Nutan & Co. has been appointed as a statutory auditor of JOE Bank Ltd., a private sector bank, registered with RBI. Mr. Chahal, the engagement…

Sr. No. Reason for such Query Action that may be taken in response to the query 1. In case of sale of NPA, where the sale is for a value higher than the NBV, the auditor is required to ensure that no profit is recognized, and the excess provision has not been reversed but retained to meet the shortfall/ loss that may arise because of the sale of other non-performing financial assets. The entry for reversal of the excess provision would be cancelled in the books and such excess provision would be retained to meet the shortfall/ loss that may arise because of the sale of other non-performing financial assets. 2. A State Government Guaranteed advance has to be treated as NPA even if it remains overdue for more than 90 days and in case of NPA, for the purpose of income recognition, interest on such advance should not be taken to income unless interest is realized. Interest income recognized on such advance would be reversed and would be taken to income only when it is realized. 3. Accounts for which the ad hoc limit has not been reviewed for 180 days from the date of such ad hoc sanction, should be considered as NPA. Its treatment in the books would be changed from performing asset to a non-performing asset from the date when such change in the treatment was required. 4. Net position in respect of each of the foreign currencies should be generally squared and should not be uncovered by a substantial amount. The net “position” of the branch in relation to each foreign currency should be squared off and get covered by a substantial amount. 5. Additional temporary limits may be sanctioned, for a maximum of 20% of the existing limit and 90 days maximum tenure. The terms of additional temporary limit in the case of such account would be revised to 20% of the existing limit and for 90 days maximum tenure.