AUDIT SCOPE : DOMESTIC TRANSACTIONS

Whether there proper segregation between front, mid and back office functions

Whether there is a functional separation of trading, settlement, monitoring & control, and accounting? Is there functional separation between front office and back office functions relating to Banks' own Investment Accounts, Portfolio Management Scheme (PMS) Clients' Accounts and other Constituents (including brokers)? Whether separate records are maintained in respect of Banks' own Investment Accounts, Portfolio Management Scheme (PMS) Clients' Accounts and other Constituents (including brokers) accounts?

Whether processing of proposals for investments is carried out by front office.

Whether branch obtains necessary approval for G-Sec investment proposal.

Call Money borrowing and Call Lending

Call money report

Export refinance,

Borrowing/Lending against Bills.

Treasury Bill transactions

Subscription to Central/State Loans,

Whether

analysis

of

financial

parameters in case of PSU / Govt. Infrastructure projects guaranteed by

Govt. or a trend analysis in case of other companies is carried out in non SLR investments.

Whether

independent

analysis

is

carried out by the Bank or copied from the issue prospectuses while submitting securities. proposal for non SLR

Empanelment of Brokers,

Whether empanelment and de-listing of brokers is on clear-cut criteria?

Whether the brokers panel is reviewed annually? Whether the brokers engaged are the members of specified Stock Exchanges?

Whether services of broker/(s), which are not empanelled with the Bank, are taken?

Validity of empanelment and adherence to the limit of 5% prescribed by RBI for transactions through a particular Broker in a financial year

Whether the transactions entered into through individual brokers exceed 5% of the total transactions? If yes, whether such excesses have been authorized by the Top Management?

Issue and control of Deal slips

Whether the deal slip contains the requisite particulars such as nature of the deal, name of the counter-party, whether it is a direct deal or through a broker, and if through a broker, name of the broker, details of security, amount, price, contract date and

time? Whether deal slips are serially numbered and controlled separately to ensure that each deal slip has been properly accounted for?

Whether Regulatory guidelines are strictly followed with regard to processing system, whether the deal slip is automatically generated in the back office or not on conclusion of a deal in the front office.

On conclusion of deal, whether deal slips are immediately passed on to the Back Office for recording and processing?

Whether any alterations/corrections were made in the deal tickets? Whether dealers are preparing deal slips manually On conclusion of deal, whether deal slips and passing the deal slips to back office, which is are immediately passed on to the Back Office for recording and processing? later entered into the system.

Scrutiny / Record

of

Investment

Deals

and

Call

Call Money Report

Borrowing and Lending with relevant Registers

Concurrent Auditors have to verify the trade time mentioned on the deal ticket and broker note as requirement of the master circular on Investment
Issue and obtaining deal confirmation from counter parties,
Whether there confirmation to the timely and confirmation is a system of issue of counterparty and whether proper receipt of requisite from counterparty is

monitored? Whether the Back Office monitors the essential details on the counter-party confirmation? Whether there is proper system for signature verification in respect of the confirmations received from the Counter Party? Whether the SGL balances are reconciled at monthly intervals with balances in the books of PDO and reported to the Audit Committee of the Board?

Maintenance of Stock of SGL,

Bankers cheques /RBI cheques issued in favor of the Bank as also those issued by the Bank

Physical verification of Securities on Half Yearly basis.

Whether Bank conducts half yearly review (31st March and 30th September) of investment portfolio this review should, apart from other operational aspects of investment portfolio, certifying adherence to Banks investment policy guidelines and RBI guidelines and whether such review is put up to the board within a month? Whether copy of such review is sent to RBI by 15th May and 15th November Held to Maturity Category (HTM) Whether investments are valued accordance with the RBI guidelines? Available for Sale Category (AFS) Whether investments are valued accordance with the RBI guidelines? in in

Whether the net depreciation, if any, under each classification, has been provided for?

Held for Trading Category (HFT)

Whether investments are valued accordance with the RBI guidelines?

in

Whether the net depreciation, if any, under each classification, has been provided for?

Verification of Reconciliation Statements of SGL holdings with RBI Statements (Banks own holdings as well as holdings on behalf of constituents)

Whether the SGL balances are reconciled at monthly intervals with balances in the books of PDO and reported to the Audit Committee of the Board?

& CSGL Balances

Whether Account with RBI is reconciled periodically?

Reconciliation of RBI A/c

Quarterly

Valuation

of

Investments

conformity to RBI/Banks guidelines/policy: e.g

Whether the maintenance of SLR and other statutory returns are reported to RBI as stipulated?

Whether valuation of unquoted Bonds / debentures is carried out as per method prescribed by FIMMDA. b) Whether valuation of various Instruments is carried out as per guidelines of RBI. c) Whether non rated / non demoted Instruments are taken into Investment Portfolio of the Bank. d)Whether valuation is being checked independently on a sample basis by the Bank or not for its correctness.
Fortnightly Statistical Returns i.e Form A and Form VIII
Whether the CRR/SLR ? branch has maintained

Verification of computation of NDTL, CRR and SLR

Whether the CRR/SLR ?

branch

has

maintained

Whether

all

transactions

conducted

at

Treasury during the period under review have been authorized by the competent authority and are within the delegated powers of the respective dealing hours functionaries and that no transaction has been entered into outside

Whether the capital market exposure norms are adhered to?

Whether the appropriate approved the transactions?

authority

has Ha of inv ca co DB da

Correctness of calculation of Monthly Accrued Interest Income Statement (Income accrued and due but not received )

Wh Whether interest and/or principal of in respect of performing investments have been realized in time?

Verification of compliance to various Prudential limits:

Whether banks own investments in ordinary shares, convertible debentures, and units of equity oriented mutual funds exceed 20% of its net worth?

. Whether investment in Unrated Bonds

& Debentures are in excess of the prudential norms Is there appropriate system and Have you come across any transaction internal control for ensuring compliance where the Branch has sold stock without having the same in its investment account? with the prudential limits on the real time basis with regard to short selling Monthly and quarterly DSB Returns

Checking of Monthly Audit Booklet

Various I.Tax

statements

submitted

for

verifying compliance with instructions on short selling as required in terms of RBI Guidelines Report on pending TDS Certificate collection verifying broker note Comment on the sale of government securities allotted in primary issues on the same day . Whether investment Department is sending details of the investment portfolio to credit Department at quarterly intervals to ensure compliance with provisions of Section
Whether the Branch does the shifting of investment to/from Held to Maturity once a year at the beginning of the year with the approval of the Asset Liability Management Committee? Whether the branch has maintained record of tax deducted at source by the issuers of securities? Whether all the certificates of deduction of TDS have been received?

that

the

trade

time

mentioned on the deal ticket and

19 (2) & (3) of B R Act 1949. Whenever securities are shifted from HFT to AFS any reason for non disposal of securities within the stipulated period of 90 days is incorporated in the note.
Whether there was any instance of an investment in the Held for Trading category not sold within the maximum stipulated period of 90 days? If yes, whether the same was shifted to the Available for Sale category? Whether there was any instance of shifting from available for sale to held for trading? If yes, whether approval has been obtained from the appropriate authority for such transfer?

Whether the shifting between categories has been done at the least of Market value of security on the day of transfer or Acquisition Cost or Book value? Whether depreciation, if any, on such transfer is provided for in the Profit and Loss account?

Whether the Branch has transferred the profit on sale of securities held under the Held to Maturity category to Capital Reserve and Loss being recognized in the Profit and Loss account?

Whether exceptional / violation reports are generated in the new software.

Whether short selling of securities are verified by concurrent auditors in terms of RBI master circular on prudential norms for classification, valuation and operation of Investment portfolio and as specified in Investment Policy.

In case of transaction of sale of Government Security, whether the purchase contract is confirmed prior to the sale contract and whether the same is guaranteed by CCIL or else?

Is there a system to ensure that the Branch does not put through sale transactions, other than those mentioned in 2.4 below, without actually holding the security in its investment account?

TRANSACTIONS BASED ON WHEN & IF ISSUED are verified by concurrent

auditors in terms of RBI guidelines / Investment Policy. Whether rating of migration of securities or the extent of NPAs in the non- SLR portfolio is covered by way of separate note / reviews. Whether half yearly review of the transactions in the constituent subsidiary generated ledger (CSGL) account is placed before the competent authority.
READY FORWARD CONTRACT IN GOVT. SECURITIES are verified by concurrent

auditors in terms of RBI guidelines / Investment Policy. Clients Accounts under PMS or otherwise is to be totally segregated and managed separately, independent of the Banks own business. Care shall be taken to provide total transparency in all transactions between the Banks own account and clients' account and will be subject to all other guidelines of Reserve Bank of India from time to time including Concurrent Audit of the Portfolio.