Audit Approach and Procedures
Capital
The auditor should verify the opening balance of capital with reference to the audited balance sheet of the previous year. In case there has been an increase in capital during the year, the auditor should examine the relevant documents supporting the increase. For example, in case of anincrease in the authorised capital of a banking company, the auditor should examine the special resolution of shareholders and the memorandum of association. An increase in subscribed and paid-up capital of a banking company, on the other hand, should be verified with reference to prospectus/other offer document, reports received from registrars to the issue, bank statement, etc. Compliance with section 14 of the Banking Regulation Act, 1949, should also be examined. In case of increase in capital of a nationalised bank through fresh contributions by the government, the auditor should examine correspondence/government notification or order, bank statement, etc.
In the case of newly formed banking companies/places of business established in India for the first time by a banking company incorporated outside India, the auditor should also examine compliance with the provisions of sections 11 and 12 of the Banking Regulation Act, 1949.
The auditor should also check the compliance with capital adequacy requirements for banks.
The auditor should verify the compliance with the RBI reporting and other requirements issued from time to time.
In case there has been an increase in Share Capital during the year/period under audit, the auditor should verify the effect of such increase on the disclosures in respect of Earnings per Share (EPS) as well as the percentage of promoter holding.
In case issuance of new share capital by bank, the auditor should examine the compliance with section 13 of the Banking Regulation Act, 1949 in respect of restriction on commission, brokerage, discount etc. on sale of shares.