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Guidance note on bank Audit of OD and CC accounts

Today we discuss on the Audit of OD and CC accounts, OD stands for overdraft and CC stands for cash credit.Overdraft facility is given against hypothication of  debtor and CC facility against hypothication of  stock

In the earlier blog we have discuss all type of advances .In this blog we will discuss the audit procedure to be followed for the  OD and CC accounts of the following audit concurrent audit, statutory audit, and stock audit.

We will show what are the documents required from the banks for conducting OD and CC accounts also how to do the bank audit of OD and CC accounts in a banking system software. All the banks are using the finacle software.

Documents for conducting bank audit of OD and CC accounts 

Take the following documents from the bank before starting the audit of OD and CC accounts

1 Trial Balance

2 Schedules of Loan Accounts

3 Balance Sheet and Profit And Loss Accounts

4 RBI Circular

5 Annual Closing Statements

6 Previous Audit Reports

7 RBI Inspection Reports

Audit Procedure Audit of OD and CC accounts

Find here how to check the OD and CC  while conducting bank audit

(I) Report if any customer accounts has become overdue in previous month

(II) Check stock and debtor statements has been duly submitted in banks as per frequency mentioned in sanction letter.

(III) Check CA certificate has been duly submitted in banks if any required as per sanction order or Closing circular of bank

(IV) Check the limit of stock audit with circular and verify stock audit report has been duly submitted in banks

(V) Check the credit rating of the customer has been properly done

(VI) Insurance policy

Check the amount of Insurance policy has taken

The time period of insurance policy whether insurance policy has been expired or not.

Check adequate insurance has been taken of Collateral as well as main security

(VIII) Check whether renewal of CC and OD accounts has been timely done.

(IX)  Check the financial statements, Income tax return of previous year has properly submitted to the banks

(X)  Check godown inspection has been done by the branch as per the frequency mentioned in circular

(XI) Check Drawing power (DP) limit of the OD and CC account with the sanction order. Also check whether DP has            been updated in the bank system as per the monthly stock and debtor statement submitted by the customer

 Check list for OD and CC accounts

Make the check list and fill it proper for smooth conducting of the Audit of OD and CC accounts

Customer name credit rating Insurance policy Renewal of CC and OD Financial statements godown inspection stock and debtor statements Stock Audit
Done or Not              

 

Audit Procedure for OD and CC accounts in banking software

All banks are using the finacle software, In this we will show how to check the Overdue and renewal of the accounts in a banking software named finacle.

How to check Overdue accounts in banking software (finacle)

Login to the finacle accounts by entering userid and passwords

Write ACLI and press enter

A gateway will open write customer account number, period and press f4. In case of account number not known write the name and press f2 select the customer and press shift + f4

How to check the Renewal of OD and CC accounts

Login to the finacle accounts by entering userid and passwords

Write ACI and press enter

Enter I in the function column and press f4

Enter H in the option column and press f4

Enter S in the operation column and press f4

It’s advisable to check first the renewal of OD and CC accounts and after that overdue in the OD and CC accounts.

 How to check the DP (drawing power) of OD and CC accounts

 Particulars Stock Debtor
Amount as per stock and debtor statements    
Margin ( take from sanction letter)    
Drawing power (A-B)    

Example to check the DP (drawing power) of OD and CC accounts

Let assume Stock of Rs 5,00,000 and debtor of Rs 8,00,000 as per the statement submitted by the dealer and margin money as per the sanction letter is 25% on stock and 40% on debtors than DP limit will be as follow 

Particulars Stock Debtor
Amount as per stock and debtor statements 5,00,000 8,00,000
Margin ( take from sanction letter) 1,25,000 (5,00,000 * 25%) 2,00,000 (8,00,000 * 25%)
Drawing power (A-B) 3,75.000 6,00,000
Total Drawing power will be   9,75,000 

Revenue leakage in OD and CC accounts

(I) Check in case of overdraft whether TOD charges have been charged to the customer or not

(II) Check Penal interest/ commitment charges as per the sanction order will be levied if customer not utilizing the limit granted.

(III) Check charges has been levied if stock and debtor statements has not submitted in banks.

About TAX BANIYA

I am passionate about my work , What ever it be . Life has its own way to express , stay positive and keep going . Life doesn't go the way you want, " Learn to adapt and modify". My mantra to be happy in life " Life has always been uncertain why worry ...forget the past , live your present focus it

2 comments

  1. superb article…….very useful for CA students who r doing bank concurrent audit…..

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