Inter Audit 24 7

CA Inter Audit 24
Class Test-7
Ch-13 Bank Audit
MM: 30 Marks
Time: 1 hr
Instructions:
• All Questions are compulsory
• Reading time 8 mins
• After completing the test refer test check guidance video on Google Drive.
• If any queries after that reach out to 9315210818 on telegram.
MCQs (5Q * 1 Marks each = 5 Marks)
1. Engagement Team Discussions are usually done at which stage of Bank audit?
a. Appointment
b. Developing an Audit Plan
c. Framing an Audit Programme
d. Issuing Audit Report
2. The LFAR is to be submitted before _______every year

a. 30th April
b. 31st May
c. 30th June
d. 30th September
3. Drawing Power in case of a Consortium advance is computed and allocated to member banks by the
a. Bank members proportionately
b. Lead bank
c. Borrower
d. Reserve Bank of India
4. A Ltd. has been assigned a Cash Credit limit of INR 20 lacs as against its Book Debts furnished as security. What kind
of Security creation is it?
a. Pledge
b. Mortgage
c. Assignment
d. Set-off
5. Which of the following is a Non-Funded facility as sanctioned by any bank:-

a. Bank Guarantee
b. Term Loan
c. Staff Advances
d. Bank Overdraft
Case Study MCQs (5Q * 1 Marks each = 5 Marks)

Kwatra & Co. is a CA firm based at New Delhi. They were appointed as the Statutory Auditors of Mannalaxmi Bank
Ltd. For the Financial year 2021-22. After having a good discussion with the Engagement team , CA Vikas , the
Engagement Partner , started the Bank audit with his team and made the following observations during the course of
the audit:-
• One of the borrowers, Mr. Rakesh Verma has availed a Machinery Loan from the Bank but has not paid the EMI
since the past 100 days. However, his business is going good and the Bank Manager is of the view that such loan
need not be classified as NPA as they have his Factory building available with them as Mortgaged Security against
the Machinery Loan and good amount could be realized by its auction in the case of default by Mr. Verma.
• Mrs. Lata, one of the prime customers of the Bank has availed a CC facility for her Garment business, a Car Loan
for her personal purpose and an Education loan for her son’s higher studies, all from the Bank branch under audit.
She has been regular in meeting the EMI obligations of all the loans except for the Car loan where she has not
been able to pay the EMI since the past 4 months.
• Mr. Kapoor has been sanctioned a Cash Credit Limit of INR 55 lakhs by the Bank and the outstanding balance in
his CC account is INR 55 lakhs since the past 3 months. There are no credits continuously for 90 days as on the
date of Balance Sheet
• Sakhi Cooperative Society’s Term Loan of INR 10 lakhs has been guaranteed by the Central Government and is
overdue since the past 120 days. The CG guarantee has not been invoked or repudiated till now.
• Similarly, Vishwas NGO’s loan of INR 7 lakhs has been guaranteed by the State Government but it is overdue since
the past 105 days but the Bank manager is of the view that this not be categorized as NPA as it has been
guaranteed by the State Government and the guarantee has not been invoked/repudiated.
• The RBI inspection team had identified a KCC Loan given to Mr. Khara, a farmer as a Loss in its RBI Report but the
Bank has not provisioned it accordingly as the manager is hopeful of recovery from such loan.
• There is a Term Loan advance by the Bank as a Lead Bank together with two other major banks under a specific
agreement to a big Corporate house in the city.
i. Mr. Verma’s Loan account in the above case should be categorized as-
a. NPA because of no recovery for more than 90 days.
b. Loss asset as there are minute chances of recovery.
c. Standard asset as per the Manager as security is available against this loan and also the net worth of the
borrower is strong.
d. SMA 02 Loan.
ii. Which of the following Loan facilities given to Mrs. Lata be categorized as NPA by the Bank –
a. Cash Credit Facility
b. Education Loan
c. Car Loan
d. All loans advanced
iii. Mr Kapoor’s loan account as per the above case is –

a. Overdue
b. SMA 01
c. Doubtful asset
d. Out of Order
iv. The loan sanctioned to Sakhi Cooperative Society in the above case should be categorized as _____ for the
purpose of Provisioning of Assets but/and deemed/taken to be as _______ for the purpose of Income recognition
by the Bank, respectively.
a. NPA; NPA.
b. NPA; Standard.
c. Standard; NPA.
d. Standard; Standard.
v. The loan sanctioned to Vishwas NGO in the above case should be categorized as _____ for the purpose of
Provisioning of Assets but/and deemed/taken to be as _______ for the purpose of Income recognition by the Bank,
respectively.
a. NPA; NPA.
b. NPA; Standard.
c. Standard; NPA.
d. Standard; Standard
Descriptive Ques [20 Marks]
1. The engagement team discussion ordinarily includes a discussion of the matters such as - Errors that may be more
likely to occur; Errors which have been identified in prior years; Method by which fraud might be perpetrated by bank
personnel or others within particular account balances and/or disclosures; etc. In the above context, explain the
advantages of such a discussion. [3M]
2. The auditor should examine the efficacy of various internal controls over advances to determine the nature, timing
and extent of his substantive procedures. Explain this statement. [4M]
3. In carrying out audit of advances, the auditor is primarily concerned with obtaining evidence about amounts
included in balance sheet in respect of advances which are outstanding. Explain stating clearly all the considerations
in this context. [4M]
4. N Ltd. has been sanctioned a Cash Credit Facility by XYZ Bank Ltd. for INR 1 crore and drawing power as per the
stock statements furnished for the last quarter is INR 80 Lakh. Outstanding balance in the account is INR 75 lakh.
Interest charged to the account is INR 3.5 Lakh and total credit into the account for the quarter is INR 2.5 Lakh. As an
auditor how will you report this account in your report. [3M]
5. When is Advances to Staff considered as non performing as per the RBI guidelines? [3M]
6. While verifying provisions of advances of a branch of MCO Bank as part of statutory branch audit, CA Z notices that
credit facilities consisting of term loan to KRT Enterprises have been classified under doubtful asset (D2) category. The
outstanding balance in above term loan account as on 31.3.2024 is ₹ 100 lakhs. Value of security held in account is ₹
80 lakhs. The branch has made provision of ₹25 lakhs. Is provision made by branch proper? Discuss. [3M]

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CA Inter Audit 24

MCQs (5Q * 1 Marks each = 5 Marks)

2. The LFAR is to be submitted before _______every year

5. Which of the following is a Non-Funded facility as sanctioned by any bank:-

Case Study MCQs (5Q * 1 Marks each = 5 Marks)

iii. Mr Kapoor’s loan account as per the above case is –

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