XYZ & Associates LLP, is a firm of Chartered Accountants, consisting of 12 partners has been allotted Central statutory audit of Maha Bank…

XYZ & Associates LLP, is a firm of Chartered Accountants, consisting of 12 partners has been allotted Central statutory audit of Maha Bank Limited, a scheduled commercial bank. (i) During the course of audit, you, as the Engagement partner, have been asked by the GM to calculate CRAR. For this purpose, you have referred to the Master circular on "Prudential Guidelines on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF)", which provides the guidelines to be followed by banks for capital adequacy. You are informed that the basic approach of capital adequacy framework is that a bank should have sufficient capital to provide as table resource to absorb any losses arising from the risks in its business. You have observed that Capital is divided into tiers according to the characteristics/qualities of each qualifying instrument. For supervisory purposes capital is split into two categories: Tier I and Tier II, representing different instruments quality as capital. You have calculated Eligible total capital funds comprising - 1. Tier I capital of Share capital 200 Crore, and disclosed Reserves 20 Crore. 2. Tier II capital of Other Reserves 30 Crore, and subordinated debt 20 Crore. The Risk weighted assets constitute 25 Crore, while Off-balance sheet items are 5 Crore. (ii) As a part of the scope, the audit firm has been asked to find out the correct position of Demand and Time liabilities of Maha Bank. DTL balance as on 30th September 2024 was - 50,000 Crore which included the following- Cr. (i) Paid up capital 27,000 (ii) Reserves 1,650 (iii) Credit balance in Profit & Loss account 1,210 (iv) Loan taken from RBI 575 (v) Refinance taken from EXIM bank and NHB 480 (vi) Part amounts of recoveries from the borrowers in respect of debts considered bad and doubtful of recovery 125 (vii) Net credit balance in branch adjustment accounts 105 (viii) Interest accrued but not accounted for in books 90 (ix) Margins held and kept in sundry deposits for funded facilities 80 (iii) During the FY 2024-25, XYZ & Associates LLP is appointed as Statutory auditors of APP Ltd., an NBFC, which was set up under the Companies Act, 2013 and got itself registered as non-banking financial company (NBFC) with the Reserve Bank of India, fulfilling the required criteria. During the financial year ending 31st March 2025, the company commenced operations on a massive scale. You are informed that RBI has revised different facets of existing NBFC Classification and regulation like Capital requirements, Government standards, Prudential regulations, etc. based on four layers that are defined based on their size, activity and perceived riskiness. During the FY 2024-25 APP Ltd. has accepted deposits of 900 Crore, while its asset size is 990 Crore. It has also undertaken following activities - (i) Standalone Primary Dealers (SPDs) (ii) Infrastructure Debt Fund (iii) Housing Finance (iv) Infrastructure Finance The auditors are about to begin audit of APP Ltd. for which your audit team has been asked to prepare audit checklist. (iv) XYZ & Associates LLP has been appointed as auditors of Heavy Electricals Corporation, a Public Sector Undertaking (PSU) during the FY 2024-25 by C & AG. It has been intimated about the intention of taking up planned performance audit with the scope and extent of audit including the constitution of audit team and the tentative time schedule, well before the commencement of Audit. The Engagement partner has asked the audit team to prepare an Audit Design Matrix (ADM) as it is a structured and highly focused approach for designing a performance audit study. The audit team has been informed that ADM should be prepared on the basis of information and knowledge obtained during the planning stage. Further, it is desirable to prepare ADM for each of the audit objectives. On the basis of above details, you are required to answer the following questions. (Q. Nos. 8 to 11):