Profitability
The auditor is required to comment on the profitability aspects as under:
Analysis of variation in major items of income and expenditure compared to previous year.
Important ratios such as ROA, ROE etc; comparison and analysis in relation to previous year.
Policy relating to general provisions/ reserves.
The auditor is expected to present an analysis of variations in major items of income and expenditure compared to previous year, along with important ratios. This information is normally compiled by banks as per the requirements of the RBI. Wherever feasible, the auditor may also comment on the extent of income generated through non-traditional and specialized activities, such as, merchant banking, consumer banking, etc., as also on any unusual items of income and expenditure which may have had a significant impact on the profit/loss for the year.
The effects of any changes in accounting policies on the profit/loss for the year should be reported by the auditor.