bank audit program-frp

JUSTO SECHICO AND ASSOCIATES, CPAsWORK PROGRAM

I. CASH ON HAND

Name of Client: ___________________________________ Audit Date: _____________________________W.P. Ref: _________________ Actual EstimatedBy: _________________ Time: ________ Time: _____________

Audit Objectives:

a. Determining that cash on hand as shown in the general ledger is represented by currency and coins on hand.

b. Determining ownership and proper accountabilities

c. Ascertaining that cash balances are available without restrictions.

Audit Procedures:

a. Examination of cash proof sheets and tracing of their totals to the general ledger

b. Test tracing of deposit or withdrawal slips to individual subsidiary ledgers and vice versa.c. Conduct actual cash count.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


II. CHECKS AND OTHER CASH ITEMS

Name of Client: ___________________________________ Audit Date: _____________________________W.P. Ref: _________________ Actual EstimatedBy: _________________ Time: ____________ Time: _____________

Audit Objectives:

a. To establish the propriety and validity of the items as of the examination date.

b. To ascertain that these items are collected or properly disposed of during the normal course of business.

Audit Procedures:

a. Comparing run up total against general ledger balance and investigating difference.

b. Reviewing checks and other cash items individually for unusual items

c. Ascertaining proper clearing or other disposition.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


III. DUE FROM BANGKO SENTRAL NG PILIPINAS (BSP)

Name of Client: ___________________________________ Audit Date: _____________________________W.P. Ref: _________________ Actual EstimateBy: _________________ Time: ____________ Time: _____________

Audit Objectives:

a. To determine that the balance is correctly stated.

b. To determine that there are no long outstanding and/or unusual items in the reconciliation.

Audit Procedures:

a. Review the statement of reconciliation of the general balance and the Central Bank account balance.

b. Obtain confirmation of such balance from the Central Bank

c. Examine deposits with the Central Bank account and withdrawals therefrom;

d. Examine outgoing and incoming learning items

e. Examine all other debits and credits to the Central Bank account.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


IV. DUE FROM OTHER BANKS


Audit Objectives:

a. To determine that the amount is correctly stated.

b. To determine that there are no long outstanding and/or unused in the reconciliations.

c. To determine compliance with law and Central Bank rules and regulations.

Audit Procedures:

a. Verify book balances by ascertaining agreement of subsidiary and general ledger records as well as agreement of subsidiary ledger balances with savings account passbook balances and totals of time deposits certificates.

b. Confirm balances with depository banks, and review reconciliation statements with these banks.

c. Ascertaining proper clearing or other disposition.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


V. FINANCIAL ASSETS


Audit Objectives:

a. To determine that the investment instruments are on hand or held in custody or safekeeping by others for account of the bank.

b. To determine that interest income and securities gains or losses have been recorded properly.

c. To determine those investments and the related income, gains and losses are properly presented in the financial statements.

d. To determine that investments have not suffered a permanent reduction in value, and allowance for losses has been provided where necessary.

e. To determine that all required disclosures have been made such as amounts pledged and market values.

f. To determine compliance with Central Bank rules and regulations governing investment securities.

g. To determine effectiveness of internal controls.

Audit Procedures:

a. Taking of inventory of investment securities simultaneous with the count of trading securities.

b. Confirmation of securities held by the Central Bank or other financial institutions.

c. Inspections of documents supporting selected investment transactions and collection of matured series and also review proper recording and income recognition upon sale/maturity.

d. Appraise the investments portfolio and determine the adequacy of the reserve for estimated decline in value of investments.

e. Review overall reasonableness of related unearned discount/premium and accrued interest receivable, if any.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


VI. LOANS AND RECEIVABLES


Audit Objectives:

a. Ascertain that all loans and advances granted are made in accordance with Central Bank rules and regulations.

b. Ascertain that the loan portfolio is fairly stated and covered by adequate allowance for loan losses.

c. Income and related accrued interest receivable and unearned income are stated in conformity with generally accepted accounting principles.

Audit Procedures:

a. Selecting a sample group loan accounts and perform detailed test on it. The tests on the sample should include examination of loan approval memo and checking against approved credit limits; inspection of promissory notes and comparison of promissory note detail with those shown in the loan subsidiary ledger; review of loan collateral documentation and checking whether the collaterals on file conform with those indicated in the loan approval memo, real estate or chattel mortgage agreement, surety agreements, appraisal reports and other loan documents. Reviewing of subsequent collection, rollover or restructuring transactions on the sample loans.

b. Confirmation of the representative sample of loans balances directly with the bank’s customers.

c. Determine the overall reasonableness of accrued interest receivable, unearned discount and interest income. Recalculation of accrued interest and unearned discount for a representative sample group of loans and test of interest income by relating such income to average loan balances and comparing the resulting yield to interest rates in effect during the period.

d. Reviewing of the Loans to officers, directors, stockholders and related interest.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


VII. BANK PREMISES, FURNITURE, FIXTURES AND EQUIPMENT


Audit Objectives:

a. To ascertain the existence and ownership of these assets including liens or encumbrances on them, and determining proper valuation in accordance with generally accepted accounting principles.

b. To establish that the amount invested in property and equipment with CB rules and regulations with respect to such investment.

Audit Procedures:

a. Tracing items on the schedule of property and equipment to the original records and review title/documents to establish authenticity of ownership on a test basis. Check physical existences of the items tested.

b. Reviewing all material acquisitions and dispositions during the period and noting the approvals and propriety of entries through the use of Board of Directors minutes of meeting.

c. Ascertaining the existence of liens or encumbrances on any item and determining the authority to contract the lien or encumber the property. Checking the adequacy of insurance coverage of the property and equipment.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


VIII. ACQUIRED ASSETS


Audit Objectives:

a. To ascertain existence and ownership of such assets

b. To determine fair valuation

c. To evaluate adequacy of allowance for probable losses

Audit Procedures:

a. Examine loan and acquisition papers, titles and legal documents and determine that titles to assets with expired redemption periods are consolidated in the name of the bank

b. Ascertain foreclosed property items are property valued by reference to loan balance or bid prices or current market values. Appraisals of property are reviewed and appraised values are noted.

c. Ascertain that expenses associated with acquired assets are properly recorded in the accounts.

d. Examination of the adequacy of the allowance for probable losses and recent appraisals of the assets provided helpful indications of the need to increase the allowance. Evaluation of adequacy of allowance for probable losses should be subject to the existing Central Bank regulations on allowance for probable losses on property held in excess of 5 years.

e. With respect to acquired assets sold during the period covered by the examination, check authorization and approval of sale and ascertain the sales transaction is properly recorded.

Remarks/Comments:

___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


IX. OTHER ASSETS


Audit Objectives:

a. To ascertain items included therein are fairly stated and properly classified.

b. To determine the adequacy of the allowance for probable losses.

Audit Procedures:

a. Vouch significant items, ascertaining their future economic benefits, and following up of their subsequent collections, reversals or applications.

b. Review overall calculation of interest accruals in relation to the review of loans and investments portfolio on the accrued interest receivable.

c. Check the method of recognizing gross profit on sales contract receivable (cost recovery method or installment method).

d. Review suspense account transactions to verify propriety of accounting entries.

e. Determine nature of significant components of the account.

f. Inspect covering documents to ensure propriety of treatment as deferred charges and reasonableness of balance.

g. Review proper amortization or write-off in the accounts by reference to pertinent Central Bank regulations and guidelines issued by the accounting profession.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


X. DUE FROM HEAD OFFICE/OTHER BRANCHES


Audit Objectives:

a. To determine that the amount is correctly stated.

b. To determine that there are no long outstanding and/or unused in the reconciliations.

c. To check the accuracy of the reconciliation of the Due to…. And the Due from… accounts of the bank.

Audit Procedures:

a. Test mathematical accuracy of the balances.

b. Verify balances and investigate material transactions during the year.

d. Investigate month-end and year-end adjustments.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XI. DEPOSIT LIABILITIES


Audit Objectives:

a. To ascertain that the bank’s liabilities for the different types of deposits as well as revenue and expense accounts related thereto are fairly stated in conformity with generally accepted accounting principles.

b. To determine proper classification of the accounts in the financial statements.

Audit Procedures:

a. Assure that the subsidiary deposit records agree with the general ledger control accounts, and confirming selected deposit account balances.

b. Investigate all differences uncovered in agreeing subsidiary ledgers and general ledger control accounts particularly returned items, items for adjustments, holdovers, overdrafts and service charges.

c. Determine the extent and type of confirmations and method of selecting the accounts to be confirmed.

d. Ascertain dormant accounts are adequately segregated and controlled.

e. “Hold Mail” accounts should be verified to written requests of the depositors.

f. With respect to time deposits, ascertain, on a test basis, that the forms used as time deposit certificates are properly controlled, that surrendered certificates are properly endorsed, canceled and filed, and duplicates of certificates are signed by authorized officers.

g. Tests for unusual transactions shown on demand deposits subsidiary ledgers should be carried our particularly as regards withdrawals against uncollected out of town checks, unusually large deposits

and temporary withdrawals in round figures, and accounts without addresses or with incomplete addresses.

h. Recalculate interest paid and accrued on interest on deposits. Test service charge income to determine corrections of charges and compliance with bank policy.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XII. BORROWED FUNDS


Audit Objectives:

a. To ascertain that the liabilities for all bank borrowings and the related expenses for such borrowings are fairly presented in conformity with generally accepted accounting principles.

b. To evaluate the bank’s borrowings policies and practices an effectiveness of internal controls.

c. To determine compliance with the rules and regulations of the Central bank and the Securities and Exchange Commission.

Audit Procedures:

a. Inspection of promissory notes issued and outstanding and other documentary evidences of the borrowings. Read loan agreements and ascertain compliance with restrictive covenants.

b. Vouch subsequent payments or retirements of the specific liabilities and ascertain if the promissory notes or loan documents are properly canceled or retired.

c. Send confirmation letters to selected creditors requesting them to confirm current balance, interest rate, pledged property and other items of the borrowings.

c. Review interest expense and accrued interest payable on borrowed funds for reasonableness.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XIII. REDEEMABLE PREFERRED SHARES


Audit Objectives:

a. To determine that the capital fund accounts are presented in accordance with generally accepted accounting principles.

b. To ascertain that all transactions related to redeemable preferred stocks are properly authorized or approved by appropriate corporate or legal authorities, where necessary, and are recorded in conformity with generally accepted accounting principles and applicable corporate or legal requirements.

c. To ascertain the adequacy of financial funds, reservations, stock options and warrants, preferred dividends in arrears, and liquidation preference of preferred stock.

Audit Procedures:

a. Obtaining a list of stockholders showing the nationality of each stockholder and individual shareholdings both in number of shares and amounts.

b. Details of the list should be traced to stockholders’ ledgers, and schedule totals should agree to general ledger control accounts.

c. Testing the propriety of the entries in the stock and transfer book and stockholders’ ledgers.d. Check whether the bank has complied with the minimum capital requirement and determine whether

equity held by foreigners is within the allowable limit.e. Examine unused stock certificates, stubs and canceled certificates for proper accounting of used and

unused certificates, payment of documentary and science stamps, and proper invalidation of cancellation. Verification of treasury share transactions for proper authorization and appropriate valuation.

f. Confirm with transfer agent and agree confirmation reply with the recorded balances in the books for bank capital stock that are listed and custodial as well as record keeping is maintained by a transfer agent.

g. Confirmation of any unpaid subscriptions should be considered.

h. Analyze changes in the accounts and determine their propriety for surplus, surplus reserves and undivided profits. Checking of the minutes of board of directors’ meetings as well as to stockholders’ meetings for the dividends.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XIV. OTHER TAXES AND LICENSES PAYABLE


Audit Objectives:

a. To ascertain that the liabilities are fairly presented in accordance with generally accepted accounting principles.

b. To determine the required disclosures have been made in the financial statements or the notes.

Audit Procedures:

a. Review supporting documents to determine validity of the liability amounts.

b. Review payments and ascertain whether such payments have been properly authorized.

c. Investigate long outstanding and unusually large items as well as debit balances and followed up subsequent dispositions of such items.

Remarks/Comments:

___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XV. OTHER LIABILITIES


Audit Objectives:



Audit Procedures:

a. Establishing agreement of subsidiary records to control records. Confirm balances of selected accounts, specifically on marginal deposits on letter of credits.

b. Review supporting documents to determine validity of the liability amounts.

c. Review payments and ascertain whether such payments have been properly authorized.

d. Investigate long outstanding and unusually large items as well as debit balances and followed up subsequent dispositions of such items.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XVI. DUE TO OTHER BRANCH


Audit Objectives:



Audit Procedures:

a. Establishing agreement of subsidiary records to control records. b. Review supporting documents to determine validity of the liability amounts.c. Check the reconciliation between the branch and the head office accounts (Due from and Due to

accounts).d. Investigate any differences between the reciprocal accounts.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XVII. EQUITY ACCOUNTS


Audit Objectives:

a. To determine that the capital fund accounts are presented in accordance with generally accepted accounting principles.

b. To ascertain that all transactions related to capital stock and other capital fund accounts are properly authorized or approved by appropriate corporate or legal authorities, where necessary, and are recorded in conformity with generally accepted accounting principles and applicable corporate or legal requirements.

c. To ascertain the adequacy of financial funds, reservations, stock options and warrants, preferred dividends in arrears, and liquidation preference of preferred stock.

Audit Procedures:

a. Obtaining a list of stockholders showing the nationality of each stockholder and individual shareholdings both in number of shares and amounts.

b. Obtain a schedule for each class of capital stock showing shares authorized, par value per share, share issued, subscribed and in treasury. Details of the list should be traced to stockholders’ ledgers, and schedule totals should agree to general ledger control accounts.

c. Testing the propriety of the entries in the stock and transfer book and stockholders’ ledgers.e. Check whether the ban has complied with the minimum capital requirement and determine whether

equity held by foreigners is within the allowable limit.e. Examine unused stock certificates, stubs and canceled certificates for proper accounting of used and

unused certificates, payment of documentary and science stamps, and proper invalidation of cancellation. Verification of treasury share transactions for proper authorization and appropriate valuation.

f. Confirm with transfer agent and agree confirmation reply with the recorded balances in the books for bank capital stock that are listed and custodial as well as record keeping is maintained by a transfer agent.

g. Confirmation of any unpaid subscriptions should be considered.h. Analyze changes in the accounts and determine their propriety for surplus, surplus reserves and

undivided profits. Checking of the minutes of board of directors’ meetings as well as to stockholders’ meetings for the dividends.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XVIII. INCOME AND EXPENSES


Audit Objectives:

a. To determine that all income applicable to the period and all costs and expenses related that income have been taken up in accordance with generally accepted accounting principles consistently applied

b. Specifically, to ascertain that income has not been recorded in excess of amounts attributable to the period and that expenses recorded do not include amounts applicable to future periods which should be carried forward as prepaid expenses, deferred charges or other appropriate asset account

c. To ascertain that income and expenses are properly described and classified in the income statement.

Audit Procedures:

a. Obtain a schedule of all income and expenses accounts and trace the amounts to the general ledger balances.

b. See to it that all income and expenses figures in the schedule of balance sheet items are cross indexed to the related schedules of income and expenses.

c. Scrutinize each income and expense account in the ledger and note whether the entries show material variations, unusual entries from month to month during the year. Investigate any material variations, unusual entries and adjustments. Compare the balance of each account with that of the preceding year and account for any significant variations not arising from differences in the level of activities or business volume.

d. Obtain or prepare analyses of selected income and expense accounts on an overall basis or in summary form, showing the significant components of the account.

Remarks/Comments:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


XIX. ALLOWANCE FOR CREDIT LOSSES


Audit Objectives:

a. To determine that the allowance is adequate to cover estimated amount of losses in the loan portfolio at the date of the financial statements.

Audit Procedures:

a. Obtain reasonable assurance that management has recorded an adequate allowance based on all relevant factors bearing on the collectibility of the loan portfolio. The allowance is an estimate based on subjective judgment.

Remarks/Comments:

___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

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