SDI Bank Ltd. is finalizing its financial statements for the year ended 31st March, 2025. PAM & Associates, Chartered Accountants are appointed…

CA M, the engagement partner, will advise the audit team to undertake the following audit procedures to address the given observations: (i) Concentration of Investment Functions with Four Staff Members Review the investment policy of the bank to ascertain that the policy conforms, in all material respects, to the RBI's guidelines as well as to any statutory provisions applicable to the bank.Check the segregation of duties within the bank staff in terms of executing trades, settlement and monitoring of such trades, and accounting of the same (generally termed as front office, middle office and back-office functions' segregation).Assess whether the concentration of all investment functions with a limited number of staff members indicates a weakness in internal controls, necessitating increased audit attention. (ii) Outstanding Bank Receipts (BRs) for More Than Eight Months: In respect of BRs issued by other banks and on hand with the bank at the year-end, the auditor should examine confirmations of counterparty banks about such BRs.Where any BRs have been outstanding for an unduly extended period, the auditor should obtain written explanation from the management for the reasons thereof.The auditor should examine the reconciliation of BRs issued by the bank.BRs should not be issued in respect of transactions in government securities for which SGL facility is available. (iii) Re-classification of Investments from AFS to HTM without explicit approval from the Board of Directors. Examine that entire investment portfolio of bank is classified under three categories i.e.HTM, HFT and AFS and shifting of securities is as per regulatory norms and laid down policy.Examine whether the shifting of the investments from 'available for sale' to 'held to maturity' is duly approved by the Board of Directors of the bank.Examine whether the investments have been properly classified into the three categories at the time of acquisition based on such intention as evidenced by the decision of the competent authority such as the Board of directors, Asset Liability Committee (ALCO) or Investment Committee.