Bank Stock Audit 2023: Sharing experiences, thoughts


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Hello friends, welcome to all of you in this article of ours today, through this article, we are going to tell you some important information related to Bank Stock Audit Empanelment, such as how you can get your Bank Stock Audit Report, Bank Stock from home. Audit Checklist, or stock audit format, Bank Stock Statement, we will tell you important information related to them through this article, so definitely read till the end.

Stock audits play a crucial role in our profession, as they not only enhance our reputation in the banking industry but also provide us with numerous opportunities in the banking sector. As cost accountants, we can leverage our technical and commercial expertise to identify and address issues in industries at an early stage, thereby helping to prevent non-performing assets (NPAs) in the banking sector.

Bank Stock Audit 2023

What do banks expect from stock auditors? They expect professionals to perform audits that ensure the safety of the bank’s funds. Each bank may have different formats to be followed, but the general requirements can be explained as follows.

As a stock auditor, the bank expects the following from us:

  • To conduct a physical stock count on a given day and determine the reasonable value of the stock.

  • To reconcile the physical stock with the book stock, excluding the value of non-moving or slow-moving stocks.

  • To provide a professional opinion on the reliability of the reporting system.

  • To examine the records and determine the amount of book debt on the given day, including outstanding amounts for a reasonable period (e.g., 90 days).

  • To assess how billing and realization are accounted for in the books of accounts and evaluate the reliability of the system.

  • To consider the agreed margin between the bank and the party and calculate the realizable value (net of amounts payable to creditors), known as the “Drawing Power” (DP).

  • To compare the DP with the outstanding amount of facility given by the bank or enjoyed by the party to determine the safety of the bank’s funds.

“It is important to make sure that stocks are stored correctly and insured for their proper value. Additionally, inventory management should be effective, ensuring that the stocks are sufficient to meet production requirements. It is also crucial to ensure that all statutory liabilities are paid on time.

The stock auditor should review the financial audit report and any previous stock audit reports to determine if corrective actions have been taken based on the auditors’ comments.”

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Furthermore, it is important to assess if there are any additional liabilities such as outstanding acceptances under usance letter of credits initiated by other banks, as well as contingent liabilities or related party transactions.

Therefore, the stock auditor plays a crucial role as the representative of the bank, ensuring the protection and safeguarding of the bank’s interests.

Having been in this field for a considerable amount of time, we would like to share some of our experiences. This information may prove useful for newcomers or young professionals entering this field.

1) Taking physical stock

In a factory, there was a large amount of stock stored in numerous spacious warehouses, each having an average base area of 3000 square feet and a height of 40 feet. The stock was packed in gunny bags of equal weight, arranged in a brick-like pattern. Counting the bags/stock individually would have taken us weeks.

To simplify the count, we requested them to stack 20 bags in the same brick-style arrangement. We measured the dimensions of this sample stack, which allowed us to estimate the total number of bags in the warehouses using the same proportion.

2) Checking Realization From Debotrs 

In a company under Consortium Finance (with 3 nationalized banks), it was observed that multiple distributors were depositing money in the bank using the same cheque book. Further investigation revealed that the company had opened an account in a private sector bank and was using it to process their collections. This action violated an important condition stated in the sanction letter.

3) Use Of Bank Funds

During our visit to a company, we discovered that a high-value asset had been purchased and installed just a week prior. When we asked about it, the accounts manager informed us that the investment had been made using the company’s own funds. However, (Bank Stock Audit Empanelment) it was clear that the funds allocated by the bank for short-term use had been used for a long-term investment in machinery. This misuse of funds would result in a lack of working capital, which would adversely affect the factory’s operations. It is important to note that this goes against the terms set out in the bank’s sanction letter.

4) Diversion Of Funds 

In a company with three partners, a significant loan was provided to another firm. This other firm had two co-owners out of the three partners.

5) TOOL Accounted AS Stores/Spares 

In the company, a valuable tool worth hundreds of thousands of rupees was stored after being used on the production floor. The value of this tool was recorded in the inventory statement.

Bank Stock Audit Empanelment, In our report, we highlighted instances where bank officials were negligent.

For example, in one company, 80% of the stock value comprised finished goods and work in progress. The previous stock auditor, who was not a certified management accountant (CMA), mentioned in his report that “production was ongoing when we visited the factory. We relied on the stocks and their value certified by the management.” This report, along with the comments, was accepted by the bank officials.

In another company, (Bank Stock Audit Empanelment) when submitting the monthly report to the bank, some stock figures were repeated for four to five months in a row (copy-paste error). It was evident that the concerned bank official had not verified the data submitted by the party for several months.

It is worth noting that our reporting, which included adverse comments, was appreciated by the bank management. As a result, we continued to receive new assignments from the bank.

(Please be aware that the examples provided above are based on real incidents and experiences. However, we cannot disclose the names of the parties or banks due to confidentiality reasons.)

Bank Stock Audit Checklist

When it comes to auditing bank stocks, it is crucial to have a comprehensive checklist in place. This checklist ensures that all the necessary areas are thoroughly reviewed and analyzed. (Bank Stock Audit Checklist)  By following this checklist, you can ensure that your bank’s stocks are being audited effectively and efficiently. Here is a simplified version of the bank stock audit checklist:

Sock Audit Format

When it comes to conducting a stock audit, (Stock Audit Format) having a proper format is essential. A stock audit helps businesses keep track of their inventory and ensure accuracy in stock records. (Sock Audit Format) In this article,(Sock Audit Format)  we will discuss the best and simplest format for conducting a stock audit, while also incorporating Stock Audit Format techniques.

FAQ”S  Bank Stock Audit 2023

How many times is audit conducted?

Well established processes may only need to be audited annually, while new or complex processes may need to be audited quarterly, or even monthly.|(Bank Stock Statement) Establishing an internal audit program with audits occurring at planned intervals will help your organization be on board with the internal audit process.

What is the limit for stock audit by bank?(Bank Stock Statement)

Stock and debtors being the primary security, bankers for ascertaining the genuineness & correctness of such statements appoint chartered accountant firms at frequent time intervals to conduct stock audit specifically where the exposure exceeds the predetermined threshold limit (generally over Rs. 100 Lacks)

What is the last date for stock audit?

The Stock Audit should be completed within 30 days from the date of intimation to the Stock Auditor as per the schedule given below: 1. Commencement of Audit work – Within 10 days from the date of intimation,Bank Stock Statement.

In which month bank audit is done? (Bank Stock Audit Report)

Long Form Audit Report (Bank Stock Statement)
It includes a detailed questionnaire prepared by the Reserve Bank of India. LFAR is to be submitted before 30th June every year for the completion of which on time proper planning is required

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