Money at Call and Short Notice :
The auditor needs to enquire whether the bank has an approved risk policy of lending money at call or short notice and the same has been adhered before lending money at call or short notice. This would be more relevant at the Head Office rather than at the branch level.
The auditor should examine whether there is a proper authorisation, general or specific, for lending of the money at call or short notice. Compliance with the instructions or guidelines laid down in this behalf by the head office or controlling office of the branch, including the limits on lending in inter-bank call money market, should also be examined.
Call loans should be verified with the certificates of the borrowers and the call loan receipts held by the bank. The auditor should examine whethern the aggregate balances comprising this item as shown in the relevant register/account tally with the control accounts as per the general ledger. He should also examine subsequent repayments received from borrowing banks to verify the amounts shown under this head as at the year-end. It may be noted that call loans made by a bank cannot be netted-off against call loans received.
Like deposits with banks, money at call and short notice are also usually (though not necessarily) in round figures. Any odd balances should, therefore, put the auditor to enquiry.
The auditor should also verify that borrowing or lending for more than 14 days are not classified under this head, but are classified as ‘deposits’ or ‘advances’, depending on the nature of lending and the parties to whom the moneys have been lent.
The auditor needs to verify monies at call to banks, whether they are fresh or roll over of the old transactions and ascertain whether any provision or write off is required.
It may be noted that as per the directions of the RBI, banks cannot pay any brokerage on deposit and call loans, except to the extent specified in paragraph 8(e) of the RBI circular dated July 22, 1974.
The auditor should examine whether interest has been properly accrued and accounted for on year-end outstanding balances of money at call and short notice by confirming the same from the opposite party.