Ind AS is a reality now!
Further to this, MCA vide notification dated 16 February 2015 has issued the Companies (Indian Accounting Standards) Rules, 2015 which lays down the roadmap for implementation of Ind AS for certain class of companies along with 39 Ind AS being part of the annexure to these Rules.
Recently, on 30 March 2016, MCA has notified amendments to Ind AS including deferment of Ind AS 115, Revenue from Contracts with Customers and bringing out Ind AS 18, Revenue and Ind AS 11, Construction Contracts in place of Ind AS 115. Thus, at present there are 40 notified Ind AS.
What are IFRS? Statements of International Accounting Standards issued by the Board of the International Accounting Standards Committee (IASC) (1973-2001) are designated as International Accounting Standards (IAS).
However, the International Accounting Standards Board (IASB) announced in April 2001 that its Accounting Standards would be designated as ‘International Financial Reporting Standards’ (IFRS). IASB publishes its Standards in a series of pronouncements called International Financial Reporting Standards (IFRS). It also adopted the body of Standards issued by the Board of the IASC. Those pronouncements continue to be designated as IAS.
Presently, there are 25 IAS and 16 IFRS, 13 IFRIC Interpretations and 5 SIC Interpretations. Some of the Standards issued by IASC have since been withdrawn and replaced or superseded.
The Chartered Accountant Student July 2016 p 09
Issues covered in ICAI Journal
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Important sharing about The Journal of ICAI for quick access and future reference.
. Many times the TRUE MESSAGE is in HIDDEN form.
ICAI Journal is the media where ICAI shares its views and vision on Accountancy Profession.
. Until it is discussed; EMERGING PROFESSIONAL OPPORTUNITIES are not CONVEYED to the MEMBERS IN LARGE.
. Due to this; now-a-days; the requirement of CPE Study Circles, Seminars and Conference has emerged.
. Let's DISCUSS such issues for the benefit of all.
BEYOND CORPORATE GOVERNANCE:
(Accounting is not restricted to mere figures).
Innovation Accounting:Necessity of Every Lean Startup
Innovation accounting represents the entire set of metrics and indicators that are used to make data based decisions, long before having impact on the economic accounts.
Hint: As Heart beats are reflected in Cardiogram
January, 2016/ p 64
ARTICLES ON BANK AUDIT:6
LONG FORM AUDIT REPORT:
2 SETS of LFAR have been prescribed by RBI :
1st for Statutory Central Auditors (SCA) and 2nd for Branch Auditors.
LFAR is not a SUBSTITUTE to STATUTORY AUDIT REPORT.
NOR it is deemed as part of Statutory Audit Report.
The auditor SHOULD NOT make any cross reference to the reference to the observation in LFAR.
In case any matter of emphasis, the AUDITOR must mention the same in the report CLEARLY.
March, 2015/ p 117
ARTICLES ON BANK AUDIT:5
AUDIT OF NPA with SPECIAL REFERENCE to PRUDENTIAL NORMS:
Please refer RBI Circular No.
http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=9009
TYPES OF NON-PERFORMING ASSETS:
As per master circular:
If principal and interest is NOT FULLY PAID within 90 days from the END OF THE QUARTER then the ADVANCE becomes NPA even though it is FULLY SECURED. Because it has LOST THE CHARACTER of GENERATING INCOME.
"ALL" the FACILITIES granted by a bank would be treated as NPA even if default is made in one account.
Example:
Sanctioned : CC and Term Loan:
If Term loan instalment and/or interest is not paid within 90 days when these become due, the WHOLE ADVANCE would be NPA.
March,2015/p 106
ARTICLES ON BANK AUDIT:4
More than 70 MASTER CIRCULARS have been issued by RBI on 1-4-2014 ( www.rbi.org.in )
AUDIT OF ADVANCES:
Annual Closing Guidelines of the Bank must be understood well.
Deviation from prevalent AS should be reported.
For details : refer ICAI Journal March,15/p98
ARTICLES ON BANK AUDIT: 3
AUDITING OF DERIVATIVE TRANSACTIONS AND TREASURY OPERATIONS IN BANKS:
Financial derivatives are simply financial contracts
in which the promised payoffs are derived
from the values of the underlying,
which is often an
asset price (stock price)
or
rate (interest rate on treasury bills).
Derivatives are either EXCHANGE-TRADED or OTC.
INHERENT RISKS IN DERIVATIVES:
1. Counterparty Credit Risk
2. Settlement Risk
3. Concentration Risk
4. Market Risk
5. Price Risk
6. Liquidity Risk
7. Valuation or Model Risk
8. Legal Risk
9. Control Risk
March, 15/ p 91
ARTICLES ON BANK AUDIT: 2
CONDUCTING BANK BRANCH AUDIT IN CBS ENVIRONMENT :
1. Ask the branch if any SYSTEM AUDIT is conducted. If yes, the Audit Report thereof.
CRITICAL ISSUES IN CBS BRANCH AUDIT:
1. Final Accounts may not be representative of the books of accounts.
Special Case : ATM when cash is withdrawn after banking hours are over.
2. Borrower Health Classification
Don't believe BLINDLY on the report generated by the APPLICATION SOFTWARE of the BANK.
What is system skips for classification of NPA or what is incorrectly classified as NPA is of concern of Branch Auditor.
3. Anti Money Laundering (AML) Application and its accurate representation
(Ask if any SOFTWARE has been installed and working).
In suspicious activities of the branch, the Auditor must scrutinize the WHILE LISTING of cases because many banks generate NIL return by making MAPPING ERRORS intentionally.
March, 2015 / p 86
ARTICLES ON BANK AUDIT: 1.
Expectations of Central Statutory Auditors from Bank Branch Auditors
The Branch Auditors' roles include-
1. Certifications required by RBI
2. Audit under Income-Tax Act
3. Issue of Statutory Audit Report
4. Ghose and Jillani Committee recommendations report.
5. Long Form Audit Report
Branch Auditors' Specific Attention:
1. Software Control
&
2. Manual Control
March 2015/p83
AUDITOR'S INDEPENDENCE
Threats to the Auditor's independence:
1. Self-interest Threat
(financial)
2. Familiarity Threat
(relationship with management due to long term services)
3. Advocay Threat
(management tries to pursue an opinion which is in fact contrary to public interest)
4. Trust Threat
(Blind trust in management due to their past attitude)
5. Intimidation Threat
(due to inside and/or outside pressure)
88/The Chartered Accountant/September 2014
BASEL III
As per Basel Committee on Banking Supervision (BCBS):
Basel III is a complete set of development measures that has been developed to TOUGHEN the
RISK MANAGEMENT,
SUPERVISION
&
REGULATION
of Banking Sector.
In the year 2008, when the whole world was under the dilemma of FINANCIAL CRISIS, BASEL III was specifically designed in order to deal with the weaknesses that were cropping up that time.
112/The Chartered Accountant/February,2015
OTHER COMPREHENSIVE INCOME
New to Indian Accounting Scenario.
Although it is found in IFRS and US GAAP.
IND-AS takes due care thereof.
Basic Concept of OCI :
Revaluation in Fixed Asset is
increase in INCOME
and/or Decrease in Liabilities
is also an INCOME.
Such increase is without any active role of the conventional factors to generate income.
OCI is a separate component of Profit and Loss Account to make the picture clear of NATURE OF PROFITS.
In nutshell, OCI focuses on WEALTH CREATIVE OBJECTIVE whereas PROFIT & LOSS A/c focuses on ACCOUNTANT'S CONCEPT OF INCOME.
84/The Chartered Accountant/February,2015
Techniques and tools
of forensic audit
1.
Benchmarking –
comparing one financial period with another or the
performance of one cost centre, or
business unit, with another, overall
business performance with its standards defined.
2.
Ratio analysis –
used to identify
any abnormal trends and changes.
3.
System analysis – to examine the
systems in place and identifying any
weaknesses that could be opportunities for the fraudsters.
4.
Specialist software- like audit tools
for data matching analysis can prove
very useful.
5.
Exception reporting –
that generates automatic reports that unchangeable
for results that fall outside
of predetermined threshold values,
enabling immediate identification of
results deviating from the norms.
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