Audit procedure for verification of suspense account/Sundry Assets
Audit procedure for verification of suspense account/Sundry Assets:
Dear readers, before starting our main topic, first try to understand why banks use suspense/clearing/sundry accounts- These accounts are used as an intermediary account to avoid mistakes in amount transfers. for e.g If a cheque is drawn for salary and annexed with a list of employees to whom the salary is to be credited along with their account numbers. Here bank will park these funds in a clearing account and from here it will credit the amount to employees. likewise, banks have plenty of transactions where banks use suspense/clearing account.
Expeditious clearance
- Verify the old outstanding entries pending for adjustment, auditor should obtain the reasons of delay in adjusting the entries. In case, auditor finds that procedure of clearance of items in suspense/sundry asset account is inadequate and entries are outstanding beyond prescribed time, comment accordingly. Review the steps taken for reversal of old entries.
Instances of window dressing for expeditious clearance:
- Traveling advance is being given to staff and taken back without executing any traveling frequently. In this case, advance will always remain with staff.
- Old debit entries in one asset account are reversed by transferring the amount to other asset account with new date. Ultimately, entry will not be reversed, it will always remain outstanding in one account or another.If auditor finds such cases, same should be reported.
Old outstanding entries
1. Auditor should obtain list of all old entries debited to suspense or any other sub head of asset account along with reasons of delay. Details should be given in prescribed format in LFAR.
2. In case, auditor feels that old entries are not recoverable and same require provision/write off, comment in report. He can recommend for MOC if required. Instances of sub heads are given below
Entries debited in asset account to avoid declaring the operating accounts as NPA
1. Debit entries received in inward clearing were debited in clearing difference account or other asset account as funds/limit/DP is not available in operating accounts, if same is debited in CC/SB/Current accounts, same will become NPA.
2. Debit due to ATM entries- In cases, customer of other branch (not connected with central server i.e CBS) has withdrawn the money from ATM at branch under audit. Amount is pending for realisation from other branch.
3. Old Clearing differences not recoverable and debited in asset accounts.
4. Fraudulent withdrawals debited to asset account pending for recovery.
5. Payments of Pensions pending for recovery from Government since long.
6. Shortage of cash debited in asset accounts pending recovery.
7. Drafts paid, but entry is pending for reversal for want of advice from branch issuing drafts
If auditor finds any unusual item same should be reported along with its nature and amount involved.
CA. K.Nagaraju
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