Current Affairs · Banking Regulations
Under the RBI guidelines for the Long Form Audit Report (LFAR), if a statutory auditor finds that a branch has consistently failed to conduct physical verification of securities for loans exceeding 5 crore rupees but has maintained updated records in the system, how must this be reported and classified?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The auditor should ignore this if the borrower is a Grade 'A' rated corporate client, as the risk of collateral loss is considered negligible.
- 2Such observations are excluded from the LFAR and are only reported in the main audit report if the discrepancy in value exceeds 10% of total advances.
- 3The auditor must report this as a significant deficiency in the internal control system specifically under the credit management section, verifying if this constitutes a lack of due diligence.✓
- 4It should be reported as a minor procedural lapse since the digital records are updated and provide a sufficient audit trail.
Correct answer
The auditor must report this as a significant deficiency in the internal control system specifically under the credit management section, verifying if this constitutes a lack of due diligence.
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