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Incorporated Banks under Companies Act
Banks are incorporated under the Companies Act like any other business but are granted special privileges under the same Companies Act and subjected to very strict controls by the Central Bank of US. Apart from frequent visits from the Central Bank and regular reports to the Central Bank on liquidity levels the auditor is also required to submit a copy of his audit report to the Central Bank. The auditor should review the reports submitted to the Central Bank and the reports submitted to the bank by the Central Bank as a result of the visits. The auditor is also concerned with enquiring into compliance with the Banking Act. In theory, banks are allowed to set up secret reserves by writing down assets or creating excessive provisions without disclosing that they have done so. The effect of this is:(a)The real position may be better than that disclosed but never worse.(b)In good years, secret reserves are created and in bad years they are run down. The effect of this is to even out the profits and the customers are not then tempted to withdraw their deposits if the bank has a bad year.If the bank was to take advantage of these provisions then it would not be possible for the auditor to give a true and fair view report on the accounts. In practice banks in US do not take advantage of the provisions and therefore the auditor carries out a normal audit and gives a report in true and fair terms.
It is a compulsory audit Completed by a CA. Finance Audit conduct by the CA to compliance the legal requirements of monitory issues.
Sundry Debtors and Loans Sundry debtors and loans are not generally material assets of companies another than those companies whose business is to create loans. We shall cons
Concept of Audit Evidence The auditing is an evidence gathering exercise. It is an exercise continued out to confirm the assertions made through the management in carrying ou
Existence - Plant and Machinery However this should generally be checked through physical inspection, so a problem arises. Items of machinery and plant can be numerous mobile
Cost and Authorization - Detailed audit of stock Cost A favor of the auditor this is restricted generally to determining the technique adopted through the organization
Providers of Funds A further point to note is that modern companies can be very large with multinational activities. Preparing accounts for such a group becomes a very complex
Current Audit File The current audit file might include inter alia: a) A copy of the audited financial statements and any report prepared as a result of audit work carried out
Authoritative Document is IAS 17 Leases The suitable technique of amortization or depreciation to require in the case of leasehold property and freehold buildings is straight-
Indications of inapplicability of Going Concern Unfortunately, Insolvency is a development industry as the economy suffers a down turn and consequently for a majority of enter
Procedures that Auditor Adopts The auditor’s procedures will include: (1) Getting an understanding of the entity as a whole in order to see the accounting system in proper per
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