Cash
The auditor is required to comment on cash operations as under:
System of monitoring of cash at branches; and Management of cash through currency chest operations.
Insurance cover (including insurance for cash in transit).
System and procedure for physical custody of cash.
In the current year due to demonetization process carried out, the Auditor has to specifically examine and report on the issues noted by the bank Management, Internal & Concurrent auditors relating to demonetization of SBN. This is with regards to deviations in compliance with RBI Circulars & bank policies / procedures on –
Exchange of SBN
Deposits of SBN by customers
Daily / weekly withdrawal limits through ATM / Branch
Transfers of SBN to RBI
Issuance of New Notes
Filing of STR / CTR & various reports to RBI
Auditors to report whether there has been no misuse of the process as was laid down by the RBI through its various circulars The auditor is supposed to comment whether the bank has an appropriate system of monitoring the cash at the branches. For this purpose, the auditor should ensure that the bank has the system of verifying that the norms for cash-holding followed by the branch are the same which are fixed by the bank.
The cash is normally maintained under joint custody of the branch manager and the cashier. The main key to the safe is with the branch manager while the second and the third keys are with the accountant and/ or cashier. Each branch should maintain the records showing the details of keys and keyholders. Further, the bank should have a system of verifying whether the instructions of the bank in this regard have been complied with consistently throughout the year.
In the normal course, cash balances are expected to be verified on a daily basis and recorded in the cash book under the signature of the branch manager and another authorised signatory, since cash is under dual charge at the branch level. The auditor should ensure whether the bank has a system for verifying the same. The system should include general scrutiny of the cash book to ascertain whether it is in accordance with the instructions given by the bank, physical verification of cash and agreeing the same with the books maintained, with due authentication of such balances by the authorised signatories. For this purpose, the auditor should review the LFARs of the branches.
The auditor should ensure whether the bank has the system of checking the cash balance at the branches at periodic intervals by the authorised officials of the bank.
The auditor is also supposed to comment whether the system relating to Management of the cash through currency chest operations is appropriate. The currency chest operations are those where the bank holds cash as an agent of RBI. The auditor should report whether the bank has a system of regularly monitoring the currency chest operations. The balances in the chest should be periodically verified by the bank officials.
The auditor should examine and report on the adequacy of the insurance cover for cash with reference to the cash balance generally carried by the bank. He should also examine whether the insurance policy is in force. The auditor should ensure and comment whether the bank has obtained a global insurance policy in respect of cash at all the branches. The auditor is also supposed to report whether the insurance obtained includes the insurance for cash-in-transit.
The auditor should ensure about the system followed for the physical custody of cash. The system may include as to maintenance of cash will be in joint custody of which two or more officials, verification of the cash balance on daily basis and tallying the same with the books maintained, etc. The system should also include the names of the person who will have the custody of the keys. The auditor should properly examine the system and procedure and report whether the same is appropriate or there are any loopholes.