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Advanced Auditing

Notes (c) whether or not the returns received from the offices and branches of the bank have been
found adequate for the purpose of his audit;
(d) whether the profit and loss account shows a true balance of profit or loss for the period
covered by such account; and any other matter which he considers should be brought to
the notice of the Central Government.

Did u know? The report of auditors of State Bank of India is also to be made to the Central
Government and is almost identical to the auditor’s report in the case of a nationalised
bank.
The auditor’s report in the case of subsidiaries of State Bank of India is identical to the auditor’s
report in the case of a nationalised bank, except that all references to Central Government have
to be construed instead as references to the State Bank of India. Similar is the position in the case
of regional rural banks, except that the references are instead to the bank concerned.
In addition to matters on which he is required to report to the shareholders under the Companies
Act, 1956, the auditor of a banking company is required to state in his report:
(a) Whether or not the information and explanations required by him have been found to be
satisfactory;

(b) whether or not the transactions of the company which have come to his notice have been
within the powers of the company;
(c) whether or not the returns received from the branch offices of the company have been
found adequate for the purpose of his audit;
(d) whether the profit and loss account shows a true balance of profit or loss for the period
covered by such account; and
(e) any other matter which he considers should be brought to the notice of the shareholders
of the company.
It may be noted that in the case of a banking company, by virtue of the provisions of clause (d)
of sub-section (3) of section 227 of the Companies Act, 1956, the auditor has to specifically report
whether, in his opinion, the profit and loss account and balance sheet of the banking company
comply with the accounting standards referred to in sub-section (3C) of section 211 of the
Companies Act, 1956.
Long Form Audit Report: Besides the audit report as per the statutory requirements discussed
above, the terms of appointment of auditors of public sector banks, private sector banks and
foreign banks [as well as their branches, require the auditors to also furnish a long form audit
report (LFAR)]. The matters which the banks require their auditors to deal with in the long form
audit report have been specified by the Reserve Bank of India.

Conducting an Audit

The audit of banks or of their branches involves the following stages:
(a) Preliminary Work.
(b) Evaluation of Internal Control System.

(c) Preparation of Audit Programme for Substantive Testing and its Execution.
(d) Preparation and Submission of Audit Report.

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