Bank Safe Ltd. holds a significant portion of its assets in the form of advances to various borrowers. Given the diverse range of advances, the internal audit team is tasked with evaluating the bank's internal controls,

Aspects of Internal Control in Bank: Advances should be made only after evaluating creditworthiness of the borrowers and obtaining sanction from the proper authorities of the bank. All the loan documents like promissory notes, letters of hypothecation, guarantee letter, etc. should be executed by the parties before advances are made. While determining the loan amount to be sanctioned, sufficient margin should be kept against securities taken so as to cover any decline in the value thereof and also to comply with RBI directives. Securities should be received and returned by responsible officer and should be kept in the joint custody of at least two responsible officers. Securities requiring registration should be registered in the name of the bank. Physical possession of goods as security, the goods should be test checked at the time of receipts. In respect of hypothecated goods not in possession of the bank, surprise checks should be made. Personal inquiries should be made so as to determine market value of goods. For any increase/decrease in the value of securities, drawing power should be adjusted. All the accounts should be kept within both the drawing power and the sanctioned limit at all times. More attentions given to all irregular accounts should be brought to the notice of the H.O. The operation in each advance should be reviewed at least once every year. There should exist a proper system for post disbursement supervision and follow-up. Ensure that the funds disbursed should be utilized only for the purpose for which advances has been granted.