S.No.

Key Audit Matters How the matter was addressed in our audit
In addition to the above time based criteria the PRs
require a subjective evaluation of the credit worthiness
of borrowers to determine the classification of advances.
The PRs also require the creation of general provision
for the consumer portfolio.
Provision against advances of overseas branches is
made as per the requirements of the respective
regulatory regimes.
The Bank has recognized a net provision against
advances amounting to Rs. 11,337.236 million in the
unconsolidated profit and loss account in the current
year. As at December 31, 2018, the Bank holds a
provision of Rs 60,335.610 million against advances.
The determination of provision against advances based
on the above criteria remains a significant area of x In accordance with the regulatory requirement,
judgement and estimation. Because of the significance
of the impact of these judgements / estimations and the the total advances portfolio and performed the
materiality of advances relative to the overall
unconsolidated statement of financial position of the
Bank, we considered the area of provision against
advances as a key audit matter.
The testing of controls included testing of:
ƒ automated (IT system based) controls over
correct classification of non-performing
advances on time based criteria;
ƒ controls over monitoring of advances with
higher risk of default and correct classification
of non-performing advances on subjective
criteria;
ƒ controls over accurate computation and
recording of provisions; and
ƒ controls over the governance and approval
process related to provisions, including
continuous reassessment by the
management.
we sampled and tested at least sixty percent of
following substantive procedures for sample loan
accounts:
ƒ verified repayments of advances / mark-up
installments and checked that non-performing
advances have been correctly classified and
categorized based on the number of days
overdue.
ƒ examined watch list accounts and, based on
review of the individual facts and
circumstances, discussions with management
and our assessment of financial conditions of
the borrowers, formed a judgement as to
whether classification of these accounts as
performing was appropriate.
x We checked the accuracy of specific provision
made against non-performing advances and of
general provision made against consumer finance
by recomputing the provision amount in
accordance with the criteria prescribed under the
PRs;
x Where the management has not identified
indicators displaying impairment, we reviewed the
credit history, account movement, financial ratios,
report on security maintained and challenged the
management’s assessment based on our review
of the credit file ; and
x We issued instructions to auditors of those
overseas branches which were selected for audit,
highlighting ‘Provision against advances’ as a
significant risk. The auditors of those branches
performed audit procedures to check compliance
with regulatory requirements and reported the
results thereof to us.

2 Valuation of investments
(Refer note 9 to the unconsolidated financial statements)

The carrying value of investments held by the Bank Our audit procedures to verify valuation of
amounted to Rs. 786,375.326 million, which constitutes investments, amongst others, included the following:
41.62% of the Bank’s total assets as at December 31, ƒ Assessed the design and tested the operating
2018. effectiveness of key controls in place relating to
valuation of investments;

68 United Bank Limited