ENCLOSURE II

BANK OF BARODA
----------------------- ZONE

TERMS AND CONDITIONS FORMING PART OF BRANCH AUDITORS

APPOINTMENT FOR AUDIT OF BANK'S ACCOUNTS FOR 2009-10.

1. ACCEPTANCE LETTER, DECLARATION OF INDEBTEDNESS AND DECLARATION OF

FIDELITY AND SECRECY:

Your acceptance letter should be sent as per prescribed proforma furnished in ANNEXURE-1.

Along with the acceptance letter, please note to send the following:

i) Form of Declaration of Indebtedness in prescribed proforma duly signed by the

proprietor or main partner of the firm, as per ANNEXURE-2.

ii) Form of Fidelity and Secrecy, duly filled in and signed by you on your letterhead as
per ANNEXURE-3.

2. DISQUALIFICATION FROM ACCEPTING AUDIT OF BRANCHES OFFERED TO YOU:

In terms of Reserve Bank of India instructions, you/your firm stand/s disqualified from
accepting audit of our branches under the following circumstances:

i) If you are indebted to the Bank for an amount exceeding Rs.1000/- or any
guarantee has been given or provided for any security in connection with the
indebtedness of any third person to the Bank for any amount exceeding Rs.1000/-.

ii) In case you are a sole proprietary concern and the proprietor is not full time
practicing Chartered Accountant or is employed elsewhere.

iii) If you sub-contract the audit work to be entrusted by us to some other audit firms.

iv) If you are appointed as concurrent auditor or any other internal assignment of our
Bank or subsidiaries.

You are, therefore, requested to note that even though we have issued this appointment
letter, you should not accept the audit, if any of the above disqualifications is applicable to
you/your firm. Your appointment is liable to be cancelled, if any of the above
disqualifications is applicable, even after your appointment.

3. AUDIT AND CERTIFICATION OF CLOSING RETURNS:

You are required to audit and certify the closing returns/statements as per the list furnished
as per ANNEXURE-4.

4. MEMORANDUM OF CHANGES (MOC):

You are required to invariably certify the MOCs in Return No.14 & 14D even if there is nil
information to be reported. This is necessary to ensure, as MOCs of all branches have to be
taken care of at the time of consolidation at Regional/Zonal Offices. You are requested to
ensure that guidelines for MOC furnished in Annexure-5 are adhered to.

5. SUBMISSION OF STATUTORY AUDIT REPORT AND LONG FORM AUDIT REPORT:

You are requested to submit your Statutory Audit Report and Long Form Audit Report
(LFAR) duly stamped and signed by you as per proforma furnished in ANNEXURE-6 and
ANNEXURE-7 respectively to our concerned authorities, as stated in Enclosure I. You are
also requested to discuss the contents of these reports with the Branch Heads without fail.
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 It may please be noted that due to non-receipt of Statutory Audit Report and LFAR, from the
Branch Auditors in time, the branch is likely to be treated as unaudited by our Statutory
Central Auditors at the time of final audit of the Bank's Corporate Accounts. You are,
therefore, requested to give utmost importance to timely submission of these reports
alongwith audited closing returns.

6. REMUNERATION AND TRAVELLING & HALTING EXPENSES FOR AUDIT WORK

The scales of remuneration, traveling and halting expenses as fixed by Reserve Bank of
India are furnished in‚ ANNEXURE-8. Your bill for Travelling & Halting Expenses is to be
submitted to our office in the prescribed proforma as per ANNEXURE-9‚ for each branch
separately together with bill for Audit Fee as applicable to the branch concerned.

Before submitting the bills, please ensure submission of audited Closing Returns, Statutory
Audit Report, LFAR, Tax Audit Report and other Audit Certificates etc. to all concerned.
Please note that you are not eligible to draw any advance from branches against your audit
fees, traveling and halting expenses. You are requested to travel as per entitlement only.
Journey by car should be avoided, as it is expensive. If there is necessity to travel by car,
prior permission of Zonal Office specifying the rate admissible should be obtained
invariably. No separate Travelling Allowance / Halting Allowance etc. is payable for LFAR /
Tax Audit Report etc.

Your attention is drawn towards the Reserve Bank of India instructions that where the
auditors have an office at the place where the branches/offices of the Bank to be audited
are situated, they will not be reimbursed TA/HA expenses. Sometimes it has been
observed that audit teams of large size (comprising of audit assistants / entitled clerks /
partner(s) of the firm) are being deployed for the purpose of statutory audit of comparatively
small sized branches. This not only increases the cost of audit but, at times delays the
completion of audit work also. You are therefore advised to constitute the audit team
keeping in view the volume of work at the branch under audit. Please therefore ensure that
expenses on lodging etc. should be kept to the minimum.

7.

i) As per Reserve Bank of India's requirements, you are required to give certificate in
respect of transactions pertaining to DICGCI. You are, therefore, required to give
audit certificate in the proforma as per Certificate-1. The certificate relates to period
01.04.2009 to 31.03.10.

ii) Audit Certificate in respect of subsidy claimed by the branch from the Reserve Bank
of India under Prime Minister's Rozgar Yojana for Educated Unemployed Youth
(PMRY).

You are, therefore, requested to certify the subsidy under PMRY Scheme claimed by
the branch in triplicate, if any, in the format furnished in Certificate-2 and 2(A).

iii) OTHER CERTIFICATES:

Apart from Tax Audit return, various other certificates to be signed by you are detailed
in Annexure 3 and formats of which are being sent to the branches directly.

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 ANNEXURE 1
LETTER OF ACCEPTANCE TO BE FURNISHED BY BRANCH AUDITORS ON
THEIR LETTERHEAD.
The General/Deputy General Manager
Bank of Baroda,
Zonal Office,
__________________

Dear Sir,

Re: Branch Audit of the Bank for the year ended 31st March 2010.

With reference to your appointment letter No. ________dated ________ we accept our appointment
as Branch Auditors of branches of your Bank for the year ended 31 st March 2010 on terms and
conditions mentioned therein, and we agree to all the terms and conditions. I/We further declare
that:

1. I /any of our partners am /is not an officer/employee of your Bank.

2. I /any of our partners am/is not a partner or in employment of any office of your Bank.

3. I /we /any of our partners including any of their spouse, dependent children and wholly or
mainly dependent parents, brothers, sisters or any of them or the firm/company in which
they are partners/directors am/are/is not indebted to your Bank in any form or as a
guarantor to your Bank on behalf of any other person.

4. I /we /any of our partners or associate firm or sister concern or branch office am/are/is not
assigned with any audit work such as concurrent audit/revenue audit of your Bank during
the current financial year and also in previous financial year other than Statutory audit of
your Bank.

5. I /we /any of our partners am/are/is not otherwise disqualified to accept the audit in terms of
Section 226 (3) (d) of the Companies Act, 1956.

6. I /we also confirm that I /we am/are full time practicing Chartered Accountant/s and am/are
not employed elsewhere and do not have any other business interest.

7. I/We also undertake not to sub-contract the audit work assigned to me/us to any outsider
without prior approval of Reserve Bank of India obtained through you.

8. I /We also confirm that all the internal assignments, if any, in the subsidiary of the Bank
have been relinquished.

9. I /We also confirm that there is no change in the constitution of the audit firm since 1 st
January 2010.

Place: ____________ Yours faithfully,

Date: ___________

( )
Name & Rubber stamp of the Auditors Firm

* Please delete whichever is not applicable.

@ The letter is to be signed by the person/firm in whose name the appointment letter has
been issued.

Copy forwarded: 1) Concerned Regional Manager under whose jurisdiction the branch is
functioning.
2) Concerned Branch Manager.

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 ANNEXURE- 2
FORMAT OF DECLARATION OF INDEBTEDNESS
(On auditors’ letter head)

Proforma ‘A’
Place : ___________
Date : ___________

DECLARATION

1. I ______________________ the proprietor / main partner of M/s

_________________________ situated at (complete address) ______________ hereby
declare that neither I nor any of our partners / members of my / their families (family will
include besides spouse, only children, parents, brothers, sisters or any of them who are
wholly or mainly dependent on the Chartered Accountants) or the firm / company in which I
am / they are partners / directors* have been declared as willful defaulter by any bank /
financial institution.

2. In case the above declaration or any part thereof is proved to be incorrect, the bank is free to
advise the details thereof to RBI and Institute of Chartered Accountants of India for initiating
necessary action against me.

Signature of Seal of
The Proprietor / Main Partner The Proprietary concern / Partnership
firm

* For the purpose of this declaration, the credit facilities availed by companies where the partner /
proprietor of a firm has been appointed as non-executive director in a professional capacity having
no financial interest shall not be included

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 ANNEXURE 3

FORM OF DECLARATION OF FIDELITY AND SECRECY

(On auditors’ letterhead)

I/we @ _______________________________________________ do hereby declare that I/we

will faithfully, truly and to the best of my/our skill and ability execute and perform the duties
required of me/us as auditors of Bank of Baroda.

I/we further declare that I/we will not communicate or allow to be communicated to any person,
not legally entitled thereto, any information relating to the affairs of Bank of Baroda or to the
affairs of any persons having dealings with Bank of Baroda, nor will allow any such person to
inspect or have access to any books or documents belonging to or in possession of Bank of
Baroda and relating to the business of Bank of Baroda or to the business of any persons having
any dealings with Bank of Baroda.

Signature
Seal of the firm (Proprietor / Main Partner)
Chartered Accountants
Place: ______________
Date: _______________ Name of the Signatory: ________________________

@ Name of the auditor/audit firm

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 ANNEXURE 4

LIST OF CLOSING RETURNS TO BE AUDITED AND CERTIFIED BY

BRANCH AUDITORS

(a) Closing Returns: -

Sr. Category of the Closing Contents

No. Returns Return
No.
(i) Relating to 1 Balance Sheet (Form No.-154)
Balance Sheet 3 Break-up of IBC/OBC
4 Details of Claims against the Bank not
acknowledged as Debt.
6A & 6B Break-up of Furniture & Fittings & Depreciation
there on
7 Outstanding balances and Doubtful amounts
(other than Advances/Suspense requiring
provision)
8 Break-up of outstanding entries in Suspense
Account
10 Important Data for Balance Sheet Adjustment
13 Balance Sheet Data for Capital Adequacy – in the
revised format. (Basel – I)
- Basel – II Returns generated through ASCROM
System

(ii) Relating to 2 Profit & Loss Account (Form No.-249)

Profit/Loss 11 Statement of Bad & Doubtful debts Written Off to
(All Profit & Loss the debit of P/L account
Returns Inter Branch Forex Transaction by PMOs /
should be Annex-VI Overseas Branches / Overseas Subsidiaries
prepared (Not to be certified by Auditors)
for the full year)
(iii) Advances related 15 Borrower wise Standard Advances
statements 16 Borrower wise Sub-Standard Advances
17 Borrower wise Doubtful Advances
18 Borrower wise Loss Advances
19 Master Summary of Advances
20 Sectoral Classification of Advances.
(It may please be noted that Returns (15 to 20)
are generated from ASCROM system, and hence,
printed forms are not required).
(iv) Memorandum of 14 Memorandum of changes (other than Advances)
changes 14D Memorandum of changes in classification of
advances and provisioning.

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 (v) Additional 22 Maturity Pattern of various Liabilities & Assets
Disclosure in (The Return is to be certified by Branch
Balance Sheet Auditors).
1. The computerized Branches will be generating
statements through ALMAN package for
deposits and through ASCROM for advances.
2. Other non-computerised Branches should
obtain these statements from their Regional
Offices.

(vi) Miscellaneous 9 Additional Information/Certificate

Returns (Not to be certified by Auditors)
21 Statement of outstanding Total Deposits &
Advances at Rural Branches.
-- Tax Audit Returns(Audited)
-- Data on Country Risk Exposure.

cates: -

Certificate Particulars
No.
1 DICGCI Claim
2 Subsidy claim under PMRY
3 Data on 12 odd dates for SLR Verification
4 Exposure to Sensitive Sector (Break up of Advances to Capital Market Sector,
Real Estate Sector, Commodities Sector). As per RBI guidelines, exposure
means outstanding amount or limits sanctioned whichever is higher.
5 Implementation of Ghosh Committee recommendations
6 Implementation of Jilani Committee recommendations
7 Movement chart of NPAs and provision on NPAs during the year 2009-2010
8 Information in respect of restructuring of advances etc.
9 Subvention Claim for Interest Relief for providing short term credit to farmers
@7% for both Kharif & Rabi crops for the full financial year 2009-10 i.e. from
01.04.09 to 31.03.10
10 Subvention Claim for Interest Relief for providing short term credit to farmers
@7% for Kharif & Rabi for the year 2009-10 (for Rabi crop upto cut-off date
i.e. period 1-04-08 to 30-06-09 )
11 Subvention Claim in respect of Rupee Export Credit for the period 1/04/08 to
31/3/2010.

All the above Closing Returns and Certificates should be got certified from the Branch
Auditors, except the Closing return No. 9, Annexure–VI (Break up of Forex items in P&L
Account).

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 ANNEXURE-5

GUIDELINES FOR MEMORANDUM OF CHANGES (MOCs)

The Balance Sheet, Profit & Loss A/c and Advances Returns received from branches are
amalgamated through computers. The branches/offices are, therefore, not permitted to
change any figures once the unaudited returns are submitted to their Regional Authority. Any
changes, arising on account of audit, are, therefore, to be given effect separately through
Memorandum of Changes (MOC).

1) MOCs in Return No.14 (other than advances)

i) Keeping in view the materiality aspect, our SCAs have agreed to give effect only of individual
entries of Rs.10000/- and above. Accordingly, only the individual entries of Rs.10000/- and
above are to be reported in this statement. The individual entries of less than Rs.10000/- are
to be ignored and no MOC need to be passed for these entries.

ii) No MOC should be prepared in respect of any error in the amount of H.O. Interest
Earned/Paid as it is netted off for Bank as a whole. As such no entry should be passed at
branches to give effect to such MOCs.

iii) Net effect on Profit & Loss A/c should tally with net effect on Balance sheet.

iv) NO entry is to be passed in branch books for those changes, which have effect only on P&L
Heads. Similarly, NO entry will be passed by branches in case of Balance Sheet Heads for
those rectifications which don’t warrant any change in G/L balance of concerned Heads i.e.
mistake of reporting the amount under wrong column / code while preparing Balance sheet
and Profit & Loss Account.

v) Rectification entries for all the Other Changes reported in MOC should be passed during the
course of Audit i.e. current year’s books, and the same is to be verified and certified by you.

vi) Changes in Off Balance Sheet Items, if any, are to be reported only under “Effect on Off
Balance Sheet Items” and not under “Effect on Balance Sheet Items”.

2) MOC in Return No.14D- Asset classification & Provisioning:

Since the Bank has to make provision for all NPA accounts, including accounts with balance
less than Rs.25, 000/-; changes required in classification and provisioning, irrespective of
amount involved should be reported in this MOC (14D) statement.

The Branch Auditors are, therefore, requested to take note of the above while suggesting
changes by way of MOC.

Effects of all MOCs in Return No. 14D will be given at Regional/Zonal Offices before
finalisation of audit of Regional/Zonal accounts by SCAs.

The effect of MOC in Return No. 14(other than advances) will be given at H.O. level.

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 ANNEXURE 6
DRAFT OF BRANCH AUDITORS’ REPORT (STATUTORY)

BANK OF BARODA
Name of Branch : ________________
Region : ________________
Zone : ________________
Branch Eight Digit Numerical Code No. : ________________

1 We have audited the attached Balance Sheet of ______________ Branch of Bank of

Baroda as at 31st March 2010 and also the Profit and Loss Account of the branch for
the year ended on that date. These financial statements are the responsibility of the
Branch management. Our responsibility is to express an opinion on these financial
statements, based on our audit.

2 We conducted the audit in accordance with auditing standards generally accepted in

India. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material mis-
statement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

3 On the basis of the audit indicated in Para 1 above and subject to the adjustment
remaining to be made for items for which action has to be taken at the Head Office in
respect of Provision for Bad and Doubtful Debts, Bonus to Staff, Terminal benefits,
taxation and Audit fees & expenses and subject to Memorandum of Changes as per
Closing Return No.14 etc. in our opinion and to the best of our information and
explanations given to us and as shown by the books of the branch:

i. The Balance Sheet is a full and fair Balance Sheet containing necessary particulars
and it is properly drawn up so as to exhibit a true and fair view of affairs of the
branch as at 31st March 2010; and

ii. The Profit & Loss Account show a true balance of the Profit/Loss* of the branch for
the year ended 31st March 2010.

4 We have obtained all information and explanations, which to the best of our knowledge
and belief, were necessary for the purposes of our audit and have found the same to
be satisfactory

5 The transactions of the branch, which have come to our notice, have been within the
powers of the bank.

6 Effect of Memorandum of Changes enclosed in Return No.14 & 14D is to be given at

Head Office.

Place: ______________
Date: ______________ Seal of the Firm CHARTERED ACCOUNTANTS

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 ANNEXURE 10
SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR 2009-2010

1. ACCOUNTING CONVENTIONS:

The Financial Statements are drawn up on historical cost basis, unless otherwise stated
and conform to statutory provisions and practices prevailing in India and the respective
countries in which foreign branches are situated.

2. TRANSLATION/CONVERSION OF FOREIGN CURRENCIES:

2.1 Bank has implemented revised AS-11 issued by ICAI and as advised by RBI.

2.2 For the purpose of AS-11, the foreign currency operations of the Bank are classified as under:
* Integral Operations
* Non Integral Operations

2.3 All Overseas Branches, OBU’s, Subsidiaries are treated as Non Integral Operations; and
Representative Offices are treated as Integral Operations.

2.4 For domestic and foreign integral operations, the transactions are recorded initially on weekly
average rate as advised by FEDAI and on quarterly closing for Balance Sheet items spot rate
of exchange announced by FEDAI for the accounting period is applied.

2.5 For non integral / International – Overseas operations at the end of each quarter P/L accounts
are translated by applying quarterly average rate as announced by FEDAI and Balance Sheet
items are translated at the closing spot rate of exchange announced by FEDAI for the
accounting period.

2.6 For domestic and foreign integral operation, the branches revalued all transactions of the
relevant accounting period at “Closing Spot Rate” announced by FEDAI on the closing date
and the difference between initial recording and quarterly revaluation is accounted through
Profit & Loss Account. Any reversals / payment of foreign currency assets & liabilities is done
at the weekly average closing rate of the preceding week and the difference between the
outstanding figure and the amount for which reversal / payment is made, is reflected in P/L a/c.

2.7 As far as Overseas branches are concerned, quarterly average rate is applied for translation of
all P/L items and B/S items and translated into Indian rupees at the closing spot rates at the
end of the quarter. Overseas subsidiaries also follow the same procedure.

2.8 The exchange differences on translation of financial statements of non integral operations are
not recognized as income or expense for the period but accumulated in a foreign currency
Translation Reserve until closure of the branch. On disposal / closure of the branch the
cumulative amount of exchange differences which have been deferred and which relate to that
branch will be recognized as income or as expense in the period in which the gain or loss on
disposal is recognized.

3. INVESTMENTS :

3.1 The Investment portfolio of the Bank is classified, in accordance with the Reserve Bank of
India guidelines, into:

a. “Held to Maturity” comprising Investments acquired with the intention to hold them till
maturity.

b. “Held for Trading” comprising Investments acquired with the intention to trade.

c. “Available for Sale” comprising Investments not covered by (a) and (b) above i.e. those
which are acquired neither for trading purposes nor for being held till maturity.

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3.2 Investments classified as “Held to Maturity” are carried at vetted average acquisition cost
unless it is more than the face value, in which case the premium is amortized over the
period remaining to maturity.
Investments classified as “Held to Maturity” include debentures/bonds which are deemed
to be in the nature of / treated as advances, for which provision is made by applying the
Reserve Bank of India prudential norms of Assets Classification and Provisioning
applicable to Advances, and Investments in Regional Rural Bank, Treasury Bills,
Commercial Papers, Indira Vikas Patras, Kisan Vikas Patras and Certificates of Deposits
which have been valued at carrying cost.
3.3 Profit/Loss on sale of Investments classified as “Held to Maturity” is recognized in the
Profit & Loss Account based on the weighted average cost / book value of the related
Investments and an amount equivalent of profit on sale of Investments in “Held to Maturity”
classification is appropriated to Capital Reserve Account.
3.4 Investments classified as ”Held for Trading” are marked to market scrip-wise and the
resultant net depreciation is recognized in the Profit and Loss Account, while the net
appreciation, if any is ignored.
3.5 Investments classified as “Available for Sale” are marked to market, scrip-wise and the
resultant net depreciation, if any, in each category disclosed in the Balance Sheet is
provided, while net appreciation, if any, is ignored.
3.6 In respect of non-performing securities, income is not recognised, and provision is made
for depreciation in the value of such securities as per Reserve Bank of India guidelines.
3.7 Cost of acquisition of Investments is net of Incentives, Front-end fees, Commission,
Brokerage and Stamp duty.
3.8 Profit / Loss on sale of Investments is recognised in the Profit and Loss Account based on
the weighted average cost/book value of the related investment. An amount equivalent of
the profit on sale of Investments in "Held to Maturity" category is appropriated to Capital
Reserve Account.

3.9 For the purpose of valuation of quoted investments in ”Held for Trading” and “Available for
Sale” categories, the market rates/quotes on the Stock Exchanges, the rates, declared by
Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives
Association (FIMMDA), are used.

Investments for which such rates/quotes are not available and valued as per norms laid
down by Reserve Bank of India, which are as under:

a Government/Approved - on Yield to Maturity basis.

securities

b Equity Shares, PSU - at book value as per the latest Balance Sheet (not more than 12
and Trustee shares months old), otherwise Re.1 per company.

c Preference Shares - on Yield to Maturity basis.

d PSU Bonds - on Yield to Maturity basis with appropriate credit spread mark-up.

e Units of Mutual Funds - at the latest repurchase price / NAV declared by the Fund in
respect of each scheme.

3.10 Investments are net of securities len,t and include securities borrowed under Repo
arrangements.

3.11 In respect of Investments at Overseas Branches, Reserve Bank of India guidelines or

those of the host countries, whichever are more stringent, are followed. In case of those
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 branches situated in countries where no guidelines are specified, the guidelines of the
Reserve Bank of India are followed.

4. INTEREST RATE SWAPS:

4.1 The interest rate swap transactions for hedging are accounted for on accrual basis and
transactions for trading are marked to market at fortnightly intervals in line with the
Reserve Bank of India guidelines.

4.2 For the purpose of valuation, the fair value of the total swap is computed on the basis of
the amount that would be receivable or payable on termination of the transactions of the
swap agreements as on the Balance Sheet date. Losses arising therefrom, if any, are
fully provided for while the profits, if any, are ignored.

4.3 a. The gross PV01 of all non-rupee derivatives contracts (including rupee-foreign currency
contracts but excluding the PV01 of derivatives contracts undertaken for Balance-Sheet
hedge) should be within 0.25% of the net worth of the Bank as on the last Balance-
Sheet date.
b. The Capital charge for market risk for the non-option derivativescontracts would be 3
times th PV01. PV01 will be calculated as stipulated by RBI.

5. ADVANCES:

5.1 Advances are net of amount received and held in Suit-filed Sundry Deposits, which is
under dispute by the borrower and is pendin for abjudication by the Court, Claims
Received and Provision made for Non-performing Advances in accordance with the
Prudential Norms prescribed by Reserve Bank of India and revised from time to time. In
respect of Advances made in overseas branches, Advances are classified in accordance
with stricter of the Prudential Norms prescribed by the Reserve Bank of India or local laws
of the host country in which Advances are made, wherever applicable.

5.2 Advances in India are classified as Standard, Sub-standard, Doubtful or Loss assets and
Provision for losses made on Sub-standard, Doubtful and Loss assets as per the
Prudential Norms of the Reserve Bank of India as under:

a. Sub-standard 10% / 20% (as applicable).

b. Doubtful 100% of the unsecured portion plus 20% / 30% / 100% of the
secured portion depending on the period for which the advance
has remained doubtful. However, in case of Doubtful advances
outstanding as on 31.03.2005, for more than 3 years, Provision
for secured portion is made upto 60% as on 31.03.2006, 75% as
on 31.03.2007 and 100% as on 31.03.2008.

c. Loss Assets 100%

5.3 a. Provision @ 0.40% is made of the Funded outstanding on a portfolio basison Standard
advances (including in respect of Investments by way of Debentures / Bonds in the
nature of Advances) with the Bank’s direct Advances to Agricultural and SME Sectors,
and is included under the head ‘Other Liabilities’ as per Reserve Bank of India
guidelines.

b. Provision @ 0.25 % is made for direct Advances to Agricultural and SME Sectors, in the
Standard Category.

5.4 In respect of Rescheduled / Restructured accounts, Provision is made for the sacrifice of
interest measured in present value terms as per Reserve Bank of India guidelines. The
said provision is included under the head ‘Other Liabilities’.

6. FIXED ASSETS:
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 Premises and other Fixed Assets are stated at historical cost except those Premises,
which have been revalued and appreciation, if any, on such revaluation, is credited to
Capital Reserve.

7. RESERVES AND SURPLUS:

Revenue and other Reserves include Statutory Reserves created by foreign branches as
per applicable local laws and Special Reserves created in earlier years as per
requirements of Income Tax Act, 1961.

8. REVENUE RECOGNITION :

Income is recognised on accrual basis, unless otherwise stated.

In view of uncertainty of collection of income in cases of Non-performing Advances and

Investments, such income is accounted for only on realisation.

Income from Fees, Commission other than on Government business, Exchange,

Brokerage, Discount on Foreign Bills Purchased and Interest on Overdue Bills/Advance
Bills are accounted for on actual realisation.

9. RETIREMENT BENEFITS TO EMPLOYEES:

Contribution to recognised Gratuity Fund, Pension Fund and provision for encashment of
accumulated leave and Additional Retirement Benefits are made on actuarial basis.

10. DEPRECIATION:

10.1 Depreciation on Fixed Assets in India except Computers, is provided under the written
down value basis at the rates prescribed in Schedule XIV to the Companies Act, 1956.

10.2 Depreciation on Fixed Assets outside India except Computers is provided as per local laws
or prevailing practices of the host countries.

10.3 Depreciation on Computers is provided on Straight Line Method at the rate of 33.33%, as
per the guidelines of Reserve Bank of India.

10.4 Depreciation on ATMs is provided on Straight Line Method at the rate of 20%.

10.5 While depreciation on additions is provided for full year, no depreciation is provided in the
year of sale / disposal.

10.6 Leasehold land is amortised over the period of lease.

11. TAXES ON INCOME:

Income Tax is provided according to provisions of the Income Tax Act, 1961.

Deferred Tax is provided for, subject to consideration of prudence, based on taxability of

income that arises in one period and which is capable of reversal in one or more
subsequent periods. While calculating the deferred tax assets / liabilities, tax rates and
laws that have been enacted or substantively enacted as on the Balance Sheet date are
applied.

12. IMPAIRMENT OF ASSETS:

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 Impairment losses (if any) on Fixed Assets (including revalued assets) are recognised in
accordance withe Accounting Standard 28 (”Impairment of Assets”) issued in this regard
by the Institute of Chartered Accountants of India.

13. CONTINGENT LIABILITIES:

Provision is made in accounts unless no reliable estimate can be made of the amount of
obligation or possibility of future cash flow is remote.

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 ANNEXURE 8

SCALE OF REMUNERATION AND TRAVELLING & HALTING EXPENSES PERMISSIBLE

FOR AUDIT FOR THE YEAR 2009-10
1. REMUNERATION:

AUDIT FEES, FEES FOR BRANCHES L.F.A.R. & TAX AUDIT PLUS SERVICE TAX
The scale of audit fees (subject to deduction of tax at sources as applicable) admissible to the
branch auditors for the audit of branches for the accounting year 2009-2010 advised by the Reserve
Bank of India are as under: -

Category of branches according to quantum of Audit Fees Fees Total fees 10% Total
advances as at 31.3.2010 fees for for Tax payable service amount
L.F.A.R Audit (2+3+4) tax + payable
.@ @ 15% educa- (5+6)
10% of of audit tion
audit fees cess
fees @ 3%
thereon
i.e.
10.3%
of
col.no.5
(1) (2) (3) (4) (5) (6) (7)

a) Upto Rs.75 lakhs

12500 1250 1875 15625 1609 17234
b) Over Rs.75 lakhs & upto Rs.150 lakhs
15000 1500 2250 18750 1931 20681
c) Over Rs.150 lakhs & upto Rs.300 lakhs 22500 2250 3375 28125 2897 31022
d) Over Rs.3 crores & upto Rs.5 crores 30000 3000 4500 37500 3863 41363
e) Over Rs.5 crores & upto Rs.10 crores 35000 3500 5250 43750 4506 48256
f) Over Rs.10 crores & upto Rs.20 crores 50000 5000 7500 62500 6438 68938
g) Over Rs.20 crores & upto Rs.30 crores 69000 6900 10350 86250 8884 95134
h) Over Rs.30 crores & upto Rs.50 crores 105000 10500 15750 131250 13519 144769
i) Over Rs.50 crores & upto Rs.75 crores 120000 12000 18000 150000 15450 165450
j) Over Rs.75 crores & upto Rs.125 crores 159000 15900 23850 198750 20471 219221
k) Over Rs.125 crores & upto Rs.175 crores 199000 19900 29850 248750 25621 274371
l) Over Rs.175 crores & upto Rs.300.00 crs.
250000 25000 37500 312500 32188 344688
m) Over Rs.300.00 crores & upto Rs.500.00
crores 282000 28200 42300 352500 36308 388808
n) Over Rs.500.00 crores
313000 31300 46950 391250 40299 431549

NOTE: 1. No separate TA/HA will be payable for LFAR & Tax Audit of branches.
2. For Branches/Offices not having advances portfolio, audit fee at rates mentioned under
category (a) above i.e. quantum of advances upto Rs.75 lac will be payable, as per RBI
instructions.

TRAVELLING ALLOWANCE:

15
 For Proprietors/Partners
First Class railway fare (air-conditioned railway
fare whenever they undertake the journey by
that class) or airfare (by economy class) or
actual cost of conveyance by bus/car/boat if
the route is not served by rail.
For Assistants
First Class railway fare (air-fare by economy
class as a special case whenever considered
necessary) or actual cost of conveyance by
bus/car/boat if the route is not served by rail.

HALTING ALLOWANCES:
The rates of Halting Allowance subject to production of bills/vouchers shall be as under: -

LODGING CHARGES:
Reimbursement of actual hotel expenses restricting to single room accommodation charges in
I.T.D.C. Hotels subject to the following:

Proprietors/Partners of Firm: 4* Hotel

Qualified Assistant: 3* Hotel

Unqualified Assistant: 1* Hotel (Non-AC)

BOARDING CHARGES:

Major A class Area - I Other Places

Cities
Rs. Rs. Rs.
Proprietors/Partners of firm 500/- 400/- 325/-

Qualified Assistants 450/- 350/- 313/-

Unqualified Assistants 350/- 313/- 275/-

Boarding charges as above shall be subject to production of bills and when no bills are
produced, boarding charges @ 60% of the rates prescribed above to cover the boarding and
other incidental expenses will be paid. Where no staying facilities are available and auditors stay
at some other places and undertake daily journey to the places of audit their expenses towards
daily journey will be restricted to admissible daily conveyance charges as per para 2(c) below.

DAILY CONVEYANCE CHARGES:

The actual local conveyance charges incurred by auditors while working away from their head
quarters for conducting the bank's audit, not exceeding Rs.188/- per day for proprietors/
partners, Rs.94/- and Rs.75/- per day for qualified assistants and unqualified assistants,
respectively will be reimbursed on the basis of self declaration.

In the case of local auditors, if the distance between auditors’ office and bank's office/ branch is
beyond 8 kms. Actual expenditure not exceeding Rs.188/- per day for proprietors/ partners,
Rs.94/- and Rs.75/- per day for qualified assistants and unqualified assistants, respectively,
may be reimbursed on a self-declaration basis.

However, the reimbursement of such expenses shall not exceed 10% of the audit fees payable
to the respective auditors.

Bank should call for such details as are considered necessary for verification of bills and
auditors should furnish such details for verification of the actual expenses.
16
It is necessary to submit your claims for actual expenses incurred for traveling, halting etc. for
conducting the audit work, duly supported by proper bills/vouchers/cash memos etc.

The traveling and halting expenses should be kept to the minimum.

Where the branch auditors have an office at the place where the branches/offices to be audited
are situated, they will not be eligible for traveling and halting expenses.

Where branch auditors have offices at different centers, they should ordinarily be reimbursed
traveling expenses for branch audits from their offices nearest to the branch.

Expenses such as postages, telegrams, telephones and stationery will not be reimbursed.

Auditors (Principal and Assistants) should undertake the journey for visits to branch situated
outside their headquarters generally as per R.B.I. norms. However, when absolutely unavoidable
and necessary for special reasons/ circumstances, they may obtain prior approval of the Zonal
Office for use of their own/hired car for audit purpose. The expenses in such cases will be paid
as may be decided by our Office.

Audit should be completed in one visit. If subsequent visit is necessitated due to delay on the
part of the branch, certificate obtained from branch should be enclosed with bill, to avoid further
correspondence.

No halting expenses are payable, if night halt is not involved. Further, if outstation branches are
located at distance which can be covered by daily up down, reimbursement of to and fro
traveling for more than one visit will be subject to maximum of Rs.30/- per day per person, while
no halting expenses are payable.

The rates stipulated by the Reserve Bank of India are only ceiling rates and not the floor rates to
be claimed uniformly in all cases and for all classes of branches (i.e. rural, semi-urban, urban).
Our Bank will consider the bills only for reasonable actual expenditure incurred. The necessary
bills and vouchers in support of the actual admissible expenses incurred by the auditors will
have to be submitted in support of their claims. Whenever the expenditure supported by the bills
tendered is in the opinion of the Bank unreasonable or on the high side, the settlement will be
made at a flat rate which is considered reasonable, depending upon the area rural, semi-urban,
urban) in which the branch is situated. Please note that the Bank will not reimburse the
expenditure of personal nature.

17
 ANNEXURE 9

CLAIM FORM IN WHICH TRAVELLING & HALTING EXPENSES BILL IS TO BE SUBMITTED TO

THE CONCERNED ZONAL AUTHORITIES FOR EACH BRANCH SEPARATELY.

1 a) Name of the Auditors :

b) Particulars of offices / branches (with full
address) :
2. Name of the branch audited for the period
ended 31.3.2010. :
3. Total outstanding advances as per the
Balance Sheet as at 31.3.2010. :
4. One way distance of the branch under audit
from your office : Kms.
5. Name of the Date of visits Principal Qualified Other Assi-
person/s who visited From To Partner Assistant tant.
the branch

Total number of man days taken for audit : _________

6. Mode of travel\conveyance used (Pl. mention
travel by rail/ bus etc.) :

A) If travel by own car/hired car No. (as per __________________________________

permission by Zonal Office.) : __________________________________

i) Total Kms. covered for out ward journey : __________________________________

ii) Total Kms. covered for inward journey. : __________________________________

iii) Total Kms. of (i) & (ii) above @ rate of __________________________________

(As permitted by Zonal Office) :

B) If travel by train
i) Amt. incurred for outward journey. : __________________________________

ii) Amt. incurred for return journey. : __________________________________

Total of A (iii) + B (i) & (ii) (Please

mention ticket No.) : __________________________________
7. HALTING EXPENSES INCURRED :
A) Lodging/Hotel accommodations
From : _________________
To : _________________
i) No. of partners/Asstts. : _________________

ii) No. of day stayed : _________________

iii) Expenses incurred : _________________

18
 B) BOARDING CHARGES
From : _________________
To : _________________
i) No. of partners/Asstts. : _________________

ii) No. of day claimed : _________________

iii) Total expenses incurred : _________________

8. DAILY CONVEYANCE CHARGES INCURRED :

From : _________________
To : _________________
i) No. of partners/Asstts. : _________________

ii) No. of day claimed : _________________

iii) Total amount claimed at the rate of Rs.____

per day.

SUMMARY OF EXPENSES INCURRED AND CLAIMED BY WAY OF REIMBURSEMENT.

For Principal For Qualified For other Total

Partner Assistant Assistants. (A+B+C)
(A) (B) (C) (D)

1. Total man-days taken for

audit.

2 Fare claimed.

3. Halting Expenses.

a) Lodging Expenses.

b) Boarding Expenses.

4. Daily conveyance

TOTAL

NOTE: We hereby declare that the daily conveyance expenses have been actually incurred by us. We
further certify that all the expenses claimed by us for our principal/partners, qualified and
Unqualified assistants, in our bills, have been actually incurred by us and they do not include any
element of profit.

---------------------------

(Auditors’ Signature)

19
 ANNEXURE 7

BANK OF BARODA
(Head Office: Mandvi, Baroda)

BRANCH ________________________
REGION ________________________
ZONE ________________________

LONG FORM AUDIT REPORT AS AT 31.03.2010

NAME & _______________________

ADDRESS _______________________
OF _______________________
THE AUDITORS _______________________

20
 BRANCH AS ON 31.3.2010

NUMERIC CODE _______________ ADVANCES (Rs.) ___________

NO.

ALPHA CODE _______________ DEPOSITS (Rs.) ___________

QUESTIONNAIRE IN CONNECTION WITH THE LONG FORM AUDIT REPORT (LFAR)

IN CASE OF BANK BRANCHES

The following paragraphs list the matters which the branch auditors of banks are expected to
comment upon in their Long Form Audit Reports. The appendix to this questionnaire contains
questions that are relevant to specialized branches dealing in foreign exchange transactions,
recovery of non-performing assets, clearing house operations and branches having very large
advances. Auditors of foreign branches of Indian Banks should also furnish this report. In the
case of such branches, reference to the Reserve Bank of India should be construed to include
the Reserve Bank of India, as well as the relevant regulating authority of the foreign country
where the branch is located.

Where any of the comments made by the auditors in their LFAR s adverse, they should consider
whether a qualification in their main report is necessary. It should not, however, be assumed that
every adverse comments in the LFAR would necessarily result in a qualification in the main
report. In deciding whether a qualification in the main report is necessary, the auditors should use
their judgement in the facts and circumstances of each case. Where the auditors have any
reservation or adverse remarks with regard to any of the matters to be dealt with in their Long
Form Audit Reports, they may give the reasons for the same. Also, where relevant, instances of
situations giving rise to their reservations or adverse remarks may also be given.

I ASSETS : Remarks/Observations of Branch

Auditors

1. CASH :

a) Does the branch generally carry cash balances

that vary significantly from the limits fixed by the
controlling authorities of the Bank? Whether
excess balances have been reported to the
controlling authorities of the Bank?
b) Does the branch hold adequate insurance covers
for cash-on-hand and cash-in-transit?
c) Is cash maintained in effective joint custody of
two or more officials, as per instructions of the
controlling authorities of the Bank?
d) Have the cash balance at the branch been
checked at periodic intervals as per the
procedure prescribed by the controlling
authorities of the Bank?

21
2. BALANCES WITH RESERVE BANK OF INDIA,
STATE BANK OF INDIA & OTHER BANKS :

a) Were balance confirmation certificates obtained

in respect of outstanding balances as at the year-
end and whether the aforesaid balances have
been reconciled? The nature and extent of
differences should be reported.
b) Your observations on the reconciliation
statements may be reported in the following
manner :
i) Cash transactions remaining unresponded
(give details) :
ii) Revenue items requiring adjustment/ write-off
(give details) :
iii) Old outstanding balances remaining unexplained
/ unadjusted. Give details for :
- Outstanding between six months and one
year and
- One year and above
c) In case any item deserves special attention of
the management, the same may be reported.
3. MONEY AT CALL AND SHORT NOTICE:

Has the branch kept money at call and short

notice during the year? If so, whether
instructions/ guidelines, if any, laid down by the
controlling authorities of the Bank have been
complied with?
4. INVESTMENTS :

(A) For Branches in India

a) Are there any investments held by Branches on
behalf of Head Office / other offices of the Bank?
If so, whether these have been made available for
physical verification or evidences have been
produced with regard to the same where these
are not in possession of the Branch?
b) Whether any amounts received as income on
such investments have been reported to the Head
Office?
c) In respect of investments held by Branches on
behalf of Head Office / other offices of the Bank
whether any income is accrued / received and
recognized as income of the branch contrary to
the instructions of the controlling authorities of the
Bank?
d) Whether there are any matured or overdue
investments that have not been encashed? If so,
give details.
e) Whether the Guidelines of the Reserve Bank of
India regarding Transactions in Securities have
been complied with.
Whether the Guidelines of the Reserve Bank of
India regarding Valuation of Investments have
been complied with.
(B) For Branches outside India
a) In respect of purchase and sale of investments,

22
 has the branch acted within its delegated
authority, having regard to the instructions /
guidelines in this behalf issued by the controlling
authorities of the Bank?
b) Have the investments held by the branch
whether on its own account or on behalf of the
Head Office / other branches been made
available for physical verification? Where the
investments are not in the possession of the
branch, whether evidences with regard to their
physical verification have been produced?

c) Is the mode of valuation of investments in

accordance with the RBI guidelines or the norms
prescribed by the relevant regulatory authority of
the country in which the branch is located which
ever are more stringent?
d) Whether there are any matured or overdue
investments that have not been encashed? If so,
give details.
5. ADVANCES :

(The answers to the following questions may be based

on the auditor's examination of all large advances and
test checks of other advances. In respect of large
advances, all cases of major adverse features,
deficiencies etc. should be reported. In respect of
other advances, the auditor may comment upon the
relevant aspects generally, along-with instances of
situations giving rise to his reservations or adverse
remarks. For purposes of the above, large advances
are those in respect of which the outstanding amount
is in excess of 5% of the aggregate advances of the
branch or Rs.2 crores, whichever is less).
a) Credit Appraisal:
i) In your opinion, has the branch generally
complied with the procedures / instructions of
the controlling authorities of the Bank
regarding loan applications, preparation of
proposals for grant / renewal of advances,
enhancement of limits, etc. including adequate
appraisal documentation in respect thereof.
b) Sanctioning / Disbursement:
i) In the cases examined by you, have you come
across instances of credit facilities having
been sanctioned beyond the delegated
authority or limit fixed for the Branch? Are
such cases promptly reported to higher
authorities?
ii) In the cases examined by you, have you come
across instances where advances have been
disbursed without complying with the terms
and conditions of the sanction? If so, give
details of such cases.
c) Documentation :
i) In the cases examined by you, have you come
across instances of credit facilities released by
the branch without execution of all the
necessary documents? If so, give details of

23
 such cases.
ii) In respect of advances examined by you,
have you come across cases of deficiencies in
documentation, non-registration of charges,
non-obtaining of guarantees etc? If so, give
details of such cases.
iii) Whether advances against lien of deposits
have been properly granted by marking a lien
on the deposit in accordance with the
guidelines of the controlling authorities of the
Bank.

d) Review /Monitoring /Supervision

i) Is the procedure laid down by the controlling
authorities of the Bank, for periodic review of
advances including periodic balance
confirmation/ acknowledgement of debts,
followed by the branch? Provide analysis of
the accounts overdue for review / renewal

- between 6 months and 1 year and

- over 1 year

ii) Are the stock / book debt statements and

other periodic operational data and financial
statements etc., received regularly from the
borrowers and duly scrutinized? Is suitable
action taken on the basis of such scrutiny in
appropriate cases?

iii) Whether there exists a system of obtaining

reports on stock audits periodically? If so,
whether the branch has complied with such
system?

iv) Indicate the cases of advances to non-

corporate entities with limits beyond Rs.10
lakhs where the Branch has not obtained the
accounts of borrowers, duly audited under the
RBI guidelines with regard to compulsory
audit under any other statute.

v) Has the inspection or physical verification of

securities charged to the Bank been carried
out by the Branch as per the procedure laid
down by the controlling authorities of the
Bank?

vi) In respect of advances examined by you,

have you come across cases of deficiencies in
value of securities and inspection thereof or
any other adverse features such as frequent /
unauthorized overdrawing beyond limits,
inadequate insurance coverage etc?

vii) In respect of leasing finance activities, has the

Branch complied with the guidelines issued by
the controlling authorities of the Bank relating
to security creation, asset inspection,

24
 insurance etc? Has the Branch complied with
the accounting norms prescribed by the
controlling authorities of the Bank relating to
such leasing activities?

viii) Are credit card dues recovered promptly?

ix) Has the branch identified and classified
advances into standard / sub standard /
doubtful / loss assets in line with the norms
prescribed by the Reserve Bank of India (The
auditor may refer to the relevant HO
instructions for identification of NPAs and
Classification of Advances).
x) Where the auditor disagrees with the branch
classification of advances into standard / sub
standard / doubtful / loss assets, the details of
such advances with reasons should be given.
Also indicate whether suitable changes have
been incorporated / suggested in the
Memorandum of Changes.

xi) Have you come across cases where the

relevant Controlling Authority of the bank has
authorized legal action for recovery of
advances or recalling of advances but no such
action was taken by the branch? If so, give
details of such cases.

xii) Have all non-performing advances been

promptly reported to the relevant Controlling
Authority of the Bank? Also state whether any
rehabilitation programme in respect of such
advances has been undertaken and if so, the
status of such programme.

xiii) Have appropriate claims for DICGC and

Export Credit Guarantee / Insurance and
subsidies, if any been duly lodged and
settled? The status of pending claims giving
year wise break up of number and amounts
involved should be given in the following
format.

Particulars Number Amount (Rs.)

Claims as at the beginning of the year (give
year-wise details)
Further claims lodged during the year
Total A
Amounts representing
(a) claims accepted / settled (give year-wise
details)
(b) claims rejected (give year-wise details)
Total B
Balance as at the year end (give year-wise
details)
A - B

xiv. In respect of non-performing assets, has the branch

obtained valuation reports from approved valuers for
25
 the fixed assets charged to the Bank, once in three
years, unless the circumstances warrant a shorter
duration ?

xv. In the cases examined by you has the branch

complied with the Recovery Policy prescribed by the
controlling authorities of the bank with respect to
compromise / settlement and write-off cases? Details
of the cases of compromise / settlement and write-off
cases involving write-offs / waivers in excess of
Rs.50.00 lakhs may be given.
xvi. List the major deficiencies in credit review,
monitoring and supervision.

e) Guarantees and Letters of Credit

i) Details of outstanding amounts of guarantees invoked and funded by the branch at
the end of the year may be obtained from the management and reported in the
following format:
(a) Guarantees invoked, paid but not adjusted:
Sr.No. Date of Name of Name of Amount Date of Remarks
Invocation the party the recovery
beneficiary

(b) Guarantees invoked but not paid

Sr.No. Date of Name of Name of Amount Date of Remarks
Invocation the party the recovery
beneficiary

(ii) Details of the outstanding amounts of letters of credit and co-acceptances funded
by the Branch at the end of the year may be obtained from the management and
reported in the following format:
Sr.No. Date of Name of Nature Amount Date of Remarks
Funding the party (LC/co- recovery
acceptance
etc.)

6. OTHER ASSETS :

a) Stationery and Stamps :

(i) Does the system of the bank ensure adequate
internal control over issue and custody of
stationery comprising of security items (Term
Deposits Receipts, Drafts, Pay Orders, Cheque
Books, Travellers' cheques, Gift Cheques, etc.)?
Whether the system is being followed by the
branch?
(ii) Have you come across cases of missing / lost
items of such stationery?

26
 b) Suspense Accounts/Sundry Assets:
i) Does the system of the bank ensure expeditious
clearance of items debited to Suspense Account?
Details of old outstanding entries may be obtained
from the branch and the reasons for delay in
adjusting the entries may be ascertained. Does
the scrutiny of the accounts under various sub-
heads reveal balances, which in your opinion are
not recoverable and would require a provision/
write-off? If so, give details in the following
format:
Year
Amount (Rs)
Remarks

Does your test check indicate any unusual items in these accounts? If so,
Report their nature and the amounts involved.

II LIABILITIES: Remarks/Observations of Branch

Auditors

01. Deposits
(i) Have the controlling authorities of the Bank laid
down any guidelines with respect to conduct and
operations of inoperative accounts? In the cases
examined by you, have you come across
instances where the guidelines laid down in this
regard have not been followed? If yes, give details
thereof
(ii) After the balance sheet date and till the date of
audit, whether there have been any unusual large
movements (whether increase or decrease) in the
aggregate deposits held at the year-end? If so,
obtain the clarifications from the management and
give your comments thereon.
(iii) Are there any overdue / matured term deposits at
the end of the year? If so, amounts thereof should
be indicated.
2. Other Liabilities
Bills Payable, Sundry Deposits etc.
(i) The number of items and the aggregate amount of
old outstanding items pending for three years or
more may be obtained from the branch and
reported under appropriate heads. Does the
scrutiny of the accounts under various sub-heads
reveal old balances If so, give details in the
following format?
Year
No. of Items
Amount Rs.
Remarks
(ii) Does your test check indicate any unusual items
or material withdrawals or debits in these
accounts? If so, report their nature and the
amounts involved.
03. Contingent Liabilities
List of major items of the contingent liabilities
(other than constituents’ liabilities such as
guarantees, letter of credit, acceptances,

27
endorsements etc) not acknowledged by the
Branch?

28
III PROFIT & LOSS ACCOUNT: Remarks/Observations of Branch
Auditors

01. Whether the branch has a system to compute

discrepancies in interest / discount and for timely
adjustment thereof in accordance with the
guidelines laid down in this regard by the
controlling authorities of the Bank? Has the test
checking of interest revealed excess / short credit
of a material amount? If so, give details thereof.
02. Has the branch complied with the Income
Recognition norms prescribed by RBI? (The
Auditor may refer to the instructions of the
controlling authorities of the Bank regarding
charging of interest on non-performing assets).
03. Whether the branch has a system to compute
discrepancies in interest on deposits and for timely
adjustment of such discrepancies in accordance
with the guidelines laid down in this regard by the
controlling authorities of the Bank? Has the test
check of interest on deposits revealed any
excess / short debit of material amount? If so, give
details thereof.
04. Does the bank have a system of estimating and
providing interest accrued on overdue / matured
term deposits?
05. Are there any divergent trends in major items of
income and expenditure, which are not
satisfactorily explained by the branch? If so, the
same may be reported upon. For this purpose, an
appropriate statement may be obtained from the
branch management explaining the divergent
trends in major items of income and expenditure.

IV G E N E R A L: Remarks/Observations of Branch
Auditors

01. Books and Records

a) In case any books of account are maintained
manually, does general scrutiny thereof indicates
whether they have been properly maintained, with
balances duly inked out and authenticated by the
authorized signatories?
b) In respect of computerized branches :
 Whether hard copies of accounts are printed
regularly?
 Indicate the extent of computerization and the
areas of operation covered.
 Are the access and data security measures
and other internal controls adequate?
 Whether regular back-ups of accounts and off-
site storage are maintained as per the guidelines of
the controlling authorities of the Bank?
 Whether adequate contingency and disaster
recovery plans are in place for loss/ encryption of
data?
 Do you have any suggestions for the
improvement in the system with regard to
29
 computerized operations of the Branch?
02. Reconciliation of Control and Subsidiary Records
Have the figures, as at the year-end, in the control
and subsidiary records been reconciled? If not, the
last date up to which such figures have been
reconciled should be given under the respective
heads, preferably in the following format :
Account
Date

General Ledger Balance (Rs.)

Subsidiary Balance (Rs.)

Last date on Which balanced

03. Inter Branch accounts

(i) Does the branch forward on a daily basis to a
designated cell / head office, a statement of debit /
credit transactions in relation to other branches
(ii) Does a check of the balance in the Head Office
Account as shown in the said statement during and
as at the year-end reveal that the same is in
agreement with the Head Office Account in the
general ledger?
(iii) Are there any outstanding debits in the Head Office
Account in respect of inter branch transactions?
(iv) Does the branch expeditiously comply with /
respond to the communications from the
designated cell / Head Office as regards
unmatched transactions? As at the year-end are
there any unresponded / uncomplied queries or
communications? If so, give details.
(v) Have you come across items of double responses
in the Head Office account? If so, give details.
(vi) Are there any old / large outstanding transactions /
entries at debits as at year-end which remain
unexplained in the accounts relatable to inter
branch adjustments?
04. Audits / Inspection
i) Is the branch covered by concurrent audit or any
other audit / inspection during the year?
ii) In framing your audit report, have you considered
the major adverse comments arising out of the
latest report of the previous auditors, concurrent
auditors, stock auditors or internal auditors, or in
the special audit report or in the Inspection Report
of the RBI? State the various adverse features
persisting in the branch, though brought out in
these audit / inspection reports.
05. Frauds
Furnish particulars of frauds discovered during the
year under audit at the branch, together with your
suggestions, if any, to minimize the possibilities of
their occurrence.
06. Miscellaneous
i) Does the examination of the accounts indicate
possible window dressing?
30
ii) Does the branch maintain records of all the fixed
assets, acquired and held by it irrespective of
whether the values thereof or depreciation thereon
have been centralized? Where documents of title in
relation to branch or other branches are available
at the ranch, whether the same have been verified.
iii) Are there any other matters, which you as a branch
auditor would like to bring to the notice of the
management or the Central Statutory Auditors?

31
 APPENDIX

QUESTIONNAIRE APPLICABLE TO SPECIALISED BRANCHES

A For Branches dealing in Foreign Exchange Transactions

1. Are there any material adverse features pointed out in the reports of concurrent auditors, interna
auditors and / or the Reserve Bank of India’s inspection report which continue to persist in relation to
NRE/NRO/NRNR/FCNR-B/EEFC/RFC and other similar deposit accounts. If so, furnish the particular
of such adverse features.

2. Whether the Branch has followed the instructions and guidelines of the controlling authorities
of the bank with regard to the following in relation to the foreign exchange, if not, state the
irregularities:

(a) Deposits
(b) Advances
(c) Export Bills
(d) Bills for Collection
(e) Dealing Room Operations (where branch has one)
(f) Any other area

3. Obtain a list of all Nostro Accounts maintained / operated by the Branch from the branch
management.

(a) Are the Nostro Accounts regularly operated?

(b) Are periodic balance confirmations obtained from all concerned overseas branches /
correspondents?
(c) Are these accounts duly reconciled periodically? Your observations on the reconciliation ma
be reported.

4. Does the Branch follow the prescribed procedures in relation to maintenance of Vostro
Accounts?

B For branches dealing in very large advances such as corporate banking branches and
industrial finance branches or branches with advances in excess of Rs. 100 crores.

1. In respect of borrowers with outstanding of Rs.2.00 crores and above, the information in the
enclosed format should be obtained from the Branch Management. Comments of the Branch
Auditor on advances with significant adverse features and which might need the attention of the
management / Central Statutory Auditors should be appended to the Long Form Audit Report.

2. What, in your opinion, are the major shortcomings in credit appraisal, monitoring etc.?

3. List the accounts (with outstanding in excess of Rs.1.00 crore), that have either been
downgraded or upgraded with regard to their classification as Non Performing Asset or
Standard Asset during the year and the reasons therefore.

C For branches dealing in recovery of Non Performing Assets such as Asset Recovery
Branches

1. In respect of borrowers with outstanding of Rs.2.00 crores and above, the information
in the enclosed format should be obtained from the Branch Management. Comments
of the Branch Auditor on advances with significant adverse features and which might
need the attention of the management / Central Statutory Auditors should be
appended to the Long Form Audit Report.

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 2. List the accounts (with outstanding in excess of Rs.1.00 crore), which been upgraded from
Non Performing to Standard during the year and the reasons therefore.

3. Whether the Branch has a system of updating periodically, the information relating to the
valuation of security charged to the bank?

4. Age-wise analysis of the recovery suits filed and pending may be furnished.

5. Is the Branch prompt in ensuring execution of decrees obtained for recovery from the
defaulting borrowers? Also list the time barred decrees, if any, and reasons therefore.

6. List the recoveries and their appropriation against the interest and the principal and the
accounts settled/written off/closed during the year.

7. List the new borrower accounts transferred to the Branch during the year. Have all the
relevant documents and records relating to these borrower accounts been transferred to the
Branch? Has the Branch obtained confirmation that all the accounts of the borrower
(including non-fund based exposures and deposits pending adjustment/margin deposits)
been transferred to the Branch?

D For branches dealing in Clearing House Operations, normally referred to as Service Branches

1. Does the branch have a system of periodic review of the outstanding entries in clearing
adjustment accounts? In your view has the system generally been complied with?

2. Whether review of the clearing adjustment accounts (inwards/outwards) reveals any

old/large/unusual outstanding entries which remain unexplained? Give year-wise break-up of
outstanding in number and value:

* Inward Clearing
Number Value
Normal Clearing
High Value Clearing
Inter-Branch Clearing
National Clearing
Returned/Dishonoured Clearing

* Outward Clearing
Number Value
Normal Clearing
High Value Clearing
Inter-Branch Clearing
National Clearing
Returned/Dishonoured Clearing

3. Has the Branch strictly followed the guidelines of the controlling authority of the bank with
respect to operations related to clearing transactions? Comment on the systems and
procedures followed by the Branch in this regard.

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 ANNEXURE TO THE LONG FORM AUDIT REPORT

(FOR LARGE IRREGULAR/CRITICAL ADVANCE ACCOUNTS)

(To be obtained from the Branch Management by the Branch Auditors of Branches dealing in
large advances/Asset Recovery Branches)

1. Name of the Borrower

2. Address

3. Constitution

4. Nature of business/activity

5. Other units in the same group

6. Total exposure of the branch to the Group

Fund Based (Rs. In lakhs)

Non Fund Based (Rs. In lakhs)

7. Name of Proprietor/Partners/Directors

8. Name of the Chief Executive, if any

9. Asset Classification by the Branch

(a) as on the date of current audit

(b) as on the date of previous Balance Sheet

10. Asset Classification by the Branch Auditor

(a) as on the date of current audit

(b) as on the date of previous Balance Sheet

11. Are there any adverse features pointed out in relation

to asset classification by the Reserve Bank of India
Inspection or any other audit.

12. Date on which the asset was first

classified as NPA (where applicable)

13. Facilities sanctioned:

Date of Nature Limit Prime Collateral Margin Balance outstanding

Sanction of (Rs. In Security Security % at the year-end
facilities Lac) Current Previous
Year Year

Provision made : Rs. ____________ Lac

14 Whether the advance is a consortium advance or

an advance made on multiple-bank basis.

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15 If Consortium,

(a) Names of participating banks

with their respective shares

(b) Name of the Lead Bank in Consortium

16 If on multiple banking basis, names of other banks and

evidence thereof

17 Has the Branch classified the advance under the

Credit Rating norms in according with the guidelines
of the controlling authorities of the Bank

18 (a) Details of verification of primary security

and evidence thereof;
(b) Details of valuation and evidence thereof.

Date verified Nature of Security Value Valued by

Insured for Rs._______ Lac (expiring on ________)

19 (a) Details of verification of collateral y security

and evidence thereof;
(b) Details of valuation and evidence thereof.

Date verified Nature of Security Value Valued by

Insured for Rs._______ lakhs (expiring on ________)

20 Give details of the Guarantee in respect of the advance

(a) Central Government Guarantee

(b) State Government Guarantee
(c) Bank Guarantee or Financial Institution Guarantee
(d) Other Guarantee
Provide the date and value of the Guarantee in respect of the above
21 Compliance with the terms and conditions of the sanction.

Terms and Conditions Compliance

(i) Primary Security
a Charge on primary security
b Mortgage of fixed assets
c Registration of charges with Registrar of Companies
d Insurance with date of validity of Policy

(ii) Collateral Security

a Charge on primary security
b Mortgage of fixed assets
c Registration of charges with Registrar of Companies
d Insurance with date of validity of Policy

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 (iii) Guarantees – Existence and execution of valid guarantees
(iv) Asset coverage to the branch based upon the arrangement
(i.e. consortium or multiple bank basis)
(v) Others
a Submission of Stock Statements/Quarterly Information
Statements and other Information Statements
b Last inspection of the unit by the Branch Officials:
Give the date and details of errors/omissions noticed.
c In case of consortium advances, whether copies of
documents executed by the company favouring the
consortium are available.
d Any other area of non-compliance with the terms and
conditions of sanction

22 Key financial indicators for the last two years and projections for the current year:

(Rs. In lakhs)
Indicators Audited Audited Estimates for
year ended year ended year ended
31st March____ 31st March____ 31st March____
Turnover
Increase in turnover % over
previous year
Profit before depreciation,
interest and tax
Less: Interest
Net Cash Profit before tax
Less: Depreciation
Less: Tax
Net Profit after Depreciation
and Tax
Net Profit to Turnover Ratio
Capital (Paid-up)
Reserves
Net Worth
Turnover to Capital
Employed Ratio (the term
capital employed means
the sum of Net Worth and
Long Term Liabilities)
Current Ratio
Stock Turnover Ratio
Total Outstanding Liabilities/
Total Net Worth Ratio
In case of listed companies,
Market Value of Shares
(a) High
(b) Low; and
(c) Closing
Earnings Per Share
Whether the accounts were
audited?
If yes, upto what date; and
are there any audit
qualifications

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23 Observations on the operations in the account:

Excess over drawing power Excess over limit

1. No. of occasions on which the
balance exceeded the drawing
power / sanctioned limit (give details)
Reasons for excess drawings, if any.
Whether excess drawings were
reported to the Controlling Authority
and approved
(Rs. In lakhs)
Debit Summation Credit Summation
2. Total summation in the account
during the year
Less: Interest
Balance

24 Adverse observations in other audit reports / Inspection Reports / Concurrent Auditor’s Report /
Internal Audit Report / Stock Audit Report / Special Audit Report or Reserve Bank of India
Inspection with regard to:

(i) Documentation
(ii) Operations
(iii) Security/Guarantee; and
(iv) Others

25 Branch Manager’s overview of the account and its operation.

(a) In case the borrower has been

identified/classified as Non Performing
Asset during the year, whether any
unrealized income including income
accrued in the previous year has been
accounted as income, contrary to the
Income Recognition Norms.
(b) Whether any action has been initiated
towards recovery in respect of accounts
identified/classified as Non Performing
Assets.

Date: ____________ Branch Seal Branch-in-charge

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