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 |Have the client prepare a detailed schedule of loans and advances. | | | |

| | |1.2 |Compare current year balance(s) with prior year and investigate | | | |

| | | |major fluctuation. | | | |

| | | | | | | |

| | |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 |For employee loans 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 advance | | | |

| | | |for expenses 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. | | | |

| | | | | | | |

| | |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. | | | |

| | |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. | | | |

| | |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 short-term nature and are | | | |

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

| | |4.7 |Ensure that requirements of SRO 66 dated January 22, 2003 issued by| | | |

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

| | | | | | | |

| | |5. Disbursements | | | |

| | | | | | | |

| | |5.1 |Check approval of appropriate level of management. | | | |

| | |5.2 |Check that all formalities necessary before disbursement of loans | | | |

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

| | |5.3 |Check disbursements of funds with disbursement register and bank | | | |

| | | |statement. | | | |

| | | | | | | |

| | |6. Repayments | | | |

| | | | | | | |

| | |6.1 |Check amount of repayment from repayment schedule or agreement. | | | |

| | |6.2 |Check receipt of funds with receipt records and bank statement. | | | |

| | |6.3 |Trace deductions from salary with the payroll records. | | | |

| | | | | | | |

| | |7. Aging and Provisioning | | | |

| | | | | | | |

| | |7.1 |Have the client prepare an age analysis. Review and scrutinize the | | | |

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

| | | |overdue receivables. | | | |

| | |7.2 |Consider realisability of overdue/over aged balances and consider | | | |

| | | |provisioning thereagainst. | | | |

| | |7.3 |Have client identify any balances doubtful of recovery and consider| | | |

| | | |appropriate provisioning thereagainst. | | | |

| | | | | | | |

| | |8. Interest Income | | | |

| | | | | | | |

| | |8.1 |Verify rate of interest from agreement. | | | |

| | |8.2 |Check the number of days for which interest is to be charged. | | | |

| | |8.3 |Recompute interest income on test basis. | | | |

| | | | | | | |

| | |9. Exercise of Powers by the Board | | | |

| | | | | | | |

| | |9.1 |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; and | | | |

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

| | |9.2 |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. | | | |

| | |9.3 |Write-off of inventories and other assets; and | | | |

| | |9.4 |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. | | | |

| | | | | | | |

| | |10. Foreign currency balances | | | |

| | | | | | | |

| | |10.1 |Ensure that all receivables in foreign currencies are re-translated| | | |

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

| | |10.2 |Ensure that hedge accounting practices in accordance with IAS-39 | | | |

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

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

| | |10.3 |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. | | | |

| | |10.4 |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). | | | |

| | | | | | |

| | |11. Related Party Balances | | | |

| | | | | | | |

| | |11.1 |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. | | | |

| | |11.2 |If related-party transactions, cross-refer it to the listing of | | | |

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

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

| | |11.3 |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. | | | |

| | |11.4 |Consider the need to consult legal counsel to determine the | | | |

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

| | |11.5 |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. | | | |

| | |11.6 |Consider the need to disclose the transactions and balances. | | | |

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

| | |11.7 |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. | | | |

| | |11.8 |If the transactions are other than routine transfers of goods| | | |

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

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

| | |11.9 |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. | | | |

| | |11.10 |Ensure that requirements, with respect to related party balances, | | | |

| | | |of SRO 66 dated January 22, 2003 issued by SECP 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 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:

___________________________________________________________________________________________________________

___________________________________________________________________________________________________________

___________________________________________________________________________________________________________

______________ ___________ ________ _______

Date:____________ Work Performer Job Incharge Manager Partner

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download