.11.50 Bhaskar CNO – BA.340

During the course of statutory branch audit of a nationalized bank, CA Amrish is performing audit
procedures in relation to the advances. He has verified the selected sample of borrower accounts
representing advances and found nothing unusual. In a banking environment, there exist documentary

evidence containing observations/comments on advances which can be useful to the statutory branch
auditor in performing an effective audit. List out few such documentary evidence which can be made use
of by CA Amrish.
Answer In a banking environment, there exist documentary evidence containing observations/comments on
advances which can be useful to the statutory branch auditor in performing an effective audit. CA Amrish,
the auditor should take into account the adverse comments, if any, on advances appearing in the
following:-
• Previous year’s audit reports.
• Latest internal inspection reports of bank officials.
• Reserve Bank’s latest inspection report.
• Concurrent / Internal audit report.
• Report on verification of security.
• Any other internal reports specially related to particular accounts.
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