Advisory issued by ICAI to approximately 35,000 firms eligible for Bank Branch Audit for initiating the process of Statutory Bank Branch audit remotely to ensure timely and effective Bank Branch Audit. The said advisory was also shared with all Central Statutory Auditors for their information.

Advisory issued to approximately 35,000 firms eligible for Bank Branch Audit for initiating the process of Statutory Bank Branch audit remotely to ensure timely and effective Bank Branch Audit. The said advisory was also shared with all Central Statutory Auditors for their information.

My dear Professional Colleagues,

I hope this communique will find you safe and healthy. I am sure that by now most of us must have received appointment letters for statutory bank branch audits indicating branches to be audited barring few cases wherein the allotment of branches is in progress. As all of us face tough unprecedented challenges arising out of COVID-19 pandemic, we as professionals need to brace up ourselves to undertake the bank branch audits, within the restrictions imposed by the government authorities. The various state government have extended the lockdown period for various intervals and the same is likely to affect the physical moment of the professionals for conducting the bank branch statutory audits, thus, the need of the hour is to initiate the process of bank branch audit remotely by seeking certain information through net and also asking the bank to keep balance requisite data / documents ready to ensure that the audit process is effectively initiated and concluded as and when the physical access to the branches is permitted as per government regulatory guidelines in coming days.

I am appending herewith an Annexure containing an illustrative communication which may be initiated from your end to the respective branches (banks) with or without any additions / deletions / amendments thereto, which will ensure that the branches which provide you the requisite data can be used by yourselves to initiate the process of audit remotely and in other cases, the communique will enable the respective branches to keep the records ready for the audit, thereby reducing the time and manpower required for conducting the audit.

I would further like to inform that the Professional Development Committee (PDC) of ICAI will be conducting couple of seminars to discuss and resolve the various challenges which the statutory branch auditors are likely to face and the practical resolutions thereto. Further, similar to earlier years, an expert panel has been formulated by AASB of ICAI to address the queries related to statutory bank audit raised by the members, which will be announced shortly.

I will once again like to assure you all that the forum of ICAI would be always available to each of its members to address any practical / professional queries arising while performing the function of statutory bank branch auditors.

Best wishes, stay safe and healthy!

Chairman, PDC
Mumbai, April 12, 2020

—————

Annexure

Illustrative format of the communication from statutory bank branch auditors   to the branch

Ref. No.: 2020-21/XXX Date: April XX, 2020

To

The Branch Manager

ABC Bank

Branch: XYZ (Branch Code: NNNN) Address of the branch

Sir / Madam

Subject: Statutory Branch Auditors of XYZ Branch (Branch Code: NNNN) of ABC Bank for the F.Y.: 2019-20

As you are aware, we have been appointed as statutory branch auditors of your bank for the financial year 2019-20.The government has ordered lockdown whereby the physical moment has been restricted and as a law abiding professional, our firm is in complete compliance of the same. Thus, we hereby request you to kindly let us know as and when the lockdown is lifted by government authorities at your branch location, so as to enable us to visit the branch accordingly. In the meanwhile, we wish to go through certain exceptional and other system generated reports and data compilations, so as to enable us to do data analysis of the same and keep our observations based on the same ready for conducting the statutory branch audit. This will enable us to reduce the audit time substantially and to start the process of bank  branch statutory audit as and when the lockdown is lifted by concerned government authorities.

As per the terms of appointment letter, the said statutory audit is required to be concluded in time. In order to ensure that the said timelines as specified by the bank are adhered to, we hereby request you to kindly make the following preliminary records available for our verification, which can be shared with us either by way of email or remote access to cloud data, whichever is convenient to you:

a) GL / PL / Trial Balance as on 31.03.2019, 30.06.2019, 30.09.2019, 12.2019 and 31.03.2020;

b) Advances and Deposits as on 31.03.2019, 30.06.2019, 30.09.2019,
12.2019 and 31.03.2020;

c) Status of the web-based (and manual) returns and certifications which are compiled and ready for audit at your end and copies of the same, including annexures LFAR, Tax Audit Report, etc.;

d) Broad composition of Advances (C & I, Personal segment in terms of of accounts and amount outstanding);

e) Details of the accounts above Rs. 2 crores of exposure;

f) No. of new accounts sanctioned during the financial year 2019-20 (data required is no. of accounts and amount sanctioned and details of new accounts sanctioned / renewed or enhancement in limits for accounts. The data should be provided separately for accounts with exposures below Rs. 2 crores and with exposures above Rs. 2 crores);

g) Jotting of new advances accounts sanctioned, renewed, enhanced during the financial year 2019-20;

h) Details of all the exceptional reports generated through CBS system;

i) NPA report of 2018-19 and 2019-20;

j) Advances report 2018-19 &2019-20

k) List of accounts wherein the deferment of installments / Interest is availed by the borrowers as per COVID- 19 Regulatory package declared by RBI vide its circular dated March 27, 2020

l) List of accounts wherein the MSME Relief was granted vide RBI circular dated January 01, 2019 and February 11, 2020

m) SMA reporting all quarter end and as per specific requested period by auditor

n) Last year statutory audit report and LFAR

o) Concurrent audit reports 2 months along with pending compliances as at March-end

p) Internal audit report (last 2) along with pending compliances as at March-end

q) Forex and other audit reports

r) BG balancing report

s) LC Balancing Report

t) Bill Balancing Report

u) Balance Sheet and P & L / Trial Balance generated from system

v) GL report from 23rd March till 4th April (for the purpose of review of unusual transactions)

w) Status of contingent liabilities as per last financials as well as current year contingent liabilities

x) Details of suits and current status

y) Details of fraud if any detected and reported

z) AML report

aa) RBI AFI Observation w.r.t.that branch

bb) In case of forex:

1. Export bills outstanding more than one-year report

2. Export Advance outstanding more than one year

3. Import Advance outstanding more than one year

4. Outstanding merchant trading transactions and it’s status

5. Outstanding BOE more than one year

We will require following basic documents ready when our audit team visits the branch:

a) Last two Statutory Audit reports (FY: 2017-18 and 2018-19) along with all annexure, certificates, Tax Audit Report and LFAR along with compliance report thereof

b) Following reports for the audits conducted during the FY: 2019-20:

a. Concurrent Audit Reports

b. Internal Inspection Report

c. Credit Audit Reports

d. Stock Audit Reports

e. RBI Inspection Reports

f. Revenue Audit Reports

g. IS / IT / EDP / System Audit Reports

h. Special Audit / Inspection Reports

i. In case if any of the above audit / inspection is not conducted during the FY: 2019-20, kindly make the last report w.r.t. the same available;

c) Files (includes document file) of new loans (Above Rs. 2 crores) and enhancements in old loan accounts with total exposure above Rs. 2 crores

d) CIS Data of Feb’20 and Mar’20

e) Statement of Income and Expenditure, Balance Sheet as at March 31, 2020

f) Statement of Depreciation along with vouchers related to additions / deletions including transfer of assets, if any

g) Movement of NPA and NPA Statement along with the documents supporting security value of the NPA Accounts

h) Capital Adequacy Returns along with the supporting related to ratings of accounts

i) Details of Letters of Comforts which are outstanding as on March 31, 2020 and details of Letters of Comforts issued and settled during the financial year along with relevant documents executed by the customer with bank and details of payment of principal and interest component on Buyer’s Credit

j) Details of Accounts restructured during the financial year 201 9-20 along with working of sacrifice

k) List of Accounts, if any, wherein the bank is holding any security issued by the borrower in Treasury Department of the bank and status of the said security (PA / NPA)

l) System generated Overdue Report of borrowers as at 31.03.2019, 30.06.2019, 30.09.2019, 31.12.2019 and 31.03.2020 duly authenticated

m) Details of Adjusting Entries passed for yearly closing of 3 1.03.2020

n) System generated NPA marking report (specifying the accounts which are considered as NPA by the automated NPA marking mechanism) as at 31.03.2019, 06.2019, 30.09.2019, 31.12.2019 and 31.03.2020

o) System-generated CIS related Audit Trail related only to (i) revocation of NPA status, (ii) changes made in limit master, (iii) changes made in date of expiry of loan for the period 01.03.2019 to 31.03 .2020

p) Details of Overdue Time Deposits, if any

q) Details of inoperative (dormant) accounts with details of date from which the account is marked as dormant

r) If the branch has been designated for gold demonetization scheme, the details of the gold demonetized

We hereby also request you to kindly let us know the name of the officer of the bank nominated by the branch for compiling the above-mentioned requirements related to annual audit, so as to enable us to co-ordinate with the said officer and maintain the time schedules prescribed by the bank. We will be continuously doing the statutory audit of your branch once the lockdown is lifted by the appropriate government authorities till completion of the audit.

Kindly let us know the branch opening timings, so as to enable us to plan our time schedules accordingly.

Further, we hereby request you to kindly provide us Read Only login to the CBS system, so as to enable us to carry out the audit function effectively.

Kindly let us know in case if you require any clarifications in the above matters.

Thanking you,

Yours sincerely

For PQR & Co.
Chartered Accountants
Firm Registration No.: NNNNNNW

LMN
Partner
M.No.: NNNNNN

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