CA B is conducting statutory audit of branch of a nationalized bank. Saurabh, a CA student, is also part of engagement team conducting statutory…

CA B is conducting statutory audit of branch of a nationalized bank. Saurabh, a CA student, is also part of engagement team conducting statutory branch audit. The field of bank branch audit is new to him and he is following instructions as required by engagement partner. The engagement partner has asked him to prepare a summary of non-funded credit facilities outstanding as on balance sheet date. The following information is appearing in branch's CBS data/records as on 31st March, 2023: Serial number Particulars in CBS (Core Banking solution)/records Amount in ₹ crores 1. Agricultural term loans 15.00 2. Staff housing loans 3.50 3. Staff vehicle loans 0.20 4. Housing loans-General public 10.00 5. Letters of credit issued 2.50 6. Education loans 1.50 7. Guarantees issued (Fully secured by 100% margin) 1.00 8. Bills purchased and discounted 2.00 9. Bills for collection 0.10 On going through listing of housing loans to general public, CA B notices that branch has sanctioned many housing loans of small ticket size ranging between - 10.00 to 20 lakhs. Therefore, he has assessed risk of material misstatements to be high. As a consequence, he has designed procedures to perform tests of controls as well as substantive tests. Saurabh has been further asked to go through SMA (Special Mention Accounts) jotting as on 30th November, 2022. Such reports are available from system on monthly frequency. Being new to such type of assignment, he is unable to understand relevance of above audit procedure mandated by engagement partner. Based on above, answer the following questions: