You are the auditor of a bank. During the audit, you are required to verify the provisions and contingencies recognised by the bank for the year.…

For audit of provisions and contingencies the auditor should: ensure that the compliances for various regulatory requirements for provisioning as contained in the various circulars have been fulfilled. obtain an understanding as to how the bank computes provision on standard assets and non-performing assets. It will primarily include checking the basis of classification of loans and receivables into standard, sub-standard, doubtful, loss and non-performing assets. The auditor may verify the loan classification on a sample basis. obtain the detailed break up of standard loans, non-performing loans and agree the outstanding balances with the general ledger. obtain the tax provision computation from the bank's management and verify the nature of items debited and credited to profit and loss account to ascertain that the same are appropriately considered in the tax provision computation. examine the other provisions for expenses vis-a-vis the circumstances warranting the provisioning and the adequacy of the same by discussing and obtaining the explanations from the bank's management. OR With regard to the integrity of a client, matters that the firm considers include, for example: The identity and business reputation of the client's principal owners, key management, related parties and those charged with its governance. The nature of the client's operations, including its business practices. Information concerning the attitude of the client's principal owners, key management and those charged with its governance towards such matters as aggressive interpretation of accounting standards and the internal control environment. Whether the client is aggressively concerned with maintaining the firm's fees as low as possible. Indications of an inappropriate limitation in the scope of work. Indications that the client might be involved in money laundering or other criminal activities. The reasons for the proposed appointment of the firm and non-reappointment of the previous firm.