Download Audit Report: Export-Import Bank of India's FY 2014-15 Financial Performance and more Study notes Administrative Law in PDF only on Docsity!
INDEX
- INTRODUCTION………………………………………………………………………………………………………
- LEDGER SCRUTINY OF DEBTORS & BILLS PAYABLE…………………………………………………...
- VOUCHING OF SALES LEDGER AND ADVERTISING EXPENSES……………………………………
- VERIFICATION OF FIXED ASSETS & INVESTMENTS…………………………………………………….
- INTRODUCTION TO FINANCIAL INSITUTION……………………………………………………………..
- STEPS FOR AUDIT OF FINANCIAL INSTITUTION………………………………………………………..
- EXIM BANK ANNUAL REPORT 2015………………………………………………………………………….
INTRODUCTION
Auditing is the objective, systematic, professional and independent examination of financial, administrative and other operations of an entity made subsequently to their execution for the purpose of evaluating and verifying them, presenting a report containing explanatory comments on audit findings together with conclusions and for future actions by the responsible officials and in the case of examination financial statements, expressing appropriate professional opinion regarding the fairness of presentation.
AUDIT CAN BE CLASSIFIED AS:
GENERAL
FINANCIAL AUDIT
COMPLAINCE AUDIT
EXPENDITURE AUDIT
AUDIT OF RECEIPTS
AUDIT OF ASSET AND LIABILITIES
AUDIT OF COMMERCIAL ACCOUNTS
AUDIT OF GOVERNMENT COMPANIES
MISCELLENEOUS AUDITS
VOUCHING OF SALES LEDGER AND ADVERTISING EXPENSES
Sales
Internal Checks System: - Auditor should check the working of internal control and test the few entries. Checking Of Invoices:-
- Debtor’s name *Date and amount
- The authority *Trade discount
- Authority for gaining discount 3. Duplicate Invoices: - Auditor should check the entries in the sales book with the duplicate invoices. 4. Authority Checking: - It should also be checked by the auditor that the invoice should be authorized by the responsible officer.
5. Comparison with Order Book: - Auditor should compare the sales book with the order received book and goods outward book. It will show that no fictitious sale is made. 6. Verification of Year: - It should be also checked by the auditor that all the entries made in the sale book belongs to the year under audit. 7. Fixed Assets Sale: - Auditor should check that if fixed assets are sold then these are recorded in the sales book. He should also check that these are posted in the sales account in the general ledger or not. 8. Dispatch of Goods: - Auditor should verify the sales invoices with the documentary evidence to ensure the dispatch of goods. 9. Over All Checking: - The auditor should check the casts and carry forwards of the sales book.
VOUCHING OF ADVERTISEMENT EXPENSES
Check that the advertisement expenses have been properly allocated whether to Capital, deferred revenue or revenue as the case may be. Examine the supporting documents to ensure that the expenses relates to the client’s business. Review and examination of the complete list of media of advertisement indicating the dates, location, timing etc., along with the amounts paid in respect of each category. Examination of the receipts of the amounts paid Reviewing the contracts with the different agencies and ensuring the billing conforms to the term and conditions specified therein Ensuring that all such outstanding expenses have been properly accounted for otherwise any material omission will results in overstatement of profits.
VERIFICATION OF FIXED ASSETS & INVESTMENTS
Fixed Assets -
The Purchases made during the Year should be tallied with the original Bills. Whether Depreciation have been charged at proper Rate or not Whether purchases made during the F.Y have been capitalized or not. Fixed assets are properly recorded at cost/valuation. The fixed assets physically exist or not. Ensure appropriate authority for acquisition. For acquisition through tender/quotation, ensure company’s policies, procedures and LOA are complied with.
FINANCIAL INSTITUTIONS
In finance and economics, a financial institution is an institution that provides financial services for its clients or members. One of the most important financial services provided by a financial institution is acting as a financial intermediary. Most financial institutions are regulated by the government.
Function
Financial institutions provide services as intermediaries of financial markets. Broadly speaking, there are three major types of financial institutions
Depositary institutions – deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies; Contractual institutions – insurance companies and pension funds; and Investment institutions – investment banks, underwriters, brokerage firms.
Some experts see a trend toward homogenization of financial institutions, meaning a tendency to invest in similar areas and have similar business strategies. A consequence of this might be fewer banks serving specific target groups, for example small-scale producers could be under served.
Standard settlement instructions
Standard Settlement Instructions (SSIs) are the agreements between two financial institutions which fix the receiving agents of each counter party in ordinary trades of some type. These agreements allow traders to make faster trades since the time used to settle the receiving agents is conserved. Limiting the trader to an SSI also lowers the likelihood of a fraud. SSIs are used by financial institutions to facilitate fast and accurate cross-border payments.
Regulation
Financial institutions in most countries operate in a heavily regulated environment because they are critical parts of countries' economies, due to economies' dependence on them to grow the money supply via fractional reserve lending. Regulatory structures differ in each country, but typically involve prudential regulation as well as consumer protection and market stability. Some countries have one consolidated agency that regulates all financial institutions while others have separate agencies for different types of institutions such as banks, insurance companies and brokers.
Countries that have separate agencies include the United States, where the key governing bodies are the Federal Financial Institutions Examination Council (FFIEC), Office of the Comptroller of the Currency - National Banks, Federal Deposit Insurance Corporation (FDIC) State "non-member" banks, National Credit Union Administration (NCUA) - Credit Unions, Federal Reserve (Fed) - "member" Banks, Office of Thrift Supervision - National Savings & Loan Association, State governments each often regulate and charter financial institutions.
Commercial Banks in India:
The commercial banks in India are categorized into foreign banks, private banks and the public sector banks. The commercial banks indulge in varied activities such as acceptance of deposits, acting as trustees, offering loans for the different purposes and are even allowed to collect taxes on behalf of the institutions and central government.
Credit Rating Agencies in India:
The credit rating agencies in India were mainly formed to assess the condition of the financial sector and to find out avenues for more improvement. The credit rating agencies offer various services as:
Operation Up gradation Training to Employees Scrutinize New Projects and find out the weak sections in it Rate different sectors
The two most important credit rating agencies in India are:
CRISIL ICRA
Securities and Exchange Board of India:
The securities and exchange board of India, also referred to as SEBI was founded in the year 1992 in order to protect the interests of the investors and to facilitate the functioning of the market intermediaries. They supervise market conditions, register institutions and indulge in risk management.
Insurance Companies in India:
The insurance companies offer protection against losses. They deal in life insurance, marine insurance, vehicle insurance and so on. The insurance companies collect the little saving of the investors and then reinvest those savings in the market. The insurance companies are collaborating with different foreign insurance companies after the liberalization process. This step has been incorporated to expand the Indian Insurance market and make it competitive.
Specialized Financial Institutions in India
The specialized financial institutions in India are government undertakings that were set up to provide assistance to the different sectors and thereby cause overall development of the Indian economy. The significant institutions falling under this category includes:
Board for Industrial & Financial Reconstruction Export-Import Bank Of India Small Industries Development Bank of India National Housing Bank
Interact with the management and obtain sufficient knowledge regarding the various types of loans lent and their nature.
Request the MSM – List of Loans and Advances (Borrower wise) as on the audit date. Fix up a Materiality Level and List down all the borrowers according to their respective O/S balances and also Overdue Amounts.
Request the Physical Documents of all Large Advances (depending upon the no. of advances made) and some of the selected borrowers from the remaining (test check selection recommended) and verify their completeness and correctness.
While the verification of the documents the following points have to be considered: a) Ensure that the stock statements are obtained monthly and drawing-power limit are determined within 1st week of every month. b) Ensure the Insurance Policy document supported for sanctioning the advance is not expired as on the audit date. c) In case of Collateral Security being given, ensure that valuation report is obtained once in three years. Compare the value of security ( as per the recent valuation report) with the balance outstanding, and consider provisioning if any deficit is found. d) In case of Equitable Mortgage being made, ensure that the encumbrance certificate is received and appropriate amount of stamp duty has been paid. e) In case of Hypothecation, ensure that the documents depict the hypothecation made with the seal of the Bank in the title deeds. Check regarding the stamping of the agreement, availability of one set of keys(in case of Vehicle Loans),etc.
f) Ensure that the Statements of Assets and Liabilities of Borrowers as well as the Guarantors are obtained, duly filled and signed by the respective parties at the end of the every year.
In case of large advance of more than 10 Lacs, confirm that the audited financial statements are obtained every year. In case of Overdrawn CC or OD Accounts, ensure necessary permission is obtained from the competent authority. From the list of borrowers selected, examine each of the account whether the asset
Classification is appropriate. In case if the account has been classified as NPA4, confirm whether the head (B, C1, C2, C3, D1, D2) under which it has been classified is justifiable.
Take special care in case of Agricultural Advances in respect of which the repayment schedules are quite different from other advances. Due to this, their classification as NPA is least probable.
In case of Agricultural Advances being rephased or rescheduled or reorganized, check for the intimation letter received by the Bank permitting them for the same.
Peruse the MSQ1 – P/L Account portion to list out the item of expenses on which TDS is required to be made under Chapter XVIIB of the Income Tax Act, 1961. Request for Statement No. 10 - Tax Audit, and see whether the TDS has been made at the appropriate rate vis-à-vis the amount debited to P/L Account and whether the same has
A Statutory Auditor is required to certify Statement No. 7 – Statement of Govt. and other Securities. Therefore, the auditor must physically verify such investments, if available
With the branch or else obtain necessary evidence to satisfy that the same are in proper custody.
If there are credits of round sums in the borrowal account during the last few days of March, the auditor is required to make further enquiries to ensure that the credit so made are not temporary so as to avoid the classification of account as NPA. For this purpose, the auditor must verify the operations in the subsequent month also. He must also probe into the source of credit and satisfy that they are genuine.
EXIM BANK ANNUAL REPORT 2015
DIRECTORS REPORT-
The Directors are pleased to present the report of the working of the Bank with the audited Balance Sheet and accounts for the year ended March 31, 2015.
Review of Operations and Financial Performance
Loan Assets
The Bank approved loans aggregating to 576.84 billion under various lending programmes during FY 2014-15 as against 482.64 billion during FY 2013-14. Loan disbursements during FY 2014-15 were 385.08 billion as against 432.62 billion during 2013-14, while loan repayments during FY 2014-15 amounted to 294.47 billion, as against ` 374.57 billion in FY 2013-14. Gross loan assets as on March 31, 2015 were 869.53 billion, registering an increase of 15 per cent over the previous year. Rupee loans and advances accounted for 35 per cent of the total loan assets as on March 31, 2015 while the balance 65 per cent were in foreign currency. Short-term loans accounted for 14 per cent of the total loans and advances as on March 31, 2015.
Non Funded Facilities
During the year, the Bank sanctioned guarantees aggregating to 59.68 billion as against 40. billion in 2013-14. Guarantees issued during 2014-15 amounted to 20.83 billion as against
Borrowings
Total borrowings of the Bank at 787.11 billion as on March 31, 2015, were higher by 10 per cent compare total borrowings of 714.82 billion as on March 31, 2015
Rupee Resources
During the year, the Bank received capital of 13 billion from the Government of India (GOI). As on March 31, 2015, the Bank’s total resources including paid-up capital of 50.59 billion and reserves of 48.43 billion, aggregated to 886.14 billion. Exim Bank’s resource base includes bonds, certificates of deposit, commercial paper, term deposits, term loans and foreign currency deposits/borrowings/long-term swaps.
The Bank’s domestic debt instruments continued to enjoy the highest rating viz. ‘AAA’ rating from the rating agencies, CRISIL and ICRA. During the year, the Bank raised borrowings of varying maturities aggregating to 313.56 billion comprising rupee resources of 183.43 billion and foreign currency resources of US$ 2.08 billion equivalent. Foreign currency resources of US$ 1.77 billion equivalent were raised through bonds, bilateral/club/syndicated loans and US$ 0.32 billion by way of Buy-Sell swaps/on-shore deposits.
As on March 31, 2015, the Bank had a pool of foreign currency resources equivalent to US$ 9.03 billion and outstanding Rupee borrowings including bonds and commercial paper of 434.09 billion. Market borrowings as on March 31, 2015, constituted 100 per cent of the total borrowings and 89 per cent of the total resources of the Bank.
Foreign Currency Resources
During 2014-15, the Bank raised foreign currency resources aggregating US$ 2.08 billion equivalent. The Bank issued 5.5-year US$ 500 million Eurodollar bonds in February 2015 and 5- year US$ 500 million Eurodollar Green Bonds in March 2015. These bonds are included in the Emerging Market Bond Index.
The Green Bonds shall also be included in the Bank of America Merrill Lynch Green Bond Index. Both issuances were priced within the secondary trading levels of the Bank’s existing bonds. The Green Bond issuance marks the first USD-denominated Green Bond offering out of India as well as the first benchmark-sized Green Bond out of Asia in 2015 and the third ever Green Bond issuance out of Asia. It has enabled the Bank to expand its investor base and to support an important market as investors seek more socially responsible investment options. The Bank also raised US$ 172 million equivalent in November 2014 by way of issue of Samurai Bonds (a yen-denominated bond issued to Japanese Investors) with partial guarantee of Japan Bank for International Cooperation (JBIC).
The Bank has now tapped the Samurai Bond market on four occasions. The Bank was able achieve the tightest spread and the lowest coupon, the sub-one per cent, in the history of the “Guarantee Acquisition toward Tokyo market Enhancement (GA facility.
The Bank has a Euro Medium Term Note Programme of US$ 6 billion of which an amount of US$ 4.28 bi equivalent (including Green Bonds issued on March 24, 2 but drawn on April 01,
- is outstanding as March 2015. So far, the Bank has raised FC resource diverse currencies including United States Dollars, Japan Yen, Swiss Francs, Euros, Australian Dollars, South Africa Rand, Singapore Dollars, Turkish Lira and Mexican Peso
