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ANNEXURE I

CENTRAL BANK OF INDIA


GUIDELINES RELATING TO PERIODICITY OF CHECKING
BY THE CONCURRENT AUDITORS

The areas to be covered by the Concurrent Auditor, as listed below, are indicative but
not exhaustive. The audit should be planned in such a way that the
transactions/vouchers are checked as per the prescribed periodicity.

DAILY CHECKING
1. Cash Book, General Ledger, General Ledger Balance Book, Clearing (both
inward and outward), Transfer Books, Cash Receipts & Payments with particular
reference to high value cash transactions to be checked with the relevant vouchers.
In CBS branches, more focus to be laid on the ‘Exceptional Transactions Report’,
‘List of Debit balances’, ‘Facility-wise Report’, ‘Inter-branch Transactions (DAS)’,
liquidation of entries in ‘Technical Contra’ within two / three days.
1. In computerized branches, the print-outs of mandatory reports
are checked & signed, and properly filed.
2. Scrutiny of all vouchers – Profit & Loss account to be checked
with the vouchers – whether properly authorized, correctly calculated and accounted
for under proper heads etc.
3. Entries passed through Sundry/Suspense Accounts, Inter-
branch account, Inter-Bank Account, Inoperative Accounts to be checked with the
vouchers – whether duly authorized/authenticated.
4. Remittances – Whether Bankers Cheques/DDs/TTs/MTs etc.
have been properly issued or paid, commission properly recovered etc.
5. Bills – Whether clean and / or documentary bills which are
tendered / received at the branch for collection / purchase / discounting are properly
accounted for, dispatched promptly and realized as per rules of the Bank
6. The formalities for Account-opening in SB/CD/Demat
accounts, etc for the new accounts opened are adhered to with particular reference
to Know Your Customers (KYC) guidelines.
7. There are no abnormal and unusual transactions in newly
opened accounts and staff accounts.
8. Whether the processing & disbursement of loans and
advances in new/existing accounts adheres to laid down norms of the Bank and the
following are also complied with:-
- Pre & post sanction inspections are carried out and
reports are held on record;
- Appraisal is properly done and recorded;
- Sanction is in accordance with delegated authority;
- All the terms and conditions of sanction are
communicated in writing to the borrower / guarantor(s) and all the terms and
conditions of sanction are complied with;

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- Security documents are properly executed and recorded
in the Security Register and are enforceable at the court of law;
- Collateral securities are obtained as per the sanction
terms and the mortgage formalities duly completed etc., the charges are
registered with appropriate authority viz. Registrar of Companies, Registrar of
Assurances, etc and are enforceable at the court of law;
- Personal / Corporate Guarantees and statement of Asset
& Liabilities are obtained as stipulated and Financial Reports prepared as per
rules of Bank;
- Insurance cover for the primary / collateral securities is
obtained /renewed timely.
9. The Bank Guarantees issued and Letters of Credit opened are
duly sanctioned, security documents are properly executed, do not contain any
onerous clause, cover only genuine trade transactions, commission and margin etc.
are correctly recovered /held, terms of sanction are duly complied with, BG & LC
properly entered in the register and vouched, etc.
10. TOD in current accounts, Adhoc/excess facility allowed in
Overdraft / working capital facilities / Bills Purchased and Discounted are justified,
proper end-use is ensured, reported to higher authorities, and the policies and
guidelines in this regard are adhered to. If delegated powers have been exceeded,
whether the Branch has promptly reported to the controlling office for confirmation /
ratification and confirmation thereof received /held on record.
11. Foreign Exchange Transactions – prescribed rules and
procedures are followed for dealing with import/export
transactions/extension/cancellation of Forward Contracts for purchase and sale of
foreign currency and necessary charges are recovered ensuring compliance of
Bank’s guidelines.

MONTHLY CHECKING
1. Rectification of irregularities of the previous month’s reports.
2. The position of recovery of revenue leakage of the previous months.
3. Physical verification of cash at currency chest attached to the branch on monthly
basis and reporting thereof including submission of counterfeit currency reports.
4. Physical verification of cash, checking of petty cash, compliance of laid down
procedures for handling of cash, accounting of inward and outward cash
remittances, cash held beyond retention limit, maintenance of proper records/books
for cash receipts and payments;
5. Physical verification of security stationery like DD books, Cheque Books,
Bankers Cheque, FSCM, Fixed Deposit Receipt books/Road Railway consignment
notes in respect of inward bills etc.
6. Checking standing instructions, stop payment instructions files/registers; Random
checking of customers’ mandate in existing deposit accounts.
7. Compliance to norms for tax collections (including TDS) & prompt remittance
thereof;

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8. Revenue Leakage checking exercise for the month covering interest paid on
deposits, interest earned on advances, commission, exchange, other fee & charges
etc., earned is properly accounted for;
9. Verification of statements including Cash Transaction Report (CTR) and
Suspicious Transaction Report (STR) and returns submitted on time to the
controlling offices and Reserve Bank of India.
10. Monthly balancing of books and reconciliation of inter-bank and inter-branch
transactions, nominal/sundry/suspense accounts.
11. Conduct of newly opened SB/CD/ accounts and staff accounts.
12. Staff Matters – Whether proper staff records are maintained in respect of leave,
punctuality and attendance, discipline etc.
13. Test-checking of payment of salary/allowances and transactions of staff
members.
14. Report on Customer Service.
15. Proper maintenance and safekeeping of books/records.
16. Premises/ furniture & fixtures/ Security aspects/ Stationery/ maintenance of
records.
17. Miscellaneous Securities – maintenance of circulars, policy documents, Manuals
of Instructions etc.
18. Post-disbursement supervision of advances including credit facilities due/overdue
for review/renewal, proper end-use of credit facility, insurance, documentation,
recovery of interest charged to the accounts, recovery of due T/L installments and
overdue in other accounts.
19. Scrutiny of compromises entered into and recommended by the Branch during
the month.
20. Classification of advances and adherence to income recognition and provisioning
norms.
21. NPA Management – Recovery/up-gradation of NPAs, recovery in written-off
accounts, follow-up of suit filed/decreed accounts and maintenance of proper
records for NPA and suit filed accounts, issuance of Recovery notices and
Possession notices under SARFAESI Act, 2002 and timely action thereon for early
realization of Bank’s dues.
22. Proper maintenance of Dummy Ledger for written off accounts and balancing
thereof.
23. Expired Guarantees are surrendered and cancelled and the laid down procedure
for reversal of Expired Guarantees is followed.
24. Cheques returned/ Bills Returned register to be checked and reasons for return
of Cheques/Bills should be looked into and whether Bank’s guidelines are complied
with.
25. Comments on systems and control mechanism at the Branch.
26. Audit around computers;
27. Guidelines on Dealing Room operations are compiled with and monetary ceiling
prescribed by the Bank / Reserve Bank of India are adhered to.
28. Reconciliation of Nostro and Vostro Accounts and test checking of transactions in
Nostro Ledger;

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29. Balances in Nostro accounts and placements in different foreign currencies are
within the limits prescribed by the Bank/ Reserve Bank of India.
30. Interest earned on Nostro Accounts/Placements to be checked;
31. Foreign Bills negotiated under letter of credit to be checked;
32. Inward/Outward/forex remittances to be checked to ensure that these are
properly accounted for, commission properly recovered etc.;
33. Applications in the prescribed format for forex transactions, external payments
and compliance with Bank’s guidelines thereof;
Guidelines to Concurrent Auditors on conduct of
Concurrent Audit of Bank’s branch and reporting thereon

The Concurrent Auditors are advised to check and comment on various aspects
so as to give a fair view of the state of affairs at the branch under Concurrent
Audit. Such aspects which should be considered and reported by the Concurrent
Auditors should include but be limited to the following:-
Physical verification of cash / Cash Transaction
• Observations should be on cash balance held by branch not within limits
fixed for the branch, excess cash, shortages in cash, cash book differences, soiled
notes, reported to controlling office.
• The date of physical verification of cash should be mentioned, along with
comments thereon, if any.
• High Value cash transactions (Rs 1.00 lac & above in respect of Small &
Medium category branches, Rs 5.00 lacs & above in respect of Large, Very Large &
Extra Large category branches) should be scrutinized. The observations should be
on the series of transactions which lead to doubt about the genuineness of
transactions.
• Whether cash withdrawals and deposits are recorded and tallied at day
end.
• Soiled notes last exchanged and quantum of such notes in cash balance.
• Cash withdrawals by the borrowers from overdraft / cash-credit accounts
should be for permissible use and as per sanction terms.
• Cash should be sorted out properly, banded (and not stapled) and signed
by the Cashier / Head Cashier.
Cash Receipts and Payments / Cash Book / General Ledger / General Ledger
Balance Book / Clearing / Transfer
• Where vouchers are not authorized as per delegations, posting of
vouchers is not done to their correct heads or vouchers not prepared for system
generated entries.
• Where the entries particularly relating to system generated transactions
are reversed.
• Whether cash balance at ATM is reconciled periodically to identify suspect
transactions and whether such matters are taken up with the concerned for
addressing the issues promptly.

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Profit & Loss Account and Vouchers
• Whether Profit & Loss vouchers are duly authenticated on day-to-day
basis, posted under proper heads of account, all debits to profit are authorized by
the Branch Manager/Accountant
• Credit vouchers for income account for interest, commission, service
charges are accurately calculated as per guidelines of the Bank.
• Whether vouchers for system-generated entries have been prepared and
authorized.
• Whether all vouchers contain necessary narration.
Suspense / In-operative / Inter-Branch accounts / Inter-Bank accounts
• Whether suspense account are opened with the authority of the Branch
Manager.
• Whether all vouchers are duly authenticated on day-to-day basis and
posted under proper heads of account.
• Whether entries are reconciled and balanced periodically.
• Whether all debits to suspense account are authorized by the Branch
Manager.
• Whether old entries outstanding in suspense accounts, inoperative
accounts are transferred to Central Office as per Bank’s guidelines.
Scrutiny of all other vouchers
• Whether all vouchers are duly authenticated on day to day basis and posted
under proper heads of accounts;
• Whether all vouchers contain necessary narration;
• Whether vouchers for system-generated entries have been prepared and
authorized.
• Whether vouchers are serially numbered & entered in Voucher Register?
• Generation of exceptional transactions report & if any abnormality is observed,
the same is to be reported.
Compliance of Guidelines on “Know Your Customer” norms and “Cash
Transactions” and other Internal Control measures
• This report can be classified as follows:
(a) Compliance with account opening formalities.
(b) Conduct and operations of accounts opened within six months.
(c) Conduct and operations of staff accounts.
(d) Conduct and operations of inoperative and dormant accounts.
• Whether the identity of the customers was established at the time of
opening of accounts as required by KYC norms.
• For corporate and other business customers, whether relevant documents
of incorporation or registration of business is obtained.
• Whether adherence to RBI / Central Office guidelines in respect of KYC
Norms / Anti-Money Laundering, ceiling & monitoring of Cash transactions and
suspicious transactions, Risk Management and monitoring procedure, precautions
against “Terrorism Finance”, Foreign Contributions Regulation Act, record keeping.

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• In respect of Demat accounts, timely logging of transactions on the basis
of transaction slips, issue of books of transaction slips, maintenance of registers /
records as per extant guidelines, etc.
High Value entries outstanding
• All responding entries and vouchers to be verified to ascertain the genuineness
of the transactions, inter-branch transaction vouchers are properly prepared and
authorized by senior branch officials.
• Reasons for entries remaining outstanding and action taken by the Branch to be
ascertained.

Fresh Advances disbursed during the month :


• Check whether the branch register for sanction of loans and advances has
been prepared at the branch and the sanction / review/renewals are reported to the
controlling office regularly through the control return.
• The proposals received at the branch and pending for sanction; proposals
sanctioned and pending for disbursement; are being followed up by the branch.
• Registers for advances including Security Register, Insurance Register,
Register of Advances to Staff, etc are duly updated and available at the branch for
inspection.
• Whether security details are clearly identified in the register along with
observations on completion of mortgage/ hypothecation formalities, insurance
covers, obtention of personal/corporate guarantees.
• Whether the Credit Rating is awarded, as per Bank’s extant guidelines, for
all credit exposures of Rs 5 lacs & above and confirmed by a superior authority and
if there is a variation of two notches or more in Credit Risk rating the reasons thereof
to be commented upon.
• The Rate of Interest is approved in consonance with Bank’s guidelines, if
reduction in ROI is not approved by MCM / CMD / ED. Reasons for downward
gradation of the Credit Rating should also be analysed / commented upon in the
process-note.
• Whether all the terms & conditions, as stipulated & considered by the
sanctioning authority, are incorporated and communicated to the borrower /
guarantor(s) and duly got accepted by them.
• Whether any concession in service charges (other than spelt out in Bank’s
Circular made effective w.e.f. 01.01.2008) is permitted only if approved by
MCM/CMD/ED.
• Compliance of policy guidelines on exercise of lending power, credit
appraisal, documentation, disbursement and end-use of funds.
• Compliance of terms and conditions of sanction.
Guarantees issued and LCs opened during the month:
• Compliance of policy guidelines on exercise of lending power, credit
appraisal, documentation, disbursement and end use of funds,
• Compliance of terms and conditions of sanction.
• Lien marking on margin held.
• Recovery of appropriate commission / charges.
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Temporary overdrafts allowed in SB and CD accounts during the month
• This report gives a list of all SB/CD accounts, which are allowed a debit
balance during the month. Observations should also be given on those accounts
where TOD is sanctioned frequently although brought in order.
• Interest on TOD allowed whether charged correctly and recovered.
Excess allowed in Overdraft accounts during the month
• Excess allowed in overdraft accounts beyond sanctioned limits should be
listed here including those allowed in the previous months, which are not yet
adjusted.
• The information about value of security as on which date may also be
mentioned.
• Accuracy of penal interest levied and reminders sent for irregularities must
be checked.
• Compliance of Bank’s guidelines on discretionary powers, frequency of
such excess facilities allowed, reasons for allowing such excesses, etc. should be
verified.
Accuracy of penal interest calculations and reminders sent for regularization of
account must be checked
Post disbursement Supervision of Advances
Spot verification of assets of newly financed units including housing loans.
.
Monitoring of Advances / identification as ‘EAS’ and ‘SMA’
The accounts with incipient signs of sickness are required to be promptly identified as
‘Early alert Signal’ account or ‘Special Mention Account’ and besides reporting to
controlling office through monthly statements, the branch personnel are required to
address the shortcomings with a view to improve the asset quality. The criteria for
identification of ‘SMA’ includes
 Interest / installment, devolved LC / invoked LG payments including DPGL
overdue for 60 days & above;
 Accounts which show less than 50% of monthly average projected sales
to the credit of the bank account;
 Non-submission of audited financial statements for > 8 months from the
date of B/S;
 Non-submission of stock-statement for 60 days and above;
 Major sanction terms & conditions not complied with and pending for > 3
months;
 Audit irregularities not rectified for > 3 months;
 Inward bills generally not retired within 60 days;
 Overdue bills purchased / discounted exceed 50% of the bills outstanding;
 Units incurring cash losses for > 18 months;
 Frequent return of cheques for want of funds;
 Non-achievement of monthly sales, production targets;
 Frequent request for adhoc / temporary accommodation / overdrawings.
Revenue Leakage checking exercise

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• Revision in interest parameters set in programs for calculation of interest on
various deposit and advances account including their accuracy in calculations may
be confirmed on test-check basis.
• Recovery of interest in SB & CD accounts on TOD allowed, penal interest on
excesses allowed in O/D accounts.
• Recovery of commission on LCs, BGs, Bankers Cheques, Cheque Return, Stop
payment, cheque-books issued, etc. as per revised schedule of charges.
• Service Tax paid by the branch is properly adjusted through Centvat Credit
Recovery of Revenue Leakage detected during the previous periods
• Mention steps taken for recovery of revenue leakage, plugging loopholes causing
revenue leakage.
• Details (sanctioning authority, date & amount) of approvals of waiver and deletion
of leakage of income to be given.
Recovery of TDS on applicable Term Deposit accounts, Payments to
Contractors / Landlord etc.
• This report includes TDS deductions on interest on term deposit Comments may
be given specifically on such transactions where TDS is not deducted on interest
accrued but not credited.
Pension Payments, PPF, Collection of Taxes and other Government Business.
• Pension payments must be specifically checked relating to such accounts where
certificates were not obtained for the pension accounts.
• Certification of claim of commission on Government transaction as and when
required in the branch wherever applicable.
Computerissation at Branch
• Whether hard copies of accounts are printed regularly, checked & signed?
• Indicate the extent of computerization and the areas of operation covered.
• Are the access and data security measures and other internal controls
adequate?
• Whether regular back-up of accounts and off-site storage are maintained as per
the guidelines of the controlling authorities of the Bank?
• Whether adequate contingency and disaster recovery plans are in place for loss/
encryption of data?
• Comments and suggestions for improvement, if any:
 The computer printouts are duly printed and authenticated
 Exceptional transactions, daily transaction list, daily supplementary of all
departments are printed daily and authenticated by concerned official
 Account masters of accounts opened are checked
Security Stationery – DD Books / Bankers’ Cheque Books/Cheque Books and
physical verification thereof (reporting every quarter-end):
• Whether proper records of these stationery items are maintained and quarterly
physical verifications of stock of these stationery items is conducted and recorded..
• Whether these stationery items are kept under dual control.
Submission of Periodical Returns/Statement (reporting every quarter-end):
• Whether branch is preparing / submitting periodical returns / statements timely.
• Observations of auditor on correctness of such returns.

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Staff Matters (reporting every quarter-end):
• Whether salary is calculated properly & entered in Salary Register
• Whether Officiating Allowance is paid and necessary permission from the
competent authority to pay such Allowance is held.
• Whether leave & Service record of the staff members is kept up-to date?
Premises, Furniture & Fixtures etc. (reporting every quarter-end):
• Whether fixed assets are recorded properly in books.
• Whether additions in fixed assets are duly authorized.
• Transfers to/from other branches are as per sanction.
Recovery Management (reporting every quarter-end):
• Whether advances accounts have been classified into NPA and provided
for as per extant guidelines.
• Observations may be given on the following:
 Whether NPA accounts are being followed-up regularly for recovery.
 Legal action initiated in accounts where recovery is not forthcoming.
 Whether fresh slippages to NPA were reported timely in EAS/SMA
statement.
 Whether Status Report on all NPA accounts of Rs 10.00 lacs & above with
full details are submitted every quarter to the controlling office.
 Whether Recovery notice issued on borrower / guarantor under
SARFAESIA, 2002. Whether Possession notice, after expiry of 60 days’ notice
period is served upon the owner of the mortgaged security and possession of
mortgaged property is taken (mention physical or symbolic). The contents of the
notices should be as per the SARFAESI Act incorporating important features
including but not limited to Bank’s dues (as on a particular date), interest & other
charges (due and recoverable), full details of mortgaged property, etc.
 Whether the borrower has come forward with any compromise offer and
the action taken by the branch thereon.
Details of Suit-filed & Decreed Accounts (reporting every quarter-end):
• List of such accounts must be available at the branch.
• Date of filing suit and amount alongwith the present position, date of
decree and amount of decree, filing of Execution Petitions and follow-up thereof.
• Recoveries made subsequent to filing of suit.
• Comments on long pending suits.
The Concurrent Auditors should note, the afore-mentioned aspects are illustrative
and not exhaustive. The Concurrent Auditors should use their judgement to check
other aspects, as deemed fit by them, and report accordingly so that the
Concurrent Audit is meaningful and serves the purpose to the Bank.

GUIDELINES FOR REVENUE CHECKING BY AUDITORS


1. The report should be submitted only on specified format enclosed. The
Auditor should ensure and certify in the report, that full recovery of the sums of
revenue leakages so detected has been effected to the debit of respective party’s
accounts.
2. Auditors should specifically identify staff lapses, if any, in the revenue
leakages reported by them with specific scrutiny on the following points:
i. Where the revenue leakage is recurring in the same account.
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ii. Where the same staff is repeatedly responsible for the revenue
leakages.
3. A discussion note between Branch Manager and Auditors should accompany
the revenue audit report, bringing out the comments of the Branch Manager
regarding reasons for the revenue leakages, staff lapses etc.
4. In case any amount cannot be recovered immediately for business or other
reasons, the Branch should be advised to submit waiver proposal on prescribed
format indicating proper reasons for non-recovery and recommending
waiver/deletion of the amount of revenue leakages. Branches should be advised to
ensure disposal of such matters at the earliest and in any case within a month to
ensure that the entire balance revenue leakage is cleared off either through actual
recovery or submission of waiver proposals to the controlling offices.
5. The auditor should invariably verify whether the Branch is adhering to
prescribed circulars/guidelines regarding interest rates, service charges, commission
deposit interest rates, etc.
6. The scope and extent of revenue checking to be conducted by the Concurrent
Auditor is mentioned below:-
Advances (other than NPA)
For advances of Rs.25 lacs and above : 100%
For other advances : 10%
Non Fund Based Business
Individual Guarantees /LCs for amount of
Rs.10 lacs and above : 100%
Other Guarantees : 10%
Deposit Accounts
S/B Accounts
Interest paid of Rs.50,000 lacs and above in a year: 100%
Other Accounts : 10%
Fixed Deposits & Call Deposits
Individual deposit of Rs.10 lacs and above : 100%
Other deposits : 10%

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