Evaluation of internal control on loans and advances
1. The internal control system should ensure that the borrowings and advances are within the limits and the persons involved are duly authorized and that they are acting within their powers to borrow.
2. The internal control should be designed in such a way that it shall ensure all the legal and other regulatory procedures relating to the borrowings are duly complied with.
3. It should also ensure that all the terms of borrowings and variations in terms of borrowings, if any are duly authorized.
4. It should be designed in such a way that the securities against loans are periodically reviewed.
5. The records and documents relating to loans, advances, deposits etc., are to be kept in safe custody and the internal control system should include periodical verification of such documents and records.
6. The system should also reconcile the balances periodically and investigate and rectify the discrepancies, if any.
7. The internal control system should ensure that appropriate method is applied for valuation of liabilities at the end of the year. Due care should be taken for valuing the liabilities that are maintained in foreign currencies.