CA JAYESH CHAVDA

JAYESH CHAVDA & CO

.F-12, GOKULDJAM ARCADE, SARDAR GUNJ, ANAND-388001
MO: 9409767038 , EMAIL : [email protected]
Contents

1. Introduction and background.................................................................................................................................. 1

2. Our proposed approach and methodology for Bank Audit...................................................................................... 3

3. Annexure............................................................................................................................................................... 14
1. Introduction and background
The business environment in India continues to experience change on an unprecedented scale. Economic
reforms and changes in India all bring problems and opportunities. As the needs and expectations of our
clients have become more challenging, we have responded by developing more sophisticated VALUE
ADDED services, broadening our range of skills and increasing our capabilities to serve our clients.

What all clients have in common a desire for quality service and value for money. To exceed their
expectation in these areas, the firm aims to understand each client business or organization and the
context in which it operates. Our main objective is to provide our clients with professional advice and
business solutions that meet business objectives. The firm provides practical answers, through the
constructive relationships between our people and the clients they serve. To achieve this, we have
adopted three key strategies.

First, as already mentioned, we aim to understand our clients business and their particular needs. Every
client is different and has different requirements. Our people at Anand Thakor & Associates provide
industry knowledge and examples of best practice, to complement the technical skills of each discipline.

Second, we recruit and develop people of high caliber-with imagination and flair, team players who can
work with others from different disciplines. They are people of integrity, enthusiastic professionals who
work hard. They are leaders in their fields, prepared to offer a view.

Finally, we take lead in developing new services and new techniques, to match the changing needs of our
clients and their market place.

But the quality that marks us out is not just the scale of our resources; it’s the ability to deliver those
resources in ways that best meet the individual needs of each and every client. Everyone in Anand Thakor
& Associates is guided by a simple yet demanding maxim: Listen to what clients wants then deliver more
than they expect'.

We have acted for many of our clients for years. We maintain a high standard of service consistently over
the years as well as on individual assignments. We do this by developing good working relationships and by
anticipating clients needs - by stretching ourselves and by going beyond expectations. Only by providing
the best service over many years and on each assignment will our client stay loyal. Today our goodwill
depends on the quality of each job done, and as professionals we aim for excellence every time
HALLMARKS OF THE FIRM:
 Service Excellence – We put our clients first.

 Professionalism – We strive to be timely, efficiently and responsive in all we do. Our working
relationships are founded on courtesy, fairness, mutual respect and personal touch.

 Integrity – We are uncompromising: partners put interests of the clients above any personal interest
or ambition. We are intent on getting to right answer, rather than one that will do – that’s part
of delivering true value for money.

 Vision – We not only understand clients business but we also picture its potential.

 Realism – We strive for clear-sighted vision, based on honest and objective Assessment of our
client. We share our view openly and frankly with clients, proposing solutions where we see
problems and initiatives where we see opportunities.

 Involvement – Seeing `the client` as a person, not as abstract, leaves no room for aloofness or
pomposity. An involvement breeds loyalty: commitment that extends through bad times as well as
good.

 Energy – We think ahead, look beyond the immediate brief to see what else needs to be considered.

 Creativity – We recognize the need to foster lateral thinking, and to stimulate innovation and
imagination within client teams as well as our own.
2. Our approach and methodology for Bank Audit
To conduct the audit of banks we should generally look forward following things:

1. Cash Balance:
Every morning we shall have to check the cash balance of Cash Book of Bank in which all details regarding
cash balances are written on daily basis and manager and cashier do the authorization. Once in the month
we have to do physical verification of cash in hand with bank and ATM (if any) surprisingly and if any
discrepancy found shall be reported in the report.

2. KYC Policy:
This is the most sensitive and crucial part of the audit. KYC stands for “Know Your Customer”, a term used
for customer identification process. It involves making reasonable efforts to determine true identity of the
beneficiary of account, source of Fund, nature of customer’s business etc, which in turn helps bank to
manage their risk prudently. The major things we observe in KYC checking are identity proof and address
proof. We should be sure that whether AOF (Account Opening Form) is properly filled or not. The
introducer who introduces the new customer to the bank should have maintained his/her account for at
least 6 months without falling under inoperative account. In AOF there is clearly mentioned the required
documents in order to open the account in bank. Recently RBI has fined some of the nationalized banks and
other big banks for non- adherence of KYC norms and hence as a concurrent auditor we should ensure the
KYC adherence of the customers and any irregularities should be reported duly in the report. We should
also discuss the major irregularities with branch officials and look forward for the solution.
3. Loans and Advance Checking:
The most sensitive part of banking operation s Loans and Advances and their compliances. To check newly
sanctioned loans and advances we’ve to ask the Loan Manager of Bank for Document Register and they’ll
provide us that. Document register is nothing just a register maintained by bank for their advances, in
which they usually write name of the party, details of sanction made, papers submitted by party to bank
etc. and is verified by both credit manager and Manager of the Branch. Following are the crucial points to
verify any advances:

 Fulfillment of KYC norms and proper fling of AOF.

 Whether CIBIL (Central Information Bureau of India Ltd.) report is good or not. Higher points in
CIBIL report show the higher credibility of that party.
 Proper documents in order to sanction the loan are submitted by the party or not like Project
Report, past few years’ statement of affairs and projected statement of affairs if the project is new
then full proof projection and duly authorized by a Chartered Accountant or an expert on respective
fields.
 If the loan is personal loan then purpose of loan should be mentioned, for vehicle loan RC i.e. Joint
registration with transport department is required within one month from the date of purchase of
vehicle further the copy of original invoice is also required.
  Details of primary and collateral security mortgaged with bank. Creation of charge with ROC.
 The form should be signed by at least one guarantor.
 For CC (Cash Credit) account party shall have to submit stock statement within 7 days from the end
of respective month. And we should have to check the DP (Drawing Power) calculation.
 See the Insurance register in order to verify the expiry of insurance of stock and securities
mortgaged with bank.
 We’ve to check the account statement of the party and see the transaction there if any doubt arise
then that should be cleared.
 NPAs and potential NPAs are to be checked carefully. And see the effort made by bank to recover
the amount from NPAs
 See the regularity in payment of interest, installments etc.
 If Ad hoc limit is provided by bank then check the repayment of same and proper functioning of
account because no ad hoc limit can be provided to irregular advance. Ad hoc limit means providing
some amount to an existing customer temporarily when the fixed limit provided by bank is
insufficient for spending. It should be repaid within 15 to 30 days. Usually there is the limit in
providing ad hoc limit which varies over bank to bank.

4. Deposit:
Generally we have to look through some high balance account and the trail of transaction. If there is any
non- operative account then we’ve to make effort to make them operative. We have to see whether
interest code and rates are correctly fed in to the system, any change in interest rates are effectively fed
into the system or not etc.

5. Forex:
If your auditing branch is authorized to do foreign exchange transactions then you are lucky that you got to
know about forex. In forex, we look through the exchange rate change and their correct valuation in books.
Available foreign exchange with bank, profit and loss in foreign exchange. There are some RBI guidelines
regarding foreign exchange and we have to see the adherence of same.

6. Income leakage:
This is the most important and sensitive part of audit. In most of the banks there are some income leakage
and we have to find out that. Generally income leakage arises due to following reasons and we have to look
that:

 Undercharge of processing fee, upfront fee and other charges by the bank during disbursement of loans.
 Wrong feeding of interest rates in the system.
 Wrong calculation of profit in forex transaction etc.

To overcome these types of revenue loss of bank we as an auditor go through the calculation and
genuineness of the different charges. Though banks are working on highly intelligent software but due to
human errors such kinds of leakage arise and we have to minimize those. Both the ICAI and Bank provides
the manual for revenue audit, if we go through that very carefully then we can understand the leakage
more effectively. We have to generate various MIS reports from the system and analyze them. If bank
undercharges the fees then it lost its income & the performance of the bank looks very weak due to this
reason its share on the market falls down. On the other hand, if bank does overcharge of such things then
the false performance of bank is shown and customer may be misguided due to this. It is the prima facial
duty of auditor to shoe the true and fair performance of the clients.
7. Housekeeping and computer:
As anauditor we have to check overall housekeeping maintenance of the branch. Whether the branch is
located in safe area or not, what safety vaults are adopted by the bank, safety of lockers, computer, its
software and its security etc.
8. Remittance:
It is also an important job of bank to provide remittance facility to their customer. We as an auditor should
check the trail of remittance. If the remittance made in foreign country then adherence of Foreign
Exchange Management Act, 1999, RBI guidelines etc are done or not.

9. Others:
There are other so many fields of banks. And as far as possible we have to cover all the areas, because
there may be fraud prone areas. We have to see the clearing process of cheque, Bills for collection and
other bills should be checked properly.
 Check List of items to be checked in above said areas of coverage
 For Newaccount
1) Nameoftheaccount holder
2) Type of a/c saving/current/time/advance
3) A/c no
4) A copy of verified Identity proof
5) A copy of verified residential address proof
6) Verification of introducer’s signature
7) Whether letter of thanks is send or not to the introducer as well as to new depositor.
8) Signature of authorized signatory obtained
9) Check Certificate of incorporation/MOA/AOA, board resolution, Copy of PAN, power of attorney
10) Cross check no of a/c opening forms with a/c opened in the system
11) Ensure photograph of the a/c holder is obtained and fixed or stapled on the a/c opening form.

 Loan Files checking: FOR DUE DILIGENCE AUDIT

1) Verify rate of interest with rate circulars
2) Compare rate of interest and calculate EMI on calculator
3) Check title of clearance in respect of Housing or any other property loan and whether it is
authorized by bank’s approved advocates.
4) Where immovable properties are held as security by way of deposit of title deeds, verifytitle deeds
register to see whether narration is written for additional limits and all formalities complied with.
5) In the case of company, Whether common seal affixed on the relevant document.
6) Check valuation of assets as per govt authorized valuer.
7) For education loan check receipt or fees payment sleep and confirm it with the college/institution
8) Check the person’s other loan and installment amount. If total installment amount is more than 60%
of its net income, then loan cannot be issued.
9) Confirm proper insurance coverage for loan asset or mortgaged asset and their renewal.
10) Check, Are all documents correctly executed in the latest revised prints of prescribed formats and
properly stamped wherever necessary in terms of Stamp Act as per manual on documentation and as per
circulars on the subject
11) Checkrequirement of Letter of acknowledgementof debt(LAD). If loan agreement is there then no
need to take LAD. If once taken then it is compulsory to review before 3 years.
12) Ensure maintenance of Insurance register
13)Submission of Tax audit report for all CC
a/c 14)Submission of CMA data
15) Check crisil credit rating
16) Submissionofmonthly Stockstatementfor C.C.a/candstockstatement
register
17) Ensure regular quarterly stock audit for C.C
18) Compute loan rate in case of LABOD by adding 1.5% to average rate of all
F.D. 19)Physical verification of loan asset
20) Verify whether credit limits are reviewed or not.
21) Verify whether security documents are held with the bank vis-à-vis stipulation on the
sanctioning documents.
22) Verifywhether the advances have been classified as per RBI
guidelines. 23)Check whether the letters of credit issued by the branch
are within the delegated power and ensure that they are for genuine
trade transactions 24)Check the Bank guarantees issued, whether they
have been properly worded and recorded in the register of the Bank.
Whether they have been promptly renewed on the due date.
25) Ensure proper follow up of overdue bills of exchange.
26) Verify whether the submission of claims to DICGC and ECGC are
in time.
27) Registration of charges with Registrar of Companies and
Resolution passed by appropriate authorities. (By filing Form 8)
28) Withdrawal within limit/ Advance Value (Drawing Power Limit)
(D/P) 29)Check Processing fees, stamp duty at the time of sanctioning
new advances.
30) Report excess drawing over D.P. (For CC and temporary O.D.)
31) Whether Select Operational Data and Quarterly Information System (now FRS) Statementsin respect of
big borrowers have been received
promptly? Whether penal rate of interest@ 1% is being charged for delayed submission/non-
submission?
32) Verify whether the branch has charged lead Bank charges in
respect of advances under consortium norms.
33) Check folio charges
34) Check Penalinterestfordelayed/non-submissionofreturns, financial
statement required to be submitted
35) Check Penal interest on advances in respect of lapsed sanction/limit.
36) Check Penal interest on excess over limit.
37) Check Overdue interest on all types of bills, loans and packing
credits for overdue period.
38) Check Commitment fee for unutilized limit is collected as per rules.
39)Check Commissionofletterofcredit, letterofguaranteeandcharges for
safe custody etc.
40) Check Standing information charges.
41) Check stop payment charges. (For all accounts)
  Cash:
1) Verifying whether exchange of cash between cashiers is made after making entry in the register.
2) Ensure dual control system for cash safe/counting of bundles.
3) verifying cash scroll and the token book with cashier’s summary and Cash Abstract.
4) Verifying whether Cash Remittance in Transit Account is reversed on the same day by debit to a
proper headofaccountdesignatedfor it
afterreceiptofproperacknowledgement/receiptwherecashisremittedtoa branch/Bank.
5) Verifying whether accounting of currency chest transactions and their reporting to RBI is done promptly
6) Ensure cash is retained as per cash retention limit of the branch. Report if the cash is retained in
excess of the cash retention limit with the reasons thereof.
7) Verify expense incurred by cash payment involving a sizable amount.
8) Verifying whether keys to Strong Room, Cash Safe, and Almirah for Security Printing Books are in
joint custody of the authorized officials?
9) Verifying whether there is any entry outstanding in Cash Remittance in Transit Account for more
than 3 days
10) Verifying whether the branch remits all its excess cash to link
branch or Currency Chest.
11) Verifying whether the branch remits its surplus balance with other
banks regularly to the designated RBI centre
12) Conducting a surprise physical verification of cash in hand , foreign
currencies, and foreign travelers’ cheques on any day during the month
13)Verifying whether the receipt and delivery of Security Printing Books
are properly recorded under joint signatures
14) Verifyingwhether physical verification of the Security Printing
Books and tallying with the balance.
15) Whether surprise verification of cash done by officer other than
joint custodian officer/manager.
Clearing:
16) If the branchis independently handlingclearing,
whethertheclearing account is brought to nil every day, if not,
comments to be noted down.
17) Whether safeguards are observed to ensure proper handling and
custody including returned instruments?
18) Whetherservicecharges/incidental chargesas prescribedarechargedfor
the cheques returned in clearing.
19) Whether drawings are allowed against unclearcheques.Whether
such cheques are referred through prescribed register and passed by
the Controlling Officer, if the drawings exceed the prescribed limit
whether thesearereportedtothe Controlling Authority.
Examinewhetherinterest was charged and report such omission for
rectification.
20) Verifying entries which remain outstanding for more 2 days and
checking for action taken for their disposal
21) Verifying whether account with the Main Branch is reconciled every week
  Other:
22) Checkcheques returned/bills returned register and look into reasons
for return of those instruments.
23) In case of difference in clearing, there is a tendency to book it in an intermediary suspense account
instead of locating the difference.
Examine the day book to verify as to how the difference in clearing has
been adjusted.
24) Such instances should be reported to Controlling Officein case
the difference persists.
25) Checkwhether debits in income account have been permittedby
the competent authorities. Check the transactions of staff members.
26) Study internal inspection/audit reports and ensure that the branch
gives proper compliance thereto.
27) Verifying whether the deduction of tax at source (TDS) from
interest income on Term Deposits is done as per laid down
procedure. Or Form 15H/15G received or not.
28) Verifying whether Form No. 60 where the depositor does not have PAN
is held on record and the same are submitted as per laid procedure (For
deposit accounts)
29) Verifyif inoperative accounts ledger and Specimen
Signaturesarekept under the custody of Manager/Asst.Manager and
access thereto is controlled. (For deposit accounts)
30) Whether dormant/inoperative accounts are transferred to inoperative
ledger. If not, it should be noted in the register and they should be
transferred. (For deposit accounts)
31) Verifythat all transactionsrelatingtoinoperativeledgersareallowed
under the written authorization of the Manager.
32) Check Incidental charges and service charges in Saving Bank
Account (including inoperative) having balance below prescribed
limit.
33) Check Destruction of oldrecords as per time schedule
prescribed. 34)Check Locker rent.
35)30% scrutiny of transactions relating to the payment of pension..
36)Whether the prescribed certificates – Life, Re-employment, Re marriage
etc. obtained, wherever required, in all pension accounts.
37)Physical checking of Govt. and other securities held on behalf of
Investment Departmentandtimelycollectionofinterestthereonandtheir
maturity proceeds.
Records to be maintained by an auditor:

Permanent File:
1) Letter of engagement, undertaking/comment by the firm to the Bank
2) Communication to previous Auditor (NOC)
3) Audit checklist
4) Information regarding branch business, data, nodal officer,status of branch, whether computerized/parallel
category of branch, etc.
5) Performance of monthly, quarterly, annual report revenue report
6) Correspondence with the Bank for any matter.

Current File/Working paper File:

1) Branch Audit Programme
2) Branch’s statement as on the data of the report on which basis it is prepared
3) Periodic correspondence with the concerned departmental officer
4) Irregularities intimated to the Controlling Officer
5) Discussion of the audit report
6) Particulars of big borrowers, depositors etc
7) Circulars received from head office of the auditee Bank
 Reporting

Reporting to branch head in the below format:

 Date
 Irregularity Observed
 Initial/Authorization of the Auditor
 Initial of Bank Official
 How irregularity rectified
 Date of rectification
 Initial/Authorization of the Auditor
 Initial of Bank Official
 Demand Deposit includes
 1) Credit balance in overdrafts & Cash Credit accounts
 2) Deposits payable atcall
 3) Overdue deposits
 4) Inoperative current accounts
 5) Matured term deposits and cash certificates
 6) Certificates of deposits, etc
 7) The cash credit account would be included if the balance is showing credit balance. The
current accounts are also payableon demand. The outstanding telegraphic and mail transfer
demand drafts are also to be included under the demand deposit head.

 Term deposit includes

 1) All deposits repayable after a specified term
 2) Fixed deposits
 3) Cumulative and recurringdeposits
 4) Cash certificates
 5) Certificates of deposits
 6) Annuity deposits
 7) Deposits mobilized under various schemes
 8) Ordinary staff deposits
 9) Foreign currency
 10) Non-resident deposit accounts, etc
3. Annexure
Annexure1: Resume

Resumes of Proprietor

Please find attached resume of Professionals whose experience and knowledge can provide valuable advice to the client

CA Jayesh Chavda Proprietor

ACA, M.com.

Practicing Chartered Accountant having experience of more than 1.5 years in Ow

 ANNEXURE 5-
SHOWING PAST AUDIT EXPERIENCE IN BANK AUDIT

Year Name of the Bank Name of the Audit Type Team Name of CA
Sr. Branch Member Firm
no. As
1 2023 Kotak Mahindra Bank Anand Due Diligence Professional V R Pandit &
Audit of Bank Co.
Customers
2 2023 HDFC Bank V V Nagar Due Diligence Professional V R Pandit &
Audit of Bank Co.
Customers
3 2023 Bank Baroda Anand Stock Audit of Professional M/S JANVI K
Bank Customers SHAH &
ASSOCIATE
4 2022 Bank of Baroda V V Nagar Due Diligence Professional Jayesh Chavda
Audit of Bank & Co.
Customers
5 2022 Bank of Baroda Boriavi Concurrent Professional M/S JANVI K
Audit SHAH &
ASSOCIATE