Examination of Reconciliation
The auditor should examine the reconciliation of the investment balances as per the financial statements with that of the balances with the custodians (PDO or a depository for investments held in dematerialised form), account statements of mutual fund, physically verify the securities on hand, obtain independent confirmations from custodians, counter-party banks for BRs on hand, to examine the control and reconciliation of BRs issued by the bank. In addition to examining the period end,the auditor needs to examine such reconciliations at other interim intervals, to ensure that the process is followed throughout the audit period. Needless to add, the actual control and reconciliations etc., are to be carried out by the bank’s management; however, the auditor needs to examine the same.
Some typical audit procedures would include:
perusing the process, frequency of reconciliation and controls over same.
perusing the reconciliation (period end as well as interim) and examining whether proper impact has been given for reconciling items.
obtaining direct balance confirmations.