Concurrent Auditing

[CONCURRENT AUDITING
Concurrent auditing
By Ashwini d BNMIT, MBA 3rd SEM 1BG10MBAO7
Introduction
1 | B. N. M. INSTITUTE OF TECHNOLOGY (BNMIT)
Concurrent auditing
BACKGROUND
RBI directed all the banks to introduce system of concurrent audit for the first time in 1993 base don the recommendations of Ghosh committee on frauds and malpractices in Banks. Subsequently, a working group headed by Mr. Jilani, CMD of Punjab National Bank, recommended some improvements in the system of concurrent audit in the Banks. Thereafter, RBI issued fresh guidelines vide its circular dated 14th August 1996 to make the system of concurrent audit in the Banks more effective .RBI issued another circular on 12th August 1997 in connection with enlargement of scope of concurrent audit to cover FOREX transactions.
Introduction CONCURRENT Auditing:

Concurrent Audit is an examination which is contemporaneous with occurrence of transaction or is carried out as near there-to as possible. It attempts to shorten the Interval between a transaction and its examination by an independent person not Involved in its documentation. There is an emphasis in favour of substantive checking in key areas rather than just checking. This audit is essentially a management process integral to the establishment of sound internal accounting Functions and effective controls and setting the tone for a Vigilant Internal Audit to preclude the incidence of serious errors and fraudulent manipulations.
SCOPE OF CONCURRENT auditing:

A concurrent auditor may not sit in judgment of the decisions taken by branch officials. The auditor will necessarily have to see whether the transactions or
decisions are within the policy parameters laid down by the Bank, they do not violate the instructions or policy prescriptions of the RBI and that they are within the delegated authority. Concurrent audit system is regarded as part of Banks Early Warning System to ensure timely detection of irregularities and lapses, which helps in preventing fraudulent transactions at branches. The scope of the concurrent audit is wide enough to cover major fraud-prone areas like handling of cash, deposits, safe custody of securities, investments, overdue bills, exercise of discretionary powers, sundry and suspense accounts, inter branch reconciliation, clearing differences, foreign exchange business including Nostro accounts, Off-balance sheet items like LCs and guarantees, treasury functions, government business, customer service and credit card business. Concurrent auditor is required to check that: Transactions are properly recorded documented and vouched. Spot rectification of the irregularities and implementation of system and procedure of the bank. To perform this job effectively and efficiently he must be aware of the latest guidelines issued by the bank as well as RBI. He should also be well versed with the functioning of different departments at the branch.
MAIN OBJECTIVES OF CONCURRENT AUDIT :

To alert the management with reporting of early warning signals so that The bank management shall take necessary steps in time to protect the Banks assets. To supplement the efforts of the Bank in carrying out the simultaneous Internal check of the transactions and other verifications and also Compliance with the laid
down procedures. In concurrent audit importanceis given to checking high risk transaction having large financial implications as opposed to transactions involving small amounts. To locate irregularities, if any, in respect of major identified areas of Branch working on an ongoing basis. To detect serious / major irregularities in documentation, security, etc. early and to ensure timely rectification To check the fraud prone areas in branch functioning and to verify whether the fraud prevention measures put in place by the Bank. PROCEDURAL ASPECTS OF CONCURRENT AUDIT The bank, based on the guidelines from RBI, has framed a policy for concurrent audit of theselected branches of the bank. Administrative control over Concurrent auditors is to be exercisedby respective Zonal Inspectorates. Areas required to be covered under concurrent audit Concurrent Auditors are required to check the entire working of the branch covering 100%Transactions.
COMMENCEMENT OF CONCURRENT AUDIT:

Concurrent audit shall be commenced during the same month of the audit commencement report shall be sent by both the internal and external concurrent auditors on the same day of commencement to Zonal Inspectorate by fax / e mail. Commencement day functions in branches other than FD: Concurrent auditors shall present their Letter of Authority to the branch in charge on the date of commencement of concurrent audit. This LOA shall be carried with
them in person daily and to be produced on demand by the branch officials. The following activities are to be carried out on the date of commencement: 01. Checking of cash balance in double lock and single lock and tallying with Daybook. Detailed verification of all pieces of 1000, 500,100 and 50 rupee denominations and test check of other denominations. Cut notes to be checked in detail and comment on the cut note holdings by the branch and whether any impounded note or burnt note or half value note etc is kept along with the note bunch. 02. Checking of cash balance in both on site and off site ATMs attached to the branch. 03. Checking of foreign currency notes and travellers cheques in the branches. Internal and External auditors shall verify the Foreign Money Accounting Head vis--vis Foreign Money Register and satisfy that there were no extraneous debits during the month. 04. Position of undelivered debits cards whether kept inside cupboards or in the open trays. 05. Verify whether the authorized persons are holding the cash keys; whether the branch manager is having permission to handover the First key to others and whether the said permission is in force; 06. Verify security items with the balancing book and control register; Ensure that no security item is kept outside the cupboard. ; verify the single lock box containing security items for day to day use. Verify whether monthly balancing of high value securities is done 07. Check whether UPS room and Server Room are kept locked. 08. Verify staff punctuality and check attendance register.
cut
KYC NORMS
It means KNOW YOUR CUSTOMERS Know Your Customer (KYC) is the due diligence and bank regulation that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. In the USA, KYC is typically a policy implemented to conform to a customer identification program mandated under the Bank Secrecy Act and USA PATRIOT Act. Know your customer policies are becoming increasingly important globally to prevent identity theft fraud, money laundering and terrorist financing.Beyond name matching, a key aspect of KYC controls is to monitor transactions of a customer against their recorded profile, history on the customers account(s) and with peers. Banks doing KYC monitoring for anti-money laundering (AML) and checks relating to combating the financing of terrorism (CFT) increasingly use specialized transaction monitoring software, particularly names analysis software and trend monitoring software. The generated alerts identify unusual activity which is then subject to due diligence or enhanced due diligence (EDD) processes that use internal and external sources of information on the subject, including the internet. This helps to determine whether a transaction or activity is suspicious and requires reporting to the authorities. In the US, it would require Suspicious Activity Reporting (SAR) filing to Financial Crimes Enforcement Network (Fin CEN). In the UK, it would require a report to Serious Organized Crime Agency (SOCA). In Canada KYC is monitored and managed by the Financial Transactions and Reports Analysis Centre of Canada also known as FINTRAC KYC has different connotations and the definition above is from an AML/CFT perspective.
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Know Your Customer processes are also employed by regular companies of all sizes, for the purpose of ensuring their proposed agents', consultants' or distributors' anti-bribery compliance. Banks, insurers and export credit agencies are increasingly demanding that customers provide detailed anti-corruption due diligence information, to verify their probity and integrity.
Cash:Daily cash transactions with particular reference to any abnormal receipts and payments. Proper accounting of inward and outward cash remittances. Proper accounting of Currency Chest transactions, its prompt reporting to the RBI. Expenses incurrent by cash payment involving sizeable amount.
Deposits:Check the transactions about deposits received and paid. Conduct percentage check of interest paid on deposits including calculation of interest on large deposits. Check new accounts opened particularly current accounts. Verify operations in new current/SB accounts in the initial periods to see whether there are any unusual operations. Deposits of Bank Concurrent Audit The main source of bank finance is the deposits accepted from public. To cater to the needs of various types of customers, banks offer different types of accounts with various facilities attached to these accounts. The Bank accounts are broadly classified into the following categories: (i) Savings Deposit (ii) Current Deposit (iii) Fixed Deposit (iv) KDR
(v) Recurring Deposit etc. (vi) NNND A/C
A)
Savings Deposit Account The Savings Deposit Accounts is opened to attract small savings of the public. The number of withdrawals per year is restricted. A Savings Deposit cannot be opened normally by any trading or business concern, whether it may be individual, or partnership concern, etc. A bank may open savings deposit account for the primary cooperative credit society which is financed by that Bank, companies incorporated under Section 25 of the Companies Act, 1956; cooperative societies, philanthropic associations and institutions which are exempt from payment of income-tax with the prior permission of the RBI. No overdraft is allowed on Savings Account.
B)
Fixed Deposit Account Fixed Deposits are the funds kept by the public with the Bank, which are not required immediately and are repayable on the expiry of term of the deposits. The period of deposits may vary from 15 days to 5 years or even more than 5 years. The rate of interest varies depending on the period the deposit is kept. Sometimes large value deposits are given special rate of interest by the banks.
Classification of Deposits of Bank Concurrent Audit For the purposes of the disclosures in the Balance Sheet, the RBI classifies the deposits accepted by Bank into following categories, namely: I. Demand Deposits II. Savings Bank Deposits III. Term Deposits
I. Demand Deposits (i) From Banks (ii) From Others Includes all Bank deposits repayable on demand. Includes all demand deposits of the non-Bank sector. Credit balances in overdrafts, cash credit accounts, deposits payable at call, overdue deposits, inoperative current accounts, matured term deposits, and cash certificates, certificates of deposits, etc. are to be included under this category. II. Savings Bank Deposits Includes all savings Bank deposits (including inoperative savings Bank accounts) III. Term Deposits (i) From Banks (ii) From Others Includes all types of Bank deposits repayable after a specified term. Includes all types of deposits of the non-Bank sector repayable after a specified term. Fixed deposits, cumulative and recurring deposits, cash certificates, certificates of deposits, annuity deposits, and deposits mobilized under various schemes, ordinary staff deposits, foreign currency non-resident deposit accounts, etc. are to be included under this category.
Verification Norms - Deposits:

1.
SB Deposits:
Test check interest payments of Rs.500/- and above. Where all interest payments are below Rs.500/- interest payment of higher amounts out of them may be checked and where both categories are there, a combination of both may be adopted. Test check TOD interest collected with interest collected subsidiary in computer. Test check all types of Service Charges applicable to SB Accounts
2. Current Deposit: Test check of TOD interest collected with interest collected subsidiary Test check half-yearly service charges and other types of Service Charges applicable to Current Account.
3.
Term Deposits:-
Test check of Accounts closed before maturity, recovery / payment of interest on account of such closure and credits / debits to interest paid subsidiary. Test check maturity value calculations in all types of term deposit accounts.
4.
NNND Deposits:-
Test check of closure before maturity / on Maturity and interest debited to Sundry Deposits with actual payment to the depositor and recovery of differential interest and its credit to interest paid account. Test check recovery of Commission wherever applicable and credit to Commission Subsidiary. Test check debit to NNND interest provision in Sundry Deposit and comment. Any abnormal transactions may be verified in detail. Closure before maturity and payment of interest after a gap of few days subsequent to closure of account may be verified if such cases are many. IO to verify such transactions in depth.
5.
Further IO has to necessarily to verify the following:Required provisions have been made correctly. Interest provisions made during earlier quarters have been promptly reversed. Correct program has been run for application of interest/calculation of interest provision. Comparison of cost of deposit and yield on advances with the previous halfyear/previous year and analyzing the reasons for abnormal variations, if any.
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Advances of Bank Concurrent Audit The lending of funds to customers is the main business of a banking company. A bank earns income from the interest and discount, etc. arising out of the funds lent by it. The lending of funds has inherent-risks, i.e. the loan or advance may go bad. Banks therefore follow prudential lending principles as prescribed by the Reserve Bank of India while lending the funds in order to reduce the associated risks. Various Forms of Credit The advances made by banks are normally in the following forms: i) Cash Credit ii) Overdraft iii) Loans
Cash Credit of Bank concurrent Audit Cash credit is an arrangement between a bank and the customer by which money is advanced against hypothecation of stocks in trade and a bond of credit by one or more sureties. The borrower can reduce the debit balance by paying back surplus available with him. The interest is charged on the total amount utilized. Cash credit is normally sanctioned by the bank for a period of one year and is generally renewed if the account is operated satisfactorily. The cash credit is generally secured by tangible assets. The borrower need not withdraw the whole amount and may withdraw the funds as and when required. The maximum amount sanctioned depends on the working capital requirements of the borrower. The interest charged (now monthly) on the outstanding debit amount to the debit of the borrowers account.
Overdraft The overdraft is a facility given by a bank to meet temporary needs of the
borrower. An overdraft facility is usually sanctioned against security, shares, stock, bonds, fixed deposit receipt, life insurance policy (surrender value) etc. VERIFICATION OF ADVANCES :
Verify that loans and advances have been sanctioned as per standing guidelines of the bank. (i.e. after due scrutiny and at the appropriate level),
Verify whether the sanctions are in accordance with delegated authority. Verify that securities and documents have been received and properly charged/ registered.
Verify that post disbursement supervision and follow up is proper such as receipt of stock statements, installments, renewal of limits etc. Verify whether there is any misutilisation of the loans and whether there are instances indicative of diversion of funds. Check whether the letters of credit issued by the branch are within the delegated power and ensure that they are for genuine trade transactions.
Check the bank guarantees issued, whether they have been properly worded and recorded in the
Register of the bank and that whether they have been promptly renewed on the due dates.
Verify proper follow up of overdue bills of exchange. Verify whether the submission of claims to DICGC and ECGC is in time.
Verify that instances of exceeding discretionary powers have been promptly reported to controlling/Head Office by the branch and have been got confirmed or ratified at the required level. Verify the frequency and genuiness of such exercise of authority beyond the discretionary powers by the concerned officials. Verify the CREDIT RATING done by the branch & ensure interest rates charged are as per the Credit Rating allotted to the account.
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LOANS AGAINST DIRECT FINANCE CHECK WHETHER

1. 2.
HYPOTHECATION
OF
VEHICLES
Loans sanctioned are within the delegated powers. Cost of the vehicle is remitted directly to the supplier along with margin by obtaining letter of authority from the borrower. Original invoices, stamped receipts and borrower's acknowledgement for having received the vehicle in good condition, are available with loan papers.
3.
4.
valuation certificate for second hand vehicles is obtained in the prescribed format from a qualified Automobile Engineer and other norms such as age, margin etc.
5. 6.
Banks lien is noted in RC Book and copy of RC book is obtained. The vehicle is registered in the name of one of the partners and loan papers are signed by all the partners , ( applicable to partnership firms ) RC Book and vehicle are verified / inspected periodically and recorded. In case of accounts in default check whether RC is verified once in a year and the vehicle is inspected once in twelve(12) months.
7.
8.
In case of vehicles not plying within the area of operation of the branch, arrangements have been made with the branch nearer to the place wherethe vehicle is plying, for periodical verification / inspection of RC /Vehicle. If yes, check whether such verification reports are received regularly.
9.
Insurance policy with Bank clause is available. transfer forms, blank and signed have been obtained in duplicate.
10. Ownership
11.Processing charges collected as per guidelines LOANS AGAINST HYPOTHECATION OF VEHICLES - INDIRECT
FINANCE CHECK WHETHER
i.All
required loan papers have been obtained and documents executed by the by the hirer is held with loan papers.
hirers lodged by the dealers with the Bank.

ii.Acknowledgement iii.blank
transfer forms , duly signed by the owner and financiers are available mandates addressed by the borrower to the hirer to pay all
iv.a)irrevocable
installments directly to the Bank has been obtained. b) Such mandates, in duplicate, were sent to hirers by registered post and copy, duly signed by them is available with loan papers. c) There is effective / adequate follow-up in case of non-receipt of copy of Mandates, or, installments. cases relating to difficulty in getting the Financier's lien cancelled and noting the Bank's lien in RC Book have been referred to the Sanctioning Authority for waiver of the same, provided all other documents including required RTA forms are obtained from the Financier/Hire purchaser, on the basis of which Bank can sell transfer the vehicle. processing charges / upfront fee have been collected. EMPLOYEES LOANS Overdraft / Loans: Check whether a) Limit / loan against approved securities like NSC, LIC, Shares / Debentures etc. are backed by sanction from appropriate authority. b) Rate of interest and margin are as per current guidelines. c) Penal interest on overdrawing,( due
to periodical debiting of interest and
non - recovery of interests on loans ) has been collected. d) Branch has adhered to other conditions applicable to loans / advances against NSC, LIC, Shares / Debentures for customers. e) The limit against shares is maintained separately and shares are held in demoted form as per procedures. f) ROI stipulated for loans beyond concessional limit to both workmen & Officer employees are as applicable to Loans to individuals - secured ". g) If an employee has more than one running limits, cheque book facility is restricted to one OD account only. (BPC on adv emp. Updated upto 31-07-07) Salary is being credited to clean OD h) Overdrawn / irregular a/cs are reported to HRM section, Circle Office, As per Appx.11 of BPC on Adv. to Employees. i) in respect of loan accounts transferred from one branch to another, interest for the broken period till the date of opening of account in the transferee branch is to be calculated manually and debited to loan account/accumulated product is entered in the system, as the case may be. HOUSING LOANS: Check whether 01 a) all the sanction terms have been complied with obtained correctly and completely . b) Relevant procedures regarding legal scrutiny, equitable mortgage transaction, Urban Land Ceiling Regulations, obtention of EC etc., are complied with 02 certificates of loan papers obtained have been forwarded to the sanctioning
and all loan papers
authority along with checklist for EMT. 03 property tax paid receipt (on first assessment of tax) and undertaking letter for waiver of production of further tax paid receipts are obtained 04 appropriate pledge letter for collateral securities such as, LIC policies, deposits and other approved securities is obtained 05 building is adequately insured with Bank clause 06 a) In the event of death of the employee during the service existing interest rate will be charged till the ostensible date of retirement. b) In case any legal heir of the deceased is employed by the Bank on compassionate grounds, monthly repayment should be made by the legal heir within the stipulated period. c) In the event of resignation etc., clearance of HL liability or continuation - to be decided before relief from the Bank. d) For continuation of liability beyond the date of resignation interest is to be charged at the rate applicable to customers. e) Charging of existing rate of interest will be permitted under the following circumstances : i) Entire liability including interest is not cleared from the terminal benefits. ii) Mandate is given to clear the liability from the terminal benefits. iii) Delay in releasing the terminal benefits should be of technical nature
and there should not be any fault on the part of the employee. 11. In respect of HL on paripassu charge with LIC Housing Finance Ltd., branch has adhered to guidelines thereof
12. The accounts have been clubbed in accordance with guidelines 13. Availability of stage wise inspection report and completion report is to be ensured. 14. Interest table to be verified. Print out to be kept with loan papers. * SPOT INSPECTION AS PER NORMS TO BE CONDUCTED AND CONSTRUCTION AS PER APPROVED PLAN TO BE ENSURED.
CANARA CASH Check whether - The financing branch is an identified branch for granting loans against shares. - Units coming under tax saving equity schemes are financed. a) Loans granted are against approved shares/debentures/bonds/Units of UTI etc and Canbank Mutual Fund and the borrowers are well introduced, credit-worthy and respectable? b) Loans/advances can be granted against securities standing in the names of third parties. Such third party should however be a close relative i.e., spouse, father, mother etc. c) Non-residents and employees of our Bank are not eligible under this scheme. However loans can be granted to spouse of our employee working in some other organization on the co-obligation/guarantee of our employees by next higher authority.
d) Quantum - Not exceeding Rs.5.00 lakhs per individual. In the case of Demat shares up to Rs 20 lakhs. e) Margin - (i) 50% on the market value of shares, and debentures, 30% in the case of PSU bonds. (ii) 50% on the NAV or the market value (whichever is less) on units of UTI/CBMF. f) Processing charges - as per norms. g) Repayment - Single transaction loans repayable a period of 60 months or OD limits can be considered. However it should be ensured that the liability does not outstand beyond the maturity date of units if any. Incase repayment is fixed in installments the same may be fixed as per the EMI chart. h) Substitution/part release of the securities may be permitted for not more than 10 times during the currency of the loan. Appropriate fee is collected. Also letter in NF 850 is to be obtained. i) Co-obligation/guarantee may be stipulated/waived by the Sanctioning Authority. j) Any relaxation in eligibility criteria/terms/conditions other than ROI/margin and those which fall under RBI guidelines may be permitted by the next higher authorities. k) In cases where loans are granted against third party security, AOD/AOS are to be obtained as per rules. CANARA MOBILE 1) For two wheelers eligibility, quantum and processing charges as per Can carry scheme (scheme since discontinued)
2) Loans granted are under fixed rate of interest only fixed rate to be reset at every 3 years. 3) Separate hypothecation agreement NF 928 is obtained or existing NF 722 incorporating additional clause as per Cir 137/2001 obtained. 4) The loan granted for purchase of second vehicle is as per guidelines. 5) Staff members and NRI s are not eligible 6) Branch has no powers to sanction second loan during the pendency of 1st loan CANARA PENSION: Check whether a) Any loan has been granted to pensioners who are already having any clean loan liability. b) Loans are within the normal delegated powers of the branch to sanction clean loans. c) Particulars of loan has been noted in the pension register d) Irrevocable mandate has been obtained as per manual of RL CANARA MORTGAGE Check whether 1. The loans are considered for genuine needs of the borrower against the security of the EMT? (Not for speculative purposes). 2. the property to be financed is in the place where the loan is availed Quantum, margin, eligibility, ROI 3. Valuation of property is done by our banks approved valuer? Whether the
inspection of the property (proposed to be mortgaged) are being carried out by the branch. 4. LSR is approved as per the guidelines 5. EMT has been created before disbursement of the loan? 6. Personal guarantee is specifically waived by the sanctioning authority or is obtained wherever stipulated? 7. The branch has ensured about the availability of adequate cash flow for servicing the periodical installments? Verify the proof of income namely ITAO, salary certificate etc., 8. In case the property of the close relatives of the borrower is accepted, whether the owner of the property is made as co-borrower/guarantor of the loan ? 9. The loans is classified as non-priority. 10. Overdue in Can mortgage loan accounts have been reported. 11. Sanction is accorded by Circle Head and above only CANARA RENT (Financing against rent receivables) CHECK WHETHER 1. The purpose, eligibility, quantum, margin, ROI of the loan are as per scheme 2. Inspection of the property let out/to be let out has been carried out by the branch before disbursement of loan. 3. The guidelines relating to inspection of property (both leased/proposed to be mortgaged) establishing its clear and marketable title based on LSR, its valuation by our approved valuer who should be qualified Chartered Engineer, creation of EMT thereon etc., are strictly adhered to by the Branch.
4. Tripartite agreement or notarized power of attorney has been obtained and whether lease deed has been registered, wherever stipulated. 5. The existing guidelines for documentation and creation of mortgage are adhered to. CANARA BUDGET EXISTING CANBUDGET, CANTRAVEL AND CANTECH SCHEMES ARE MERGED WITH CANARA BUDGET SCHEME CHECK WHETHER: 1. The borrower is a confirmed employee. 2. Minimum NTH salary is 40% after meeting the EMI. 3. NTH salary after meeting the EMI is not less than Rs 7500 wherever salary is maintained and Rs 10000 wherever salary mandate is obtained. 4. Pass sheets of the bank account for the past six months are verified wherever PDCs are obtained. 5. Suitable coobligant is obtained. 6. The branch has assessed the repayment capacity of the borrower by calling for information about other liabilities (clean as well as secured)? If the party is already having clean liabilities, it must be ensured that the total of all clean loans outstanding at any point of time do not exceed the total eligible quantum under this Scheme. 7. The applicant is dealing with our Bank or applicant's salary is credited to the account with us? Whether mandate from borrower for deducting installment from salary and remitting the same directly to bank is lodged with the employer and copy available.
8. Non salaried class also eligible for loan under this scheme (HO Cir no.316/2008). LOANS TO TEACHERS CHECK WHETHER 1. Scheme guidelines are followed as per norms
2.
Loans are granted to confirmed regular teaching staff/non teaching staff whose salary is credited to the financing branch. undertaking from the educational institution is obtained not to shift the salary account without NOC from the branch repayments are by salary deduction or through salary account (PDCs/ cash remittance should not be accepted for repayment) Letter from the branch addressed to the salary disbursing authority requesting them to inform the branch in case of termination/transfer etc is available. NTH after meeting the proposed EMI is 30 % of gross pay. Maximum repayment period permitted is 48 months. suitable co obligation is obtained any other clean loans are permitted to the same borrower against norms (can be permitted by DGM of circle)
3.
4.
5.
6. 7. 8. 9.
EDUCATION LOANS CHECK WHETHER: 1) Capitation fee loans are granted under Education Loans which is prohibited 2) Are the stipulations regarding eligibility, quantum, margin, security, repayment holiday, repayment period and other conditions stipulated from time to time complied with 3) Security, margin, repayment capacity is reckoned as family as a unit in case of
more than one loan is granted to the different members of the same family. 4) Loan quantum for caution deposit is restricted to 10 % of the total tuition fee of the entire course. 5) Loan facility is extended to students pursuing their studies in affiliated universities/ autonomous colleges ONLY (others can be permitted by AGM at RO/CO) 6) Joint documents are obtained either from spouse/parent/parents in law in respect of married persons. 7) Co obligation of employees is obtained in respect of loans to close relatives of employees. 8) Loans are granted to borrowers residing near the branch. 9) Security and margin norms are adhered in case of top up loans as per CIR 107/08 10) In respect of loans for studies abroad, security stipulations are complied with, when loan has been considered for the eligible courses as per CIR 107/08 BRINSP 1302 11) Where the student is a minor: a) Is the loan granted only to the parent/guardian and undertaking letter obtained from the minor on attaining majority? 12) Bank guarantee issued under Educational Loan Scheme is as per the terms of the scheme 13) Repayment holiday, repayment period and commencement of repayment are correctly stipulated. 14) Mode of charging interest during repayment holiday and afterwards is as per
norms. 15) Yearly progress reports/ course completion certificate/ employment details are obtained. 16) Repayment of loan is postponed till the date of completion of higher course when no loan has been availed for higher studies. 17) Necessary permission has been obtained from Circle Head in case of modifications/relaxations in security norms. 18) In case of Rural/Semi-Urban Branches, whether Service Area norms have been adhered to while financing ELs? 19) Upfront fee is collected in the form of refundable deposit in case of studies abroad. BRINSP 4009 20) EMI amount is informed to the borrower immediately on completion of the course BRINSP 1319 21) Branch has submitted confirmation as at December to RO/CO adhering to the guidelines as per CIR 255/04 & 328/07. 22) Degree/Diploma courses in Teachers Training course/Nursing course/B.Ed., course (Cir no.300/2008).
CANARA JEEVAN CHECK WHETHER: 1) Loans are granted to residents owning house or flat in their name BRINSP 1012 2) Spouse is a joint borrower irrespective of title deed
3) First applicant is above 60 years old and the joint applicant is more than 55 years 4) Commercial property is taken as security against norms. BRINSP 1302 5) The quantum of loan is assessed depending upon the market value and residual life of the property as per norms 6) Option for periodical payments are interchanged against norms 7) Lump sum payment is made to meet special requirements as per the scheme guidelines 8) Fixed rate of interest is charged and reset every 3 years. 9) Loan is granted for the eligible purposes 10) Valuation is obtained once in 3 years and revision in loan amount is made On the basis of reduction of value of the property BRINSP 1226 11) Sanction by circle head only. 12) All the properties taken as security to the loans under the scheme are compulsorily inspected by the IO 13) Tax paid receipt, ITAO and life certificate are obtained annually BRINSP 1235 14) IT clearance certificate is obtained before sanction of loan 15) Further ECs are obtained once in 3 years BRINSP 1233 16) Pension account is maintained with us in respect of pensioner borrowers 17) Foreclosure norms are applied in case of default. 18) Documents as per annexure V is obtained and the will executed by the Borrower in favour of the bank is registered BRINSP 1201 CREDIT CARDS (CANARA CARDS) Check whether 1) Branch has retained photo copy of application for its records. 2) A). Loss of card reported by card holder/stale card surrendered if any informed/forwarded to CBD HO by telex / telegram / FAX / telephone on the
same day of receipt of information. In case of loss of Canaracard-Visa whether copy of the FIR lodged by Card Holder with the Police is forwarded. B. returned cards destroyed beyond usage and certificate sent to the Card Division along with request letter of the card holder for cancellation. 3) Branch has collected appropriate charges and obtained unstamped letter-cumindemnity for duplicate cards, if any, issued. 4) Following have been ensured in respect of cards issued to NRIs: a) Possession of Indian Passports. b) Undertaking to surrender the cards when they cease to be Indian passport holders. c) SB account with a minimum balance of Rs.10000/- for at least one year. 5) Board resolution authorizing designated officers to avail the credit card and specifying the limits is obtained in respect of cards issued to corporate. If reimbursing branch, check whether
1)
The branch is designated by Canaracard Division to make reimbursement to the particular ME? The particulars viz., code no., floor limit, the rate of commission fixed for the ME etc are noted in a separate register a) Branch has ensured that card is not hot listed and transaction is within the floor limit of ME before reimbursing the amount to ME
2)
3)
b) Reimbursement against hand written charge slips with undertaking letter has been extended selectively. 4) a) Branch has reimbursed the amount to MEs promptly against Bank copy of charge slips duly ensuring that the summation sheet is filled in all respects and signed by the ME. b) Prescribed letter has been obtained from ME where reimbursement of charge slips which are more than 30 days. 5) BAR raised by the branch is only for actual amount paid to the MEs. 6) ME discount rates are reduced to as under:
Canaracard 2%} VISA 2%}
Housing Keeping:
Check that the maintenance and balancing of accounts ledgers and registers including clean cash is proper. Check reconciliation of entries outstanding in the inter branch suspense account (IBSA) and inter bank accounts, Suspense account Sundry Creditors Account, DPWA account, Payment made on account of other branches (POAB) account etc. Ensure early adjustment of large value entries.
Carry out a percentage check of calculations of interest, discount, commission and exchange. Check whether debits in income account have been permitted by the competent authorities.
Check the transactions of staff accounts. In case of difference in clearing there is a tendency to book it in an intermediary suspense account (DNR A/C) instead of locating the difference. Examine the day book to verify as to how the differences in clearing have been adjusted. Such instances should be reported to Head Office in case the difference persists. Detection and prevention of revenue leakages through close examination of income and expenditure heads. Check cheques returned/bills returned register and look into reasons for return of those instruments. Checking of inward and outward remittances (DDs, MTs and TTs)
NPA management.
27
Check that the early warning signals in the account are being picked up and immediate remedial actions including marking the account as SMA is being done.
Check the follow up being carried out by the branch towards recovery. Check that proper record of Technical write Off accounts is maintained. STATIONERY
Whether items of stationery are properly recorded and tallied with Balance of Stock of Stationery? Whether security forms in use remain during office hours in the custoy of authorized persons as per laid down norms and kept in safe in the strong room after closing hours?
Whether details of surplus/obsolete stationery items including MICR/NONMICR cheque books etc. been given to ZO/HO Stationery Department seeking instructions for disposal
Whether any SCRA relating to Stationery supplied is pending with the branch? FURNITURE & FIXTURES (FF) (1129) Whether furniture items are numbered? Whether they tally with furniture and fixtures register maintained for the purpose? Whether F.F. Balances tally with G.L.? Whether the sign board is properly displayed ? Whether lease deed of bank premises executed or not? Whether lease deed of the bank premises is in force ? Whether rent is being paid regulary? Whether appropriate steps taken to renew the lease. If it has already expired or going to expire shortly? Whether payment of taxes and ground rent is being made in time? (This is applicable for bank owned premises or in case of rented premises
where payment of taxes is the liability of the work). Whether communication with regard to insurance of furniture and fixture items has been received from H.O. Accounts Department and kept on record? Whether details of obsolete and broken furniture and other items given to ZO seeking instructions for disposal? Whether vehicles allotted to branch are insured? Whether cost of all the vehicles is duly recorded in books?
CASH MANAGEMENT (1101) 110101. Have you satisfied that correct assessment of daily cash requirements is made by the BM ? 110102. Have you verified that minimum cash balance is maintained by the branch for daily transactions? 110103. Have you satisfied that proper utilization of cashier manpower including paying cashiers is made for sorting and bundling of notes denomination-wise ? 110104. Are you satisfied that the cashier staff has full days job and that hey attend and leave the office according to scheduled working hours ? 110105. Are you satisfied that the branch is depositing surplus cash (if not otherwise disposed of) with the nearest branch/currency chest/RBI/SBI etc. (Inspectors should furnish figures of average cash holding on fortnightly basis as against the Retention Limit fixed for the branch since the date of last inspection as per Annexure VIII)? 110106. Have you verified that entries relating to remittance in transit are reversed within the prescribed period ? List of entries outstanding for more than 10 days should be furnished as per Annexure 1 (e) 110107. Whether adequate escort is provided for transit cash remittances in accordance
with HO Security Department Circular No.1/93 dated 16.03.1993? 110108. Does the branch furnish weekly statement to ZO in respect of cash movement as per HO Accounts Deptt. Circulatory letter No. 15/93 dt.09.06.1993 ? 110109. Whether cash remittance and cash drawn registers maintained ? 110110. Miscellaneous 16 PETTY CASH, POSTAGE, TELEGRAM, STAMPS IN (1102) HAND/EMBOSSED STAMPS ETC. 110201. Whether balances in petty cash, postage and stamps in hand as on the date of inspection tally with GL.? 110202. Have you physically counted the adhesive stamps and stamp papers/forms and tallied with balances in GL ? 110203. Have you verified that the branch maintains adequate stock of stamp forms? 110204. Whether proper register is maintained by the branch in this regard ? 110205. Have you physically verified all the unused/unissued cheque books/draft books, MC books, FDR Books and other security forms with the record and found that no security form is missing (in case of any shortage, inspecting officer must inform ZO/HO(I) with the following details). Have you further verified that all security items are kept under the joint custody of BM and second man and are also released jointly to prevent fraud?
ROLES AND RESPONSIBILITIES OF OFFICERS AT DIFFERENT TIERS

6.1. Concurrent Auditor 01. The Concurrent auditor shall commence the concurrent audit of the branch during the month to which it pertains. 02. The concurrent auditor shall prepare the jotting sheets in duplicate on daily basis with continuous serial numbers. The running serial number shall continue for 3 months only viz. April to June/ July to Sep / Oct to Dec/Jan to March. Each page of jotting sheets / Executive Summary / Quarterly Concurrent Audit report / Annexures / Part B Report / Special Report shall be signed by the concerned Concurrent Auditor without fail. 03. Original jotting sheets shall be handed over to the Nodal Officer of the branch against acknowledgement. The duplicate copy shall be retained by the Concurrent Auditor. 04. Part B items, if any, are also to be recorded in the jotting sheets with running serial number. Part B report (with unrectified remarks) shall be prepared and be annexed to the monthly Executive Summary/Quarterly Concurrent Audit Report.
05. In respect of Special report, the concurrent auditor should adhere to the extant guidelines as per ITIO 24/09 dated 16 07 09. It is necessary that the concurrent auditor has to discuss the matter with the Branch inCharge, without divulging the fact that Special Report is being submitted. Report is to be sent to the CO, ZI and Inspection Wing immediately without any delay. Such reports are to be fully elaborated and supported with necessary evidence/ proof. 06. The branch officials shall rectify the observations then and there. The concurrent auditor shall guide the branch officials for maximum spot rectification. Wherever the remarks are rectified, the concerned branch official shall round off the remarks and affix his initials against each rounded off remark. 07. Correctness of all the replies pertaining to Part A need not be verified by the concurrent auditor. Depending on the seriousness of the remark, he can verify compliance. However, the concurrent auditor should select serious remarks for verification of compliance, during the half yearly Quality Audit.
32
08. The responsibility of attending to the observations and correctness of replies to the observations is the responsibility of the branch only. 09. In respect of Part B observations, wherever rectification is reported by the branch, the concurrent auditor should call for the evidence, verify the compliance & satisfy himself before treating such remarks as complied with. 10. While completing the concurrent audit of any month, the concurrent auditor should call for the jotting sheets and verify the rectified/unrectified observations. Based on the above, the concurrent auditor shall prepare an Executive Summary on his observations in triplicate in the structured format covering all the serious irregularities / critical points / Early Warning Signals / persisting irregularities (along with Annexure 10, in the case of forex designated branches). He shall handover one copy to the branch and send the remaining copies to IF Section, CO and Zonal Inspectorate respectively on or before 5th of the succeeding month. 11. Wherever rectification process is tardy, concurrent auditor should discuss the matter with branch in charge and take up the matter with CO/ Z.I. by way of e mail/letter, wherever necessary.
12. At the end of the third month (i.e end of June, Sep, Dec and March), all the unrectified Part A observations of three months shall be consolidated and brought in the Quarterly Concurrent Audit Report format in the respective rows/ columns. Wherever the space provided is not sufficient, the concurrent auditor may record the details in supporting sheets. All the unrectified Part B observations shall be furnished in Annexure 12 (as free
style report) to the quarterly Concurrent Audit report. Pending remarks of
the previous quarter should be furnished in Annexure 13. 13.
The concurrent auditor shall collect the original jotting sheets of all the three months from the branch and send the same to I.F. Section, Circle Office along with the quarterly concurrent audit report. 14. The concurrent auditor should ensure handing over of the Monthly Executive Summary / Quarterly Concurrent Audit report to the Branch in any case not later than 5th of the succeeding month and despatch copies to ZI & IF Section of the CO, so as to reach them on or before 7th of the succeeding month. 15. Separate guidelines regarding closure of concurrent audit reports are
being issued to the branches/Circle Offices/Zonal Inspectorates. 16. I S Audit areas should also be verified by the concurrent auditor in the specified format.
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Concurrent Auditing

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Concurrent Auditing

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[CONCURRENT AUDITING

By Ashwini d BNMIT, MBA 3rd SEM 1BG10MBAO7

Introduction CONCURRENT Auditing:

SCOPE OF CONCURRENT auditing:

MAIN OBJECTIVES OF CONCURRENT AUDIT :

COMMENCEMENT OF CONCURRENT AUDIT:

| B. N. M. INSTITUTE OF TECHNOLOGY (BNMIT)

| B. N. M. INSTITUTE OF TECHNOLOGY (BNMIT)

Verification Norms - Deposits:

| B. N. M. INSTITUTE OF TECHNOLOGY (BNMIT)

| B. N. M. INSTITUTE OF TECHNOLOGY (BNMIT)

LOANS AGAINST DIRECT FINANCE CHECK WHETHER

hirers lodged by the dealers with the Bank.

to periodical debiting of interest and

and all loan papers

| B. N. M. INSTITUTE OF TECHNOLOGY (BNMIT)

ROLES AND RESPONSIBILITIES OF OFFICERS AT DIFFERENT TIERS

| B. N. M. INSTITUTE OF TECHNOLOGY (BNMIT)

the previous quarter should be furnished in Annexure 13. 13.

| B. N. M. INSTITUTE OF TECHNOLOGY (BNMIT)

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