2013

Audit Hashir Khan 11589

MCB BANK

[MCB BANK]
BBA 7

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MCB BANK

Contents
Contents............................................................................................................................3 INTRODUCTION ...........................................................................................................4 MANAGEMENT HIERARCHY ..................................................................................8 .........................................................................................................................................10 Structure & Function Of Finance Department Of MCB Bank......................................11 Finance & Accounting Operations:................................................................................11 Role of Financial Manager..............................................................................................12 Branch Departmentalization...........................................................................................15 Account Opening Department .......................................................................................15 Character.................................................................................................................17 INTERNAL AUDIT DEPARTMENT ORGANIZATIONAL STRUTURE.................24 Planning the Detailed Audit............................................................................................27 AUDIT PROGRAM......................................................................................................28 ILLEGAL AND IMPROPER ACTIVITIES..................................................................29 FRAUD / IRREGULARITIES / INVESTIGATIONS...................................................30

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MCB BANK

INTRODUCTION
Over the years MCB has developed strong relationships with its customers by understanding their needs and treating them with respect, dignity and importance. The driving force behind its commitment and services is its focus on customers, ensuring that it not only meets, but also exceeds their expectation. They strive to achieve excellence by ensuring that every moment of their time is spent in adding value, making sure that they do things right, first time, and every time. With the quest of quality MCB has always taken initiatives bringing banking into a new arena; from cash to the convenience of plastic; from branch banking to internet banking and from face to face customer interaction to online accessibility. It encourages diversity and treats each of its employees with fairness. It gives constructive feedback for their continuous development and seeks suggestion from all employees for further improvement. It ensures that quality performance is acknowledged and rewarded and exercise utmost responsibility in decision making with regards to its employees. Integrity of its employees is the strength of its performance. MCB believe in achieving their mission and vision by working together as a combine group. It treats its colleague as its internal customer and ensures that the requirements of internal customer focus are always met. Equipped with in-depth product knowledge and recognizing the strengths in each individual, It strive for optimum-results from its co-workers and bringing out peak performances by working towards common goals and objectives in today's dynamic banking environment. MCB has an edge over other local banks, as it was the first privatized bank. The State Bank of Pakistan has restricted the number of branches that can be opened by foreign banks, an advantage that MCB capitalizes because of its extensive branch network. Ten years after privatization, MCB is now in a consolidation stage designed to lock in the gains made in recent years and prepare the groundwork for future growth. The bank has restructured its asset portfolio and rationalized the cost structure in order to remain a low cost producer.

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MCB BANK MCB now focuses on three core businesses namely Corporate, Commercial and Consumer Banking. Corporate clientele includes public sector companies as well as large local and multi national concerns. MCB is also catering to the growing middle class by providing new asset and liability products. The Bank provides 24 hour banking convenience with the largest ATM network in Pakistan covering 30 cities with over 225 ATM locations. The Banks Rupee Traveler Cheques have been leaders for the past six years and have recently launched their Gift Cheques Scheme. MCB Bank Limited (Formerly Muslim Commercial Bank Limited ) has a solid foundation of over 50 years in Pakistan, with a network of over 900 branches, over 750 of which are Automated Branches, over 225 MCB ATMs in 41 cities nationwide and a network of over 12 banks on the MNET ATM Switch. MCB has become the only bank to receive the Euro money award for the fourth time in the last five years. MCB won the "Best Bank in Pakistan" in 2005, 2004, 2003, 2001, and in 2000 the "Best Domestic Bank in Pakistan" awards. In addition, MCB also has the distinction of winning the Asia Money 2005 & 2004 awards for being "The Best Domestic Commercial Bank in Pakistan". MCB offers a wide range of financial products and advice for Personal and Corporate Customers. You can also apply on-line for many of our Online Services. Customers can access their accounts using our simple and convenient MCB Virtual Internet Banking services.

MANAGEMENT
AUDIT COMMITTEE Mian Mohammad Mansha Sheikh Mukhtar Ahmed Shehzad Saleem Chairman Member Member

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MCB BANK CHIEF FINANCIAL OFFICER Ali Amin

AUDITORS A.F. Ferguson & Co. M. Yousuf Adil Saleem & Co. Chartered accountants

ORGANIZATIONAL STRUCTURE OF MCB BANK LTD

As MCB is a banking company listed in stock exchange therefore it follows all the legalities which are imposed by concerned statutes Mr. Muhammad Mansha is chairman & chief executive of the company with a team of 10 directors and 1 vice chairman to help in the business control and strategy making for the company. Operational Management of the bank is being handled by a team of 10 professionals. This team is also headed by Mr. Muhammad Mansha. The different operational departments are Consumer Banking & IT div; Financial & Inter branch div; Banking operations div; HR & Legal div; financial control & Audit div; Credit management div; Commercial Banking div; Corporate Banking div; Treasury management & FX Group and lastly Special Assets Management (SAM) Group

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MCB BANK

LINE OF BUSINESS (LOB) ORGANIZATION

President and CEO

Group Head Corporate

Group Head Commercial North

Group Head Commercial South

South Karachi North Karachi

Lahore East Lahore West Faisalabad

Karachi East Karachi west

Karachi

Central

Gujranwala Abbotabad Sargodha Peshawar

Quetta Bahawalpur Multan Hyderabad Sukkur

General Manager/ Circle Offices

General Manager/ Circle Offices

General Manager/ Circle Offices

Regional Managers/ Regional Offices

Regional Managers/ Regional Offices

Regional Managers/ Regional Offices

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MCB BANK

MANAGEMENT HIERARCHY
Branch

Chief Manager

Operational Manager

Credit Department

Supervisor

Operation Officer

Clearing

Cash Dept. (Chief cash)

Teller

Teller

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MCB BANK POLICY FORMATION PROCESS At MCB Bank all policies are formulated at the Head Office at Karachi and are then distributed among the vast network of more than 950 branches of MCB. Among some of the policies they implement are that the Commercial Office East or West, keeps in view new opportunity for a suitable and profitable location for its new branch. But as all policies are done by the HO no suitable information could be gathered. MANAGERIAL POLICIES Managers handle their staff at branch level. The duties assigned to them are to keep the monthly deposit up to the mark; opening of new accounts has to be either stable or increasing. They are responsible for assigning leaves to their staff on yearly basis and even handle emergency absence. MCB has a rule of working 9 to 5 daily but, internally their staff has alternate off on Saturdays. The manager has to develop a leave program so as this routine does not disturbs any customer. They have to handle the problems of disappointed or angry customers and convince them about the best service MCB provides. They receive specific targets which they have o achieve within the given time period which results in bonuses distributed among the staff and the manager released by the HO.

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MCB BANK

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MCB BANK

Structure & Function Of Finance Department Of MCB Bank

Structure of Finance/Accounting Department of MCB Bank MCB Bank has separate departments for accounts and finance. Both of these departments are controlled by CFO. Accounts Department has further Accounting and Operation Department, Accounting & Audit Department and Control Department whose officers report to CFO. Finance Department has further Portfolio Management Department and Investment and Finance Planning Department whose officers also report to CFO. Portfolio Department has further sub-department of lending who report to Portfolio Officer. Investment and Finance Planning Department has further subdepartment of Funds Raising who report to Financial Planning Officer.

Finance & Accounting Operations: Generation of Accounting Information Finance and accounting policies and procedures are strictly followed. With them departments and divisions to help management more effectively focus and control the banks resources e.g. fund raising and fund management division, funds allocation department, portfolio management department, personal financial services division, investment and funding group etc. These departments and divisions require the appointment of bank management and staff that can devote more time to surveying customer surveys, and modifying old service offerings to reflect changing customer needs. The technology of financial services production and delivery has shifted more and more in recent days towards computer-based system and electronic service delivery.

Automated bookkeeping has reduced the time managers spend in routine operations, thus allowing greater opportunity for planning new services and new operations.

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MCB BANK

Recording of Accounting Information Accounting information handle by preparing journal, ledger and trial balance and information recorded electronically. The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and income and expenses. It also requires management to exercise its judgment in the process of applying the accounting policies. Estimates and judgments are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Role of Financial Manager Financial manager mainly emphasize on maximize shareholders wealth. All important decisions related to finance and investment that must improve the success of the organization. Financial manager also perform several tasks as follows: Advice institutions on high net worth individual customer on investing funds, managing assets, reorganizations, raising capital. Purchase short term assets (mainly accounts receivable) from business in exchange for supplying temporary financing. Purchase short term credit to improve commercial use. Offer saving deposit plans and housing related credit predominantly to individual. Execute customer buy and sell orders for marketable securities and exchange traded financial futures and option contracts and provide other full service brokerage functions.

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MCB BANK Control of the composition of a banks assets to provide adequate liquidity and earnings. Control over a banks liabilities, usually through changes in interest rates offered to provide the bank with adequate liquidity. Invest in corporate stock to help finance the start of new branches to support the expansion of existing business. Remittances Department The remittances department transfers the funds from one bank to other bank and from one place to another place. ATM and online banking has also effected the remittances department and increased its efficiency.

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MCB BANK

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MCB BANK

Branch Departmentalization
The process of grouping individuals into separate units and departments to facilitate the accomplishment of organizational goals is known as departmentalization., departmentalization is done on pure functional basis. In the functional form of departmentalization, people and resources having a common activity to support are grouped together. Functions performed by some important departments of MCB

Account Opening Department

The opening of an account is the establishment of banker customer relationship. Before a banker opens a new account, the banker should determine the prospective customers integrity, respectability, occupation and the nature of business by the introductory references given at the time of account opening.

Cash Department
Cash department performs the following functions Receipt The money, which either comes or goes out from the bank, its record should be kept. Cash department performs this function. The deposits of all customers of the bank are controlled by means of ledger accounts. Every customer has its own ledger account and have separate ledger cards. Payments It is a bankers primary contract to repay money received for this customers account usually by honoring his cheques. Cheques and their Payment The Negotiable Instruments. Act, 1881, Cheque if a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Since a cheque has been declared to be a bill of exchange, it must have all its characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881. Therefore, one can say that a cheque can be defined as an:

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MCB BANK An unconditional order in writing drawn on a specified banker, signed by the drawer, requiring the banker to pay on demand a sum certain in money to, or to the order of, a specified person or to the bearer, and which does not order any act to be done in addition to the payment of money. (Law of Banking by Dr. Hart, p.327).

Advances Department
Advances department is one of the most sensitive and important departments of the bank. The major portion of the profit is earned through this department. The job of this department is to make proposals about the loans. The Credit Management Division of Head Office directly controls all the advances. As we known bank is a profit seeking institution. It attracts surplus balances from the customers at low rate of interest and makes advances at a higher rate of interest to the individuals and business firms. Credit extensions are the most important activity of all financial institutions, because it is the main source of earning. However, at the same time, it is a very risky task and the risk cannot be completely eliminated but could be minimized largely with certain techniques. Any individual or company who wants loan from MCB, first of all have to undergo the filling of a prescribed form, which provides the following information to the banker.

Name and address of the borrower.

Existing financial position of a borrower at a particular branch. Accounts details of other banks (if any). Security against loan. Exiting financial position of the company. (Balance Sheet & Income Statement). Signing a promissory note is also a requirement of lending, through this note borrower promise that he will be responsible to pay the certain amount of money with interest.

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MCB BANK

Principles of Advances
There are five principles, which must be duly observed while advancing money to the borrowers. Safety. Liquidity. Dispersal. Remuneration. Suitability. Safety Bankers funds comprise mainly of money borrowed from numerous customers on various accounts such as Current Account, Savings Bank Account, Call Deposit Account, Special Notice Account and Fixed Deposit Account. It indicates that whatever money the banker holds is that of his customers who have entrusted the banker with it only because they have full confidence in the expert handling of money by their banker. Therefore, the banker must be very careful and ensure that his depositors money is advanced to safe hands where the risk of loss does not exist. The elements of character, capacity and capital can help a banker in arriving at a conclusion regarding the safety of advances allowed by him. Character It is the most important factor in determining the safety of advance, for there is no substitute for character. A borrowers character can indicate his intention to repay the advance since his honesty and integrity is of primary importance. If the past record of the borrower shows that his integrity has been questionable, the banker should avoid him, especially when the securities offered by him are inadequate in covering the full amount of advance.

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MCB BANK It is obligation on the banker to ensure that his borrower is a person of character and has capacity enough to repay the money borrowed including the interest thereon.

Capacity This is the management ability factor, which tells how successful a business has been in the past and what the future possibilities are. A businessman may not have vast financial resources, but with sound management abilities, including the insight into a specific business, he may make his business very profitable. On the other hand if a person has no insight into the particular business for which he wants to borrow funds from the banker, there are more chances of loss to the banker. Capital This is the monetary base because the money invested by the proprietors represents their faith in the business and its future. The role of commercial banks is to provide short-term capital for commerce and industry, yet some borrowers would insist that their bankers provide most of the capital required. This makes the banker a partner. As such the banker must consider whether the amount requested for is reasonable to the borrowers own resources or investment. Liquidity Liquidity means the possibilities of recovering the advances in emergency, because all the money borrowed by the customer is repayable in lump sum on demand. Generally the borrowers repay their loans steadily, and the funds thus released can be used to allow fresh loans to other borrowers. Nevertheless, the banker must ensure that the money he is lending is not blocked for an undue long time, and that the borrowers are in such a financial position as to pay back the entire amount outstanding against them on a short notice. In such a situation, it is very important for a banker to study his borrowers assets to liquidity, because he would prefer to lend only for a short period in order to meet the shortfalls in the wording capital. If the borrower asks for an advance for the purchase of fixed assets the banker should refuse because it shall not be possible

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MCB BANK for him to repay when the banker wants his customer to repay the amount. Hence, the baker must adhere to the consideration of the principles of liquidity very careful.

Dispersal The dispersal of the amount of advance should be broadly based so that large number of borrowing customer may benefit from the bankers funds. The banker must ensure that his funds are not invested in specific sectors like textile industry, heavy engineering or agriculture. He must see that from his available funds he advances them to a wide range of sector like commerce, industry, farming, agriculture, small business, housing projects and various other financial concerns in order of priorities. Dispersal of advances is very necessary from the point of security as well, because it reduces the risk of recovery when something goes wrong in one particular sector or in one field. Remuneration A major portion of the bankers earnings comes form the interest charged on the money borrowed by the customers. The banker needs sufficient earnings to meet the following: Interest payable to the money deposited with him. Salaries and fringe benefits payable to the staff members. Overhead expense and depreciation and maintenance of the fixed assets of the bank. An adequate sum to meet possible losses. Provisions for a reserve fund to meet unforeseen contingencies. Payment of dividends to the shareholders. Suitability The word suitability is not to be taken in its usual literary sense but in the broader sense of purport. It means that advance should be allowed not only to the carefully selected and suitable borrowers but also in keeping with the overall national development plans chalked out by the authorities concerned. Before accommodating a

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MCB BANK borrower the banker should ensure that the lending is for a purpose in conformity with the current national credit policy laid down by the central bank of the country.

Forms of Loans In addition to purchase and discounting of bills, bankers in Pakistan generally lend in the form of cash finance, overdrafts and loans. MCB provides advances to different people in different ways as the case demand. Cash Finance This is a very common form of borrowing by commercial and industrial concerns and is made available either against pledge or hypothecation of goods, produce or merchandise. In cash finance a borrower is allowed to borrow money from the banker up to a certain limit, either at once or as and when required. The borrower prefers this form of lending due to the facility of paying markup/services charges only on the amount he actually utilizes. If the borrower does not utilize the full limit, the banker has to lose return on the unutilized amount. In order to offset this loss, the banker may provide for a suitable clause in the cash finance agreement, according to which the borrower has to pay markup/service charges on at least on self or one quarter of the amount of cash finance limit allowed to him even when he does not utilize that amount.

Overdraft/Running Finance This is the most common form of bank lending. When a borrower requires temporary accommodation his banker allows withdrawals on his account in excess of the balance which the borrowing customer has in credit, and an overdraft thus occurs. This accommodation is generally allowed against collateral securities. When it is against collateral securities it is called Secured Overdraft and when the borrowing customer

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MCB BANK cannot offer any collateral security except his personal security, the accommodation is called a Clean Overdraft. The borrowing customer is in an advantageous position in an overdraft, because he has to pay service charges only on the balance outstanding against him. The main difference between a cash finance and overdraft lies in the fact that cash finance is a bank finance used for long term by commercial and industrial concern on regular basis, while an overdraft is a temporary accommodation occasionally resorted to.

Demand Financing/Loans When a customer borrows from a banker a fixed amount repayable either in periodic installments or in lump sum at a fixed future time, it is called a loan. When bankers allow loans to their customers against collateral securities they are called secured loans and when no collateral security is taken they are called clean loans. The amount of loan is placed at the borrowers disposal in lump sum for the period agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus the borrower gets a fixed amount of money for his use, while the banker feels satisfied in lending money in fixed amounts for definite short periods against a satisfactory security

Remittance Department Remittance means a sum of money sent in payment for something. This department deals with either the transfer of money from one bank to other bank or from one branch to another branch for their customers. MCB offers the following forms of remittances. Demand Draft Telegraphic Transfer Pay Order Mail Transfer

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MCB BANK

ACCOUNTING PRACTICE FOLLOWED BY MCB

The financial statements of MCB have been prepared in accordance with the directives issued by the State Bank of Pakistan, the requirements of the Banking Companies Ordinance(1962), Companies Ordinance(1984), the accounting standards issued by the International Accounting Standards Committee (IASC) and its interpretations issued by Standing Interpretations Committee of the IASC, as adopted in Pakistan. These statements have been prepared under the historical cost convention except that certain fixed assets and investments have been included at revalued amounts. Historical cost convention refers to the practice of recording assets at their original value at which they were acquired.

Mark-up on advances and returns on investments are recognised on an accrual basis except the mark-up on classified advances, which is recognized on receipt basis, in accordance with the Prudential Regulations issued by the State Bank of Pakistan. Commission income too is recognized on receipt basis. Accrual basis of accounting refers to the practice of recording revenue for the period in which it is earned while, receipt basis calls for recognition of revenue for the period in which it is actually received, no matter when it is earned.

Investments are recorded in accordance with the requirements of State Bank of Pakistan.
Advances are stated net of provisions for doubtful debts. Provision for doubtful debts is determined on the basis of Prudential Regulations issued by the State Bank of Pakistan and charged to the income statement. Property and equipment, other than land which is not depreciated, are stated by deducting the accumulated depreciation from the original cost or the revalued amounts. Any assets or liabilities that are in foreign currencies are shown at their equivalent in Pakistani rupee at the exchange rate prevalent on the balance sheet date. In case they are covered by forward exchange contracts, i.e. contracts for the sale or purchase of a

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MCB BANK given amount of foreign currency at a future time at a rate of exchange that is fixed when the contract is made, then contracted rates are used. Provisions for current taxation are based on taxable income at the current rates of taxation after taking into consideration tax credits and rebates available. For deferred taxes, liability method is used.

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MCB BANK

INTERNAL AUDIT DEPARTMENT ORGANIZATIONAL STRUTURE

Head Operational & Departmental Audit

Mortgage

Consumer Financing

3rd (South)

4th (Sindh)

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MCB BANK

Job responsibility: Develop the scope for operational, information technologies, financial and security audit projects and select/develop appropriate audit steps necessary to promote effective audit coverage for the managers approval Conduct management, information technologies, financial and security audit projects according to the yearly audit plans in all areas of the Corporation. The primary objective of the Audit and Inspection Group (AIG) is to review the effectiveness of internal controls and risk management practices to minimize business risk. The Audit and Inspections group is expected to perform wide range of audits, which include the following: Financial Audit: To assess the reliability of the accounting system and information and of resulting financial reports. This also includes appraisal of the related systems of internal controls. Compliance Audit: To assess compliance with the laws, regulations, policies and procedures. Management Audit: To assess the quality of managements approach to risk and control in accordance with the Banks objectives. Basically, it concentrates on control problems of high-level management, e.g. evaluation of the organizational structure and financial discipline, long-range plans and objectives, budgeting, profit planning, human and physical facilities etc. Information System Audit: To assess the controls over Information Technology systems and their application. This covers the analysis of computer based information systems (including the aspects of Change Management, Disaster Recovery Planning, Page 25 of 31

MCB BANK Integrity of information produced etc.), which is an essential part in the evaluation of the overall system of accounting and internal controls and assessing reliability of the processed data.

AUDIT OBJECTIVES AND PLANNING

To uniformly document the audit planning process, an Audit Objectives and Planning Checklist will be completed before each audit begins. The Audit Manager responsible for the audit will be responsible for the timely completion of the checklist. . The checklist has been designed to document the following planning information: Reviewing prior audit work papers, prior audit scope and audit reports, and determining specific follow up steps required. Reviewing prior audit time versus findings and conclusions on controls, and determining the impact on the current audit. Assessing current audit risk, and identifying current audit concerns. Coordinating the audit with outside auditors, and determining the effect of their work on current audit scope. Establishing specific audit objectives. Estimating the time and resources necessary to meet the audit objectives. Developing and approving the detailed audit program. Communicating with all who need to know about the audit. Documenting the rationale for selecting audit entrance- and exit-level management to make sure that the management level selected has the authority to implement the agreed corrective actions.

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MCB BANK Communicating with management of the unit to be audited regarding the audit objectives, and obtaining their comments and suggestions to facilitate positive audit results. Revising the detailed audit program, if appropriate, to reflect the results of communications with management of the location to be audited, or to reflect the results of the on-site survey. L. Approving the audit work plan and target completion date. Planning the Detailed Audit The elements of materiality and relative risk must be considered in performing the audit. The due professional care standards do not imply unlimited responsibility for disclosure of irregularities and other deficiencies. The auditor's principal effort should be in those areas where significant problems or deficiencies may exist, rather than in areas that are relatively unimportant. Time should not be spent examining or developing evidence beyond what is necessary to afford a sound basis for a professional opinion. The results of the survey should be analyzed to determine the need for a detailed audit and the specific areas to be covered. To assist in identifying those vital activities and to help evaluate their relative importance, the following steps can be applied: Briefly record each problem indicated during the survey Record your evaluation of the significance of the problem Record the potential effect of the problem Record what is needed and the estimated time required to confirm the extent and significance of the problem Rank the problems in the order of importance After these steps have been completed, the detailed audit program should be prepared, allocating the project budget time for fieldwork to the specific areas to be covered in the audit.

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MCB BANK AUDIT PROGRAM The audit program should be prepared after the completion of the preliminary survey. The audit program is a detailed plan for the work to be performed during the audit. A well-constructed program is essential to completing the audit project in an efficient manner. A well-constructed program provides: A systematic plan for each phase of the work that can be communicated to all audit personnel concerned. A means of self-control for the audit staff assigned. A means by which the audit supervisor/manager can review and compare performance with approved plans. Assistance in training inexperienced staff members and acquainting them with the scope, objectives, and work steps of an audit. The basis for a summary record of work actually performed. An aid to supervisor/manager making possible a reduction in the amount of direct supervisory effort needed. Assistance in familiarizing successive audit staff with the nature of work previously carried out. The program consists of specific directions for carrying out the assignment. It should contain a statement of the objectives of the operation being reviewed. For each segment of the audit the program should 1) list the risks that must be covered in that segment; 2) Show for each risk the controls that exist or that are needed to protect against the indicated risk; 3) Show for each of the listed controls the work steps required to test the effectiveness of those controls, or set forth the recommendations that will be required to install needed controls; and (4) provide space for initials of auditor

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MCB BANK completing the audit step, reference to the related audit work papers, and brief comments. The audit assignment, usually prepared by the Audit Manager, initiates the start of Internal Audit activity. It is to be completed before any work is done on the audit. The audit Manager assigns the audit name and number, provides direction as to what the audit objectives are and any special concerns or considerations, determines the audit period, and assigns audit personnel and time budget. (as per the audit assignment form.) The estimated time budget is initially obtained from the annual audit plan. Any proposed changes to the budgeted hours based upon preliminary work such as review of prior work papers, discussions with the audit customer, etc., are requested .(through the use of the Budget Revision Form

AUDIT ASSIGNMENT The audit assignment, usually prepared by the Audit Manager, initiates the start of Internal Audit activity. It is to be completed before any work is done on the audit. The audit Manager assigns the audit name and number, provides direction as to what the audit objectives are and any special concerns or considerations, determines the audit period, and assigns audit personnel and time budget. (as per the audit assignment form.)

ILLEGAL AND IMPROPER ACTIVITIES

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MCB BANK Organizational policy specifically prohibits certain activities and requires approval of a senior executive before actions may be taken regarding certain other types of transactions. The prohibitions cover: Political Contributions Bribes, Payoffs and Kickbacks Off-Book Accounts - False and Fictitious Entries Exchange Law Violations Customs Law Violations Tax Law Violations Violations of Any Law Relating to Business Conduct Violations of Any Other Laws Payments of Excessive Fees or Commissions to Consultants, Where the Justification Is Not Documented

FRAUD / IRREGULARITIES / INVESTIGATIONS Auditors will be familiar with the organizations fraud policy (as appropriate) and be alert to situations involving possible fraud or irregularities. In cooperation with the Legal Department, the following guidelines will be followed if such a situation is encountered. If shortages or irregularities are found, carefully avoid openly accusing anyone.

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MCB BANK Contact the applicable Audit Manager or the Chief Internal Auditor, and provide the following details: The name(s) of the employee(s) who has/have knowledge of the situation. The approximate amount of the suspected or potential fraud or irregularity. A brief description of the evidence which substantiates the suspected or potential irregularity. Maintain confidentiality about possible shortages/irregularities/ fraud until the Audit Manager or the Chief Internal Auditor has approved an investigation plan. Internal Audit management will consult with the Legal Department regarding the investigation plan and the appointment of an investigation team.

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