Webinar on Audit of Bank

Branches

BORIVALI (CENTRAL) CPE STUDY

CIRCLE

Major Issues in LFAR – Advances

(including NPA) & Other Areas

Pankaj Tiwari
CNK & Associates LLP
 DISCLAIMER
2

 Views expressed herein may not necessarily reflect the views of the firm.
 A presentation which raises ideas and concepts does not amount to an
opinion of the firm or of the author but should be merely viewed as
matters having potential possibility.
 Presentations are intended to be dissuasive and not conclusive.
 A presentation is not a replacement for a formal opinion on a point of law
which may require to be addressed.
 The information and views contained in this presentation are to be
viewed with caution and should be appropriately considered.
 Information provided herein is only for the benefit of the recipients and is
not to be shared with any other person without our or ICAI’s consent.
Relevant Circulars for FY 2021-22:
 Master Circular/Master Directions: relating to Advances

❑ Master Circular on Prudential norms on Income Recognition, Asset

Classification and Provisioning (IRAC) dated October 1,2021 along with
classification issued on November 12, 2021

❑ Master Directions on Frauds – Classification and Reporting by

commercial banks and select FI- July 2017- RFA & EWS mechanism

❑ Master Direction-Priority Sector Lending-Targets and Classification

(amended from time to time)- Certificate from SBA’s

❑ Master Direction - Know Your Customer (KYC) Direction, 2016- New

LFAR clauses

❑ Master Direction - Lending to Micro, Small & Medium Enterprises

(MSME) Sector- various relaxation
Relevant Circulars for FY 2021-22:
 Other Circular/Notifications: relating to Advances & Other Areas

❑ New Definition of Micro, Small and Medium Enterprises -

Addition of Retail and Wholesale Trade dated July 7,2021

❑ Resolution Framework 2.0 – Resolution of Covid-19 related

stress of Micro, Small and Medium Enterprises (MSMEs) dated
May 5,2021

❑ Resolution Framework – 2.0: Resolution of Covid-19 related

stress of Individuals and Small Businesses dated May 5,2021

❑ Guidelines for Implementation of the circular on Opening of

Current Accounts by Banks- LFAR Reporting
Relevant Circulars for FY 2021-22:
 Other Circular/Notifications: relating to Advances & Other Areas

❑ Long Form Audit Report (LFAR) – Review- September 5, 2020- New

Format of LFAR

❑ Automation of NPA- Classification & Provision- September 14, 2020

❑ To be implemented by 30th June,2021;
❑ Manual intervention- on classification & provisioning to be
removed;
❑ NPA classification to be made as day-end process- DAILY NPA;
❑ System should be audited by independent expert
Changes to remember:

FY 2020-21 FY 2021-22

5th September 14th

1st October 12th November
2020 September
2021 2021 & 15th
New Format of 2020
IRAC Norms February 2022
LFAR Automation of
2.0 IRAC
NPA
Clarification
Relevant Circulars for FY 2021-22:
 Changes in IRAC norms- Banks
❑ Earlier requirements:

❑ New requirements:
 Relevant Circulars for FY 2021-22:
 Major points of clarifications - 12th November 2021 circular:
❑ Specification of due date/repayment date in loan agreement

❑ Classification of SMA & NPA –part of day-end process

❑ Clarification regarding definition of ‘out of order’

❑ NPA classification in case of interest payments

❑ Upgradation to standard status- not relevant for banks

❑ Income recognition policy in case of loans with moratorium on interest

❑ Consumer education
 Relevant Circulars for FY 2021-22:
 Usual day-end process in case independent system used for NPA:
1
Source
System(Finacle NPA System
etc.)
2
▪ Asset
▪ Customer
1- Data Transfer on Classification-
Database
from Source system to SSA/DB/Loss
▪ Type of Facility
NPA System ▪ Provision on
▪ Position of
NPA
Demand &
▪ Interest
Recovery 2- Asset classification
reversal on
▪ Flag of tagging from NPA
downgrading
Restructuring system to source
▪ Upgradation
etc. system with correct
of NPA A/c
NPA date
 Relevant Circulars for FY 2021-22:
 Classification of SMA & NPA –part of day-end process:

Due date Overdue date SMA NPA

31/03/21 01/04/21 01/04/21 30/06/21

Due date Overdue date SMA NPA

31/03/21 31/03/21 31/03/21 29/06/21
❑ Different banks were following different practice of identification of account as NPA-
monthly/quarterly/daily
❑ September 2020 circular and November 2021 circulars now requires SCB to identify
the NPA on daily basis through system- June 2021
❑ No exceptions are given for Saturday/Sunday/Holidays- NPA process need to run to
identify any account as NPA- LFAR point
❑ Major impact- total overdue recovery for NPA vs. Partial recovery in Standard
accounts
 Relevant Circulars for FY 2021-22:
 Clarification regarding definition of ‘out of order’:

3
 Relevant Circulars for FY 2021-22:
 Clarification regarding interest during moratorium period:

 Mainly applicable for Educational loans- where accrued interest during the
repayment holiday period is added to the principal and repayment in Equated
Monthly Instalments (EMI) fixed.

 Different views among the auditors/banks on treatment of the above interest once
the account is classified as “NPA”.
 Relevant Circulars for FY 2021-22:
 Major points of clarifications – 15th February 2022 circular:
❑ Out of order- applicable to all loan products being offered as an
overdraft facility

❑ Previous 90 days period- inclusive of the day for which the day-end
process is being run- IMP clarification

❑ Upgradation of the facility-only upon repayment of entire arrears of

interest and principal pertaining to all the credit facilities- IMP
clarification
 Relevant Circulars for FY 2021-22:
 Upgradation of loan account:
1st October 2021 IRAC norms:

15th February 2022- Clarification:

RBI Divergence-Major Issues :
Major Issues identified by RBI in divergence:
 Non-implementation of RP-7th June 2019

❑ Defaults not rectified within the review period of 30 days or

viable RP not implemented within 180 days
❑ Additional provision made only on FB exposure portion and not
on total o/s amount (FB+NFB)
❑ DP computed based on the expired stock statements- to be classified as
NPA
❑ Wrongful upgradation of NPA accounts before implementation of
restructuring plan
❑ Wrongful reversal of provision on change in ownership before expiry of
monitoring period
❑ Realisable value of security less than 10% of o/s- not classified as Loss
assets – only NPA cases
Introduction - LFAR
 Questions by RBI related to branch- answer them “Now” or
“Later”
 Introduced in 1985 – to PSB and then to all banks
 Revised in 1992-93 & 2003
 Recently updated in September 2020
 Submission of LFAR by CA – below cut off
 Detailed questionnaire formulated by RBI (SBA)
 Not a substitute for AR under SA 700
 Important tool to communicate with Management and
Central Statutory Auditor
Main Objective
 RBI circular dated 5th September,2020:
Expectation from Branch Auditor How it helps overall bank?
Carry out transaction testing and Provides input to SCA’s while
comment upon adequacy of comment on various aspect in Bank
implementation of various policy and LFAR
regulatory requirement (e.g. Credit
policy)

Verification of data integrity and Provides assurance on data used for

data related control system and MIS at corporate office level and for
process (e.g. wrong regulatory reporting purposes to RBI
classification code for Priority Sector
and Non-priority sector)
Broad Areas Covered
 Assets
 Cash & Bank
 Money at call & short notice
 Advances- Critical for SBA’s – Significant changes
 Investments
 Other assets
 Liabilities
 Deposits
 Other liabilities
 Contingent Liabilities
Broad Areas Covered
 Profit & Loss
 Revenue Recognition
 Divergent trends
 Other General areas
 Gold/Bullion/Security Items
 Books, & records
 Inter branch accounts
 Fraud
 Implementation of KYC/AML guidelines
 Management Information System
 Other Miscellaneous
Areas Covered
(Specialized Branches)
 Dealing in FOREX
 Asset Recovery Branches
 Clearing house operations / service branches
Important Changes in LFAR
Area of LFAR
1. Assets
1.1 Cash
(ii) Does the figure of the balance in the
branch books in respect of cash with its
ATM(s) tally with the amounts of balances
with the respective ATMs, based on the
year end scrolls generated by the ATMs? If
there is any difference, same should be
reported.
Comments for BBA’s
BBA always carry out the physical
verification of cash and balance in ATM
linked to the branch as part of their audit
procedure. Several discrepancies have also
been reported in this area.
Role of BBA:
No additional responsibility on the part of
BBA due to this change.
Need to mention the balances as per GL
and as per ATM scroll- difference if any
need to be highlighted.
Important Changes in LFAR
Area of LFAR Comments of BBA’s
1.2 Balances with Reserve Bank of India, State Bank of India and other banks.

(iv) Where the branch maintains an BBA always considered and verified these
account with RBI, the following additional entries to avoid any material adjustments
matter may be reported: as on the balance sheet date.
Entries originated prior to, but
communicated/recorded after the year
end in relation to currency chest Role of BBA:
operations at the branch/other link Additional reporting on the entries
branches, involving deposits recorded after year end to identify any
into/withdrawals from the currency chest material adjustments at currency chest.
attached to such branches (Give details)
1.3 Money at Call and Short Notice Changes under this area are NOT relevant
for BBA.
Important Changes in LFAR
Area of LFAR Comments of BBA’
1.4 Advances
For this purpose, large advances are those
BBA always carry out the verification of the
in respect of which the outstanding amount
all the areas on test check basis. The RBI
is in excess of 10% of outstanding through inclusion of this clause has asked the
aggregate balance of fund based and branch auditor to include the samples
non-fund based advances of the branch orselected as part of the LFAR. This is one of
Rs.10 crores , whichever is less. the significant change in this section. Till
now, these sample were part of the audit
Accounts above the threshold- Carry out working papers and were not
transaction audit communicated.

Accounts below the threshold- the process Limit revised since NFB exposure has been
needs to be checked and commented upon added to determine the samples
Important Changes in LFAR
Area of LFAR Comments of BBA’
1.4 Advances
(a) List of accounts examined for audit: Role of BBA:
• Rationale of sample selection need to be
A/c No. Name FB Bal NFB Bal clearly documented in the Working
papers;

Total xx xx • Discrepancies observed by RBI inspection

team in sample reported would require
Branch total yy yy clarification from BBA;

• Strengthen the process of documentation

% recovered zz zz
for the samples reported under this clause;

• Ensure Adequate coverage of both Fund

based and NFB exposure.
Important Changes in LFAR
Area of LFAR
(b) Have you come across cases of quick
mortality in accounts, where the facility
became non-performing within a period of
12 months from the date of first sanction?
Details of such accounts may be provided
in following manner:
➢ Account No.
➢ Account Name
➢ Balance as at year end
[Quick Mortality Accounts (QMA)]
Comments of BBA’s
BBA always covered this area as part of the
audit process.
Role of BBA:
• Should be from first disbursement/expiry
of repayment holiday;
• Need to go beyond reporting- reasons
may be pervasive in nature ;
• Account classified as QMA-closed during
year also need to be reviewed
Important Changes in LFAR
Area of LFAR Comments of BBA’s

(c) Whether in borrowal accounts the Role of BBA:

applicable interest rate is correctly fed • Primary Responsibility of Concurrent
into the system? Auditor;
• Verify for the samples selected based
(d) Whether the interest rate is on limit
reviewed periodically as per the • The BBA should specifically restrict its
guidelines applicable to floating rate responsibility by highlighting that the
loans linked to MCLR/ EBLR (External “correctness” has been verified only in
Benchmark Lending Rate)? respect of the files mentioned above.

• Master Direction - Reserve Bank of

India (Interest Rate on Advances)
Directions, 2016 can be referred for
this clause.
Important Changes in LFAR
Area of LFAR Comments of BBA’s

(e) Have you come across cases of Role of BBA:

frequent renewal / rollover of short-term • The word “frequent” has not defined in
loans? If yes, give the details of such the clause and hence it will subject to
accounts. judgement of the auditor.

• Refer RBI circular dated 21st August,

2020 on Ad-hoc/Short
Review/Renewal of Credit Facilities.

• Accounts frequently short-reviewed and

renewed need to be also seen for NPA
Classification

• Coverage by Internal Auditor &

Concurrent Auditor
Important Changes in LFAR
Area of LFAR
(f) Whether correct and valid credit rating, Role of BBA:
if available, of the credit facilities of
bank's borrowers from RBI accredited
Credit Rating Agencies has been fed into
the system?
Eligible Credit Rating Agencies-CARE,
CRISIL, FITCH India, ICRA, Brickwork
Ratings, SMERA and INFOMERICS – RBI
Circular dated- 13th June 2017
Comments of BBA’s
• This is one of the important area for the
purpose of determining the correct
Capital Adequacy of the bank.
• BBA should verify the same on test
check basis and highlight the
discrepancies on immediate basis.
Significant downgrade in the credit
ratings could also give an indication that
an account may be classified as NPA.
• Recent changes in credit rating & its
impact on interest rate also need to be
analysed.
Important Changes in LFAR
Area of LFAR Comments of BBA’s
(g) Did the bank provide loans to Role of BBA:
companies for buy-back of • Prohibited by RBI
shares/securities? • Indirect utilisation of funds to be
verified
(h) Does the branch have on its record, a Role of BBA:
due diligence report in the form and • BBA is responsible to review such report
manner required by the Reserve Bank of to identify any discrepancies in the
India in respect of advances under account which may have impact on
consortium and multiple banking credit worthiness of the customer.
arrangements. Give the list of accounts
where such certificate/report is not • BBA should also highlight the cases
obtained or not available on record. (In where no such report is available with
case, the branch is not the lead bank, copy the branch.
of certificate/report should be obtained
from lead bank for review and record) • CRILIC report need to be verified in
absence of such reports.
Important Changes in LFAR
Area of LFAR Comments of BBA’s

(i) Whether there is a Role of BBA:

substantial deterioration in value of • BBA always carry out such analysis
security during financial year as per while determining the adequacy of
latest valuation report in comparison NPA provision.
with earlier valuation report on record?
• Before reporting on such clauses, BBA
should ensure adequate documents and
[RBI Divergence Observations in PY] working papers in place and any
discrepancies arising due to above has
been dealt with through MOC’s.

• Refer para- 4.2.9 of IRAC norms on

erosion in Security Value- classification
to DB class/Loss assets- system driven
Important Changes in LFAR
Area of LFAR Comments of BBA’s
(j) Whether the branch has any red- Role of BBA:
flagged account? If yes, whether any • BBA should also review the average period
deviations were observed related to for which the account continued to remain in
compliance of bank's policy related RFA list- this may indicate potential fraud in
with Red Flag Accounts? such account.

• Maximum 6 months- lift RFA status or classify

it as Fraud- reason for reclassification
(k) Comment on adverse features Role of BBA:
considered significant in top 5 • This is always reported by BBA as part of the
standard large advances and which various annexures to LFAR.
need management's attention. • In case BBA were not reporting, the same
need to be performed and reported under
this clause. BBA can take reference from
Annexure on Large Advances.
 Important Changes in LFAR
Area of LFAR
Has the branch identified and classified
advances into standard / substandard
/ doubtful / loss assets through the
computer system, without manual
intervention?
(l) List the accounts (with outstanding in
excess of Rs. 10.00 crore) which have
either been downgraded or upgraded
with regard to their classification as
Non-Performing Asset or Standard
Asset during the year and the reason
thereof.
Comments of BBA’s
Role of BBA:
Refer RBI Circular on Automation of NPA Automation
Process discussed before.
30th June 2021- was last date to automate the
process of NPA classification +November 12
clarification on IRAC norms
Role of BBA:
• Reason for down gradation should align with
classification for e.g. date of NPA in case of
restructured account need to be carefully
determined.
• This clause should be linked to QMA clause
• Upgraded account should be carefully examined
to verify the recovery- IMP for restructured
accounts
Important Changes in LFAR
Area of LFAR Comments of BBA’s

Whether RBI guidelines on income Role of BBA:

recognition and provisioning have been Any exception need to be highlighted
followed. under this- CY compliance of 12th
November 2021 circular status need to be
reported under this point.

Whether the upgradations in non- Role of BBA:

performing advances is in line with the • BBA need to confirm that these have
norms of Reserve Bank of India. been upgraded as per RBI direction;
[RBI Divergence Observation]
• In case of disagreement- not only
Where the auditor disagrees with comment but appropriate adjustments
upgradation of accounts? If yes, give through MOC.
reasons thereof.
• Need to pay specific attention on
upgradation of restructured accounts
 Important Changes in LFAR
Area of LFAR Comments of BBA’s
(m) (i) Whether the branch has reported Role of BBA:
accounts restructured or rephased during the • This is normally not relevant in many
year to Controlling Authority of the bank? branches, however considering the
(ii) Whether the RBI Guidelines for COVID-19 situation and various RBI
restructuring on all such cases have been schemes this clause may be relevant in
followed? many of the branches.
(iii) Whether the branch complies with the
regulatory stance for resolution of stressed • BBA should refer RBI circular on
assets, including the compliance with board Resolution Framework for COVID-19-
approved policies in this regard, related Stress, Micro, Small and Medium
tracking/reporting of defaults for resolution Enterprises (MSME) sector – Restructuring
purposes among others? of Advances etc.

• Policy of the bank need to reviewed

before commenting under this clause
Important Changes in LFAR
Area of LFAR Comments of BBA’s
(n) (i) Whether there are any accounts Role of BBA: - this is normally not
wherein process under IBC is mandated but not applicable to most of the branches and
initiated by the branch? relevant for Top-20 branches.
(ii) Whether there are any borrowers at the
branch against whom the process of IBC is Change in 1st October 2021 circular to
initiated by any of the creditors including make the provision on accounts after 180
bank? If yes, provide the list of such accounts days on Fund Based + Non-Fund Based
and comment on the adequacy of provision facilities
made thereto?
ECGC: Role of BBA: Impact of the rejection on
c) Whether the rejection is appropriately provision need to be verified by the
considered while determining the provisioning auditor.
requirements
ECGC claims directly reduced from the
outstanding balance for NPA provision
(0% provision on such claims).
Important Changes in LFAR
Area of LFAR Comments of BBA’s
(p) Whether in the cases concluded the Role of BBA:
recoveries have been properly • This is normally stated in the closing
appropriated against the guidelines/significant accounting policies
principal/interest as per the policy of the of the bank.
bank? • BBA should review the same and verify
the appropriation in both standard as
well NPA accounts. This is mainly
because the appropriation policy is
different for NPA and Standard
accounts.
(q) In cases where documents are held at Role of BBA:
centralized processing centres/office, • This is important since now many PSB’s
whether the auditor has received the have started following Centralised system.
relevant documents as asked by them on • BBA should attach the file wise list of
test check basis and satisfied themselves. documents not received for the purpose of
Report the exceptions, if any audit.
 Important Changes in LFAR
Area of LFAR Comments of BBA’s
2. LIABILITIES -Deposits
(a) Whether the scheme of automatic renewal of Role of BBA:
deposits applies to FCNR(B) deposits? Where such • BBA need to carry out specific
deposits have been renewed, report whether the testing in this regard and should
branch has satisfied itself as to the 'non-resident keep appropriate documents while
status' of the depositor and whether the renewal reporting on the same.
is made as per the applicable regulatory
guidelines and the original receipts/soft copy
have been dispatched.
(b) Is the branch complying with the Role of BBA:
regulations on minimum balance • Earlier certificate from SBA’s- now
requirement and levy of charges on non- part of LFAR
maintenance of minimum balance in
individual savings accounts? • Refer RBI Circular of 20th November,
2014 on system of application of
these charges
Important Changes in LFAR
Area of LFAR
3. GENERAL
3.1 GOLD/BULLION/SECURITY ITEMS
(a) Does the system ensure that
gold/bullion is in effective joint custody
of two or more officials, as per the
instructions of the controlling authorities of
the bank?
(b) Does the branch maintain
adequate records for receipt, issues and
balances of gold/bullion and updated
regularly? Does the periodic verification
reveal any excess/shortage of stocks as
compared to book records and if any
discrepancies observed have been
promptly reported to controlling authorities
of the bank?
Comments of BBA’s
Role of BBA:
• Applicable in very few branches
• The inclusion of these specific clauses is
due to recent frauds/ irregularity
reported in this area.
• BBA need to be very careful and should
adequately document the process and
take the relevant document to support
the verification such process. (for e.g.
Verification reports etc.)
• BBA should also inquire and verify
various control build around the physical
security of gold kept at branch.
Important Changes in LFAR
Area of LFAR Comments of BBA’s
3.2 Books and Records
(a) Whether there are any Role of BBA:
software/systems (manual or otherwise) • This is important considering various
used at the branch which are not integrated operating system used at the branch.
with the CBS? If yes, give details thereof. BBA should obtain list of various system
used (CBS, NPA, ALM, CRAR etc.) and
should inquire about the interface
between these system.
Important Changes in LFAR
Area of LFAR Comments of BBA’s
3.2 Books and Records
(b) i) In case the branch has been Role of BBA:
subjected to IS Audit whether there • Only to the extent of verifying the
are any adverse features reported and existence of such report and verifying
have a direct or indirect bearing on the any adverse observations in the same.
branch accounts and are pending
compliance? If yes give details. • SBA’s should inquire about the various
ii) Whether branch is generating, and exception reports generated by Branch;
verifying exception reports at the
periodicity as prescribed by the bank? • Process of review of these reports on
iii) Whether the system of bank warrants sample basis also need to be
expeditious compliance of daily exception documented.
reports and whether there are any major
observations pending such compliance at
the year end.
Important Changes in LFAR
Area of LFAR Comments of BBA’s
(iv) Whether the bank has laid down Role of BBA:
procedures for manual intervention to • Scope of reporting is enormous- ICAI
system generated data and proper need to provide guidance
authentication of the related transactions • Only to the extent of identifying such
arising there from along with proper audit areas if any and reporting on the same.
trail of manual intervention has been
obtained.

(v) Furnish your comments on data integrity Role of BBA:

(including data entry, checking • BBA should comment upon based on the
correctness/integrity of data, no back audit procedures carried out and should
ended strategies etc.) which is used for MIS avoid making any general comments
at HO/CO level. under this clause.
• Refer Concurrent audit report
Important Changes in LFAR
Area of LFAR
3.3 FRAUDS
Furnish particulars of:
(i) Frauds detected/classified but
confirmation of reporting to RBI not
available on record at branch.
Comments of BBA’s
Role of BBA:
• Considering the recent surge in fraud
reporting by the banking industry this is
very significant and important area of
the audit.

(ii) Whether any suspected or likely fraud • BBA should inquire with the branch
cases are reported by branch to higher regarding the process of fraud
office during the year? If yes, provide the reporting- generally this process is
details thereof related to status of centralised and handled at Corporate
investigation. office.
Important Changes in LFAR
Area of LFAR
3.3 FRAUDS
Furnish particulars of:
(iii) In respect of fraud, based on your
overall observation, please provide your
comments on the potential risk areas
which might lead to perpetuation of fraud.
[Various example given in clause itself]
(iv) Whether the system of Early Warning
Framework is working effectively and, as
required, the early warning signals form the
basis for classifying an account as RFA.
Comments of BBA’s
Role of BBA:
• In reported cases, BBA should verify the
forensic audit report/internal memo
prepared by the bank for reporting on
potential risk area etc.
• BBA should comment on classifying an
account as RFA based on the its
verification and comments made in the
other part of LFAR.
Important Changes in LFAR
Area of LFAR
3.4 Implementation of KYC/ AML
guidelines
(i) Whether the branch has adequate
systems and processes, as required, to
ensure adherence to KYC/AML guidelines
towards prevention of money laundering
and terrorist financing?
(ii) Whether the branch followed the
KYC/AML guidelines based on the test
check carried out by the branch auditors?
Comments of BBA’s
Role of BBA:
• BBA should review the concurrent audit
report to ensure the control over KYC
and ALM compliance.
• BBA should also verify on test check
basis the compliance of the same and
should include in work paper with
supporting documents.
• Guidance from RBI Master Direction as
mentioned before.
Important Changes in LFAR
Area of LFAR Comments of BBA’s

3.5 Management Information System

(i) Whether the branch has the proper Role of BBA:

systems and procedures to ensure data • This is in line with the objective as
integrity relating to all data inputs which mentioned in the beginning of this
are to be used for MIS at corporate analysis.
office level and for supervisory reporting • BBA should highlight various
purposes. Have you come across any discrepancies which cannot be rectified
instances where data integrity was through MOC like for e.g. incorrect PSL
compromised? classification, sector code classification,
wrong input of repayment schedule used
for ALM purpose which may affect
various disclosure and output used for
regulatory reporting.
Do’s & Don’t’s
 LFAR reporting is to be kept in mind while audit planning and
verification of advances.
 Use LFAR as checklist & List of illustrative data given in GN.
 Adverse remarks/ observations are to be supported by
instances .
 Specific and clear replies as against ambiguous and long.
 Give annexures, if required.
 Don’t camouflage under provisioning or non reporting of NPA
 Random checking and Materiality (mention).
 Summary.
 Discussion with branch manager before finalization.
Key Takeaways
REMEMBER ➢ LFAR is “long form” report and hence answer should be
descriptive and not in “Yes/No”.

➢ All comments/observations should be supported by instances

or examples without any general comments.

NEVER ➢ Ctrl+C & Ctrl+V should not be applied for any

comments/observations from the previous year report or any
other inspection reports.

ALWAYS ➢ Observation/comments should be based on work papers or

other audit evidence obtained as part of audit procedures.
Thank You
Contact- pankajtiwari@cnkindia.com