LOANS - 4G Accounts



| |AUDIT OBJECTIVES | | | | |

| | | | | | | |

| | |To determine whether : | | | |

| | | | | | | |

| | |A. |Loans and advances represent all amounts that can reasonably be | | | |

| | | |expected to be realized through future operations or otherwise and | | | |

| | | |are properly recorded. | | | |

| | |B. |Interest on loans and advances, if any, has been properly | | | |

| | | |calculated and recorded. | | | |

| | |C. |Loans and advances are properly described and classified, and | | | |

| | | |adequate disclosure with respect to these amounts have been made. | | | |

| | |D. |Allowances for doubtful debts are adequate. | | | |

| | | | | | | |

| | |SUBSTANTIVE PROCEDURES | | | |

| | | | | | | |

| | |1. Overall Analytical Review | | | |

| | | | | | | |

| | |1.1 |Obtain a detailed schedule of loans and advances. | | | |

| | |1.2 |Compare current year balance with prior year and investigate major | | | |

| | | |fluctuations. | | | |

| | | | | | | |

| | |2. Circularization | | | |

| | | | | | | |

| | |2.1 |Select a sample of loans receivable from the detailed trial | | | |

| | | |balances for confirmation. Particularly include any identified | | | |

| | | |related party without exemption. | | | |

| | |2.2 |Have the client prepare confirmation requests. Obtain requests and | | | |

| | | |prepare confirmation control. Send first requests. Retain copies. | | | |

| | |2.3 |Follow-up on confirmation requests and send second and third | | | |

| | | |requests as required. | | | |

| | |2.4 |Upon receiving confirmation replies, update the confirmation | | | |

| | | |control and file the replies as clean; clean, with gratuitous | | | |

| | | |comments; and exceptions. | | | |

| | |2.5 |Prepare confirmation summary. | | | |

| | |2.6 |Have client reconcile exceptions (consider using Standard | | | |

| | | |Reconciliation Form. Verify the clerical accuracy of the | | | |

| | | |reconciliations and review for completeness. Examine support for | | | |

| | | |reconciling items, (Scope/Sample:________). | | | |

| | |2.7 |Consider covering in covering letter if the significant amounts are| | | |

| | | |not confirmed. | | | |

| | |3. Subsequent realisation and other tests | | | |

| | | | | | | |

| | |3.1 |For non-replies, RPOs (returned by post office) perform procedures| | | |

| | | |in lieu of circularization. | | | |

| | |3.2 |Have the client list subsequent cash collections for all loans over| | | |

| | | |Rs.____. Trace subsequent collections to the cash receipts records.| | | |

| | | |(Scope/Sample:_______). Ensure that receipts are not against | | | |

| | | |subsequent advances. | | | |

| | |3.3 |Verify closing balances and movements during the period by | | | |

| | | |examining critical forms and documents and ensure that all | | | |

| | | |transactions are properly supported. Obtain confirmations of all | | | |

| | | |significant outstanding balances. | | | |

| | |3.4 |Scan general ledger for any unusual transactions and loans granted | | | |

| | | |and recovered during the period. Select a sample of transaction | | | |

| | | |from the general ledger (Scope/Sample:_____) to ensure proper | | | |

| | | |compliance of the Companies policies and laws and regulations. | | | |

| | |3.5 |Ensure employees are valid employees of the company by ensuring | | | |

| | | |they are included on the latest available payroll listing. | | | |

| | |3.6 |In respect of the `advance for expenses’ review the listing for | | | |

| | | |unusual items, and investigate as appropriate. Ensure that expense | | | |

| | | |advances of are supported by authorized subsequent invoices and | | | |

| | | |that the services obtained relate to the period. | | | |

| | |3.7 |In respect of the employee loans, vouch balances to the loan | | | |

| | | |agreement. For each balance ensure, by review of personnel records,| | | |

| | | |cash books and loan agreements, that the employee is making | | | |

| | | |repayment in accordance with the loan agreement. | | | |

| | |3.8 |Review for concentration of loans with one borrower. Consider the | | | |

| | | |possibility that additional loans made to borrower are not | | | |

| | | |adequately secured or loan is obtained for identifiable business | | | |

| | | |purpose. | | | |

| | | | | | | |

| | |4. Terms and Conditions | | | |

| | | | | | | |

| | |4.1 |For all loans and advances, obtain loan agreements and review the | | | |

| | | |adequacy of the documentation and make extracts, and ensure that | | | |

| | | |they are in accordance with the Company’s policies. | | | |

| | |4.2 |Check whether the terms and conditions of the loans are softer than| | | |

| | | |those generally prevalent in the trade. If so, then inquire the | | | |

| | | |reasons from the management and obtain a written representation | | | |

| | | |from the management specifying the reasons for the softer terms of | | | |

| | | |the loans and ensure that proper disclosure in the financial | | | |

| | | |statement is made as per the requirements of the Companies | | | |

| | | |Ordinance, 1984,Banking Companies Ordinance and/or other laws and | | | |

| | | |regulations and relevant IAS. | | | |

| | |4.3 |For loans/advances to directors, chief executives, managing agents | | | |

| | | |and employees of the Company ensure that the loan and the terms and| | | |

| | | |conditions are in agreement with the rules and regulations of the | | | |

| | | |Company. Ensure that proper disclosures are made. | | | |

| | |4.4 |Ensure compliance of section 208 and 195 of the Companies | | | |

| | | |Ordinance, 1984,Banking Companies Ordinance and/or other laws and | | | |

| | | |regulations and relevant IAS. | | | |

| | |4.5 |For loans to subsidiaries, Directors and Executives scan general | | | |

| | | |ledger to determine the maximum amount outstanding at any month | | | |

| | | |end. | | | |

| | |4.6 |Determine whether the amounts are of a long-term nature and are | | | |

| | | |properly classified in the financial statements. | | | |

| | |5. Bank Loans | | | |

| | | | | | | |

| | |5.1 |Select a sample of loans extended or renewed, with below market | | | |

| | | |interest rates or otherwise restructured, and determine whether | | | |

| | | |management has carried out a credit evaluation. | | | |

| | |5.2 |Compare current period loan balances of portfolio to prior period | | | |

| | | |balances in total and/or by subcategories (e.g., by type of loan). | | | |

| | | |Note any significant changes and obtain explanations. | | | |

| | |5.3 |Trace loan disbursements from CLR to customers account selected. | | | |

| | |5.4 |Identify loans that have more than normal elements of risk and make| | | |

| | | |detailed review thereof. The usual characteristics of such loans | | | |

| | | |are: | | | |

| | | |Excessive loan renewals and extensions. | | | |

| | | |Absence of current financial data. | | | |

| | | |Loans applicable to industries having a record of economic | | | |

| | | |instability. | | | |

| | | |Loan declared as OAEM, sub-standard, doubtful, loss etc. by the | | | |

| | | |branch, Head Office or State Bank of Pakistan. | | | |

| | | |Customer having operating losses. | | | |

| | | |Customer facing legal action, cash flow problems etc. | | | |

| | | |Difficulty in determining the ealizedt value of security or | | | |

| | | |security not readily marketable. | | | |

| | | | | | |

| | |Loan Evaluation | | | |

| | | | | | | |

| | |5.5 |Evaluate the quality of the advances identified above and other | | | |

| | | |advances selected for detailed review by the use of evaluation | | | |

| | | |forms. Ensure that the evaluation forms are comprehensively and | | | |

| | | |appropriately completed to the maximum extent. Any exceptions | | | |

| | | |should be explained (e.g. not required by C.R.) Test and document | | | |

| | | |key ealizedtion procedures. Prepare a summary of the results of our| | | |

| | | |evaluation and review of quality of credit. | | | |

| | |5.6 |Ensure that loan evaluation forms should include – | | | |

| | | |Outstanding balance as of examination date (in local currency and | | | |

| | | |US Dollars or other foreign currency). | | | |

| | | |Brief history of the borrower. | | | |

| | | |Independent credit rating of customers. | | | |

| | | |The financial strength of the borrower and a review of appropriate | | | |

| | | |ratios. | | | |

| | | |Repayment position. | | | |

| | | |Economic environment and future prospects of the borrower. | | | |

| | | |Our familiarity with/knowledge of the borrower’s business. | | | |

| | | |Whether the loan is secured or unsecured and if secured adequacy | | | |

| | | |(nature, value and liquidity) of collateral values and nature of | | | |

| | | |charge in respect of collateral i.e. – | | | |

| | | |Hypothecation | | | |

| | | |Pledge | | | |

| | | |Mortgage | | | |

| | | |Particulars of collateral insurance coverage etc. Ensure that | | | |

| | | |insurance policies are current and cover all appropriate hazards. | | | |

| | | |The borrower’s relationship to the company (e.g. related party). | | | |

| | | |Length of time the loan has been performing. | | | |

| | | |Comments made in regulatory reports. | | | |

| | | |Exceptions noted, if any. | | | |

| | | |Bank credit personnel’s opinion in respect of exceptions, if any, | | | |

| | | |noted. | | | |

| | | |Our opinion as to the quality of the advance. | | | |

| | |5.7 |Obtain loan file of the borrower and examine the advance is in line| | | |

| | | |with the sanction approved locally or from the head office with | | | |

| | | |particular reference to the financial data the limit on borrowing, | | | |

| | | |nature of security, margin to be kept, interest, terms of | | | |

| | | |repayment, insurance of goods and property, documents to be | | | |

| | | |obtained, guarantees, submission of special reports such as monthly| | | |

| | | |stock reports, audited accounts etc. | | | |

| | |5.8 |Review whether the file is being actively monitored and reviewed on| | | |

| | | |periodic basis by client’s management and any exceptions are | | | |

| | | |appropriately dealt with. | | | |

| | |5.9 |Discuss with bank’s credit personnel any exceptions noted in | | | |

| | | |respect of customers’ credit file or quality of credit and note | | | |

| | | |their opinion. | | | |

| | | Other Tests | | | |

| | |5.10 |Test that drawings are within limits, outstanding amounts | | | |

| | | |(including mark-up) are within sanctioned limits, approval / | | | |

| | | |authority for credit risk has not expired, nature and margin | | | |

| | | |collateral requirements are being duly complied with, rate of | | | |

| | | |interest is as agreed etc. Prepare list of exceptions. | | | |

| | |5.11 |Where advances are secured by hypothecation of goods, examine | | | |

| | | |letters of hypothecation, check the periodical statements of stock | | | |

| | | |reports etc. submitted by the customer and examine whether the | | | |

| | | |quantities and values shown therein seem reasonable and ensure that| | | |

| | | |– | | | |

| | | | | | | |

| | | |Stock reports are submitted by the customers periodically as of the| | | |

| | | |agreed dates. | | | |

| | | |Goods are physically inspected by the bank’s personnel at regular | | | |

| | | |intervals at the customers premises. | | | |

| | |5.12 |In the case of advances against Trust Receipt ensure that the Trust| | | |

| | | |Receipt is duly signed by the customers and that this facility is | | | |

| | | |given to reputed customers. | | | |

| | |5.13 |In case of pledge, determine whether the goods are held by the bank| | | |

| | | |or are in the custody of mukkadam (third party custodian) and | | | |

| | | |charge is properly registered where required. | | | |

| | |5.14 |Review the agreement with the Mukkadam to ensure that bank is fully| | | |

| | | |covered for any loss or negligence of Mukkadam. | | | |

| | |5.15 |Scrip collateral should be verified by physical check or by | | | |

| | | |confirmation from outside custodians as appropriate. | | | |

| | |5.16 |In case of mortgage of immovable property review whether it is a | | | |

| | | |registered or unregistered mortgage and determine – | | | |

| | | | | | | |

| | | |In respect of registered mortgage, that the charge documents are | | | |

| | | |with the bank. | | | |

| | | |In respect of unregistered mortgage that original documents in | | | |

| | | |respect of property is with the bank and it is kept under lock and | | | |

| | | |key and that Memo of deposit has been obtained from the title | | | |

| | | |holder. | | | |

| | | |If borrower has good title, by reference to title deeds / title | | | |

| | | |search. | | | |

| | | |That no encumbrance certificate is available. | | | |

| | | |If independent appraisal / valuation has been obtained in respect | | | |

| | | |of property mortgaged to ensure fair value or NRV is accurately | | | |

| | | |calculated and is adequate to cover exposures. | | | |

| | |5.17 |As regards advances against banks own Fixed Deposit Receipts, | | | |

| | | |inspect the certificates and see that they are duly discharged. | | | |

| | | |Also trace the FDR to the FDR register and counter foils to ensure | | | |

| | | |that these were properly issued. Ensure lien noted on FDRs and also| | | |

| | | |in the FDR register. | | | |

| | |5.18 |Loans against packing credits – | | | |

| | | | | | | |

| | | |Select loans against packing credit for review from respective | | | |

| | | |register. | | | |

| | | |Check the sales contract on the basis of which loan was granted. | | | |

| | | |Ensure that the facility enjoyed was adjusted on or before the due | | | |

| | | |date. | | | |

| | | |Check the mark-up calculations and its recovery according to the | | | |

| | | |prescribed rate. | | | |

| | | |In case of refinance from State Bank of Pakistan check that loan is| | | |

| | | |adjusted within stipulated period. | | | |

| | | |Check the vouchers as to amount credited to income account | | | |

| | | |(mark-up) and share of SBP in mark-up credited to suspense | | | |

| | | |(liability) account. | | | |

| | | |Check CD account statements of selected parties, when loan is | | | |

| | | |allowed to parties and adjusted. | | | |

| | | |Check the applications of parties for loan against packing credit. | | | |

| | | |Ensure that the amount of advance was within the limit. | | | |

| | |5.19 |Loans against foreign bills – | | | |

| | | | | | | |

| | | |Ensure that loan against foreign bills is availed by the party | | | |

| | | |within limit allowed. | | | |

| | | |In case of re-finance from SBP, ensure that proceeds ealized before| | | |

| | | |due date, are deposited with SBP within the time stipulated by the | | | |

| | | |SBP. | | | |

| | | |Check the bill or letter of credit against which the loan is | | | |

| | | |allowed. | | | |

| | | |Ensure that loan is ealized on the maturity of bill or letter of | | | |

| | | |credit. | | | |

| | | |Check the calculations of mark-up. | | | |

| | | |Check from vouchers to ensure that mark-up is posted correctly as | | | |

| | | |to amount and head of account. | | | |

| | | |In case of re-finance check that required mark-up of SBP is | | | |

| | | |credited to relevant SBP’s account and then paid to SBP. | | | |

| | | |Check the recoveries of LAFB, advanced to parties – through | | | |

| | | |vouchers. | | | |

| | | |Check the account statements of the parties, when loan is granted | | | |

| | | |and adjusted. | | | |

| | |5.20 |In respect of PAD, examine bill of lading, invoice, certificate of | | | |

| | | |packing, insurance policies etc. and compare with PAD register. | | | |

| | | |Also ensure that advances are within the sanctioned limit. | | | |

| | | |Ascertain reasons for any delay in retirement of documents. | | | |

| | |5.21 |Ensure that collateral whether, hypothecated, pledge or mortgaged | | | |

| | | |against financing are adequately insured against fire, flood | | | |

| | | |earthquake etc. as appropriate. | | | |

| | |5.22 |Where customer is a company ensure that the charges created on | | | |

| | | |company’s assets is registered with the Registrar of Joint Stock | | | |

| | | |Companies within the period prescribed in the Companies Ordinance, | | | |

| | | |1984,Banking Companies Ordinance and/or other laws and regulations | | | |

| | | |and relevant IAS. | | | |

| | |5.23 |Where advances are guaranteed by third parties (Borrowers Directors| | | |

| | | |guarantees are not considered valid for this purpose) examine the | | | |

| | | |guarantee papers (bonds) and ensure that these are from reputable | | | |

| | | |companies or individuals with adequate net-worth. Review value of | | | |

| | | |security, if any, offered against guarantees. | | | |

| | |5.24 |Automobile lease documents should be consistent with the legal | | | |

| | | |opinion. | | | |

| | |5.25 |Credit Loss Reserves – | | | |

| | | | | | | |

| | | |Obtain schedule of the above. | | | |

| | | |Check the footings and arithmetical accuracy of the schedule. | | | |

| | | |Agree the balance with General Ledger. | | | |

| | | |Compare overdue advances balances with schedule for any omission in| | | |

| | | |the schedule. | | | |

| | | |Examine basis of clients included and classified in the schedule. | | | |

| | | |Discuss with Loan Admin./Credit Personnel for customers being | | | |

| | | |classified (doubtful, sub-standard, loss, split classification). | | | |

| | | |Obtain documentation showing reasons for such classifications. | | | |

| | |5.26 |Obtain from the bank a schedule of advances classified according to| | | |

| | | |Prudential Regulations (i.e. OAEM, sub-standard, doubtful, or | | | |

| | | |loss). Review these and discuss the classification if we are not | | | |

| | | |satisfied with the classification. | | | |

| | | |Review classified advances by use of loan inspection/internal | | | |

| | | |auditors, H.O. and SBP or other supervisory reports. | | | |

| | | |Review overdue/loan delinquency (or similar) reports to ensure | | | |

| | | |whether there are any clients being reflected in the report but not| | | |

| | | |included in credit loss reserve data unless there are any other | | | |

| | | |genuine reasons. | | | |

| | | |Review and evaluate securities held by the bank. | | | |

| | | |In case of nil or irregular repayments, examine loan file to see | | | |

| | | |the effectiveness of collection procedures e.g. by examining | | | |

| | | |letters written to the borrowers requesting for repayment. | | | |

| | | |Review the allowances for possible loan losses and evaluate its | | | |

| | | |adequacy. Discuss any shortfall in provision with management. | | | |

| | | |Verify authority for loans and advances written-off and also that | | | |

| | | |SBP write-off requirements are met. | | | |

| | |5.27 |Review the recovery position of classified advances and ascertain | | | |

| | | |whether interest is being taken to income or suspense account as | | | |

| | | |appropriate in accordance with the prudential regulations. | | | |

| | |5.28 |Obtain a schedule from the client classifying advances according to| | | |

| | | |the requirements of the Banking Companies Ordinance, 1962 and test | | | |

| | | |accuracy of details thereof. | | | |

| | |Aging & Provisioning | | | |

| | |5.29 |Bad and doubtful advances should be identified separately and | | | |

| | | |reviewed for adequate collateral and provision in accordance with | | | |

| | | |the Banking Companies Ordinance, 1962. | | | |

| | |5.30 |Discuss any shortfall in provision with management. | | | |

| | |5.31 |Ensure that accounting treatment for legal fees related to problem | | | |

| | | |advances is appropriate. | | | |

| | |5.32 |Verify authority for loans and advances written off and ensure that| | | |

| | | |these are within the limits and conditions specified by the State | | | |

| | | |Bank of Pakistan. | | | |

| | |5.33 |Obtain a list of letters of credit and other off-balance sheet | | | |

| | | |commitments that may be related to problem loans previously | | | |

| | | |identified and determine if any potential exposure is evident. | | | |

| | | | | | | |

| | |6. Disbursements | | | |

| | | | | | | |

| | |6.1 |Check approval of appropriate level of management. | | | |

| | |6.2 |Check that all formalities necessary before disbursement of loans | | | |

| | | |have been fulfilled by the party. | | | |

| | |6.3 |Check disbursements of funds with disbursement register and bank | | | |

| | | |statement. | | | |

| | | | | | | |

| | |7. Repayments | | | |

| | | | | | | |

| | |7.1 |Check amount of repayment from repayment schedule or agreement. | | | |

| | |7.2 |Check receipt of funds with receipt records and bank statement. | | | |

| | |7.3 |Trace deductions from salary with the payroll records. | | | |

| | | | | | | |

| | |8. Aging and Provisioning | | | |

| | | | | | | |

| | |8.1 |Have the client prepare an age analysis. Review and scrutinize the | | | |

| | | |age analysis for outstanding balances and investigate reasons for | | | |

| | | |overdue receivables. | | | |

| | |8.2 |Consider realisibility of overdue/over aged balances and consider | | | |

| | | |provisioning there against in accordance with SBP directives. | | | |

| | |8.3 |Have client identify any balances doubtful of recovery and consider| | | |

| | | |appropriate provisioning there against. | | | |

| | | | | | | |

| | |9. Interest Income | | | |

| | | | | | | |

| | |9.1 |Verify rate of interest from agreement. | | | |

| | |9.2 |Check the number of days for which interest is to be charged. | | | |

| | |9.3 |Recompute interest income on test basis. | | | |

| | | | | | | |

| | |10. Exercise of Powers by the Board | | | |

| | | | | | | |

| | |10.1 |Ensure that the following powers are exercised by the Board of | | | |

| | | |Directors on behalf of the Company and decisions on material | | | |

| | | |transactions or significant matters are documented by a resolution | | | |

| | | |passed at a meeting of the Board: | | | |

| | | | | | | |

| | | |determination of the nature of loans and advances made by the | | | |

| | | |company and fixing a monetary limit thereof; | | | |

| | | |write-off of bad debts, advances and receivables and determination | | | |

| | | |of a reasonable provision for doubtful debts; | | | |

| | | |write-off of other assets. | | | |

| | | | Investment and disinvestments of funds where the maturity period | | | |

| | | |of such investments is six months or more, except in the case of | | | |

| | | |banking companies, trusts, mutual funds and insurance companies. | | | |

| | | | Determination of the terms of and the circumstances in which a law| | | |

| | | |suit may be compromised and a claim/right in favour of the company | | | |

| | | |may be waived, released, extinguished or relinquished. | | | |

| | | | | | | |

| | |11. Foreign currency balances | | | |

| | | | | | | |

| | |11.1 |Ensure that all receivables in foreign currencies are re-translated| | | |

| | | |at the exchange rate prevailing on the balance sheet date. | | | |

| | |11.2 |Ensure that hedge accounting practices in accordance with IAS-39 | | | |

| | | |have been followed with regard to any balances covered under | | | |

| | | |forward exchange contracts. | | | |

| | |11.3 |Have the client prepare a schedule of re-translation, from rate at | | | |

| | | |initial recognition and at balance sheet date, of all receivables. | | | |

| | | |Cross-refer exchange differences with financial charges/other | | | |

| | | |income. | | | |

| | |11.4 |Where the company uses forward exchange contracts, such contracts | | | |

| | | |should be accounted for as assets and liabilities. Gains and losses| | | |

| | | |on such financial instruments used for hedging of foreign currency | | | |

| | | |transactions should be recognized as income and expense on the same| | | |

| | | |basis as the corresponding hedged item. Foreign exchange contracts | | | |

| | | |are translated at exchange rates prevailing at the balance sheet | | | |

| | | |date (representing their fair value). | | | |

| | | | | | | |

| | |12. Related Party Balances | | | |

| | | | | | | |

| | |12.1 |Identify receivables from officers, directors and principal | | | |

| | | |shareholders and determine whether they arise from routine | | | |

| | | |transactions, such as regularly settled travel advances, or are | | | |

| | | |related-party transactions. | | | |

| | |12.2 |If related-party transactions, cross-reference to the listing of | | | |

| | | |such transactions obtained in the Related Party section of the | | | |

| | | |Financial Reporting work. | | | |

| | |12.3 |Review transactions in the accounts carefully to determine they | | | |

| | | |have been properly authorized and are actually what they purport to| | | |

| | | |be. Check credit postings to the accounts for propriety. | | | |

| | |12.4 |Consider the need to consult legal counsel to determine the | | | |

| | | |legality of loans and advances. | | | |

| | |12.5 |Consider the collectibility of receivables from officers, | | | |

| | | |directors, principal shareholders and other related parties during | | | |

| | | |the review of the adequacy of the allowance for doubtful accounts. | | | |

| | |12.6 |Consider the need to disclose the transactions and balances. | | | |

| | | |Propose disclosure points, as appropriate. | | | |

| | |12.7 |Obtain an understanding of the nature of the inter-company | | | |

| | | |receivables, including the following: | | | |

| | | |- How they arose. | | | |

| | | |- How they are being or are to be liquidated. | | | |

| | | |- What security exists. | | | |

| | | |- What the funds were used for. | | | |

| | | |- What the tax implications are. | | | |

| | |12.8 |If the transactions are other than routine transfers of goods| | | |

| | | |and services, inspect supporting critical forms and | | | |

| | | |documents ( ). Scope/Sample:( ) | | | |

| | |12.9 |Tie amounts to the inter-company payables reflected in the audit | | | |

| | | |working papers for the affiliates. If the inter-company accounts | | | |

| | | |are not in balance, have client personnel prepare reconciliations. | | | |

| | | |Examine support for significant or unusual reconciling items. | | | |

| | | |Propose adjustments for unrecorded transactions, if appropriate. | | | |

| | |12.10 |Ensure that all the requirements of SRO 66 dated January 22, 2003 | | | |

| | | |have been complied with. | | | |

| | | | | | | |

| | |Other tests as deemed necessary | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | |Management Letter | | | |

| | | | | | | |

| | | |Prepare management letter points including: | | | |

| | | | | | | |

| | | |Internal control weaknesses; | | | |

| | | |Business improvement opportunities; | | | |

| | | |Legal non-compliance; | | | |

| | | |Accounting system deficiencies; and | | | |

| | | |Errors and irregularities not material at the financial statements | | | |

| | | |level. | | | |

| | | | | | | |

| | |Disclosure | | | |

| | | | | | | |

| | | |Ensure appropriate disclosure have been made in accordance with the| | | |

| | | |reporting framework and fill relevant portion of FSDCL. | | | |

| | | | | | | |

| | |Supervision, review and conclusion | | | |

| | | | | | | |

| | |1. |Perform Senior review and supervision. | | | |

| | |2. |Resolve Senior review points. | | | |

| | |3. |Resolve Partner and Manager review points. | | | |

| | |4. |Conclude response to the audit objectives. | | | |

Audit conclusion

Based on the substantive test procedures, I/we performed as outlined above, it is my/our opinion that the audit objectives set forth at the beginning of this audit program have been achieved, except as follows:

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______________ ____________ ________ _______

Date:____________ Signature Job Incharge Manager Partner

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