Bills for Collection
The auditor should examine whether the bills drawn on other branches of the bank are not included in bills for collection.
Inward bills are generally available with the bank on the closing day and the auditor may inspect them at that time. The bank dispatches outward bills for collection soon after they are received. They are, therefore, not likely to be in hand at the date of the balance sheet. The auditor may verify them with reference to the register maintained for outward bills for collection.
The auditor should also examine collections made subsequent to the date of the balance sheet to obtain further evidence about the existence and completeness of bills for collection.
In regard to bills for collection, the auditor should also examine the procedure for crediting the party on whose behalf the bill has been collected. The procedure is usually such that the customer’s account is credited only after the bill has actually been collected from the drawee either by the bank itself or through its agents, etc. This procedure is in consonance with the nature of obligations of the bank in respect of bills for collection.
9.50 The commission of the branch becomes due only when the bill has been collected. The auditor should, accordingly, examine that there exists adequate internal control system that debits the customer’s account with the amount of bank’s commission as soon as a bill collected is credited to the customer’s account. The auditor should also examine that no income has been accrued in the accounts in respect of bills outstanding on the balance sheet date.
Co-acceptance of Bills
The auditor should examine whether the bank has instituted an adequate internal control system to comply with the safeguards as set out by the RBI’s Master Circular No. RBI/2015-16/76 DBR. No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Coacceptances” to ascertain whether such system, inter alia, captures all such items, appropriately records the same and also determines all the material items forming contingent liabilities, whether any item needs a provision in the books.