1. CASH AND BANK BALANCES
Consider results of tests of controls over cash receipts and disbursements.
1. Obtain or prepare a lead schedule of cash and bank balances.
(a) Trace last year’s balances with last year’s working papers.
(b) Check arithmetical accuracy of the schedule.
(c) Trace totals of the schedule to balance sheet. (completeness)
2. Confirm bank balances including those accounts which have been closed during the year. (completeness)
3. Inspect bank reconciliation at year end
(a) Trace balances per books with general ledger.
(b) Trace balances per bank with and bank statement.
(c) Check arithmetical accuracy of reconciliation.
(d) Review long outstanding items.
(e) Check outstanding items for subsequent clearance.
(f) Account for all cheques issued during the last month of the accounting year.
(g) Verify reconciling items such as bank charges and direct credits to bank accounts. Existence, Rights and Obligations, Completeness)
4. Inspect petty cash
(a) List all petty cash funds and names of their custodians.
(b) Count cash and cash items.
(c) Obtain signatures of cashier for return of cash after counting.
(d) Ensure that cash counted plus cash items should equal to imprest balance. (Existence, Completeness)
5. Check that foreign currency items are converted into rupees at the rates prevailing at year end. (Valuation)
6. Perform cash cut-off tests
(a) Determine that all cash received through the close of business on the last day of the accounting year is included in cash in hand or deposits in transit and that no receipts of the subsequent period is included.
(b) Observe the last cheque issued and mailed on the last business day of the accounting year and trace to accounting records to determine accuracy of cash cut-off. (Cut ofJ)
7. Perform analytical procedures.
(a) Review changes in bank balances during the year and ascertain reasons for unusual items.
(b) Compare cash and bank balances with the cash budget and ascertain causes for significant and unusual variations.
(c) Review activity in general ledger accounts for cash and investigate entries which appear unusual. (Accuracy, valuation)
8. Inspect financial statements to check that cash and bank balances have been disclosed, classified and described in accordance with IFRS and comply with statutory requirements.
Matters to be included in bank confirmation letter
(1) Full titles of all accounts, including overdrafts and running and term finances under markup arrangements, whether in rupee or in any oth3er currency together with the account numbers and balances thereon, including NIL balances:
(a) Where your customer’s name is the sole name in the title;
(b) Where your customer’s name is joint with that of other parties;
(c) Where the account is in a trade name.
(2) Full titles and dates of closure of all accounts closed during the period.
(3) Details of amounts accrued but not changed or credited as at the above date; e.g. bank charges, commitment fees, markup/ interest etc.
(4) The amount of mark-up / interest charged during the period, if not specified separately in the customer’s statement of account.
(5) Details of leasing facilities, loans, overdrafts, cash credit facilities (including standby facilities), and associated guarantees / indemnities, specifying agreed limits, unused facilities, markup / interest terms, overdue rentals / installments and in case of term loans and overdrafts, date for repayment or review or expiry.
(6) ature, currency; amount and extent of facilities limits and details of period of availability of agreed facility of all contingent liabilities, viz: Total of bills discounted with recourse to the customer or anysubsidiary or related party of the customer Any guarantees / comfort letters / letters of undertaking / bonds / endorsements or indemnities given by the customer in favour of third parties (other than subsidiary or related party) Any guarantees / bonds or indemnities given by the bank, on the customer’s behalf, stating where there is recourse to the customer and / or to its holding, parent. Total of outstanding liabilities under documentary credits.
Others (please give details)
DERIVATIVES AND COMMODITY TRADING
(7) Details of all outstanding contracts specifying the number, deal date, maturity or value date, price at which the deal was transacted and currency of the contract bought and sold.
(8) Information regarding secunties in respect of facilities, contingent liabilities and derivatives and commodity trading. Please give:
(i) details of any security formally charged in favour of the bank, including
(ii) particulars of any undertaking to assign to the bank any assets. If a security is limited to any borrowing, or if there is a prior pari passu or subordinate charge, please indicate.
(iii) details. whether the security supports facilities granted by the bank to the customer or to another party.
(iv) For any arrangements for setoff of balances or compensating balances e.g. back to back loans, give particulars of any acknowledgement of set off (i.e. date, type of document and covered).
Investments, bills of exchange, documents of title, or other assets held but not charged. Please give details.
Information in respect of any letter of comfort obtained by the bank from the parent or any other associated concern of the company.
ASSETS U DER THE ISLAMIC MODES OF FINANCE
(9) Details including the nature, amount, and maturity date of the assets covered under Islamic mode of finance (e.g. morabaha musharika, modaraba etc.) or any other mode of financ including leasing.
ADDITIONAL BANKING RELATIONSHIP
(10) A list of other banks, or branches of your bank, where you at aware that a relationship has been established during the period.
(1 l ) Other related information, if any is as follows: