AUDIT TEST SHEET Inter Company Loans

Issue The bank has Inter Company loans amounting to $30,000,000

Tax Risk 1) 2) The loans do not exist and the local bank is claiming an interest charge. The interest rate charged is not at market rates (the cost of the loan could be used to manipulate profits or losses reported.) The bank borrowing the funds does not use the funds for trading purposes

3)

Audit Test 1.1) 1.2) 2.1) 2.2) 3.1) 3.2) Verify that the loan funds were transferred (received by the local bank). Establish what documentation is in place to verify that the loan existed. Is the interest rate charged above or below the market rate? If so, has either party got profits or losses that cannot be utilised. Establish if the loan funds are being used for a genuine business purpose? Speak to the loan underwriter or Treasury dealer that charges the fee or commission (asking the above questions). From the above establish if they offer any services outside the normal (i.e. a Derivative, a loan with special arrangements etc.) Test Results 4.1) 4.2) 4.3)