Audit of Banks – Test 1

In case of classification of advance as doubtful assets, provision is required by the bank for
unsecured portion

In case of classification of advance as doubtful assets (up to one year), provision is required by the
bank for secured portion

In case of classification of advance as doubtful assets (more than one year but up to 3 year),
provision is required by the bank for secured portion

In case of classification of advance as doubtful assets (more than 3 years), provision is required by
the bank for secured portion

In case of classification of advance as loss assets, provision is required by the bank

___________________ refers to the security offered by the borrower for bank finance or the one against
which credit has been extended by the bank.

___________________ is an additional security. Security can be in any form i.e. tangible or intangible asset,
movable or immovable asset

Most common types of securities accepted by banks are the following

Which of the following is not type of mortgage

_____________________ can be effected by a registered instrument called the “Mortgage Deed” signed by
the mortgagor

____________________ is effected by a mere delivery of title deeds or other documents of title with intent
to create security thereof

_____________________ involves bailment or delivery of goods by the borrower to the lending bank, with
the intention of creating a charge thereon as security for the advance

_____________________ is the creation of an equitable charge, which is created in favour of the lending
bank by execution of agreement in respect of movable securities belonging to the borrower

________________ is a transfer of an existing or future debt, right or property belonging to a person in
favour of another person

___________________ is a statutory right of a creditor to adjust, wholly or partly, the debit balance in the
debtor’s account against any credit balance lying in another account of the debtor.

___________________ is a creation of legal charge with consent of the owner, which gives lender a legal
right to seize and dispose/ liquidate the asset under lease.

An advance will be classified as NPA, if

An account should be treated as ‘Out-of-Order’ if

Where it appears that an account has inherent weakness and few credits near balance sheet tries to
make it regular, the account should be classified as __________________

Which of the following statement is incorrect w.r.t classification of advance as NPA

The credit facilities backed by __________________ through overdue, will be classified as NPA only when
the ___________________ repudiates its guarantee when invoked

Loan granted for short duration crop shall be classified as NPA if interest and/ or installments of
principal is overdue for

Loan granted for long duration crop shall be classified as NPA if interest and/ or installments of
principal is overdue for

Credit card account shall be classified as NPA, if __________________ amount due, as mentioned in the
credit card statement is not paid fully within ________________ days from next statement date

Which of the following is not exception to norms for classification of assets as NPA

Banks should recognize income from NPA

Interest income from advances through overdue but not classifies as NPA as secured against Term
Deposits, NSC, KVP, IVP may be recognize

Interest income from advances through overdue but not classifies as NPA as secured against
guarantee of the Central Government, recognized as

The auditor can obtain sufficient appropriate audit evidence about advances by study and
evaluation of the internal controls relating to advances, and by:

If a loan/ advance is treated as NPA for the first time, interest accrued which had not been realized
but credited to the income account should be reversed by transfer to a separate account called
________________