We all are still in disbelief mood as far as cash & bank balance fraud is concerned. I had a talk with one of my friend, who is in the internal audit department of one of the private sector banks. Although there is no confirmed news, but the information gathered from some of sources of the investigating agencies (ICAI, SEBI etc.) are as under:
The Company had put an FD with bank A initially for 5 years for say Rs. 100. Then Company applied for the duplicate FD certificate saying they lost the original and did the prematured withdrawal after 3 months – Rs 102 (including interest) using the duplicate FD certificates. Then on the next day Rs. 102 for 5 years was put as an FD with Bank B. Following the same modus operandi, he put the FD with Bank C,D &E. Then at the end of the year he shows the original FD certificates of Banks A, B, C, D & E to the auditors. Auditors did not get the bank confirmation from the banks A to E (which we must do, but some of us are not doing) regarding these FDs. The Company merrily carried on with the practice over 10 years and so. That's how the cash and bank balance and accrued interest are overstated. The issue here is verification of the bank statement in addition to the FD certificates. FD certificates are not sufficient audit evidence.Even getting other off balance sheet balance confirmations from some of the banks are also very difficult. Definitely the banks will also come under the scanner after this incidence.
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