1.7 Query Scope of branch audit of a bank1.The querists were appointed as branch auditors of a bank. The guidelines sent to them in this regard are as follows:
“Branch auditors are requested to send their report in two parts. The first part i.e. memorandum of changes should be sent first, it will cover all the accounting changes affecting the Balance-sheet. The second part of the audit report will contain the detailed observations/suggestions, etc; but such report will be considered as merely information and not as qualifying the report.”
2. Some irregularities which do not amount to any accounting change such as defects in loan documents, non-reconciliation of general ledger with subsidiary ledgers, advances allowed without sanction of proper authority and many other material defects which involve the auditors’ liability will be pointed out in the detailed report and will not be considered as qualifying the main report, as per the guidelines.
3.Under the circumstances, the querists have sought the advice as to how should they prepare their audit report?
Opinion * March 29,1985
In the circumstances of the case cited by the querists the auditors should include all qualifications, whether affecting the balance sheet or not, in the memorandum of changes to be submitted to the bank. Further, in the second part of the audit report containing the detailed observations/suggestions etc. of the auditors, they should clearly specify those items which constitute a qualifications and thus, have been included in the memorandum of changes. The aforesaid fact of inclusion of all qualifications in the memorandum of changes should also be clearly brought out by the auditor in his covering letter to the bank while submitting the audit report. _____________________ * Finalised by the Auditing Practices Committee of the Institute of Chartered Accountants of India |