Other Matters
Besides the above matters, the auditor is also expected to comment on the following:
Comments on accounting policies, if any, including comments on changes in accounting policies made during the period.
Policies and systems for monitoring activities such as underwriting, derivatives, etc.
Adequacy of provisions made for statutory liabilities such as Income Tax, Interest Tax, Gratuity, Pension, Provident Fund, etc.
Adequacy of provisions made for off-balance sheet exposures and other claims against the bank.
Any major observations on branch returns and process of their consolidation in final statement of accounts.
Balances with other banks – observations on outstanding items in reconciliation statements.
Procedure for revaluation of NOSTRO accounts and outstanding forward exchange contracts.
Observations on the working of subsidiaries of the bank:
(a) reporting system to the holding bank and
(b) major losses of the subsidiary, if any.
Any other matter, which the auditor considers should be brought to the notice of the Management.
The Long Form Audit Report (LFAR) issued by the RBI clarifies that the matters required to be reported by the auditor therein are illustrative and not exhaustive. Therefore, if it is felt that if there is any other important matter which deserves to be included in the LFAR the statutory auditor may do so. The LFAR format was drafted in 2003. There have been significant changes in the banking Industry ever since. As a result certain additional areas which have not been considered in any of the above paragraphs can also be considered. The following is an illustrative list of few such matters:
· Corporate Governance |
· Legal departments (Details relating to suit filed and decreed accounts) |
· Borrowings |
· Merchant banking activity |
· Premises |
· Inter Office adjustments |
· Stationery department |
· Planning department |
· Jilani and Ghosh Committee Compliances |
· Raj Bhasha |
· Implementation of recommendation of Mitra Committee |
· Voluntary retirement scheme |
· Service Tax |
· Demat accounts and Loan against Shares |
· Fringe Benefit Tax |
· Legal Compliance Certificate |
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· Stress Testing |
The auditor should examine whether the Income Tax liability is computed as per the provisions of the Income Tax Act, 1961. Apart from that the auditor should review the appellate orders received during the year and consider the need for any additional provision/ reversal. If there is no requirement to retain a provision, it can be reversed.
Provisions for certain employee costs, such as, bonus, ex-gratia in lieu of bonus, and gratuity, pension and other retirement benefits are usually made at the head office level. The auditor should examine whether the liability for bonus is provided for in accordance with the Payment of Bonus Act, 1965 and/or agreement with the employees or an award of a competent authority.
The auditor should examine whether provisions in respect of termination benefits; retirement benefits such as gratuity, pension, postemployment life insurance and post-employment medical care; and other long term employee benefits like, long-service leave, bonuses, deferred compensation, etc., are made in accordance with the requirements of Accounting Standard (AS) 15, “Employee Benefits”. The auditor should examine the adequacy of the provisions made with reference of such documentary evidence as reports of actuaries or certificates from the LIC, as appropriate under the facts and circumstances of the case.
Auditor should reassess all off-balance sheet exposures and other claims against the bank for its contingency and chances of accrual. Auditor can go through the relevant files, papers and documents related to legal case.