CONCURRENT AUDIT

“Audit or verification of transactions or activities of an organisation concurrently as the transaction or activity takes place.”
 It is done on regular Basis.
 Mandatory for Banks to cover at least :
(i) 50% of total deposits &
(ii) 50% of total advances
 Following should be considered :
(i) Large / very Large branches
(ii) Special branches
(iii) Large problem branches
(iv) H.O. department dealing with treasury/funds management & handling Investment Portfolio.
(v) Any other branch/deptt. at discreation of bank
 It can be undertaken by internal inspection staff or outside C.A.
 Scope of Concurrent Audit :
Daily Cash Transactions, purchase & sale of share & securities physical verification, procedure for opening new A/c Verification of Advances, foreign Exchange Transaction, House keeping (Reconciliation. Balancing of ledger etc.) , Determination of revenue Leakage, fraud prone areas, High Value transactions, Safe custody of security form, T.D.S., statement, H.O. return etc., study of RBI Report & Inspection Report dealing with customers complaints.
 Its objective is to see whether transactions or decisions are within the policy parameters valid down by H.O., they don’t violate instructions of RBI & they are within authority.
 Remuneration of auditor is fixed by bank.
 Minor irregularities to be rectified on the spot. Serious irregularities reported to H.O. /Z.O.
 Proper reporting & at proper interval. Reported on 10th of next month/quarter but flash report can be submitted immediately,



AUDIT COMMITTEE
 Member : Executive director, nominee of Central Govt. & RBI, CA director & one of non-official directors
 Review Internal inspection/ appointment & Remuneration of Concurrent Auditor/ Conducting training Programmes etc.
NORMS FOR INVESTMENT
 Banks to frame suitable Investment policy.
 Classification of Investment
• Held to maturity
• Available for Sale
• Held for Trading
 Disclosure in A/c same as present 6 categories.

HELD TO MATURITY
 Intention Basis.
 HTM 25% of Banks total Investment.
 Following not to be Covered /Counted for 25%
(i) Re-capitalisation Bonds from govt. of India.
(ii) Investment in subsidiary & Joint Venture.
(iii) Investment in Debenture/Bonds if deemed to be in nature of advance
• If issued for project finance (3 Yrs. or more)
Or
If issued for working capital finance (less than 1 yr.)
and
• Banks state is 10% is issue.
and
• Issue is part of private placement.
 Profit on sale of such I to P&L A/c & thereafter Capital Reserve A/c. Loss to P&L A./c.
 Carried at acquisition cost. If acquisition Cost is more than face value there amortise the premium. Recognise permanent dimunation.

HELD FOR TRADING
(i) Intention to trade for short term price/Interest rate gain
(ii) to be sold within 90 Days
(iii) Profit or loss on sale to P&L A/c
(iv) Marked to Market at Monthly/Frequent intervals.

AVAILABLE FOR SALE
(i) If not is above 2 categories.
(ii) Profit or Loss on sale to P/L A/c.
(iii) Valuation  Individually script-wise Marked to Market at quarterly/frequent interval.
(iv) Dept. to be Provided (appreciation ignored) Debit to P&L A/c & equivalent amt. To be transferred from I Fluctuation Reserve A/c to P&L A/c.

INVESTMENT FLUCTUATION RESERVE
(i) minimum 5% of investment within 5 years (only w.r. to held for trading and available for sale)
(ii) Maximum upto 10% of Portfolio
(iii) Transfer maximum amount of gains realised on sale of Investment in Securities to Investment Fluctuation Reserve (IFR)
(iv) IFR eligible for inclusion in Tier-2 Capital.
(v) Transfer to IFR as appropriation to net Profit “below line” after statutory Reserve.

Shifting among categories of I
(i) To / from HTM  Approval of BOD. Shifting can take place once a year at beginning of year.
(ii) From AFS to HFT  with approval of BOD / ALCO/ Investment Committee.
(iii) From HFT to AFS  Generally not allowed only in exceptional situation with permission of BOD / ACCO / I Committee.
(iv) Transfer at acquisition Cost / Book value / Market value on date of Transfer (least) depreciation provided for.

Income Recognition on I :
(i) Accrual Basis on securities if guaranteed by Central govt.
(ii) Otherwise if owners right is established.
(iii) From mutual funds on cash Basis.

Broken period Interest
Banks not to capitalize BPI paid to seller as part of cost but treat as exps. in P&L A/c.

CDR (Corporate Debt Restructuring)
(i) For corporate debt of entities facing problems which are outside purview of BIFR etc.
(ii) Apply to multiple Banking A/c etc. with O/S exposure of 10 crore or more.
(iii) Provision for sacrifice of Interest at H.O. Books.
SOME IMPORTANT MATTERS TO BE CONSIDERED BY AUDITOR
Bills for Collection
1. All documents accompanying the bill should be received and entered in the register by a proper officer.
2. The accounts of the principals should be credited only after realisation of the bill.
3. It should be ensured that bills sent by one branch to another branch for collection are not included twice in the amalgamated balance sheet.
Bills Purchased
1. At the time of purchase of the bills, an officer should verify that all documents of title are properly assigned to the bank.
2. Sufficient margin should be kept while purchasing or discounting of a bill.
3. All irregular outstanding accounts should be periodically reported to the head office.
4. Incase of purchase or discounting of a bill, proportionate income should be recognized between the periods.
Credit Card Operations
1. There should be effective screening of applications with reasonably good credit assessment.
2. There should be strict control over storage and issue of credit cards.
3. The system whereby the merchant confirms the unutilized balance of the customer With the bank before accepting payment should be properly installed.
4. There should be a system of prompt reporting by the merchants of all settlements accepted by them through credit cards.
5. All the reimbursements should be immediately charged to the customer's account.
6. Items overdue beyond a reasonable period should be identified and attended to carefully.
6. There should be a system of periodic review of credit card holder's accounts.

LOANS :
1. Loan documents to be check.
2. Check the securities hypothecated against loan.
3. Check the internal control, procedures for loans applied by the bank.
4. Whether loan agreements (sanction limits) within authority of bank.
5. Whether bank is properly following up the loan.
6. Check NPA and their provisions.
7. Interest calculations.
8. Whether there is healthy turnover in account.
9. Whether repayment schedule is made considering repayment capacity of borrower.
10. If borrower is a company, whether there is proper resolution to borrow amount from bank.
11. Audit of bank borrower.

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