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CA Intermediate · Auditing and Ethics · Audit of Banks

In the audit of Ganga Urban Bank, the long form audit report (LFAR) is required by RBI. Which statement about the LFAR is correct?

The long form audit report is a separate detailed report to the bank's management or Board on matters the RBI prescribes. It supplements the report on the financial statements and does not replace it. It is not circulated to shareholders and is not optional.

  1. AThe LFAR replaces the auditor's report on the financial statements
  2. BThe LFAR is a separate report to the bank's management or Board covering matters prescribed by RBI, and is in addition to the audit report on the financial statementsCorrect
  3. CThe LFAR is sent to shareholders along with the annual report
  4. DThe LFAR is optional and is prepared only if the auditor finds fraud

Explanation

The LFAR is a detailed report addressed to the bank's management or Board on matters prescribed by the RBI, such as the adequacy of systems, asset classification and compliance. It supplements, not replaces, the auditor's report on the financial statements. It is not meant for circulation to shareholders and is not optional.

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