Statutory Audit under CBS Environment Arif Ahmed, Partner: Arif Ahmed & Associates
LFAR and CBS Cash and Bank Balances. Money at call and Short Notice. Investments. Advances Other assets. Deposits and other liabilities. Profit and Loss Account. General. Specialized Branches.
Cash Cash balance which vary significantly from the limit fixed by controlling authorities. Data available from CBS Joint custody Check security setting in vault accounting, entries for main cash to counter cash ATM Balance Verify ATM balance Check the system of cash replenishment and balance updation
Money at Call and Short Notice Balance confirmation Data available from CBS Cash transactions remaining un-responded Data available from CBS Old outstanding balances remaining unexplained and age wise analysis Data available from CBS Unauthorized deposits and excess of authorized deposits to be reported Data available from CBS
Investment Physical verification on behalf of H.O. Book balance available on CBS Income earned on such Investments is not accounted by Branch Review the income accounts on CBS Matured or overdue investments Review report generated based on maturity date
NPA identification Advance Check parameter setting for NPA marking Confirm whether NPA marking is set to manual Generate NPA report Loans Overdue Position Inquiry : LAOPI Loan Overdue Details : LOANODUE Review system parameter setting Account creation authority Account activation authority Disbursement activation authoriy
Advances Master File - Check Parameters Repayment Schedule: Loans Repayment Schedule Report : LARSH EMI s Interest Rate Drawing Power Penal Interest Overdue Principal and Interest (LAOPI) Asset Classification Account Inquiry (ACI)
Linking of credit limits In CBS environment, in order to know the consolidated outstanding and value of assets of a customer under various credit-limits, all limits are linked to central/common node. One NPA all NPA Duplicate Cust-id
Other Assets Stationery and Stamps Check balance as per books from CBS Valuable paper inventory system: VPIS Suspense Accounts / Sundry Assets Use CBS to obtain details and clarification in respect of old unadjusted entries Check for balances that are not recoverable, common heads being Advance against travelling, advance payment for expenses, legal expenses, cash in transit
Securities Master Maintenance To check whether values of various securities are updated promptly and drawing powers are allowed on current value of such securities. Security Register (SRM) value of securities, date of inspection, date of valuation.
Deposits and Other Liabilities Unusual movements after balance sheet date Data on CBS Quantification of Overdue / Matured term deposits at the year end. Data on CBS List of major items of contingent liabilities other than Guarantees, LCs, Endorsements, Acceptances etc., Obtain from CBS
Deposits Overdue and auto renewal To check whether auto renewal of overdue TDR has been enabled Comment on Effective renewals and failures and On application of interest
Profit and Loss Test check interest / discount income and expenditure for select account in different categories Specifically check Treatment of instalment paid in advance for EMI based loan and recurring deposit accounts Review with test check system of estimation and provision of Interest on overdue / matured term deposits.
Reasons for Incorrect Interest Interest rate not mapped correctly: for example, interest rate of housing loan to staff linked to interest rate of vehicle loan to staff. Interest rate field kept as Zero Interest collection flag kept as N instead of Y Next interest demand date not changed and kept same as date of application of interest. Account wrongly marked as overdue/ NPA
General Inter Branch Accounts HO Account and branch Accounts agreement Old outstanding debits in the Head Office Account esp. those inherited Check for window dressing using CBS Large deposit at year end Under utilised facilities converted in deposits Unsecured loans shown as secured Review FA register esp. for assets purchased at HO and debited to branch
Specialised Branch Foreign Exchange Branches Check if interest is being paid on NOSTRO accounts If paid, whether service tax has been collected on services provided to those accounts Large Advances CBS can provide report on accounts with balance above specified limit
Areas Included under LFAR Whether hard copies of accounts are printed Areas of operations covered Are access and data security measures and other internal controls adequate Physical Access Logical Access Database Access Back-up Measures Contingency and disaster recovery plans for loss of data
Areas included under LFAR Scrutiny of the Information System Audit Report. Jilani Committee Recommendation Have appropriate control measures been devised and documented to prevent the computer system from attacks of unscrupulous elements. (Logical access controls) All aspects of security, reliability and accessibility are ensured before introduction of EDP applications in place of manual system by having pilot parallel runs.
Areas included under LFAR Jilani Committee Recommendation Consistent and reliable system of inputting, processing and generation of output of data. EDP activities brought under scrutiny if inspection and audit including the financial aspects Are there formal methods for incorporating changes in standard software
Areas included under LFAR Ghosh Committee Recommendation Are standards devised for suitable internal control (IT Policy) Are standards in place for fully computerised branches Replacement of unwilling workers in computer area
Special Focus Areas Day end Reports Impact of system generated transactions Intersol Transactions Parking Transactions Impersonal Accounts Security Maintenance Other important areas Jilani and Ghosh committee Reporting
Day end reports Exceptional report (EXCPRPT) List of users Access Log Rejected/Cancelled entries Over-limits/TOD Report GL affected Balances Report Report on large cash transactions/kyc Anti Money Laundering
Exception Reports Maturity record deleted Inactive accounts reactivated Excess allowed over limit Debits to Income head accounts Overdue bills and bills returned Withdrawal against clearings Deposits accounts debit balance Temporary O/D beyond sanction limit Standing instruction failed in day
System generated transactions Application of Interest Application of service charges Updation of parameters globally Balancing & Reconciliations Classification of inoperative accounts
Intersol transactions Reconciled centrally at Data Centre as a part of end of day Large Balances
Income recognition and asset classification To check asset classification done by the system for correctness. To check whether overdue status has been marked to all NPA accounts. Provisioning at HO, normally not by system Reversal of interest Notional interest accounting
TDS To check whether accounts of customers submitting Form 15G/15H have been linked to correct TDS Table. To check whether all accounts of the customer have been linked to a customer-id for the purposes of TDS. TDS Inquiry & Printing : TDSIP
Parking/Proxy transactions System generated Standing instructions with sol closed User generated Ambiguity For instance: Depositing RD installment in excess of the cumulative installments. This entry may not be posted in RD Account and posted in Proxy/parking transactions account and reversed subsequently.
Impersonal/personal accounts For instance: (a) sundry credit accounts, (b) sundry deposit accounts, (c) suspense (d) H.O Account etc. Postings in sundry credit accounts and sundry deposit accounts have been duly verified by the branch. Deposit from public and Deposit from Banks have been shown correctly in appropriate GL Subheads. Credit balances in Loan accounts have not been shown in sundry deposit account.
Internet Banking To check & comment specifically whether adequate validation procedures such as verification of data relating to customer profile Identity and address proof Nature of constitution and Mode of operations etc. fed into system have been carried out at Branch
Other important areas Verify that balance in GL tallies with the balance in Subsidiary book. Charges automatically calculated. Charges calculated manually not through parameters. Penalty Interest. Lien Marking of fixed deposits.
Fraud Consideration Review some consideration of fraud Active ID for transferred employees Employee absent but transaction from same ID Duplicate user ID Review of employee job profile and privileges Number of head teller in the branch Employees permitted to commit inter-branch transaction System of issue of ATM card to customer
Useful Finacle Command ACLI (Account Ledger Inquiry) Check the transactions in any account including Fixed assets, Depreciation, TDS remittance pending, service tax, depreciation, etc. and Limit History Maintenance shows increase or decrease of sanction limit and drawing power of an account. (ACLHM.) It also shows the last review date and expiry date of the account. Asset Classification Details will show if a particular asset is classified as NPA
Useful Finacle Commands ACLPCA & ACLPOA (Customer Account Ledger Print & Office Account Ledger Print) Generate soft copy of any account ACLPCA generates soft copy of customer accounts (e.g. Saving Accounts, Overdrafts, CC etc.) ACLPOA gives office accounts (e.g. Block of Fixed Assets, Cash on Hand, Sundry Expenses etc.)
Useful Finacle Commands AFI (Audit File Inquiry) Useful to verify transactions on a daily basis. Generates a list of critical transactions which are required to be monitored closely, such as premature closure of an FD to check charges thereon or transactions in accounts having balance below minimum limit.
Useful Finacle Commands AVGBAL (Average Balance) Average balance maintained in a particular customer s account for given range of time. Useful when commitment charges are taken on OD/CC accounts for under utilization BCREPORT (Bankers Cheque Report) Generate a list of Banker s Cheque Outstanding BCREPORT > Report To: M > Self: Y > Data Centre: N > Other than Home: N > Data Centre Icl. Self: N > Paid Only: N > From Date: > To Date: > F4.
Useful Finacle Command DCEXPLST ( Report on Expiring Documentary Credits) Generates the list of Letter of Credits (LCs) expired but not closed. Such LCs should be closed before the Balance Sheet date to avoid misrepresentation.
Useful Finacle Commands DCQRY ( Query on Documentary Credit) Generates the list of all inland/foreign LCs issued during the given period. Auditor can also check if the details entered in the system are as mentioned in the documents. Shows the list of both Inward and Outward Documentary Credits. Each LC can be verified from this menu.
Useful Finacle Commands IRM/ ORM (Inward/ Outward Remittance Maintenance) A branch having foreign business will obviously have Inward and Outward remittances in foreign currencies. The charges upon those remittances can be checked from these menus; moreover it generates the actual list of transactions the branch has entered into. Auditor can verify supporting documents for such transactions.
Useful Finacle Commands MSGOIRP (Outstanding Items Report) Reports outstanding entries in sensitive accounts such as Suspense Account, Special Debit Account, Pension Payment Account, Sundry Deposits, Sundry Creditors etc. Gives day wise break up of balances in such accounts, indicating how old one particular entry is. NPARPT (NPA Report) Generates the list of accounts classified as NPAs
Useful Finacle Commands LAOPI (Loan Overdue Position Inquiry)/TODRP Generate lists of overdue loan accounts PR (Print Reports) Various reports can be printed or a soft copy GILR ( Guarantee Issued Liability Register) Guarantees which are expired but not cancelled can be checked from this menu. POVDPC (Party wise Overdue Packing Credit)] This menu option lists overdue packing credits
Some More Finacle Commands Interest Report for Accounts : AINTRPT Loan Interest Details Inquiry : AITINQ Abnormal Transaction Inquiry : ATI Bills Inquiry : BI Rate List History Query : RTHQRY Standing Instructions Inquiry : SII TDS Inquiry & Printing : TDSIP Transactions Exceptions Inquiry : TEI
Some More Finacle Commands Customer Unutilised Limit Inquiry : CULI Charges Income Report : CHGIR Exceptions Report : EXCPRPT Report for Matured OD/FD Accounts : ODFDREP Loans Overdue Position Inquiry : LAOPI Loans Repayment Schedule Report : LARSH Pending Instalments List : PLIST BG Margin Printing : BGMARGIN
Some More Finacle Commands Account TOD Inquiry : ACTODI Accounts Turnover Report : ATOR Insurance Expired Yesterday : INSEXPD Loan Overdue Details : LOANODUE List of Pending and Dishonoured Bills : FBPADB Overdue Foreign Bills : ODFB Guarantees Expired but not Reversed : GENR Guarantees Invoked or not Paid : GIPNP
Some More Finacle Commands Guarantees Issued Cum Liability Register : GILR Loan Sanction Limit Review : LAROR Insurance Expiry List : INSTOEXP Loan document expiry date : INQLAC Change in sanction limit : CHLMT Non submitted stock statement : STKSTMT/SRM Loan account Master report : LAMP
Useful Flexcube Commands Detailed manual is available at https://docs.oracle.com/cd/e51465_01/homepage.html
Thank You