PUNJAB NATIONAL BANK invites applications for empanelment of Forensic Auditors for the period 2016-2017. Criteria ofqualifications, experience, scope of work, application forms, undertakings, addresses of the Zonal Offices etc. are enclosed.
Please note that applications and copies of the qualification, experience, undertakings etc. be submitted to nearest Zonal Office (list of the Zonal Offices is also attached) of the Bank till 27.04.2016 (5.00 pm).
Fee Structure Payable To Forensic Auditors
Forensic Audit is to completed within a maximum period of 2 years from the date of authorizing the audit.
The Forensic Auditor will be paid fee as under:
| S. No. | Account having exposure Solo/consortium basis | Maximum Fee Payable* ( in Rupees) |
| 2. | Upto ₹ 100 crore | ₹1,50,000/- |
| 3 | Above ₹ 100 crore – ₹250crore | ₹2,50,000/- |
| 4. | Above ₹250 crore – ₹500 crore | ₹3,50,000/- |
| 5. | Above ₹ 500 crore – ₹ 1000 crore | ₹4,00,000/- |
| 6. | Above ₹ 1000 crore | ₹ 5,00,000/- |
*(Service Tax will be payable over and above fee. TDS as applicable will be deducted.)
Travelling & lodging expenses may be considered over and above the aforementioned fee. However, total travelling & lodging expenses should not exceed 15% of the fee payable in respect of the Forensic Audit subject to submission of travelling and lodging bills.
Scope of Forensic Audit
The scope of Forensic audit will extend to following aspects relating to a borrower:
- Capacity to pay: Examine as to if the borrower has defaulted in meeting its payment / repayment obligations to the bank even when it has the capacity to honour the same
- Money trail & End use of funds financed by the Bank/lenders.
- Diversion of funds:diversion of funds on the part of borrower would be construed in any of the undernoted occurrences:
- Utilization of short term working capital funds for long term purposes not in conformity with the terms of sanction;
- Deploying borrowed funds for purposes / activities or creation of assets other than those for which the loan was sanctioned.
- Transferring borrowed funds to the subsidiaries / group companies or other Corporate by whatever modalities.
- Routing of funds through any bank other than the lender bank or members of consortium without prior permission of the bank/lenders.
- Investment in other companies by way of acquiring equities / debt instruments without approval of lenders.
- Shortfall in deployment of funds vis-Ã -vis the amounts disbursed / drawn and the difference not being accounted for.
- Siphoning off funds:siphoning off funds on the part of borrower would be construed to occur if any funds borrowed from bank are utilized for purposes un-related to the operations of the borrower, to the detriment of the financial health of the entity and/or the lender.
- Capital Structure:Tracing the source of contribution by promoters by analyzing equity / debt infused by promoters / partners.
- Abnormal trade transactions: Commenting on transactions of substantial amount, which seem not to be normal trade transactions at arm’s length.
- Sales: Verifying revenue from operations including checking sale order, invoices and controls in billing process. The focus should be on inflated turnover / fictitious sales and / or Sales on Return (SOR) basis where profit has been booked and sales returned in the subsequent accounting period leading to writing off of stocks / debtors and reversal of booked profits. The sustainability of sales in future years should be co-related with Technical and Viability (TEV) study.
- Escrow / Trust & retention Account (TRA):Commenting on adherence to escrow / Trust & Retention Account (TRA) arrangements made with various Details of all transactions with banks outside the consortium / other than nominated account.
- Concentrating transactions – sole customer, sole supplier, major transactions with related parties / group companies, analysis of relationship in two-way deals with the same party or indirect payments made by customers of the borrower to the vendors of borrower,
- Movements in unsecured loans during specified period
- Details of substantial debts raised in sister / associate / group companies either through corporate guarantee of borrower or against security of promoters or promoters’ family assets.
- Verifying receivables thoroughly as there have been cases where the units have shown reciprocal receivables against each other, especially in case of related parties.
- Finding details of assets of unit / its promoter (s) / partners to ensure recovery of loans granted by banks as there would be cases where some assets are not reported in financials of the unit / promoters / partners.
- Examining chain of transactions pertaining to unit / promoters / partners to ensure genuineness of the dealings as there could be cases of bogus family/other transactions.
- Examining stocks / inventory & purchase transactions in particular with related parties / sister concerns.
- Identifying the type of fraud that has been operating, how long it has been operating for, and how the fraud has been concealed.
- Identifying the fraudster(s) involved.
- Quantifying the financial loss suffered by the bank.
- Gathering evidence to be used in court proceedings.
- Providing advice to prevent the reoccurrence of the fraud.
The list is indicative only and a Forensic Auditor may be assigned other jobs also within the ambit of Forensic Audit.
Qualifications required for empanelment of Forensic Auditors
Check list for selection of Forensic auditor firm/ company:
a) Firms/Corporates who display exceptional professional competence in Forensic Auditing of the accounts with exposure of ₹ 50 cr and above.
b) Having in-depth knowledge and extensive experience in accounting and should be aware of the various practices existing in cross section of industries.
c) At least 2 qualified Fellow of Chartered Accountants (i.e. experience of 10 years) as Members & must be registered with Institute of Chartered Accountants of India (ICAI). At least one Partner/Director with experience of minimum 10years, preferably having exposure in banking sectorlaw and practice. The firm/Corporate should be at least 10 years old.
d) The firm should be empaneled with RBI for conducting bank audits.Average professional receipt from audit as shown in the income tax return should be ₹50 lacs in last three years.
e) One of the partner/director of the firm /corporate should be Certified Fraud Examiner (CFE) or has done Forensic Audit and Fraud Prevention (FAFP) course of The Institute of Chartered Accountants of India (ICAI).
f) Proven track record of conducting a number of Forensic and Investigative audits and exposed/established frauds and malpractices.
g) Firm should preferably have at least 5 years’ experience of doing statutory or internal Audit of organization covered below-
(i) listed companies; or
(ii) unlisted public companies having a paid-up share capital of INR 10 crores or more; or
(iii) all private limited companies having a paid-up share capital of INR 20 crores or more; or
(iv) all companies (private and public) which do not meet the thresholds mentioned in (ii) and (iii) above, but have public borrowings from banks / financial institutions or public deposits of more than INR 50 crores
h) Reputation beyond reproach. Unblemished track record, with no unsatisfactory conduct in the past and should not have been blacklisted by any financial institution/other organizations/any government department. The firm/company should furnish self-attested affidavit on stamp paper in this regard.
i) The name of the Firm/Company or its promoter/partner etc. should not be in the defaulters/barred/caution list published/displayed at websites of public bodies such as by RBI/IBA/ECGC/SEBI/CICs etc.
j) Forensic auditor not working as auditor of the borrower company for last
k) The Forensic Auditors who were associated with any NPA account as auditor / concurrent auditor in the past will not be allocated Forensic Audit in that NPA account
l) Usual KYC norms like Identity and address proof of Firm/Company are mandatory.
m) PAN Number and Registration Number with Institute of Chartered Accountant of India is also mandatory for applicant and its CA Partners/Directors.
n) In the event of gross negligence/malpractices noticed by the Bank in Forensic Auditor’s conduct/scope of work, apart from de-paneling the firm/company, the Bank reserves the right to include their names in the caution list for circulation to all the Banks through IBA.
o) Forensic Auditor will be evaluated on the basis of their performance and usefulness to the Bank during review of empanelment at annual interval or as convenient to the bank.
p) Bank reserves the right to reject any or all applications for empanelment without assigning any reasons there for.
q) The firm/company should have a fixed office premises with reasonable space and adequate infrastructure.
r) The firm/company should have specialist staff on the rolls of employment or available on retention basis, with minimum CA/ICWA/legal and certificate from ICAI (Forensic Audit and Fraud detection) in the field of service offered. Technical/ professional staff should be a minimum of 10 and include finance professionals. The firm should provide a dedicated team for timely completion of forensic audit.
s) The terms of reference for forensic audit should be in such a way so that forensic auditors may not have any leeway.