Revenue audit is the audit of items governing income & expenditure of banks, basically this type

of audits are conducted with a view to verify the accuracy, relevance of expenditure incurred &
Incomes earned by the banks according to applicable latest circulars, notification , Auditors only
required to concentrate on the areas which affect revenue items of the banks. Normal Procedure
to conduct the revenue audit is as under
.


1 Study the relevant circulars pertaining to charges given by bank, Go through the Format of
Audit Report & Annexure attached to the audit report. Design the Query Sheet in Format of
annexure given to bank & get some print out copies of query sheet before going to audit.


2. Prepare a separate file for audit & dont forget to carry Audit engagement letter given by head
office along with file & query sheet formats, circulars, r scales, audit pens, pencils calculators.


3. Prepare the Short Audit Programme for audit covering which areas to be covered & to be
covered by whom.


4. Auditors are advised to keep in mind the period of audit so as to avoid haphazard way of audit.



5. Scrutinize the previous revenue audit reports, latest concurrent audit reports of branch to get
the idea of nature of leakage that can be possible to identify. Get Some idea about Bank Officials
& Nature of their duties, positions,


6. Get Some Basic idea about branchs banking software (i.e. Putting A/c No, Period of Audit)
so as to facilitate easy viewing of customer ledger.



7. Ask the Bank manager to make available Advances Sanction Register for our Audit Period,
Jottings of Some Important accounts. Total Cash Credit Accounts Of Branch Top 10 Saving
Accounts Top 10 Current Accounts Top 10 Depositors of bank. Overdue Advances in Audit
Period List of Special Advance Sanctions & Get its Sanction Letters. List of NPA Accounts of
branch of Recoveries made during audit period against them.




8. List of areas to be covered & procedure for its audit are as under : Incomes of Bank :- a)
Interest Earned On Advances:- See that interest is charged in accordance with latest circulars of
RBI Check the Interest Calculation on Selective basis See that for special sactions interest is
charged according to sanction letter.


Check that revised interest rates are properly applied in system from relevant date of
applicability.


b) Penal Interest On Overdue installments & On Late Submission of stock statement.
Generally 1% subject to maximum of 2% Identify the installment which are overdue & see that
penal interest is charged to customers account accordingly. Penal Interest on Overdrawn


Amount exceeding Drawing Power is properly charged to customers account. Check that
stock statements for each month are properly received & Receipt Dates are properly fed into the
system & see that penal interest is accordingly charged to customers account.


Any discrepancy noted in above calculations should be noted of query sheets in proper format.
c) Processing Fees :- On following advances sanctioned during the audit period. Term Loans.


Housing Loans Personal Loans Vehicle Loans Cash Credits Bank Guarantee Other Advances
Cash Credit Limit Expansion Scrutinize ledger of every sanction during the audit period &
verify that processing charges are debited accordingly to borrowers ledger as per circular of
charges. Read Sanction Letter for any special sactions from controlling authorities & verify
that charges mentioned in Sanction Letter are debited to borrowers account accordingly.



If any discrepancy observed that should be noted down in query sheets. d) Cash Credit Renewal
Charges:- Cash Credit Limit should be renewed every year as per the Banking regulations. So
Verify the Renewal Register if maintained by bank, & see that in every CC Account CC
Renewal Charges are debited. Renewal Charges are calculated on basis of applicable
processing charges.



If any discrepancy observed that should be noted down in query sheets. e) Inspection Charges:-
Verify that the charges are properly debited in borrowers ledger as per circular of charges on
basic of per inspection carried out.


At Least Four times Inspections Charges should be debited in borrowers ledger. If any
discrepancy observed that should be noted down in query sheets. f) Documentation Charges:-
Documentation charges should be debited in each sanction during the audit period as per the
circular of charges If any discrepancy observed that should be noted down in query sheets. g)
Minimum Balance Charges :- These Charges are generally debited on Saving Accounts &
debited by Data Centre in Case of CBS branches Verify Some Account on random basis that
these charges are properly debited in accounts as per applicable circulars if account balance falls
below minimum.


These Charges are to be charged on per instance basis i.e. if in Six month Period ,four times
minimum balance has not maintained then charges should be levied as (No. of Instances *
Charges per instance). h) Ledger Folio Charges:- These charges are to be charged to current
accounts, cash credit accounts, saving accounts. On basis of per ledger folio. Generally these
charges are debited by Data Centre in case of CBS Branches.


So selective account should be checked to determine whether charges are debited as per
circulars or not. i) Cash Recovery Against NPA Accounts :- Get the list of all NPA Accounts
Check whether any recoveries are made against it in Audit period. Confirm that all
Outstanding Charges, Interest Outstanding are adjusted against such recoveries, then principal
amount of loan adjusted. If discrepancy is noted against above treatment same should be noted
down. j)


Locker rent Charges:- Generally Locker Rent Register maintained by bank & applicable
charges are debited to saving account of customer. Auditors have to check out whether charges
as per circular have been debited to customer or not. Hence saving accounts of locker holder has
to be checked. k) DD Commission, IBC/OBC Commission, Cheque Book Charges, Stop
Payment Charges:- Obtain Pay Order DD Register, IBC OBC Register from branch & verify
on selective basis that charges are properly debited to customers account. Obtain Cheque book
register & verify that series of Cheque books properly entered in register & when Cheque book
issued to customer that series fed into the system so that Cheque book charges are debited to
customers ledger. Stop Payment Charges are debited on basis of per instrument basis i.e. (No
of Instrument* Rate per Instrument).


l) Income From Investment :- Verify whether any investments are made by branch. Obtain
investment register from branch & verify whether interest & dividend are timely collected &
accounted by bank as per applicable rates. Expenses Of Bank :-


a) Interest Paid On Saving, Current Accounts:- Generally bank gives credit of interest to
customers account on half yearly basis by giving command of Interest Credit in case of CBS
Operation. Auditors has to check on selective basis whether interest has been credited on due
time & at appropriate rate as per circulars. If any irregularity observed auditor has to report the
same.