A STUDY ON

BANKING AUDIT IN KOTAK MAHINDRA

 ABSTRACT
The audit of banking companies plays a very important role in India as it help to
regulate the banking companies in right manner. In audit of banks includes various types of
audit which are normally carried out in banking companies such as statutory audit,
revenue/income expenditure audit, concurrent audit, computer and system audit etc. the
above audit is mainly conducted by the banks own staff or external auditor. However, the
rules and the regulation relating to the conduct of various types of audit or inspections differ
from a bank to bank expect the statutory audit for which the RBI guidelines is applicable. In
this, I have given more importance on the overall bank audit system. In today’s competitive
world audit is very much necessary as well as compulsory , because investor investing
decision is depend on that particular concept if auditor has expressing his view about
particular organization is true and fair then investor can get his ideas about how much he
should invest in particular companies.
. If decisions are to be consistent with the intention of the decision makers, the
information used in the decision process must be reliable. Unreliable information can cause
inefficient use of resources to the detriment of the society and to the decision makers
themselves. In the lending decision example, assume that the barfly makes the loan on the
basis of misleading financial statements and the borrower Company is ultimately unable to
repay. As a result the bank has lost both the principal and the interest. In addition, another
company that could have used the funds effectively was deprived of the money. As society
become more complex, there is an increased likelihood that unreliable information will be
provided to decision makers. There are several reasons for this: remoteness of information,
voluminous data and the existence of complex exchange transactions
 INDEX

CONTENTS PAGE:NO
CHAPTERS

INTRODUCTION
1

 NEED & IMPORTANCE OF THE STUDY

 OBJECTIVES OF THE STUDY
 SCOPE OF THE STUDY
 METHODOLOGY OF THE STUDY
 LIMITATIONS OF THE STUDY

REVIEW OF LITERATURE
2

3
COMPANY PROFILE

DATA ANALYSIS &INTERPREATION

4

5 FINDINGS, CONCLUSIONS SUGGESTIONS

BIBLIOGRAPHY
CHAPTER-1
INTRODUCTION
 INTRODUCTION

The audit of banking companies plays a very important role in India as it help to
regulate the banking companies in right manner. In audit of  banks includes various types of
audit which are normally carried out in banking companies such as statutory audit,
revenue/income expenditure audit, concurrent audit, computer and system audit etc. the
above audit is mainly conducted by the banks own staff or external auditor. However, the
rules and the regulation relating to the conduct of various types of audit or inspections differ
from a bank to bank expect the statutory audit for which the RBI guidelines is applicable. In
this, I have given more importance on the overall bank audit system. In today’s competitive
world audit is very much necessary as well as compulsory , because investor investing
decision is depend on that particular concept if auditor has expressing his view
about particular organization is true and fair then investor can get his ideas about how much
he should invest in particular companies.

ORIGIN AND EVOLUATION OF AUDITING

1) Origin of term :

The term audit is derived from the Latin term “audire” mean to hear. In early days, an auditor
used to listing to the accounts read out by the accountant in order to check them.

2) Ancient origin :

Auditing is as old as accounting. It was in use in all ancient countries such as Mesopotamia,
Egypt, Greece, Rome, U.K., and India. The Vedas, Ramayana, Mahabharata contain
references to accounting and auditing. Arthashasastra by Kautilya gives detailed rules for
accounting and auditing of public finances. The Mauryas, the Guptas and the Mughals had
developed and accounting and auditing system to control state finances. Thus, basically,
accounting and auditing had their origin in the need for the government to control the income
and expenditure of the state and the army. The original object of auditing was to detect
and prevent errors and frauds.

3) Compulsory audits of companies:

With increasing number of companies, the companies’ acts indifferent countries began
providing for compulsory audit of accounts of companies. Thus U.K. audit of accounts of
limited companies became compulsory in 1900. In India, the companies act, 1913 made audit
of company accounts compulsory. With increase in size of companies, the object of audit also
shifted to ascertaining whether the accounts were “true and fair” rather than “true and
correct”. Thus, the emphasis was not arithmetical accuracy but on fair representation of
financial affairs.

4) Development of accounting and auditing standard:

The international accounting standards committee and the accounting standards board of
institute of chartered accountant of India have developed standard accounting and auditing
practices to guide the accountants and auditor in their day-to-day work.

5) Computer technology:

The latest development in auditing pertains to the use of computers in accounting as well as
auditing. Really, auditing has come a long way from “hearing” the accounts in the ancient
day to using computers to examine computerized accounts of today.

DEFINITION OF AUDITING

Various persons such as the owners, shareholders, investors, creditors, lenders, government
etc. use the final account of business concern for different purposes. All these users need to
be sure that the final accounts prepared by the management are reliable. An auditor is an
independent expert who examines the accounts of a business concern and reports whether the
final accounts are reliable or not. Different authorities have defined auditing as follows.

Definition of 'Audit'

An unbiased examination and evaluation of the financial statements of an organization. It can

be done internally (by employees of the organization) or externally (by an outside firm).

Mautz

Define the auditing as “auditing is concerned with the verification of accounting data, with
determining the accuracy and reliability of accounting statement and reports”.

International auditing guidelines

Defines the auditing as “auditing is an independent examination of financial information of

any entity with a view to expressing an opinion thereon”.
 OBJECTIVES OF THE STUDY

 To study how the banks will do auditing.

 To identify the internal control in selected area.
 To study the steps involved in bank auditing.
 To understand the type of banks auditing.
 To analysis the efficiency and effectiveness of bank auditing.
 To make suggestion if there is a problem with regard to the banks auditing.

.
 NEED FOR THE STATE MENT

Auditing is the most important part of banking organization. The success and failure
of any bank or company solely depends upon auditing and process of auditing.

Due to misappropriation in the accounts and finance of banking industry the audit of
the banking play a vital role on the bank. Every banking industry however small or
big, public or private or cooperative banks has to as it mandatory. In this project the
study is focus on KOTAK.
 SCOPE OF THE STUDY

 An introduction to HYDERABAD city co operative bank.

 The scope of the study is limited to HYDERABAD city co operative bank.
 The scope of the study of bank auditing is very wide so I have done as possible as my
concern.
 An attempt is made to identify how the auditing will takes place in the KOTAK
 RESEARCH METHODOLOGY:

MEANING OF RESEARCH DESIGN:

A detailed outline of how an investigation will take place. A research design will typically
include how data is to be collected, what instruments will be employed, how the instruments
will be used and the intended means for analyzing data collected
There are two type of research design.

1 Qualitative.

2 Quantitave
This is the case study and an index study of audit of bank with special reference to the
Hyderabad .The research methodology based on primary data and secondary data.
The various data is collected by adopting two main methods. They are

 PRIMARY DATA:
The primary data has been collected from the concerned authority through
direct interview.

 SECONDARY DATA:
The secondary data has been collected from the various sources including
audit report, company profile, financial statement of company, and published
periodical annual report of the company. It has also been collected through
website www.google.com.
 LIMITATION OF THE STUDY
 The published information used in the study may not be accurate and may be
biased.
 The study is conducted only on the main branch of the company.
 The research may not contribute to overall performance of the HYDERABAD
 The study was undertaken for less than one month that to in year ending, so
information gathering during that period may not sufficient.
 To collect data about auditing was quite difficult due to year ending and non
co operation of some respondent. This proved to be the major limitation of the
study.
 Due to secrecy maintenance in the bank some data could not included in the
project report.
 CHAPTER-2
REVIEW OF LITERATURE
 REVIEW OF LITERATURE
CLASSIFICATION OF BANKS
1} ON THE BASIS OF OWNERSHIP

A) Public Sector Banks.

These types of banks are operated by the Government. Their main focus is to
serve the people rather earn profits. State bank of India, Punjab National bank,
State bank of Patiala, Allahabad Bank, etc. are the some of the important
examples of Public sector bank.
B) Private Sector Banks.

These banks are owned and operated by the private institutes and are controlled by
the market forces. The greater share of the private sector banks is held by private
players and not the government. Some good examples of Private sector banks are
Kotak Mahindra bank, ICICI Bank, HDFC Bank, Axis Bank, etc
C) Co-operative sector.

Is very much useful for rural people and provide finance to farmers, salaried
people, small scale industries, etc. These banks are controlled, owned, managed
and operated by the cooperative societies and came into existence under
Cooperative Societies Act in 1912.
2} ACCORDING TO THE LAW

A) Scheduled Banks.
In India are those banks which have been included in the Second Schedule of
Reserve Bank of India (RBI) Act, 1934.[1] RBI in turn includes only those banks
in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the
Act.
As on 30 June 1999, there were 300 scheduled banks in India having a total
network of 64,918 branches. Scheduled commercial banks in India include State
Bank of India and its associates (5), nationalized banks (20), foreign banks (45),
private sector banks (32), co-operative banks and regional rural banks.

B) Non scheduled bank.

It is a bank which does not come under RBI act 1949.

3} ACCORDING TO THE FUNCTIONS

A) Central bank.

The central bank is also called the banker's bank in any country. In India, the
Reserve Bank of India is the central bank. The Federal Reserve in USA and the
Bank of England in UK function as the central bank. This bank makes various
monetary policies, decides the rates of interest, controlling the other banks in the
country, manages the foreign exchange rate and the gold reserves and also issues
paper currency in a country. The monetary control is the primary function of a
central bank in most countries and so they are considered as the lender of last
resort to various commercial banks.
B) Commercial banks.

These banks function to help the entrepreneurs and businesses. They give
financial services to these businessmen like debit cards, banks accounts, short
term deposits, etc. with the money people deposit in such banks. They also lend
money to businessmen in the form of overdrafts, credit cards, secured loans,
unsecured loans and mortgage loans to businessmen. The commercial banks in the
country were nationalized in 1969.

C) Foreign banks:
Are those that are based in a foreign country but have several branches in India.
Some examples of these banks include; HSBC, Standard Chartered Bank etc.

D) Savings banks:
These banks function with the intention to culminate saving habits among people,
especially those who belong to low income groups or those who are salaried. The
money these people deposit in the banks are invested in securities, bonds etc.
These days, many commercial banks perform the dual functions of savings bank.
The postal department is also in a way a saving bank.

E) Agricultural banks:
Those banks that gives credit to agricultural sector.

F) Industrial banks:
Those banks that offer long and medium term loan to industrial sectors and work
for their development.
The functions of banks are briefly highlighted in following
Diagram or Chart
1} PRIMARY FUNCTIONS OF BANKS:
The primary functions of a bank are also known as banking functions. They are the main
functions of a bank. These primary functions of banks are explained below.
A) Accepting Deposits
The bank collects deposits from the public. These deposits can be of different types, such
as:
a. saving deposit.
b. fixed deposit.
c. current deposit.

B) Granting of Loans and Advances.

The bank advances loans to the business community and other members of the public.
The rate charged is higher than what it pays on deposits. The difference in the interest
rates (lending rate and the deposit rate) is its profit.
The types of bank loans and advances are:-
1. Cash Credits.
2. Loans.
3. Discounting of bill of exchange.
4. Over draft.
 2} SECONDARY FUNCTIONS OF BANKS
The bank performs a number of secondary functions, also called as non-banking functions.
These important secondary functions of banks are explained below.
A) Agency Functions.
The bank acts as an agent of its customers. The bank performs a number of agency functions
which includes:-
1. Collection of Cheques
2. Periodic Payments
3. Portfolio Management
4. Periodic Collections
5. Other Agency Functions
6. Transfer of fund
B) General Utility Functions.
The bank also performs general utility functions, such as:-
1. Locker Facility
2. Issue of draft, letter of credit
3. Underwriting of Shares
4. Dealing in Foreign Exchange
5. Project Reports
6. Social Welfare Programmes
7. Other Utility Functions.
 BASIC PRINCIPAL OF AUDITING:

 Integrity, objectivity and independence:

The auditor should be honest and sincere in his audit work. He must be fair and objective. He
should also be independent.

 Confidentiality:

The auditor should keep the information obtained during audit, confidential. He should not
disclose such information to any third party. He should, keep his eyes and ears open but his
mouth shut.

 Skill and competence:

The auditor should have adequate training, experience and competence in Auditing. He
should have a professional qualification (i.e. be a Chartered Accountant) and practical
experience. He should be aware of recent developments in the field of auditing such as
statement of ICAI, changes in company law, decisions of courts etc.

 Working papers:

The auditor should maintain working papers of important matters to prove that audit was
conducted with due care according to the basic principles.

 Planning:

The auditor should plan his audit work. He should prepare an audit programmed to complete
the audit efficiently and in time.

 Audit evidence:

The report of the auditor should be base on evidence obtained in the course of audit. The
evidence may be obtained through vouching of transactions, verification of assets and
liabilities, ratio analysis etc.

 Evaluation of accounting system and internal control:

The auditor should ensure that the accounting system is adequate. He should see that all the
transaction have been properly recorded. He should study and evaluate the internal controls.

 Opinion and report:

The auditor should arrive at his opinion on the account based on the audit evidence and
submit his report. The opinion may be unqualified, qualified or adverse. The audit report
should clearly express his opinion. Law should require the content and form of audit report.

NEW PRINCIPLES FOR AUDITING BANKS

The Basel Committee published a “consultative document on the external audit of banks” on
21 March 2020. It proposed 16 principles and set out supervisory expectations on how:

 external auditors can discharge their responsibilities more effectively

 audit committees can contribute to audit quality in their oversight of the external audit

 an effective relationship between external auditors and supervisors can lead to regular
communication of mutually useful information

 regular and effective dialogue between banking supervisors and relevant oversight
bodies can enhance the quality of bank audits.

The Basel Committee also published a letter to the International Auditing and Assurance
Standards Board calling for more authoritative guidance relating to bank audits, and setting
out specific areas where International Standards on Auditing should be improved.

This guidance would supersede existing Basel Committee material on the relationship
between banking supervisors and bank’s external auditors (2002) and external audit quality
and banking supervision (2008). The consultation closes on 21 June 2020.

AUDIT COMMITTEE

In pursuance of RBI circular September 26, 1995, a bank is required to constitute an Audit
Committee of its Board. The membership of the audit committee is restricted to the Executive
Director, nominees of Central Government and the RBI, Chartered Accountant director and
one of the non-official directors. One of the functions of this committee is to provide
direction and oversees the operations of the total audit function in the bank. The committee
also has to review the internal inspection function in the bank, with special emphasis on the
system, its quality and effectiveness in terms of follow up. The committee has to review the
system of appointment and remuneration of concurrent auditors. The audit committee is,
therefore, connected with the functioning of the system of concurrent audit. The method of
appointment of auditors, their remuneration and the quality of their work is to be reviewed by
the Audit Committee. It is in this context that periodical meeting by the members of the audit
committee with the concurrent auditors help the audit committee to oversee the operations of
the total audit function in the bank

Considering the coverage of this audit assignment and the specialized nature of work there is
also a need for training to be imported to the staff of the auditors. This training has to be
given in specialized field such as foreign exchange, computerization, and areas of income
leakage, fraud prone areas, determination of credit rating and other similar specialized areas.
The bank can organize such training programmed at various places so that it can ensure the
quality of audit.

ADVANTAGES, DISADVANTAGES AND LIMITATIONS OF AUDIT

It is mandatory for public companies to have statutory financial statements audit. Many
business stakeholders have embraced auditing. So today we will look at the advantages of
having financial statements audit and the disadvantages.
ADVANTAGES OF AUDIT

1.    Audited accounts are readily accepted by Government authorities like Tax authorities
and Central banks.

2.    By auditing the accounts Errors and frauds can be detected and rectified in time.

3.    Audited accounts carry greater authority than the accounts which have not been audited.

4.    For accessing finance from financial institutions like Banks, previous years audited
accounts are evaluated for determining repayment capability.

5.    Regular audit of account create fear among the employees in the accounts department
and exercise a great moral influence on clients staff thereby restraining them from commit
frauds and errors.

6.    Audited accounts facilitate settlement of claims on the retirement/death of a partner.

7.    In the event of loss of property by fire or on happening of the event insured against,
Audited accounts help in the early settlement of claims from the insurance company.

8.    In case of Public Company where ownership is separated from management, auditing of
accounts reassure the shareholders that accounts have been properly maintained, funds are
utilized for the right purpose and the management have not taken any undue advantage of
their position.

9.    To determine the value of the business in the event of purchase or sales of the business,
audited account will be the treated as the base for the evaluation.

10. The audit of accounts by a qualified auditor also help the management to understand the
financial position of the business and also it will help the management to take decision on
various matters like report in internal control system of the organization or setting up of an
internal audit department etc.

11. If the accounts have been audited by an independent person, disputes between the
management and labor unions on payment of bonus and higher wages can be settled
amicably.
12. In the event of admission of a new partner, audited accounts will facilitate the formation
of terms and conditions for joining the new partner. Last 3 years audited accounts will give a
general idea about the growth and financial position of the business to the new partner.

DISADVANTAGES OF AUDIT

1.    The payment of audit fees brings extra cost burden to the organization.

2.    During an audit the auditor requires the attention several company staff and therefore
causes disruption.

LIMITATIONS OF AUDIT

1.    An audit does not assure future viability of the organization audited

2.    An audit does not assure the effectiveness and efficiency of management.

3.    Auditors express opinion and therefore does not give total assurance of the true fair
presentation of annual reports.

4. An auditor cannot check each and every transaction he has to check only the selected areas
and transaction on a sample basis.
 TYPES OF AUDIT IN A BANK

1. STATUTORY AUDIT.
2. INTERNAL AUDIT.
3. CONCURRENT AUDIT.
4. SYSTEM AUDIT.
5. REVENUE AUDIT.

1 STATUTORY AUDIT

Statutory auditor is a title used in various countries to refer to a person or entity with an
auditing role, whose appointment is mandated by the terms of a statute.

In the United Kingdom, the term "statutory auditor" refers to an external auditor whose
appointment is mandated by law. A "statutory audit" is a legally required review of the
accuracy of a company's or government's financial records. The purpose of a statutory audit is
the same as the purpose of any other audit - to determine whether an organization is
providing a fair and accurate representation of its financial position by examining information
such as bank balances, bookkeeping records and financial transactions. The European Union
has also made efforts to mandate statutory audits and statutory auditors on an EU-wide level.

2 INTERNAL AUDIT

The examination, monitoring and analysis of activities related to a company's operation,

including its business structure, employee behavior and information systems. An internal
audit is designed to review what a company is doing in order to identify potential threats to
the organization's health and profitability, and to make suggestions for mitigating the risk
associated with those threats in order to minimize costs.

Regulations, such as the Sarbanes-Oxley Act of 2002, have increased corporate requirements
for performing internal audits. They are important components of a company's risk
management, as they help companies identify issues before they become substantial
problems. They also help identify risky behavior by individual employees and threats posed
by outside parties, such as attempts to steal intellectual property.
3 CONCURRENT AUDIT

Concurrent audit is a systematic and timely examination of financial trascation on a regular

basis to ensure accuracy, compliance with procedure and guidelines.

The concept of concurrent audit has been introduced to reduce time gap between occurrences
of transaction and is overview or checking. It serves the purpose of effective internal control.
Concurrent audit is an examination, which is contemporaneous with the occurrence of
transactions or is carried out as near thereto as possible. The main focus while conducting
concurrent audit it to ensure that transactions are not dealt with in routine but in adherence
with the systems and procedures laid down. We ensure that the transaction or decisions are
within the policy parameters laid down, they do not violate the instructions or policy
prescriptions, and that they are within the delegated authority and in compliance with the
terms and conditions for exercise of the delegated authority

4 SYSTEM AUDIT

In today’s technology advancement banking are using a well organized computer system to
perform their transaction. So it is very necessary to conduct system audit in order to evaluate
computer system for effectiveness.

System audit is the audit of such computer environment/system and comprise of following
internal control over Electronic Data Processing (EDP) activities and with application
controls over accounting applications/assuring that all transaction records are authorized
completely, accurately, timely processed manner which in turn are verified by computer.

5 REVENUE AUDIT

Revenue audit refers to the audit of revenues/ incomes. In revenue audit of banking
companies, auditors go through the various sources of revenues from which bank earn
income. In revenue audit of banks, the auditor inspects that all the records are showing true
and fair picture of revenues or not.
 STAGES IN AUDITING

1 preliminary work:
A) The auditor should acquire knowledge of the regulatory environment in which the
bank operates. Thus, the auditor should familiarize himself with the relevant
provisions of applicable laws and ascertain the scope of his duties and responsibilities
in accordance with such laws. He should be well acquainted with the provisions of the
Banking Regulation act, 1956 in the case of audit of a banking company as far as they
relate of preparation and presentation of financial statements and their audit.

B) The auditor should also acquire knowledge of the economic environment in which the
bank operates. Similarly, the auditor needs to acquire good working knowledge of the
services offered by the bank. In acquiring such knowledge, the auditor needs to be
aware of  the many variation in the basic deposit, loan and treasury services that are
offered and continue to be developed by banks in response to market conditions. To
do so, the auditor needs to understand the nature of services rendered through
instruments such as letters of credit, acceptances, forward contracts and other similar
instruments.
C) The auditor should also obtain and understanding of the nature of  books and records
maintained and the terminology used by the bank to describe various types of
transaction and operations. In case of joint auditors, it would be preferable that the
auditor also obtains a general understanding of the books and records, etc, relating to
the work of the other auditors, In addition to the above, the auditor should undertake
the following:

 Obtaining internal audit reports, inspection reports, inspection reports and concurrent
audit reports pertaining to the bank/branch.
 Obtaining the latest report of revenue or income and expenditure audits, where
available.
 In the case of branch auditors, obtaining the report given by the outgoing branch
manager to the incoming branch in the case of change in incumbent at the branch
during the year under audit, to the extent the same is relevant for the audit.
D) RBI has introduced and offsite surveillance system for commercial banks on various
aspects of operations including solvency, liquidity, asset quality, earnings,
performance, insider trading etc., and has indicated that such reports shall be
submitted at periodic intervals from the year commencing 1-04-1995. It will be
appropriate to be familiar with the reports submitted and to review them to the event
that they are relevant for the purpose of audit.

E) In a computerized environment the audit procedure may have to appropriately tuned

to the circumstances, particularly as the books are not authenticated as in manually
maintained accounts and the auditor may not have his in-house computer facility to
taste the software programmer. The emphasis would have to be laid on internal
control procedure related to inputs, security in the matter of access to EDP system,
use of codes, passwords, data inputs being prepared by person independent of key
operators and other build-in procedure for data validation and system controls as to
ensure completeness and correctness of the transaction keyed in. system
documentation of the software may be obtained and examined.
F) One set of tests that the auditor at both the branch level and head office level may
apply for audit of banks in analytical procedure.

2 Evaluation of internal control system:

It may be noted that transaction in banks are voluminous and repetitive, and fall into
limited categories/heads of account. It may, therefore, be more appropriate that the
evaluation of the internal control is made for each class/category of transaction. If the
exercise of internal control evaluation is properly carried out, it assist the auditor to
determine the effectiveness or otherwise of the control systems and accordingly
enable him to strengthen his audit procedures, and lay appropriate emphasis on the
risk prone areas. Internal control would include accounting control administrative
controls.
A) Accounting controls:
Accounting controls cover areas directly concerned with recording of financial
transactions and maintenance of such registers/records as to ensure their
reliability. Internal accounting controls are also envisaging such procedures as
 would determine responsibility and fix accountability with regard to safeguarding
of the assets of the bank. It would not be out of place of mention that there is a
distinction between accounting system and internal accounting controls.
Accounting system envisages the processing of the transaction and events, their
recognition, and appropriate recording. Internal controls are techniques, method
and procedures so designed and usually built into systems, as would enable
prevention as well as detection of errors, omissions or irregularities in the process
of execution and recording of transaction/events. The internal accounting controls
as would ensure prevention of errors, omissions and irregularities would include
following:
 No transaction can be registered/recorded unless it is sanctioned/approved by the
designated authority.
 Built- in dual control/supervisory procedures ensure that there is an independent
automatic check on input/vouchers.
 No single person has authority to initiate transaction and record through all stages to
the general ledger. Each day transactions are accurately and promptly recorded, and
the control and subsidiary records are kept balanced through personnel independent of
each other.

The auditor would be well advised to look into other areas may lead to detection of
errors, omissions and irregularities, inter alias in the following
 Missing/loss of security paper, stationery forms.
 Accumulation of transactions/balances in nominal heads of accounts like suspense,
sundries, inter-branch accounts, or other nominal head of accounts particularly if
there accounts particularly if these accounts are extensively used to balance books,
despite availability of information.
 Accumulation of old/large unexplained/unsubstantiated entries in accounts with
Reserve Bank of India and other banks and institutions.
 Transaction represented by mere book adjustments not evidenced/substantiated or
upon non-honoring of contracts/commitments.
 accounts/inter-branch accounts.
 Analytical review procedure.
 Serious irregularities pointer out in internal audit/inspection/special audit
 Complaints/matters pending in the vigilance/grievances cell, as regards discrepancies
in accounts of constituents, etc.
 Results of periodic analytical review, if observed as adverse.

B) Administrative control:
These are broadly concerned with the decision making process and laying down of
authority/delegation of powers by the management. It may be noted that in the normal
course, the head office use the zonal/regional offices do not conduct any banking
business. They are generally responsible for administrative and policy decisions
which are executed at the branch level.

3 Preparation of audit program for substantive testing and its

execution:
Having familiarized him the requirements of audit, the auditor should prepare an audit
programme for substantive testing which should adequately cover the scope of his
work. In framing the audit programmers, due weigh age should be given by the
auditor to areas where, in his view, there are weaknesses in the internal controls. The
audit programmers for the statutory auditors would be different from that of the
branch auditor. At the branch level, basic banking operation is to be covered by the
audit. On the other hand, the statutory auditors at the head office (provisions for
gratuity, inter-office accounts, etc.). The scope of the work of the statutory auditors
would also involve dealing with various accounting aspects and disclosure
requirements arising out of the branch returns.

4 Preparation and submission of audit report :

The branch auditor forwards his report to the statutory auditors who have to deal with
the same in such manner, as they considered necessary. It is desirable that the branch
auditors’ reports are adequately in unambiguous terms. As far as possible, the
financial impact of all qualification or adverse comments on the branch accounts
should be clearly brought out in the branch audit report. It would assist the statutory
auditors if a standard pattern of reporting, say, head wise, commencing with assets,
then liabilities and thereafter items related to income and expenditure, is followed. In
preparing the audit report, the auditor should keep in mind the concept of materiality.
Thus, items which do not materially affect the view presented by the financial
statements may be ignored. However, in the judgment of the auditor, an item though
not material, is contrary to accounting principles or any pronouncements of the
Institute of Chartered Accountants of India or in such as would require a review of the
relevant procedure, it would be appropriate for him to draw the attention of the
management to this aspect in his long form audit report. In all cases, matters covering
the statutory responsibilities of the auditor should be dealt with in the main report.
The LFAR (long form audit report) should be used to further elaborate matters
contained in the main report and as substitute thereof. Similarly while framing his
main report, the auditor should consider, wherever practicable, the significance of
various comments in his LFAR, where any of the comments made by the auditor
therein is adverse, he should consider whether qualification in his main report is
necessary by using his discretion on the facts and circumstances of each case. In may
be emphasized that the main report should be self-contained document.
 CHAPTER-3
COMPANY PROFILE
 COMPANY PROFILE
KOTAK MAHINDRA

Kotak Mahindra is one of India’s leading financial institutions, offering complete financial
solutions that encompass every sphere of life. From commercial banking, to stock broking, to
mutual funds, to life insurance, to investment banking, the group caters to the financial needs
of individuals and corporate.
The group has a net worth of around Rs.2, 500 crore and employs around 6,700 employees
across its various businesses servicing around one million four hundred thousand customer
accounts through a distribution network of branches, franchisees, representative offices and
satellite offices across 250 cities and towns in India and offices in New York, London, Dubai
and Mauritius.

Kotakstreet.com: The sign of real-world expertise Amidst all the uncertainties today, it had
become imperative to take control of your financial assets. With lot of external factors
affecting the volatility of the market, it is important to channelize your investments in an
organized fashion. The virtual world of kotakstreet provides you that pedestal, where you as
an investor can take control of all your investing needs. Kotak street, the retail arm of Kotak
Securities, caters exclusively to your stock broking and investment requirements. Kotak
Securities needs no introduction as one of the largest stock broking houses in the country and
a leading distributor of primary market offerings.

Kotak Securities limited is a joint venture between Kotak Mahindra Finance Ltd. and
Goldman Sachs, the international investment banking and brokerage firm. The company rose
over Rs. 19000 crore in the primary market in 1999-2000 alone, and this is twice the amount
raised by its closest competitor. In the secondary market, the broking turnover of Kotak was
Rs. 40000 crore plus during 2000-2001.Kotak Securities is a corporate member of both the
BSE and the NSE. It is also a depository participant with the National Securities Depository
Limited (NSDL) for trading and settlement of dematerialized shares. Kotak Securities has the
following areas of business: Institutional Stock Broking: It covers secondary market broking
for foreign and Indian institutional investors in Indian equities. It also has a special research
cell with sectoral analysts. Private Client Services:
This is a special investment division for high net-worth individuals, non-resident Indian
investors, trusts, corporate and banks. This service is also available at the Group's offices in
Dubai and London. Client Money Management. This division provides portfolio management
services to high net-worth Individuals and corporate. The expertise of Kotak in research and
stock broking gives it the right perspective to provide investment advisory services. Retail
distribution: Kotak Securities has a comprehensive retail distribution network, consisting of
approximately 7000 agents, 13 branches and over 20 franchisees across India.
This network is used for the distribution and placement of company fixed deposits,
mutual funds, Initial Public Offerings, secondary debt and equity and small savings schemes.
Depository Services: Kotak Securities is a depository participant with the National Securities
Depository Limited (NSDL) for trading and settlement of dematerialized shares. Since we are
also in the broking business, investors who use our depository services get a dual benefit.
They can use our brokerage services to execute transactions and our depository services to
settle them. If you have been waiting to experience the kind of exclusive service enjoyed by
large institutional investors, Kotak Street signals the end of your long wait! So go ahead and
enjoy an investing experience of a new kind.
The Journey so far
In October 2005, Kotak Group acquired the 40% stake in Kotak Prime held by Ford Credit
International (FCI) and FCI acquired the stake in Ford Credit Kotak Mahindra (FCKM)
held by Kotak Group.
In March 2006, Kotak Group agreed to buy 25% stake held by Goldman Sachs in Kotak
Capital and Kotak Securities subject to regulatory approvals.

1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting

1987 Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market

1990 The Auto Finance division is started

1991 The Investment Banking Division is started. Takes over FICOM, one of
India’s largest financial retail marketing networks

1992 Enters the Funds Syndication sector

1995 Brokerage and Distribution businesses incorporated into a separate company

- Kotak Securities. Investment Banking division incorporated into a separate
company - Kotak Mahindra Capital Company

1996 The Auto Finance Business is hived off into a separate company - Kotak
Mahindra Prime Limited (formerly known as Kotak Mahindra Primus
Limited). Kotak Mahindra takes a significant stake in Ford Credit Kotak
Mahindra Limited, for financing Ford vehicles. The launch of Matrix
Information Services Limited marks the Group’s entry into information
 distribution.

1998 Enters the mutual fund market with the launch of Kotak Mahindra Asset
Management Company.

2000 Kotak Mahindra ties up with Old Mutual plc. for the Life Insurance
business.
Kotak Securities launches its on-line broking site (now
www.kotaksecurities.com). Commencement of private equity activity
through setting up of Kotak Mahindra Venture Capital Fund.

2001 Matrix sold to Friday Corporation

Launches Insurance Services

2003 Kotak Mahindra Finance Ltd. converts to a commercial bank – the first
Indian company to do so.

2004 Launches India Growth Fund, a private equity fund.

2005 Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra
Prime (formerly known as Kotak Mahindra Primus Limited) and sells Ford
credit Kotak Mahindra.
Launches a real estate fund

KEY GROUP COMPANIES AND THEIR BUSINESSES

KOTAK MAHINDRA BANK

The Kotak Mahindra Group’s flagship company, Kotak Mahindra Finance Ltd which was
established in 1985, was converted into a bank – Kotak Mahindra Bank Ltd in March 2003
becoming the first Indian company to convert into a Bank. It’s banking operations offers a
central platform for customer relationships across the group’s various businesses. The bank
has a presence in the Commercial Vehicles, Retail Finance, Corporate Banking, Treasury and
Housing Finance.
KOTAK MAHINDRA CAPITAL COMPANY
Kotak Mahindra Capital Company Limited (KMCC) is India's premier Investment Bank and
a Primary Dealer (PD) approved by the RBI. KMCC's core business areas include Equity
Issuances, Mergers & Acquisitions, Structured Finance and Advisory Services, Fixed Income
Securities and Principal Business.
KOTAK SECURITIES
Kotak Securities Ltd., is one of India's largest brokerage and securities distribution house in
India. Over the years Kotak Securities has been one of the leading investment broking houses
catering to the needs of both institutional and non-institutional investor categories with
presence all over the country through franchisees and co-coordinators. Kotak Securities Ltd.
offers online (through www.kotaksecurities.com) and offline services
based on well-researched expertise and financial products to the non-institutional investors.

KOTAK MAHINDRA PRIME

Kotak Mahindra Prime Limited (KMP) (formerly known as Kotak Mahindra Primus Limited)
has been formed with the objective of financing the retail and wholesale trade of passenger
and multi utility vehicles in India. KMP offers customers retail finance for both new as well
as used cars and wholesale finance to dealers in the automobile trade. KMP continues to be
among the leading car finance companies in India.

KOTAK MAHINDRA ASSET MANAGEMENT COMPANY

Kotak Mahindra Asset Management Company (KMAMC), a subsidiary of Kotak Mahindra
Bank, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMMF manages
funds in excess of Rs 10,000 crores and offers schemes catering to investors with varying
risk- return profiles. It was the first fund house in the country to launch a dedicated gilt
scheme investing only in government securities.

KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LIMITED

Kotak Mahindra Old Mutual Life Insurance Limited is a joint venture between Kotak
Mahindra Bank Ltd. and Old Mutual fund. Kotak Life Insurance helps customers to take
important financial decisions at every stage in life by offering them a wide range of
innovative life insurance products, to make them financially independent.
 COMPANY AT A GLANCE

GROUP MANAGEMENT

Mr. Uday Kotak Executive Vice Chairman & Managing Director

Mr. Shivaji Dam

Mr. C. Jayaram

Mr. Deepak Gupta

REGISTERED OFFICE
Kotak Mahindra Bank Limited
36-38A, Nariman Bhavan,
227 Nariman Point,
Mumbai 400 021.

Tel : (022) 5658 1100

Fax : (022) 2285 5577
 CHAPTER-4
DATA ANALYSIS AND
INTRODUCTION
 DATA ANALYIS AND INTERPRETATION

Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with
the goal of highlighting useful information, suggestion, and conclusion and supporting
decision making.
Data analysis has multiple fact and approaches, encompassing diverse techniques under a
verity of name, in a different business, science, and social domains.

KOTAK MAHINDRA BANK

BALANCE SHEET AS ON : 01-04-2008 TO 31/03/2016

LIABILITIES AMOUNT ASSESTS AMOUNT

Share capital 17,33,63,267 Cash in hand 3,43,68,746

Reserves & 44,98,27,118 Cash at bank 10,01,13,012

Other Funds

Loans 378,63,09,868 Investments 140,58,20,493

Suspense 47,56,009 Loans & advances 294,84,43,869

accounts

Other 15,16,46,024 Other assets 13,23,88,764

liabilities

Branch 160,25,34,828 Branch accounts 160,31,68,942

accounts

Interest 2,81,97,948 Furniture 79,51,791

payable on
loans
Profit for the 5,17,00,057 Building 91,43,74
current year

Generator cost 6,67,687

Vehicle cost 2,39,903

Computer cost 60,08,168

Total 624,83,35,122 Total 624,83,35,122

BALANCE SHEET AS ON : 01-04-2016 TO 31/03/2017

LIABILITIES AMOUNT ASSESTS AMOUNT

Share capital 21,84,53,827 Cash in hand 3,12,62,897
Reserves & 48,25,77,806 Cash at bank 13,13,73,812
Other Funds

Loans 489,58,18,010 Investments 199,13,74,743

Suspense 31,66,749 Loans & advances 352,98,19,370
accounts

Other 17,48,68,047 Other assets 15,44,37,682

liabilities

Branch 206,47,87,656 Branch accounts 206,62,25,845

accounts

Interest 3,77,02,976 Furniture 1,21,91,561

payable on
loans

Profit for the 5,33,77,802 Building 89,15,151

current year

Generator cost 8,10,238

Vehicle cost 1,19,952
Computer cost 42,21,352
 Total 793,07,52,606 Total 793,07,52,606

BALANCE SHEET AS ON : 01-04-2017 TO 31/03/2018

LIABILITIES AMOUNT ASSESTS AMOUNT

Share capital 28,71,12,907 Cash in hand 3,35,90,290
Reserves & 54,26,10,058 Cash at bank 17,50,07,942
Other Funds

Loans 597,62,10,335 Investments 229,13,05,825

Suspense 30,27,360 Loans & advances 444,12,12,211
accounts

Other 21,66,40,368 Other assets 17,18,64,798

liabilities

Branch 2,429,618,505 Branch accounts 2,428,803,838

accounts

Interest 4,51,09,375 Furniture 1,28,68,259

payable on
loans

Profit for the 7,95,66,288 Building 2,01,72,212

current year

Generator cost 10,17,846

Vehicle cost 6,48,328
Computer cost 20,81,688
Total 957,92,34,219 Total 957,92,34,219
 BALANCE SHEET AS ON : 01-04-2011 TO 31/03/2019

LIABILITIES AMOUNT ASSESTS AMOUNT

Share capital 35,01,79,012.00 Cash in hand 3,58,56,397.00
Reserves & 63,16,96,730.73 Cash at bank 20,98,59,934.51
Other Funds

Loans 7,36,09,92,441.27 Investments 299,84,93,046.21

Suspense 58,17,015,88.00 Loans & advances 526,50,17,038.03
accounts

Other 26,54,98,271.57 Other assets 22,61,45,149.57

liabilities

Branch 15,64,64,246.75 Branch accounts 295,10,12,581.66

accounts

Interest 5,25,74,318.00 Furniture 1,32,04,352.43

payable on
loans

Profit for the 10,34,96,563.80 Building 1,99,54,905.49

current year

Generator cost 8,36,094.10

Vehicle cost 5,04,255.40
Computer cost 9,68,164.56
Total 1187,82,97,319.71 Total 1187,82,97,319.71

BALANCE SHEET AS ON : 01-04-2019 TO 31/03/2020

LIABILITIES AMOUNT ASSESTS AMOUNT

 Share capital 43,16,59,372.00 Cash in hand 5,60,01,034.00
Reserves & 71,44,23,015.00 Cash at bank 26,53,83,552.00
Other Funds

Loans 9,75,96,47,834.00 Investments 3,82,97,12,243.00

Suspense 19,39,810.00 Loans & advances 6,92,55,27,605.00
accounts

Other 33,68,28,381.00 Other assets 28,43,65,118.00

liabilities

Branch 3,97,30,46,165.00 Branch accounts 3,97,26,31,532.00

accounts

Interest 6,39,39,024.00 Furniture 2,87,59,609.00

payable on
loans

Profit for the 11,09,28,872.00 Building 1,97,43,031.00

current year

Generator cost 6,54,341.00

Vehicle cost 23,66,495.00
Computer cost 67,49,867.00
Total Total

TOOLS USED FOR ANALYSIS AND INTRPRETATION OF DATA AT KOTAK

BANK:

 GROWTH OF DEPOSIT.
 GROWTH OF LOANS.
 GROWTH OF NET PROFIT.
 THE FOLLOWING TABLE SHOWS GROWTH OF DEPOSIT

TABLE NO 1

YEAR AMOUNT(in crores) % OF CHANGES

378.63 23.64
2016

486.88 22.23
2017

597.62 18.466
2018

736.1 18.8
2019

975.96 24.57
2020
CHART NO 1.

1200

1000 975.96

800 736.1
597.62
600
486.88

400 378.63

200
23.64 22.23 18.46 18.8 24.57
0
2016 2017 2018 2019 2020

AMOUNT(in crores) % OF CHANGES

ANALYSIS
From the above table and chart we can observe that how growth of deposit took place in 2016
the deposit was Rs378.63 and in 2017 it was increase to Rs486.88 nearly 22.23%change has
taken place. In 2011 the deposit has move from 486.66 to 597.62 (18.46%). in 2019 the
deposit has increase lit from 597.62 to 736.1(18.80%). In 2020 it has increase to975.96 from
736.1 (24.57%).
 THE FOLLOWING TABLE SHOWS GROWTH OF LOANS

TABLE NO 2.

YEAR AMOUNT(in cr) %CHANGES

294.85 20.74
2016
352.98 16.46
2017
444.12 20.52
2018
526.5 15.64
2019
692.55 23.97
2020
CHART NO 2.

800
692.55
700

600
526.5
500
444.12
400 352.98
294.85
300

200

100
20.74 16.46 20.52 15.64 23.97
0 AMOUNT(in cr) %CHANGES
2016 2017 2018 2019 2020

ANALYSIS
From the above table and chart we can observe that how growth of loan took place in 2016
the loan was Rs294.85 and in 2017 it was increase to Rs352.98 nearly 16.46%change has
taken place. In 2011 the loan has move from 444.12 to 526.5 (20.52%). in 2019 the loan has
increase lit from 444.12 to 526.5(15.64%). In 2020 it has increase to 692.55from 526.5
(23.97%).
 THE FOLLOWING TABLE SHOWS GROWTH OF NET PROFIT

TABLE NO 3.

YEAR AMOUNT(Cr) %CHANGES

2016 5.17 17.4

2017 5.34 3.18

2018 7.96 32.91

2019 10.35 23.09

2020 11 5.9
CHART NO 3.

35 32.91

30

25 23.09

20 17.4
15
10.35 11
10 7.96
5.17 5.34 5.9
5 3.18

0
2016 2017 2018 2019 2020

AMOUNT(Cr) %CHANGES

ANALYSIS
From the above table and chart we can observe that how growth of net profit took place in
2016 the net profit was Rs5.17cr and in 2017 it was increase to Rs5.34cr nearly 3.18%
change has taken place. In 2011 the net profit has move from 5.34cr to 7.96cr (32.91%). in
2019 the net profit has increase lit from 7.96cr to 10.35 (23.09%). In 2020 it has increase to
11 from 10.35 (5.9%).
 INTERNAL CONTROL IN CERTAIN SELECTED AREAS
GENERAL

 The staff and officer of a bank should lift form one position to another frequently
and without prior notice.
 The work of one person should always be checked by another person in the
normal course of business.
 All arithmetical accuracy of the book should be proved independently every day.
 All bank form (e.g. books, demand draft book, ‘travellers’ cheque, etc.) should be
kept in the possession of an officer, and another responsible officer should
occasionally verify the stock of such stationary.
 The mail should be opened by responsible officers. Signature on all the letters and
advice received from other branches of the bank or its correspondence should be
checked by an officer with signature book.
 The signature book of the telegraphic codebook should be kept with responsible
officers, used, and seen by authorized officers only.
 The bank should take out insurance policies against loss and employees infidelity.
 The power of officers of different grade should be clearly defined.
 There should be surprise inspection of office and branches at periodic interval by
the internal audit department. The irregularities pointed out in the inspection
reports should be promptly rectified.

CASH:

 Cash should be kept in the joint custody of two responsible people.

 In addition to normal checking by the chief cashier, cash should be test checked daily
and counted in full occasionally by responsible officers unconnected with the
balanced shown the balanced shown by the daybook every day.
 The cashier should have no access to the ledger account and the daybook. This is an
important safeguard. Bank management are often tempted to used cashier because of
their shorter working hours as a ledger clerks in the absence of regular staff on leave,
etc. This cash can be a very expensive price of economy.
CLEARINGS:

 Cheques received by the bank in clearing should with the list accompanying them
independent list should be prepared for cheques debited to different customers
account and those return unpaid and these should be checked by officers.
 The total numbered and amount of cheques sent out the bank for clearing should be
agreed with the total of the clearing pay-in-slip, by an independent person.
 The unpaid cheques received back return clearing should be checked in the same
manner as the cheques received.

CONSTITUENT LEDGER:

 Before making payment, cheques should properly checked in respect of signature,

date, balanced in hand etc. and should be passed by an officers and entered into
constituent’s account.
 No withdrawal should normally be allowed against cheques deposited on the same
day.
 An officer should check all the entries made in the ledger with the original document
particularly nothing that the correct account have been debited or credited.
 Ledger keeper should not have access to voucher summary sheet after they have been
checked by an officer and to the daybook.
 Interest debited or credited to constituent account should be independently checked.
BILL OF COLLECTION:

 All documents accompanying the bill should be received and entered in the register
by a responsible officer. All the time of dispatch, the officer should also see that all
document sent along with the bills.
 The account of customers or principals should be credited only after bills have been
collected or an advice to that effect received form the branch or agent to which they
were sent for collection.
 It should be ensured that bills sent by one, branch for collection to another branch of
the bank, are not in the collection twice in the amalgamated balance sheet of the bank.
For this purpose, the receiving branch should reverse the entries such as bills at the
end of the receiving branch at the end of the year fir closing purposes.

BILL PURCHASED:

 At the time of purchased of bill, an officer should verify that all the document of titles
are properly assigned to the bank.
 Sufficient margin should be kept while purchased or discounting a bill to cover any
decline in the value of the security etc.
 If the bank is unable to collect a bill on the due date, immediately step should be taken
to recoveries the amount form the drawer against the security provided.
 All irregular outstanding account should be reported to the head office.
 In the case of purchased outstanding at the close of the year discount received thereon
should thereon should be properly apportioned between years.

LOAN AND ADVANCES:

 The bank should make advances only after satisfying itself as to the creditworthiness
of the borrowers and after obtaining sanction from the proper authorities of bank.
 The entire necessary document (e.g. agreement, demand promissory note, letter of
hypothecation etc.)
 Sufficient margin should be kept against securities taken to cover any decline in the
value thereof and also to comply with proper authorities of directives. Such margin
 should be determined by the proper authorities of the bank as a general policy or for
particular account.
 All the securities should be received and returned by responsible officer. They should
be kept in the joint custody of two such officer
 In the case of good in possession of the bank, content of the package should be test
checked at the time of receipt.
 Surprise check should be made in respect of hypothecated goods not in the possession
of the bank.
 Market value of good should be checked by officer of the bank by personal enquiry in
addition to the invoice to the invoice value given by the borrowers.
 As soon as any increased or decreased takes take place in the value of securities
proper entries should be made in the drawing power book and daily balance book.
These entries should be checked by an officer.
 All account should be kept within both the drawing power and the sanctioned limit at
all times.
 At the account, which exceed the sanctioned limit or drawing power or are against
unapproved securities or are otherwise irregular, should be brought to the notice of the
management/head office regularly.

DEMAND DRAFT:
 The signature on demand draft should be checked by an officer with signature book.
 All the best demand draft sold by should be immediately confirmed by the advice to
the branches concerned.
 If the branches does not receive does not received proper confirmation of ant demand
draft form the issuing branch or does not received credit in its account with that
branches, it should take immediate step to ascertain the reason.

INTER BRANCH ACCOUNT:

 The account should be adjusted only on the basis of application with reasonably good
credit assessment.
 Prompt action should be taken preferably by central authorities, if any entries are not
reasonably time.
CREDIT CARD OPERATION:

 There should be effective screening of application with reasonably good credit

assessment.
 There should be strict control over storage and issues of card.
 There should be at system whereby a merchant confirm the statues of utilized limit
of a credit card holder form the bank before accepting the settlement in case the
amount to be settled exceed a specified percentage of the total limit of the credit
holder.
 There should be system of prompt reporting by the merchant of all settlement
accepted by them through credit cards.
 Reimbursement to merchants should be made only after verification of the validity
of merchant acceptance of card.
 All the reimbursement should be made immediately charged to the customers
account.
 There should be a system to ensure that statements are sent regularly and promptly
to the customers.
 There should be a system to monitor and follow up customer payment.
 Items overdue beyond a reasonable period should identification and attended to
carefully. Credit should be stopped by informing the merchant through periodic
bulletin, as early as possibly to avoid increased losses.
 There should be a system of periodic review of credit card holder account. On the
basis, the limit of customer may be revised; it necessary, the review should also
includes determination of doubtful amount and the provisioning in respect thereof.
 BOOKS OF ACCOUNTS OF BANKS

A banking company is required to maintain the books of accounts in accordance with

sec.209 of the companies act. There are, however, certain imperatives in banking
business they are the requirements to maintain accurate and always up to date
account. Banks, therefore, device their accounting system to suit these requirements.
The main characteristics of a banks system of book keeping are as follows:
Entries in the personal ledgers are made directly from vouchers instead of being
posted from the books of prime entry.

A. The vouchers entered into different personal ledgers each day are summarized
on summery sheet; the totals of each are posted to the control accounts in the
general ledger.

B. The general ledger trail balance is extracted and agreed every day.

C. All entries in the detail personal ledgers and the summary sheet are check by
person other than those who have made the entries, with the general results
that most clerical mistakes are detected before another day begins.
D. A trial balance of the detailed personal ledgers is prepared periodically,
usually every two weeks, and agreed with the general ledger control accounts.
E. Expecting for cash transactions, always two vouchers are prepared for each
transaction, one for debit and the other for credit. This system ensures double
entry at the basic level and obviates the possibility of errors in posting.

PRINCIPAL BOOKS OF ACCOUNT

 GENERAL LEDGER:

It contains control accounts of all personal ledgers, the profit and loss account and
different assets and liabilities accounts. There are certain additional accounts known as
contra accounts, which is unique feature of bank accounting. These contra accounts are
maintained with a view to keeping control over transactions, which have no direct effect
on the banks positions. For e.g. letter of credit opened, bills received for collection,
guarantee is given etc.

 PROFIT AND LOSS LEDGERS:

Some banks keep one account for profit and loss in this general ledger and maintained
separate books for the detailed accounts. These are columnar books having separate
columns for each revenue receipt and expense head. Other banks keep separate books for
debits and credits posted are entered in to the profit and loss account in the general ledger.

SUBSIDIARY BOOKS OF ACCOUNTS

 PERSONAL LEDGERS:

Separate ledgers are maintained by banks for different types of accounts, i.e. current
account, saving account, etc. As has been maintained earlier, these ledgers are posted
directly from vouchers and the entire voucher entered in each ledger in a day is
summarized in to Voucher Summary Sheets.

 BILL REGISTERS:

Details of different types of bills are kept in separate registers, which have suitable
columns. For e.g. bill purchased, inward bill for collection, outward bills for
collection etc are entered serially day to day in separate registers. Entries in these
registers are made by reference to the original documents.

 OTHER SUBSIDIARY REGISTERS:

There are different registers for various types of transaction. Their number, volume
and details, which differ according to the individual needs of each bank. For example,
there will be registers for:

A. Demand drafts, telegraphic and mail transfers issued on branches or agencies.

B. Demand drafts, telegraphic and mail transfers received from branches and
agencies.
 CHAPTER-5
FINDINGS, SUGGESTIONS, CONCLUSIONS
 FINDINGS

During the course of the project following observation were made at HYDERABAD bank.

The HYDERABAD bank has successfully completed 108 year of excellence in the
field of banking industry.
The performance of the bank since last 5 year is good.
The internal and external auditors are doing their job effectively and efficiently.
The HYDERABAD city is very efficient banking organization.
The bank has been publishing their annual report and maintaining their account in
TELUGU..
There is dress code for employees in the bank. Every employee from low level to
high level is following the dress code.
The coordination between the internal auditor and external auditor was really good.
There is a good coordination among the employees.
Though it is a cooperatives bank it is fully computerized.
The top officials of the bank are highly educated and knowledgeable.
HYDERABAD has 12 branches in the HYDERABAD.
Bank has taken RBI classification GRADE- 1
Banks’ auditing classification is ‘A’
Deposit, loans, and net profit of the HYDERABAD bank has been increasing from
year to year.
Bank provides coffee and tea to the employees.
The profit position of the bank has raised 11.09cr during the 2019-2020.
 SUGGESTIONS

From the above analysis it is clearly shows that bank’s profitability is good and financial
position is good however the following some recommendation are given towards bank can
pay more attention.

Since the overall performance of the bank is good ant bank should maintain the good
performance in the future also.
The bank has to concentrate more on the marketing strategy like advertisement in
media and news papers.
Attractive and effective new scheme should be introduce to attract new customer.
Since the ATM culture has picked up in the banking sector, diversification of the
ATM should be encouraged.
The bank should adopt more computerized system than manual.
Bank should publish its annual report and maintain its financial reports in English
along with TELUGU..

CONCLUSION

The project the position of Indian banking system as well as the principal laid down by the
Basel Committee on banking supervision. This assessment was done in seven major areas
Which are core principals, concurrent audit, internal audit, loan, loan accounting and
Transparency of transaction. The project concluded that, given the Complexity and
development of Indian banking sector, the overall level of compliances with the standards
and codes is of high order. This project gives the correct ideas about how the major areas can
be found by way of effective auditing system i.e. errors, frauds, manipulations etc. form this
auditor get the clear ideas how to recommend on the banks position. Project also contain that
how to conduct of audit of the BCCB banks, what are the various procedure through which
audit of banks should be done. Form auditing point of view, there is proper follow up of work
done in every organization whether it is banking company or any other company or any other
company there no misconduct of transactions is taken places for that purpose the auditing is
very important aspect in today’s scenario form company and point of view.

BIBLIOGRAPHY

Websites

www.moneycontrol.com

www.icai.org

www,rbI.org

Books
Auditing