Sanctioning/Disbursement
In respect of sanctioning / disbursement of advances, the auditor is expected to comment on –
Delegation of powers / authority at various levels; adherence to authorised limits; whether limits are disbursed after complying with the terms and conditions of sanction.
The auditor should familiarise himself with the system of sanctioning and disbursement of advances. He should also familiarise himself with the relevant directives of RBI. Normally, the system in a bank provides for limits on the sanctioning powers of authorities at various levels. The auditor should examine the documents prescribing such limits, e.g., operation manual, circulars from head office, etc. Where the branch auditors’ reports indicate cases of credit facilities sanctioned beyond the aforesaid limits, the auditor should draw attention to this fact in his LFAR. The auditor should also examine the branch auditors’ report to ascertain whether such cases have been promptly reported to higher authorities as per the procedure laid down in this regard. If not, he should report the fact, giving illustrations of non-compliance with the laid down procedure in his LFAR.
The auditor should also review the sanctions made at different levels. For this purpose, the auditor should randomly select a sample of sanctions made at various levels and review whether the procedure laid down for the concerned level has been followed. Where the auditor has serious reservations about any of the aspects thereof, he should give his observations in this regard in his LFAR. Where the branch auditors’ reports indicate cases where limits have been disbursed without complying with the terms and conditions of the relevant sanctions or cases of frequent overdrawing beyond sanctioned limits, the auditor should state this fact in his LFAR, giving illustrations.