{"id":6065,"date":"2023-07-10T16:42:40","date_gmt":"2023-07-10T16:42:40","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=6065"},"modified":"2025-03-25T11:23:13","modified_gmt":"2025-03-25T11:23:13","slug":"long-form-audit-report-lfar-key-points","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/","title":{"rendered":"Long Form Audit Report (LFAR) Key Points"},"content":{"rendered":"<h2><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-6066\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/07\/Long-Form-Audit-Report.jpg\" alt=\"Long Form Audit Report\" width=\"992\" height=\"743\" \/><\/h2>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69f4e232df128\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69f4e232df128\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Long_Form_Audit_Report_Key_Points_To_Be_Considered\" title=\"Long Form Audit Report Key Points To Be Considered\">Long Form Audit Report Key Points To Be Considered<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Credit_Apraisal\" title=\"Credit Apraisal\">Credit Apraisal<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Advances_%E2%80%93_Monitoring_Supervision\" title=\"Advances &#8211; Monitoring\/ Supervision\">Advances &#8211; Monitoring\/ Supervision<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Liabilities_%E2%80%93_Deposits\" title=\"Liabilities \u2013 Deposits:\">Liabilities \u2013 Deposits:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Other_Liabilities_%E2%80%93_Bills_Payable_Sundry_Deposits_etc\" title=\"Other Liabilities \u2013 Bills Payable, Sundry Deposits etc :\">Other Liabilities \u2013 Bills Payable, Sundry Deposits etc :<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Contingent_Liabilities\" title=\"Contingent Liabilities :\">Contingent Liabilities :<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Profit_and_Loss_Account\" title=\"Profit and Loss Account:\">Profit and Loss Account:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Audits_Inspections\" title=\"Audits\/ Inspections:\">Audits\/ Inspections:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Frauds\" title=\"Frauds:\">Frauds:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.caindelhiindia.com\/blog\/long-form-audit-report-lfar-key-points\/#Preparation_for_Bank_Audits_%E2%80%93_Audit_Documentation_Formats\" title=\"Preparation for Bank Audits \u2013 Audit Documentation Formats\">Preparation for Bank Audits \u2013 Audit Documentation Formats<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Long_Form_Audit_Report_Key_Points_To_Be_Considered\"><\/span><span style=\"color: #000080;\"><strong>Long Form Audit Report Key Points To Be Considered<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>LFAR -long form audit report, the main focus is on identification of the lacunae in the operations and internal control system of the Bank. Statutory Audit Report may not communicate this aspect.<\/p>\n<p>1. Whether Cash Balance is within the limits prescribed by Controlling Authorities.<\/p>\n<p>2. Regular reporting of Excess Cash Balance<\/p>\n<p>3. Insurance for Cash-in-custody and Cash-in-Transit (Generally at H.O. level)<\/p>\n<p>4. Balance with THE RESERVE BANK OF INDIA, SBI and Other Banks- Verify Balance Confirmation Certificates and Reconciliation Statements, in case of difference. Analyze Pending\/ Outstanding entries in Reconciliation and Explanation to be obtained from the Branch. If there are any revenue entries pending in Reconciliation which require Write Off \u2013 the same should be reported in long form audit report. If there are pending entries in Reconciliation Statement outstanding for a period of more than 6 months, specific details of such pending entries should be given in long form audit report.<\/p>\n<p>5. Investments: Normally, Investments of Bank are accounted at H.O. Level. If there are any such transactions at Branch, the Auditor should physically verify such Investment Certificates and should obtain a certificate from the Branch regarding the Investments of Head Office held at the Branch. Examine that income from Investments is regularly received and\u00a0 matured Investments are encashed on time.<\/p>\n<p>6. Advances- Reporting on four areas:<\/p>\n<p>(a) Credit Appraisal\u2013 At the time of application and sanction. \u2013 And also on Review\/Renewal<\/p>\n<p>(b) Sanction \/ Disbursement \u2013 Authority to Sanction, Compliance of Sanction Terms before Disbursement. (c) Documentation- Execution &amp; Renewal of Documents, Vetting of Documents by Legal Dept.- Disbursement without Documentation??<\/p>\n<p>(d) Review \/ Monitoring \/ Supervision of Advances.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Credit_Apraisal\"><\/span><span style=\"color: #000080;\"><strong>Credit Apraisal<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>1. Whether Application from borrower in prescribed form? 2. Whether KYC Compliance as Per THE RESERVE BANK OF INDIA Requirements?<\/p>\n<p>3. Whether Evaluation of Financial Data, Project Report- CMA data, Projected P&amp;L, BS &amp; Cash Flow etc. done?<\/p>\n<p>4. Board Resolution for the availment of the facility<\/p>\n<p>5. Latest I. Tax Records &amp; Net Worth of Borrower\/Guarantor<\/p>\n<p>6. Confidential report and NOC from the existing banker<\/p>\n<p>7. CIBIL Report, Title clearance report &amp; valuation report<\/p>\n<p>8. Whether Analysis of important Financial ratios done?<\/p>\n<p>9. Whether Security Valuation &amp; Title Verified?<\/p>\n<p>10. Whether Appraisal done by Competent person?<\/p>\n<p>Advances &#8211; Sanction &amp; Disbursement 1. Examine the sanction procedure and powers.<\/p>\n<p>2. Check that the Limits sanctioned are within the powers of the sanctioning authority<\/p>\n<p>3. Any change in the terms of sanction whether ratified by proper authority<\/p>\n<p>4. Examine the system of Pre &amp; Post-Disbursement unit inspection and reports.<\/p>\n<p>5. Whether Acceptance of the terms &amp; conditions of sanction obtained from Borrower?<\/p>\n<p>6. Verify that Disbursement done only after compliance of all the Sanction terms and conditions<\/p>\n<p>Advances &#8211; Loan Documentation 1. Whether All loan documents, as required by the sanction letter and loan policy have been executed<\/p>\n<p>2. Whether Loan documents are properly executed and approved by legal department or legal expert?<\/p>\n<p>3. Fresh loan documents obtained on change in limit, change in the constitution of the borrower?<\/p>\n<p>4. Whether Original title deeds, title clearance certificate valuation report are held on record?<\/p>\n<p>5. Whether Charge on securities registered with ROC\/ RTO\/ LIC\/ other appropriate authority<\/p>\n<p>6. Lien marking\/ NOC of housing society<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Advances_%E2%80%93_Monitoring_Supervision\"><\/span><span style=\"color: #000080;\">Advances &#8211; Monitoring\/ Supervision<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>1. Verify that Regular QIS, Stock &amp; Debtors statements are submitted and scrutinized &#8211; Examine Stock Inspection reports<\/p>\n<p>2. Whether Periodic Review of Overdue\/ NPA accounts is done by Bank<\/p>\n<p>3. Adequacy and Validity of Insurance Cover.<\/p>\n<p>4. Review\/ Renewal of facilities carried out as per Bank policy<\/p>\n<p>5. End use of Funds \u2013 Ensure that No Diversion of Funds<\/p>\n<p>6. Penal interest charged for breach of DP limits\/ non-submission of Stock Statements?<\/p>\n<p>7. Stock statements older than 3 months &#8211; Account will be NPA.<\/p>\n<p>8. Non-renewal\/ Non-regularization of regular\/ ad-hoc limit within 180 days from the due date will make the account NPA.<\/p>\n<p>9. Verify Stock audit report (once in 12 months) and Valuation Report (once in 3 yrs) for Accounts with limits&gt; Rs.5.00 Crore<\/p>\n<p>10. Other Assets:<\/p>\n<p><span style=\"color: #000080;\"><strong>A) Stationery &amp; Stamp Items:<\/strong><\/span><\/p>\n<p>&#8211; Examine the control on custody and issue of Stationery Items like Drafts, Pay Orders, TDRs, Cheque Books, Traveller Cheques etc.<\/p>\n<p><span style=\"color: #000080;\"><strong>B) Sundries &amp; Suspense Debit Items:<\/strong><\/span><\/p>\n<p>&#8211; Obtain details of age-wise analysis of Pending Entries in Sundries and Suspense Debit Account.<\/p>\n<p>&#8211; Examine the reasons for Long Outstanding \/ Pending Entries and its Recoverability.<\/p>\n<p>&#8211; Suggest Write Off \/ Provisioning for Irrecoverable Items.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Liabilities_%E2%80%93_Deposits\"><\/span><span style=\"color: #000080;\"><strong>Liabilities \u2013 Deposits:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&#8211; Verify Compliance of KYC Norms in case of Deposit Accounts.<\/p>\n<p>&#8211; Compliance of H.O. Guidelines for operations in Dormant\/ Inoperative Deposit Accounts. &#8211; Inoperative Accounts \u2013 Possible Fraud Area. &#8211; Examine Unusual Large Movements in Deposit Accounts at the year end.<\/p>\n<p>&#8211; Obtain and Examine the list of Overdue\/ Matured Deposits (Figure to be reported in LONG FORM AUDIT REPORT) &#8211; Whether Bank has a system of providing for Interest on Overdue \/ Matured Deposits?<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Other_Liabilities_%E2%80%93_Bills_Payable_Sundry_Deposits_etc\"><\/span><span style=\"color: #000080;\"><strong>Other Liabilities \u2013 Bills Payable, Sundry Deposits etc :<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&#8211; Obtain and Examine the list of age-wise pending entries in Bills Payable and Sundry Deposit Accounts.<\/p>\n<p>&#8211; Identify Unusual Items if any in these accounts.<\/p>\n<p>&#8211; Also Examine How these items have been disposed off (e.g. Deposit of Money without Account Number in Sundry Deposits A\/c.) \u2013 Possible Fraud Area.<\/p>\n<p>&#8211; Also suggest Disposal of Long Outstanding Entries.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Contingent_Liabilities\"><\/span><span style=\"color: #000080;\"><strong>Contingent Liabilities :<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&#8211; Examine the List of Contingent Liabilities\u00a0 (Other than Constituent Liabilities such as\u00a0 Guarantees, LC etc.).<\/p>\n<p>&#8211; Discuss with Branch about any legal matters pending against the Branch and possibility of any loss in respect of any such items \u2013Whether such items have been disclosed as Contingent Liability or whether Provision made for the probable Loss?<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Profit_and_Loss_Account\"><\/span><span style=\"color: #000080;\"><strong>Profit and Loss Account:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&#8211; Interest and Commission income to be verified on Test Check basis.<\/p>\n<p>&#8211; Examine the system of changing the rate of interest on deposits\/ advances from time to time as per Head Office Circulars.<\/p>\n<p>&#8211; Examine the implementation of Income Recognition Norms with respect to Income from NPA Accounts. &#8211; Whether there are any Divergent Trends in respect of major items of Income or Expenditure? \u2013 Comparison and Ratio Analysis are Important Tools for finding out such Divergent Trends in Revenue Items.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Audits_Inspections\"><\/span><span style=\"color: #000080;\"><strong>Audits\/ Inspections:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&#8211; Examine the observations\/qualifications in Previous Audit Report and Reports of Concurrent Audit, Internal Audit, THE RESERVE BANK OF INDIA\u00a0 Inspection, Stock Audit, Credit Audit, Revenue Audit etc. and find out that whether they have been complied with in time? &#8211; Consider the major adverse comments and non-compliances of such reports while finalizing your Audit Report.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Frauds\"><\/span><span style=\"color: #000080;\"><strong>Frauds:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&#8211; Examine the Fraud Register maintained by the Branch and report the frauds discovered during the year under Audit.<\/p>\n<p>&#8211; Examine the corrective steps taken by the Branch to minimize the occurrence of such frauds in future.<\/p>\n<p>&#8211; Auditor may give useful suggestions to minimize the possibility of Occurrence of Frauds with respect to various aspects.<\/p>\n<p><span style=\"color: #000080;\"><strong>Miscellaneous:<\/strong><\/span><\/p>\n<p>&#8211; Examine proper maintenance of Fixed Asset Records and Calculation of Depreciation.<\/p>\n<p>&#8211; Examine the Possibility of Window Dressing by the Branch. &#8211; Any other matter to be brought to the notice of the Management or Central Statutory Auditors.<\/p>\n<p>Annexure to LFAR : (to be obtained from Branch Management)-<\/p>\n<p>For Branches dealing in Large Advances\/Asset Recovery Branches \u2013 for all advances with outstanding balance of Rs.2 Crores and above<\/p>\n<p>&#8211; For Advances upgraded or downgraded during the year with with outstanding balance of Rs.1 Crores and above.<\/p>\n<p>&#8211; For All other Branches \u2013 in respect of advances with outstanding balance of Rs.10 Crores and above.<\/p>\n<h3 data-start=\"88\" data-end=\"160\"><span class=\"ez-toc-section\" id=\"Preparation_for_Bank_Audits_%E2%80%93_Audit_Documentation_Formats\"><\/span><span style=\"color: #000080;\"><strong>Preparation for Bank Audits \u2013 Audit Documentation Formats<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p class=\"\" data-start=\"190\" data-end=\"410\">As we approach the financial year-end, it\u2019s time to prepare for the upcoming bank audits. To assist you in this process, I am sharing draft formats of essential audit documentation that will be useful during the audit.\u00a0Attached to this email is the <strong data-start=\"442\" data-end=\"477\">Format of the Engagement Letter<\/strong> for your reference.\u00a0You can download all the required <strong data-start=\"535\" data-end=\"558\">editable Word files<\/strong> by clicking the link below or scanning the QR code:\u00a0<a href=\"https:\/\/drive.google.com\/drive\/u\/0\/home\">https:\/\/drive.google.com\/drive\/u\/0\/home<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Long Form Audit Report Key Points To Be Considered LFAR -long form audit report, the main focus is on identification of the lacunae in the operations and internal control system of the Bank. Statutory Audit Report may not communicate this aspect. 1. Whether Cash Balance is within the limits prescribed by Controlling Authorities. 2. Regular &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[98],"tags":[1025],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/6065"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=6065"}],"version-history":[{"count":4,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/6065\/revisions"}],"predecessor-version":[{"id":8851,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/6065\/revisions\/8851"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=6065"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=6065"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=6065"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}