REVENUE AUDIT PROCEDURE
Revenue audit is the audit of items governing income & expenditure of banks, basically this type of audits are conducted with a view to verify the accuracy, relevance of expenditure incurred & Incomes earned by the banks according to applicable latest circulars, notification , Auditors only required to concentrate on the areas which affect revenue items of the banks.
Normal Procedure to conduct the revenue audit is as under
1. Study the relevant circulars pertaining to charges given by bank, Go through the Format of Audit Report & Annexure attached to the audit report. Design the Query Sheet in Format of annexure given to bank & get some print out copies of query sheet before going to audit.
2. Prepare a separate file for audit & don’t forget to carry Audit engagement letter given by head office along with file & query sheet formats, circulars, r scales, audit pens, pencils calculators.
3. Prepare the Short Audit Programme for audit covering which areas to be covered & to be covered by whom.
4. Auditors are advised to keep in mind the period of audit so as to avoid haphazard way of audit.
5. Scrutinize the previous revenue audit reports, latest concurrent audit reports of branch to get the idea of nature of leakage that can be possible to identify. Get Some idea about Bank Officials & Nature of their duties, positions,
6. Get Some Basic idea about branch’s banking software (i.e. Putting A/c No, Period of Audit) so as to facilitate easy viewing of customer ledger.
7. Ask the Bank manager to make available Advances Sanction Register for our Audit Period, Jottings of Some Important accounts.
¨ Total Cash Credit Accounts Of Branch
¨ Top 10 Saving Accounts
¨ Top 10 Current Accounts
¨ Top 10 Depositors of bank.
¨ Overdue Advances in Audit Period
¨ List of Special Advance Sanctions & Get its Sanction Letters.
¨ List of NPA Accounts of branch of Recoveries made during audit period against them.
8. List of areas to be covered & procedure for its audit are as under :
¨ Incomes of Bank :-
a) Interest Earned On Advances:-
ØSee that interest is charged in accordance with latest circulars of RBI
ØCheck the Interest Calculation on Selective basis
ØSee that for special sactions interest is charged according to sanction letter.
ØCheck that revised interest rates are properly applied in system from relevant date of applicability.
b) Penal Interest On Overdue installments & On Late Submission of stock statement. – Generally 1% subject to maximum of 2%
ØIdentify the installment which are overdue & see that penal interest is charged to customer’s account accordingly.
ØPenal Interest on Overdrawn Amount exceeding Drawing Power is properly charged to customer’s account.
ØCheck that stock statements for each month are properly received & Receipt Dates are properly fed into the system & see that penal interest is accordingly charged to customer’s account.
ØAny discrepancy noted in above calculations should be noted of query sheets in proper format.
c) Processing Fees :-
ØOn following advances sanctioned during the audit period.
Term Loans.
Housing Loans
Personal Loans
Vehicle Loans
Cash Credits
Bank Guarantee
Other Advances
Cash Credit Limit Expansion
Ø Scrutinize ledger of every sanction during the audit period & verify that processing charges are debited accordingly to borrower’s ledger as per circular of charges.
Ø Read Sanction Letter for any special sactions from controlling authorities & verify that charges mentioned in Sanction Letter are debited to borrower’s account accordingly.
Ø If any discrepancy observed that should be noted down in query sheets.
d) Cash Credit Renewal Charges:-
ØCash Credit Limit should be renewed every year as per the Banking regulations. So Verify the Renewal Register if maintained by bank, & see that in every CC Account CC Renewal Charges are debited.
ØRenewal Charges are calculated on basis of applicable processing charges.
ØIf any discrepancy observed that should be noted down in query sheets.
e) Inspection Charges:-
ØVerify that the charges are properly debited in borrower’s ledger as per circular of charges on basic of per inspection carried out.
Ø At Least Four times Inspections Charges should be debited in borrower’s ledger.
ØIf any discrepancy observed that should be noted down in query sheets.
f) Documentation Charges:-
ØDocumentation charges should be debited in each sanction during the audit period as per the circular of charges
ØIf any discrepancy observed that should be noted down in query sheets.
g) Minimum Balance Charges :-
ØThese Charges are generally debited on Saving Accounts & debited by Data Centre in Case of CBS branches
ØVerify Some Account on random basis that these charges are properly debited in accounts as per applicable circulars if account balance falls below minimum.
ØThese Charges are to be charged on per instance basis i.e. if in Six month Period ,four times minimum balance has not maintained then charges should be levied as (No. of Instances * Charges per instance).
h) Ledger Folio Charges:-
ØThese charges are to be charged to current accounts, cash credit accounts, saving accounts. On basis of per ledger folio.
ØGenerally these charges are debited by Data Centre in case of CBS Branches. So selective account should be checked to determine whether charges are debited as per circulars or not.
i) Cash Recovery Against NPA Accounts :-
ØGet the list of all NPA Accounts
ØCheck whether any recoveries are made against it in Audit period.
ØConfirm that all Outstanding Charges, Interest Outstanding are adjusted against such recoveries, then principal amount of loan adjusted.
ØIf discrepancy is noted against above treatment same should be noted down.
j) Locker rent Charges:-
ØGenerally Locker Rent Register maintained by bank & applicable charges are debited to saving account of customer.
ØAuditors have to check out whether charges as per circular have been debited to customer or not. Hence saving accounts of locker holder has to be checked.
k) DD Commission, IBC/OBC Commission, Cheque Book Charges, Stop Payment Charges:-
ØObtain Pay Order DD Register, IBC OBC Register from branch & verify on selective basis that charges are properly debited to customer’s account.
ØObtain Cheque book register & verify that series of Cheque books properly entered in register & when Cheque book issued to customer that series fed into the system so that Cheque book charges are debited to customer’s ledger.
ØStop Payment Charges are debited on basis of per instrument basis i.e. (No of Instrument* Rate per Instrument).
l) Income From Investment :-
ØVerify whether any investments are made by branch.
ØObtain investment register from branch & verify whether interest & dividend are timely collected & accounted by bank as per applicable rates.
¨ Expenses Of Bank :-
a) Interest Paid On Saving, Current Accounts:-
ØGenerally bank gives credit of interest to customer’s account on half yearly basis by giving command of Interest Credit in case of CBS Operation.
ØAuditors has to check on selective basis whether interest has been credited on due time & at appropriate rate as per circulars.
ØIf any irregularity observed auditor has to report the same.
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