Аудит На Форексе

&#;

Forex Transactions report displays all the Vouchers having multi currency. This report will help the Auditor to check if the proper Rate of exchanges are entered and other guidelines regarding the Forex are followed during the transactions.

To view the Forex Transactions report,

Go to Gateway of Tally > Audit & Compliance > Audit & Analysis > Forex Transactions

The Forex Transactions report displays the Name of the Voucher Type, Type of Voucher, Total Vouchers for each Voucher Type, Forex Vouchers for each Voucher Type and count for Audited Vouchers.

The Auditor can press Enter in the Forex Vouchers column to display the Forex Vouchers report for the selected Voucher Type.

The Auditor can also press Enter in the Total Vouchers column to view the Voucher Register displaying all the Vouchers for the selected Voucher Type.

Button options in the Forex Transaction screen

F4: Chg Vch

Click on F4: Chg Vch or press F4 to filter and view the Forex Transactions for the selected Voucher Type.

Ctrl+W: Audit Wkg Paper

To view the Audit Working Paper during Auditing, click on Ctrl+W: Audit Wkg Paper or press Ctrl+W keys. The details displayed in Audit Working Paper will be relevant to report from where it is triggered.

F9: Inv Reports

Click on F9: Inv Reports or press F9 key to navigate to the default Inventory Reportslike Godown Summary, Movement Analysis, Stock Summary etc.

F Acc Reports

Click on F Acc Reports or press F10 key to navigate to the default Accounting Reports like Balance Sheet, Cash Flow, Trial Balance etc.

F Audit Reports

Click on F Audit Reports or press Alt+F10 keys to navigate to the other Audit Reports within Statutory Audit and 44AB Audit (Tax Audit).

F Range

Click on F Range or press Alt+F12 to use the Range Filter option to search the specific Vouchers from the list of Vouchers under each Voucher Type.

Ctrl+F Value

Click on Ctrl+F Value or press Ctrl+F12 to use the Value Filter option to search the specific Vouchers as per the specified user defined criteria.

&#;

Audit of Forex Transactions

responsibility of any Central Bank will be to regulate the inflows and outflows of foreign exchange through proper l e g i s l a t i o n s . K. Parameswaran FEMA was introduced in our country for the purpose of facilitating external trade and payment and for promoting the orderly development and management of foreign exchange market in India. Features of FEMA are: Freeing of current account transactions, permitting identified capital account transactions and delegating more powers to Authorised Dealers (ADs) for independently handling transactions on verifying proper documents. Under such liberalised environment an efficient audit system will help the Central Bank and the Authorised Dealers to ascertain the impact of liberalisation and also to monitor compliance of prescribed regulations.

Forex transactions, if not monitored properly, may lead to drainage of the scarce forex reserves of a country which will have a direct impact on the economy. Forex market is one of the most volatile markets where banking institutions can incur heavy losses if they dnot have a Risk Management Policy. Audit of Forex transactions can establish as to whether regulatory aspects are properly complied with, credit facilities at concessional rate of interest are not misused and the forex dealings are conducted in a disciplined manner. This will help the economy to build up healthy forex reserve, prevent illegal money transfers and robust industrial growth. leakages wherever credit facilities are extended Ensure compliance of bank specific policies/guidelines Prevent recurrence of frauds by checking the existing systems so that the top management is able to capture the details of frauds in time and will be in a position to review their corporate policy for introducing appropriate preventive measures.

Role of an Auditor in forex audit will be to

Ensure that regulatory provisions are complied with Detect revenue

The author is Asst. Professor, S P Jain Institute of Management and Research. He can be reached at [email protected]
THE CHARTERED ACCOUNTANT

MAY

THEME
Regulations/guidelines related to Forex transactions

FEMA Notifications issued by Reserve Bank & Rules framed by Government of India. Guidelines issued by IECD/DBOD/DBOS/FED of the Reserve Bank. Foreign Trade (Development and Regulation) Act, Foreign Trade Policy Foreign Contribution Regulation Act, The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, Uniform Customs and Practice for Documentary Credits (UCPDC ICC ). FEDAI Rules SEBI guidelines

Forex audit will cover the following areas

Trade Services Export transactions (1) Fund based facilities (2) Pre and Post shipment Finance (3) Non Fund based facilities (4)Export Guarantees Import transactions (1) Non Fund based facilities (2) Issuing Letters of Credit, Guarantees and Standby Credits arranging for trade credits and external commercial borrowings. (3) Handling Import collections Remittances Inward remittances Outward remittances Dealing / Treasury operations.

Section 7 of FEMA and Notification No prescribe that exporter should realise full payment for his exports within the prescribed time limit in the prescribed manner. Delay in realisation, realising reduced value or write off of export receivables can now be permitted/approved by the authorised dealer under their delegated powers. In case of overdue export bills beyond the prescribed time limit, AD is advised to report such transactions to Reserve Bank. Audit will ensure whether AD properly monitors the export realisations and/or exercising the delegated authority with due diligence and reports the overdue export bills in time to Reserve Bank. The audit, therefore, has to cover cases where the appraisal, sanction, documentation, disbursement and the operations in the Export Credit/non fund based transactions to ensure the objectives of audit referred to earlier are fully complied with. The auditor, in particular, has to evaluate the system and procedure prescribed by the bank and whether they are updated and are fully applied to each case. Deviations are to be highlighted in the Audit report with necessary sample of irregularities for an effective follow up and rectification by the controlling office. FEMA on import of goods and services: Value of forex outflow for import of goods and services should be covered equally with matching physical import of goods or services. The time limit within which import payments should be remitted is also prescribed by Reserve Bank. To enable the importers for availing cheaper credit facilities at international market rates, importers are allowed to raise trade credits or

Section 7 of FEMA and Notification No. 23 prescribe that exporter should realise full payment for his exports within the prescribed time limit in the prescribed manner.
external commercial borrowings from recognised overseas sources. Importers are also allowed to remit advance payments. While simplifying the procedures and relaxing most of the regulations, Reserve Bank has prescribed certain conditions to ensure end use. Audit will ensure whether the conditions specified by Reserve Bank for undertaking such transactions are properly complied with by the importers and the ADs. For example, trade credits from overseas source can be availed for import of capital goods, provided the maturity of the loan is less than three years and the rate of interest should not exceed LIBOR plus % subject to a monetary ceiling of USD 20 mn equivalent per transaction. Audit will ensure compliance of the prescribed conditions by the importer and the ADs in handling such transactions. There is a possibility of illegal money transfers routed through Trade transactions. Further customers can use the trade route to effect capital transfer. In order to avoid such misutilisation of trade transactions Reserve Bank has advised ADs to implement Know Your Customer (KYC) norms and also due diligence on the overseas seller. Role of audit will ensure whether AD has complied with the guidelines issued by Reserve Bank while undertaking such import
MAY

Regulatory issues
FEMA on export of goods and services:
THE CHARTERED ACCOUNTANT

THEME
transactions so that genuine transactions are alone carried out. the flow may have a direct impact on the forex market. Audit can examine whether only registered FIIs are routFEMA on Remittances: ing their investments and repatriaRemittances can be for: tions through the branch authorized Resident Individuals to handle such transactions and the Resident organizations reporting is done by the bank to Res Resident corporate erve Bank promptly on daily basis. Transfer of funds under various Since Non Resident Indians schemes meant for FDI/FII/NRIs (NRI) are enjoying full convertibilWhile handling inward remit- ity in certain schemes there are postances, Reserve Bank wants to sibilities for ineligible funds getting ensure that such remittances are for repatriated out of India through genuine purposes only. such schemes. NRIs are also enjoyFor instance, foreign inward ing the facilities of repatriating curremittances for organizations if not rent income, sale proceeds of monitored properly may be diverted immovable assets subject to comfor purposes other than for what it is pliance of tax liabilities and certain meant for. AD is advised to ensure conditions. Audit may bring out that the organisation, which receives whether the prescribed conditions foreign inward remittance is regis- are fulfilled before handling such tered under FCRA, with remittances since such unauthoMinistry of Home Affairs and such rized remittances not only are ineliremittances should be handled only gible but also will have an impact on by the identified branch of a bank. AD our countrys balance of payment. has also fixed with the responsibility Regarding outward remittances of reporting operations in such relating to Travel, Higher Studies, accounts to Government of India. Medical Treatment, Emigration etc., Audit can check whether organiza- Reserve Bank has simplified the procedures. Audit can bring out With the deregulation of interest rates whether such and free pricing of products, banks are relaxations and having their own guidelines on such simplification issues. Most of the banks are following of procedures their own rating system on their borroware extended to ers and such ratings are used as the base residents by the for fixing the interest rates and pricing of ADs. their products. Audit may check whether the parameters fixed for rating of the borrower is properly arrived at. of their products. Audit may check whether the parameters fixed for rating of the borrower is properly arrived at. To enable the exporters to quote their price more competitively in the International market, Reserve Bank has allowed more flexibility for the banks to offer export credit facilities at comparatively cheaper interest rates. Export finance is a purpose-oriented advance and ultimately export should take place to enable the exporter to avail credit facilities at concessional rate of interest. If the exporter could not complete his export obligation the entire credit facility looses concessional rate of interest and will be treated as commercial advance. If the advance becomes overdue, such overdue advances are not eligible for concessional rate of interest for the overdue period. All such guidelines are for promoting exports and also to fulfil the export obligations by the exporter in time.

Audit should check the following

Revenue Leakages

tions, which are receiving foreign inward remittances are properly registered with Government of India and the AD is regular in reporting to Government of India. In case of remittances by FIIs for investments in securities and stocks it will be of short term in nature and

With the deregulation of interest rates and free pricing of products, banks are having their own guidelines on such issues. Most of the banks are following their own rating system on their borrowers and such ratings are used as the base for fixing the interest rates and pricing

The credit rating system and the relevant parameters fixed by the bank for rating a customer; The maximum period of advance eligible for concessional rate of interest; The mode of liquidation of such advances either with export documents or with local funds; Recovery of overdue interest/ commercial interest wherever the advance becomes overdue / liquidated with local funds; In case of export bills purchased/discounted/negotiated by the bank, if the payment is not realized on the notional due date, AD should crystallize exporters foreign exchange liability on the

THE CHARTERED ACCOUNTANT

MAY

THEME
30th day after the expiry of Normal Transit Period in case of unpaid DP bills and 30th day after notional due date in case of DA bills at market TT Selling Rate ruling on the day of crystallization or the original bills buying rate whichever is higher; Scrutiny of such transaction may enable the Auditor to identify any diversification of funds for local commercial operations; In case of import bills drawn under letter of credit transactions, AD should recover interest from the importer from the date of debit in their nostro account; In case of import bills drawn at sight under letter of credit, if not paid by the importer within 10 days from date of receipt of the bill (DP bills) the forex exposure to be crystallised. And in case of usance bills if not paid on due date the forex exposure should be crystallised on the due date.

Operations Risk

The impact of irregularities in forex transactions can have greater consequences affecting initially the banks financial position and later on countrys reserve and economic growth. An efficient audit system Bank will be in a position to take corrective measures at an appropriate time and also will be able to contribute to establish a robust economy. the default of the exporter at pre and post shipment stage with ECGC through a guarantee scheme. If a bank has not opted for such guarantee scheme with ECGC, bank may advise their exporters to cover themselves with ECGC under appropriate specific buyer wise policy. Dealing room operations are exposed to highly volatile, vibrant forex market movements. Reported incident of a dealer who has taken a huge exposure resulting in liquidation of an established years old bank is on record. In this referred case, it was pointed out that the bank was not having a proper Risk Management Policy. Auditing of dealing room and treasury operations are of different nature. In this regard Reserve Bank has issued an Internal Control Guidelines specifying certain general check points. On the basis of broad guidelines issued by Reserve Bank and also with the present changes, banks Risk Management Policy should cover the following areas: Market Risk Credit Risk Liquidity Risk

Some of the issues that should be looked into while auditing such transactions are: Limit fixed for intra day trading and over night exposures currency wise for the dealer Fixing review standards, indicating methodology for calculation and validating market risk models Exceptions Fixing limits for counter party exposures Monitoring the gaps and funding plans Operations risk consisting of procedures, reporting system, capturing transactions, reconciliation, valuation, payment of brokerage and disaster recovery system. Compliance of Accounting Standards (AS 11, IAS 39, FASB, GAAP norms).

Preventive Vigilance
Audit can bring out the deficiencies, if any, in the systems, the time interval in capturing the occurrence of a fraud and the time taken for the reviewing authority / board in getting the report and examining the fraud and the remedial measures to avoid such recurrence in future.

Bank Specific Issues

Conclusion
To conclude, the impact of irregularities in forex transactions can have greater consequences affecting initially the banks financial position and later on countrys reserve and destabilize the economic growth. With the help of an efficient audit system Bank will be in a position to take corrective measures at the appropriate time and also will be able to contribute to establish a robust economy.

THE CHARTERED ACCOUNTANT

MAY