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APG for LC

General Objectives:
1. To check on the reliability of financial
records.
2.

To check compliance with the generally


accepted auditing standards.

3.

To ensure if established policies and


controls are adequate and consistently
applied.

4.

To review compliance with laws and


regulatory requirements.

PRELIMINARY AUDIT PROCEDURES:


1. Obtain a copy of the approved Table of
Organization (TO) with position description
and Operations Manual of the Department.
2. Evaluate the functions handled by assigned
officers/staff against the approved TO and
Operations Manual.
3. Inquire and evaluate monitoring tools of the
Department in:
Carrying out their functions;
Measuring performance of
subordinates; and
In complying the regulatory
requirements/external reports
4. Obtain Balance Sheet as of audit cut-off
date and comparative BS as of last year.
Prepare the comparative BS and obtain
comments of the unit for any significant
changes.
5. Inquire and validate access given to
employees to different systems and check
compliance to approved security matrix.

APG for LC
IMPORT TRADE TRANSACTIONS a flow of goods/ bringing in of goods into the country from a foreign
source. Imports may be paid via:
A.

Letters of Credit

B.

Documentary Collections
Document against Payment (DP)
Document against Acceptance (DA)
Open Account Arrangement (OA)
Direct Remittance
Consignment

Documents used in International trade are:


1. Transport documents
1.1 Air Waybill is a receipt of goods only, which is issued by an airline company and not a document of
title. The goods are delivered to the named consignee once customs clearance has been obtained.
1.2 Bill of Lading (Marine) a marine or ocean bill of lading is a receipt of goods, a contract for carriage
and a document of title. It is issued by the actual carrier or his agent and bears evidence that the
goods have actually been loaded on board by a named vessel. As a document title, it must be
presented to the shipping company to obtain possession of the goods.
1.3 Combined Transport Document is issued when more than one mode of transport is necessary to
move goods from a point of departure to a point of final destination (also known as inter-modal or
multi-modal transport document).
2. Commercial Documents
2.1 Commercial Invoice both a statement of goods shipped and a bill
2.2 Packing List sets out the details of the packing of the goods
2.3 Inspection Certificate certificate declaring the result of an examination of the goods by a recognized
independent inspection body.
2.4 Certificate of Analysis states the ingredients and proportions found by an independent analysis of
merchandise.
2.5 Certificate of Weight issued by a specified party usually certifying the gross and net weights of each
packing unit.
3. Official Documents
3.1 Certificate of Origin declaration that certain goods originated from a particular country.
3.2 Consular Invoice issued by consul of the importers country attesting to the value and origin of goods.
4. Financial Document
Draft/ Bill of Exchange demand for payment (at sight or usance).
A.

IMPORT LETTERS OF CREDIT (LC)


- An instrument issued to document an arrangement whereby a bank (Issuing Bank), acting at the request
and in accordance with the instructions of a customer (applicant for the credit, buyer or the importer), is to
make payment to or to the order of a third party (the beneficiary/seller or the exporter) a predetermined
amount of money within a prescribed time limit provided terms and conditions of the credit are complied
with.
2 types of Import LC according to Method of payment:
Sight LC - beneficiary gets paid immediately upon presentation of required documents.
Usance LC - payable at a specific future time
Import Letters of Credit
1. Obtain subsidiary ledger of outstanding
LCs as of cut-off date and compare the

APG for LC
same with GL balance.
(LCs opened are booked under Contingent
accounts Sight or Usance LC Outstanding).

2.

Review of LCs opened vs. Line


2.1 Check whether LC opening was made
against clients available LCTR line. If
vs. other credit lines, secure copy of
approval.
2.2 Test-check on the proper approval and
accuracy of line encoded.

AMLA

2.3 No LCs opened for walk-in clients.


They must be referred to Corporate
Banking
Division
for
proper
identification and evaluation of credit
worthiness.
3. Observe and check if LC applications are
stamped with the date and time of receipt.
Test-check if these are processed within
the day or next day (if received after cutoff time).
Check also if LC numbers are given to
client only if the documents are complete.

Cir 1389
Sec 9

4. Ensure that the LC was opened on or


before the date of the shipment with max.
validity period of 1 year and that only 1 LC
was opened for each import transaction.

Cir 1389
Sec 9;
Cir407

5. Review of the documentation:


Check whether LC opening was supported
by the following:
a. Duly accomplished LC application

Cir 1389
Appendix
1
MAAB
dated
09.26.90

b. Firm
offer/Pro-forma
Invoice
containing information on specific
quantity of the importation, unit cost
and
total
cost,
complete
description/specification
of
the
commodity
and
Phil.
Standard
Commodity Classification code
c.

Permits/clearances from appropriate


government
agencies,
whenever
applicable (for regulated commodities)

d. Duly accomplished Import Entry


Declaration Form (IED) which serve as
basis for payment of advance duties

APG for LC
as required under PD 1853
6. Check if the deficiencies in the LC
application relative to the following were
referred to the client for regularization:
6.1 Incomplete name and/or address of
importer and exporter
6.2

Amount does not tally in the


proforma invoice or equivalent
documents

6.3

Term of shipment, term of payment


and/or manner of shipment not
indicated

6.4

Incomplete merchandise description


or too detailed &/or inconsistent with
supporting documents

6.5

Shipping/expiry dates &/or mode of


advising LC not properly indicated

6.6

Incorrect CB Commodity Code

6.7

Alterations not duly signed by the


client/authorized signatories

7. Compare details of LC opened per SWIFT


message vs. AAILC.
8. Compare
the
signature
of
the
client/authorized
signatories
on
the
Application and Agreement of Irrevocable
Letter of Credit (AAILC) against the
signature card/authorized signatories per
Board resolution. Check if signature
verified by the Unit.
CB Cir.
No. 1389
Sec 9

9. In case of LC Amendment, look for the


authorized and verified instructions from
the customer.
1.1Ascertain that no existing regulations
prohibit the amendment required.
1.2Appropriate approval if pertained to
increase in amount or extension of
expiry date
1.3Check if extension of LC validity of
more than one (1) year should have
prior CB approval if payment of the
LC is to be sourced from the banking
system

APG for LC
1.4Ascertain that the reimbursing bank
was duly notified for any increase/
decrease in amount of the LC.
1.5
CPG No.
004/2004

10. Check submission of marine insurance


coverage
10.1
10.2

10.3
10.4

BSP Cir.
No.909
Sec 9
Cir 844

USC No.
265/99

Check if corresponding charges for


the amendments were collected.

Open Policy up to the line limit


Cover Note- to be submitted within
one week after LC opening provided
goods have not been shipped (for C
&F, FOB and FAS shipments)
Compare
details
against
LC
application
Issued by an accredited insurance
company, otherwise proper approval
obtained.

11 Test-check on the computation of charges


and accuracy of amount collected and
booking for the LC opening:
11.1Advance Customs Duties (amount
collected based on the amount
indicated in the IED).
11.2Opening charges (see Policy Manual)
11.3Cash LC/ Marginal Deposit (if required)
12 Check whether clean-up of expired LCs is
being made at least once every quarter:
Items to be checked:
12.1

12.2

12.3
12.4
12.5

LCs with nominal balance (less than


10% of the LC amount) should be
cancelled if already expired for 60
days or more
LCs fully
unutilized
or with
substantial balances should be
cancelled if already expired for more
than 90 days, provided;
No BL endorsement has been made
No Bank Guarantee has been issued
No Inward Bills for Collection (IBC)
or Acceptance is outstanding

Shipside Bonds/Bank Guarantee (arrival of


goods to destination before the documents)
There are times that the goods reach their
destination before the documents. The Bank
can issue a shipping guarantee in favor of the
shipping company authorizing the release of the
goods to the importer against the Banks
undertaking to deliver the original Bill of
Lading.

APG for LC
The amount shall be carried in the books (under
contingent account Bank Guarantees) at the
local currency equivalent of the shipment at the
banks booking rate permissible within the forex
band and shall be reversed upon surrender to
the bank of the shipside bonds duly cancelled.
1.

Obtain subsidiary ledger of outstanding


shipping guaranty as at audit cut-off date
and tally the same against GL/FCCL
balances.

2.

Check whether a register was being


maintained for all shipping guaranty
issued.

3.

Verify whether issuances of shipping


guaranty were limited only to clients with
LC/TR lines and L/Cs with 100% cover.

4.

Ascertain whether the following were


submitted by the client in support of the
application for SG (all required documents
shall be signed only by the clients
authorized signatories):

5.

Letter of Indemnity
Trust Receipt (in case client has no TR
line, ascertain whether full payment of
the Customer Liability Account (CLS)
was required prior to the issuance of
the SG.)
Copy of Bill of Lading
Copy of Commercial Invoice
Steamship Guaranty (Undertaking for
release of cargo accomplished by
shipping agency and singed by client.)
Undertaking for discrepancies
Form 104 (Surrender of Original BL)
Accepted Draft Signed Across (for
Usance LC/DA only)

Verify whether the SGs issued were


stamped with protective clause as
follows:
It is understood and agreed that the liability of
the undersigned bank in no event, shall not be
in excess of $_____, the invoice value indicated
herein which liability shall be extinguished upon

APG for LC
the production and surrender of the proper bill
or bills of lading or the expiration of one year
from date hereof whichever shall first occur.
It is further understood and agreed that all
terms and stipulation not related to the release
of the merchandise under guaranty are hereby
deemed inapplicable in the event of a
settlement of our liability, the place of payment
will be in Metro Manila, Philippines.

6.

Check if bank guaranty issued correspond


to the amount (at the same foreign
currency) and other information against
TR, LC, bill of lading and commercial
invoice.

7.

Ascertain correctness of
collected from the client.

8.

Review outstanding items for more than


30 days from issue date and check
whether the unit has already received
original documents but not yet presented
to the shipping company for cancellation.

the

charges

Note: Bank guaranties must be cancelled within 30


days from receipt of the original shipping documents
or shall be automatically cancelled at maturity, which
is one year from date of issuance.

APG for LC
Import Bills (upon negotiation of the LC)
Upon receipt of documents, the issuing bank
rechecks them and if satisfied that they comply with
the LC terms and conditions, it presents the same to
the importer/client for payment. The accounts used
to record the receivable of the bank from
importer/client (representing the value of the import
bills presented by the paying bank for negotiation)
are:

Customers Liability Under Import Bills


(CLIB) this account is debited for all import
bills drawn under a sight LC (payable by the
importer/client upon presentation by the issuing
bank) upon receipt of debit advice or documents
from the negotiation bank.
Contra account
credited is Due to FX Banks (nostro) for
payment to correspondent bank.
Customers Liability Under AcceptancesForeign (CLUAF) this account is debited for
all import bills drawn under a Usance LC
(payable at certain date after acceptance) upon
acceptance of the draft by the importer. A
contra account, Outstanding Acceptances is
also set up by the bank representing its liability
to the paying bank for the drafts drawn.

1. Obtain subsidiary ledgers and compare the


same with the GL balance as of audit cutoff date. Reconcile any difference noted.
Note:
Should be booked in FX currency;
conversion to Peso Import Bill s not allowed.
2. Inquire and check on the safekeeping of
documents (including drafts) received
under a credit during and at end of day.
Documents not processed/ released should
be held in custody by a designated clerk
and kept under joint custody at the end of
day (fire-proof vault).
3. Test check items booked as to:
Cir 1389
Sec 9

3.1 Completeness of documentation


(cable, draft, bill of lading/airway bill,
commercial invoice, insurance).
3.2

Timeliness of booking.

3.4 Compliance with the terms and


conditions set forth in the LC.
3.5 Compliance with the Uniform Customs
and Practices on Documentary
Credits.

APG for LC
3.6 Requirement of pre-shipment
inspection/Clean report of findings
(CRF) is strictly observed, whenever
applicable.
4. In case of discrepancy, determine if the
following procedures were made:
Note: Booking of LCs with discrepancies remains
under contingent account Inward Bills for
Collection. Reversal and booking to CLIB/CLUAF is
upon acceptance of client of the discrepancies.

4.1 Discrepancy notice was sent to


negotiation bank within seven (7)
banking days from receipt of
documents.
4.2 Discrepancy letter was sent to client
for conformity. If no approval was
received from the client, the
negotiating bank should be
immediately informed.
4.3 Determine whether documents were
released to client only upon
acceptance of the discrepancies.
5. Determine whether documents were
released only after payment for sight LC or
only upon acceptance of the draft for
Usance or upon lodging to TR.
Ascertain compliance with policies on
release of documents.
6. Test-check payment received for settled
customers liability accounts. Ascertain
accuracy of amount debited to clients
account (principal amount paid and
negotiation charges)
6.1

Verify outstanding items for more


than 15 days. Check if reclassified
to Past Due Import Bills account if
no approval for extension for another
15 days is obtained or to Trust
Receipt if converted to TR.

Notes:
Clients account debited vs. credit to CLIB for sight
LC or Due to FX Banks for usance LC
(corresponding set-up to CLUAF and related
Outstanding Acceptances GL accounts also
reversed). For usance LC, correspondent bank is
paid on maturity date whether import client pays or
not.
In case of non-payment from importer, contra
account debited is Past Due Import Bills or TR if
converted to TR.

APG for LC
CPB
2002/02
8.21.02

7. Check approval of the Unibank Crecom


Chairman/President in the following cases
(regardless of amount; except when the
Usance LC is fully covered by assignment
of FCDU deposits):
7.1 Usance LC is for a term of more than
180 days even without any TR facility.
7.2 Usance term plus the TR term exceeds
180 days.

APG for LC

PD 115 or
TR law

Trust Receipts (TR)


Under a LC, importer has the option of
authorizing the Issuing/ Opening Bank to debit
his account or request re-financing under a TR
Agreement (in peso or dollar denomination).
TR is an agreement, which enables the importer
to obtain possession of the merchandise for
resale in exchange of a promise to hold the
merchandise received in the name of the Bank.
Bank retains ownership of the merchandise and
importer is obligated to pay the bank from the
proceeds of the sale.
1.

Check duly approved Instruction Sheet for


the conversion of IB to TR (no automatic
conversion to TR; shall be initiated by
client and coursed thru the Account
Officer).
Terms of the TR i.e., term, interest rate etc
should tally with CO/IS

Credit pol.
category
C
CPB No.
93/004;
2002/016

CPB
93/004 :
3.12.93

2.

Check covering Trust Receipt Agreement


and ensure the following:
2.1 Duly signed by the client/authorized
signatories and authenticated by an
officer.
2.2 Corresponding documentary stamps
was affixed.
2.3 Goods under TR and amount tallies
with the IB documents

3.

Check on accuracy of TR booked (vs. IS


for the Peso conversion).
Dollar
denominated TR should have proper
approval.

4.

Ascertain if TR granted is for a term of not


more than 120 days.
Extension of TR term beyond 120 days
(max. of 180 days) subject to the following:

Specified partial payment from 20% to


50% as approved by appropriate level
of authority
Any deviation from this policy on
partial payment requires Crecom
approval regardless of amount.
Cumulative usance term (i.e. supplier's
term plus TR term) shall not exceed
180 days.
Extension of FCDU TRs limited to

APG for LC
prime CBD clients subject to Crecom
approval
Conversion of IB to TR by clients with
existing past due subject to appropriate
approval
5.

Goods subject of TR
4.1 Check whether only goods under
Section 4 of PD No. 115 (Trust
Receipt Law) were accepted under
the Trust Receipt Agreement.
4.2 Importation covering capital goods
are subject to the following:

Drawn vs. approved LCTR line


Tenor subject to existing policy on
TR

Allowed only for light equipment,


machinery and supplies (spare
parts) used for manufacturing
operations.
Dollar denominated TR not
allowed
Maximum TR amount shall only
be up to P 10M. If over P10M,
the conversion to TR shall be
handled on case-to-case basis.

Note: Long-term financing (e.g., via leasing facility


with BPI Leasing or via an approved STL/MTL)
should be determined even prior to LC opening.
The TR shall be allowed only for bridge financing
purposes and shall be subject to the approval of the
appropriate approving credit committee to ensure
that the TR, if granted, can be repaid/refinanced
upon its maturity by a longer term credit facility.

6.

Check if goods under TR are covered with


fire insurance policy. Items to be checked
on the insurance policy:
5.1 Issued by accredited insurance
company; otherwise with proper
approval
5.2 Not expired
5.3 Description of goods under TR tallies
with insurance
5.4 Amount of the insurance equal to the
amount of the TR.
5.5 Duly endorsed in favor of the bank
5.6 OR for the premium payment.

7.

Verify if the following charges were


collected:
6.1 Interest at approved rates from date
of IB booking/acceptance to date of
TR conversion
6.2 Penalty

APG for LC
6.3

Principal amount (upon liquidation of


the TR)

8.

Check and evaluate referral of unpaid TRs


on due date to the AO. Inquire on status/
remedial management on account. Check
corresponding booking to Past Due TR
and/or Items in Litigation (if case is filed
against client).
B. DOCUMENTARY COLLECTIONS
An Operation by which a bank collects payment on behalf of the seller/ exporter by delivering the documents to
the buyer/ importer against payment or acceptance of a draft either via:

1)
2)
3)
4)
5)

Document against Payment (DP) bank advise importer of the receipt of the complete original shipping
documents and shall effect the release of said documents to importer upon receipt of payment. Bank
shall remit payment to the seller thru the correspondent bank abroad.
Document against Acceptance (DA) shipping documents are released to the importer by the local
bank thru the sellers bank upon the importers acceptance of the sellers bill of exchange obligating
importer to pay for the shipment at some future date.
Open Account arrangement (OA) - the shipping documents are sent and released by the seller directly
to the importer without coursing the documents thru the banks upon importers promise to pat at some
future date after shipment.
Direct Remittance Exporter sends documents directly to importer. Importer presents copies of the
documents and an application for foreign exchange to the bank when ready to pay. Bank then remits
proceeds to exporter according to instructions.
Consignment goods are not sold to importer but entrusted only by exporter to importer to sell. Title of
goods remains with exporter until sold.

DA/DP/OA/Direct remittance transactions are booked under contingent account Inward Bills for Collection
with sub-classification if DP/DA/OA.
AUDIT PROCEDURES
1. Obtain subsidiary ledger of all outstanding
inward bills for collection and tally the
same against GL balance as of audit cutoff date.
2. Check whether documents received were
stamped with a date of receipt and
recorded in the register (with IB reference
no.).
3. Determine whether all items recorded per
register were booked to its proper GL
accounts.
Cir 419
Sec 11

4. Check compliance on the required


reporting of importations under DA or OA
arrangements (daily schedule is sent to
UCAD who prepares the report to BSP cc
IOD).

APG for LC
5. Ascertain that foreign drafts were signed
by the importer to indicate acceptance for
DA arrangement.
Check for the:
Date of acceptance
Date of maturity
Initial by an officer to indicate
authenticity/ validity of importers
signature.
6. Determine whether documents were
released only after acceptance of draft
under (IBC-DA) or upon payment (IBCDP).
7. Determine whether a billing statement was
prepared 10 days before maturity date
(based on correct selling rate for the day).
CB Cir
No.419
series
2004

8. Check existence of Records of Goods


Importer (RGI) submitted by the importer.
(For OA, DA)

Should be duly
accomplished/ signed by the importer
and assigned with reference Bank
Reference No.
Submitted to BSP
within 5 banking days after the end of
the reference week
Importations listed in
the RGI should tally with those of the
DA documents.

9. Ascertain that correspondent bank was


advised of the acceptance of draft/
discrepancies by the importer by way of
the Advice of Maturity (AM-DA).
10. Ascertain that letter of authority to debit
the account was on file for payment made
against debit to importers account
(supported by an IS). Check if the same is
signature verified.
11. Determine if payment of collection items
were covered with receipts. Test check
computation of total value of collection and
charges.
12. Test check if remittance schedule were
stamped paid on the date of payment.

APG for LC
13. Investigate
items
which
remained
outstanding for a considerable length of
time
OTHER PRODUCTS
Stand-by LC Domestic and Foreign
Issuing bank acts only as the guarantor to a
Foreign Loan or Performance bond. May be
drawn only when debtor (accountee) defaults in
his payment (in case of loan) or obligation (in
case of a performance bond). Standby LCs
issued are booked under contingent account
Stand by LC.
1. Obtain subsidiary ledgers of outstanding
Stand-by LC and tally the same with GL
balance as at audit cut-off date.
2. Make an inventory of outstanding Stand-by
LC based on subsidiary ledger.
Application for Stand-by LC and compare
the same against LC opened. Check if
duly signed by an authorized signatory of
the bank.
CPG
98/003

3. Verify if with specific approval for the


Standby LC. Obtain copy of the Credit
Offering which should include the:
3.1 Purpose
3.2 Amount
3.3 Beneficiary
3.4 Expiry Date (may go beyond the
expiry of the approved line provided
that the Standby LC line is still
operative at the time of the LC
opening).
3.5 Terms and conditions of the availment
of LC in case of a drawdown by the
beneficiary

MOR Sec
X347.1 & .
2

4. Ensure that party who opened the Standby


LC does not have any past due obligation
for the 90-day period preceding the date of
issuance of LC.
5. Check if the standard Standby LC form
was used; otherwise it should be subjected
to legal review.
6. Check if the terms and conditions as
specified in the LC were strictly
implemented i.e., amount, interests or
penalty etc.
7. Determine whether issuance of a Stand-by

APG for LC
LC FX had prior clearance and approval of
CB through the Management of External
Debt and Investment Accounts Department
(MEDIAD) (CAG Memo 083/83).
8. Ascertain whether LC
specified an expiry date.
CPG
98/003

opened

has

9. Check if the required fees/charges were


collected from the client (subject to
commitment fee).
10. Inquire and validate any Standby LC paid
due to applicants default in respect of an
obligation owed to the beneficiary.
Review and evaluate handling/ booking.

MOR Sec
X347.1

11. Check compliance to the monthly report of


Domestic Standby LCs issued and
outstanding.
Ensure timeliness and completeness of
information as required.
Export LC
1. Obtain subsidiary ledger (SL) of all
outstanding export LC and tally the same
with GL balance as of audit cut-off date.
2. Make an inventory of confirmed export LC
based on SL.
3. Check if supported with Purchase Order or
Sales Contract
4. Check outstanding items if maximum
validity period of 90 days from date of
issue is observed, inclusive of extensions
provided that the expiry date does not go
beyond the delivery period specified in the
LC, PO or SC
Export Bills Purchased
Outright purchase/ immediate credit of payment
to the exporter prior to receipt of payment from
the Reimbursing Bank.
1. Obtain SL of outstanding EBP and tally the
same with GL balance as of audit cut-off
date.
2. Determine whether items purchased is

APG for LC
within clients EBP Line and the same is
properly earmarked. If no line is available,
check if the purchase was covered with
instruction sheet duly approved by
appropriate lending body.
3. Check whether the following documents
were submitted by the clients prior to
purchase of Export Bills:
a. Original copy of Export Letters of
Credit (ELC) together with:

Draft
Comm
ercial Invoice

Purch
ase Order/ Firm Offer

Insura
nce Certificate (if any)
Letter
of Indemnity from the client duly
signature verified.
Such
other documents required by ELC.

b. The following documents required


internally by CB and other government
agencies:

Inform
ation Sheet

Report
of Foreign Sales

Export
Declaration

Custo
m Invoice
c.

If a bank other than BPI was named as


negotiating bank in the ELC determine
whether:

Check notation on the covering


ELC for partial negotiation with
other bank.

Confirm with named negotiation


bank
for
possible
partial
negotiation not noted per ELC.

4. Check documents submitted and ascertain


that all terms and conditions of the credit
were complied with.
5. Check correctness of the computation of
proceeds taking into account the propriety
of exchange rate used and collection of the

APG for LC
required bank charges (such as interest
rate, documentary stamps, postage, cable
charges, etc.).
6. Trace disposition of proceeds of items
purchased.
7. Ascertain whether dishonored/ returned
items were immediately debited to clients
deposit account, taking into consideration
the following:
Exchange rate
Maximum selling rate
Interest applicable rate collected from
date of negotiation to date of actual
payment by the exporter.
8. Documents
purchased
should
be
couriered/ air mailed to the correspondent
bank within 24 hours from date of booking.
9. Past Due Export Bills
Check booking:
9.1 Sight drafts lodged to past due if w/o
payment after 45 calendar days
from booking date.
9.2 Usance drafts lodged to past due if
w/o payment 3 calendar days from
maturity date.
Outward Bills for Collection (OBC) FX
Sending of export documents to the Issuing
Bank for collection.
1. Obtain subsidiary ledger of outstanding
OBCs as of cut-off date and compare the
same with GL/FCCL balances.
2. Make an inventory of outstanding items
(remittance schedule) based on the SL
obtained.
3. Determine whether item sent for collection
was properly accounted for by assigning a
control number.
4. Verify whether items received for collection
were sent/ mailed to their respective
drawees within 24 hours upon receipt
thereof.
5. Test-check validity of collection items
already paid. Determine if paid/ credited to
exporter and only upon receipt of payment
from the Reimbursing Bank.

APG for LC
6. In case of dishonored collected items,
check if exporters/ sellers/ depositors were
billed when applicable for commission,
postage, documentary stamps and such
billings were promptly paid.
7. Investigate
items,
which
remained
unrealized/ uncollected for a considerable
length of time.
Cir 1389
USC2002/
001

Crediting of FCDU accounts for Traderelated Foreign Exchange (FX) sale


8.

Check compliance to the following:

Underlying transaction is trade-related and


limited to OA/Direct remittance or
Document against Payment without Draft

Remittance to final beneficiary is on same


day of FX sale

Client submits all the documentary


requirements and is included in the list of
clients with Treasury to have their FCDU
accounts credited for proceeds of FX sale

for trade related txn.


9.

Check confirmation sent by IOD to


Treasury if documents submitted by clients
were complete and proper.

10.

Verify if the amount of FX sold by


Treasury does not exceed the amount
indicated in the commercial invoice.

11. Check if IODs processing of outward


remittance (should be done on same day
the FX proceeds have been credited to the
clients FCDU account).
12. Check if all copies of the trade documents
were stamped with the phrase FX Sold
and cable confirmation in the respective
clients folder.
Note: Above transactions are coursed thru Treasury.
However, the review of the completeness and
orderliness of documents of clients is handled by
IOD who should inform Treasury if documents were
in accordance with the BSP requirement. Treasury
handles debiting of clients peso account for the
payment and crediting of the importer-clients FCDU
account for the proceeds of sale.

OTHER FUNCTIONS
CABLE SECTION

APG for LC
1. Ascertain whether computer terminals
were
properly
safeguarded
against
unauthorized access. Observe logging in
the MERVA system and check compliance
to
Confidentiality of Encoder/ Officers
password
Logging-off of computer terminals
when not in use.
2. Inquire and evaluate procedures in
monitoring including distribution and
reconciliation
of
incoming
SWIFT
messages.
Test-check to validate.
3. Ascertain whether control in the use of
swift facility were strictly observed:
Authorization of second officer on
outgoing
payment
messages
amounting to $5,000 and above.
Total outgoing messages per Traffic
Reconciliation were accounted against
duplicate
copies
of
messages
approved by officer.
No sending of message type (MT)
202 (authority to remit funds to a third
bank) to avoid double payment of
Import Bills.
Collection and accounting of Custom Duties
Unit uses the PAS system in reporting the custom
duties collected to Bureau of Customs and the
EFTIS system for the remittance of the custom
duties to BSP.

1.

Obtain logbook maintained for IEIRD


received for the day to determine that all
documents received for the day were
processed (including the transactions of
the Offsite Receiving Units or ORUs).

2.

Check accuracy of amount encoded in the


PAS system against supporting IEIRD.
Amount validated in the IEIRD should tally
with the amount of assessment by BOC
per IEIRD.

3.

Check if amount of customs duties were


debited to clients account prior to release
of validated IEIRD to client

4. Obtain totals of customs duties collected


for the day (via lotus notes for ORUs)

APG for LC
including the collections for Head Office
IOD
and compare
against
DCAs
responded (for ORUs).
Check corresponding booking to Due to
CB- Bureau of Customs and Due to CBCB Circular 909 accounts for final and
advance duties collected, respectively.
5.

Check if collections of customs duties are


remitted to CB
After 10 banking days for Advance and
Final Customs Duties
After 1 week (every Tuesday) for Import
Processing Fees (IPF).
6. Check daily reporting to BSP-Treasury of
the deposit account balance of BOC. Testcheck accuracy of computation.

APG for LC

Cir 1389
Part 4

REPORTS AND POST VERIFICATION


1.
Check compliance on reports that are
required to be submitted to CB. Test-check
on correctness of data and timeliness in
submission:
Report on Export Negotiations
Report on Export Proceeds Received
Report on Export Declaration Issued
(with or without FX proceeds)
Report on Red Clause and Other Export
Advances
Report on Regular LCs opened
Report on Negotiations on Regular LCs
Report on Confirmation/ Amendments
of LCs
Report on DA/OA Availments (with
accomplished Record of Goods Imported)
Report on DA/OA repayments
Report on FX Remittances under D/P
Imports (including Direct Remittances)
Consolidated Daily report on deposits
collected (advance custom duties to BOC).
Consolidated
Daily
Report
on
collections of custom duties, taxes and
other levies (final and import processing
fees).
2. Check prompt reporting to Treasury Group
of the BOC collections and remittance due
dates.
ACCOUNTING FUNCTIONS
Due to/from HOBA
Due to/from BSP
Due to/from FX Banks
1.

Review tracers/ summary of unreconciled


items.
Evaluate monitoring/ review of
the unit in general of outstanding float
items for the prompt and correct
disposition of the same.

2.

Test-check/ validate on the actual


disposition made. Determine if valid,
including correctness of accounting
entries passed.

3.

Verify nature of significant and long


outstanding float items. Determine actions
taken by the unit to account for the same.
Check if referred and followed-up to
concerned units/sections.

APG for LC
4.

Coordinate with continual audit and/or


UCAD for any related findings regarding
the units outstanding float items.

On MPVR:
1. Check compliance to MPVR requirement.
2. Scan MPVRs and review long outstanding
material differences reported by the unit.
Check disposition/ adjustments made.
3. Check disclosure in the MPVR any SL/GL
discrepancies noted as of audit cut-off date.
Other Assets/Other Liabilities
1. Obtain Subsidiary Ledgers and compare
against GL Balances
2. Ascertain propriety of items composing the
account and verify authorization thereof.
3.

Based on comparative figures of the


accounts from previous to present cut off
date, account for the items causing
significant increase/decrease of balances
of accounts and determine validity of
booking/reversal.

4. List items that have remained in the


account for unreasonable period of time
and secure the departments explanation
for non-disposition
Furniture, Fixtures and Equipment/ Fixed
Assets
1. Ascertain periodic conduct of inventory.
Obtain copies of inventory report and
comparison against the SL and GL
balances.
2. Check approval, proper booking and
accounting of new acquisitions.
These
should be physically delivered with the unit
and duly recorded in the SL and GL of the
unit.
3. Re-perform inventory of assets.
Accounts written-off (contingent account)
Nominal value of P1.00 is booked for accounts
written-off
Check any increase in amount from last audit
cut-off date. Obtain and review approval for

APG for LC
any additional items written-off.
PERSONNEL
1. Check the actual headcount of the Unit vs.
approved plantilla.
Check the actual
manpower
complement
vs.
existing
manpower complement on HRD Database.
2. Inquire and evaluate units monitoring and
reporting of the attendance of officers and
employees.
3. Test-check on the accuracy of reported
attendance.
4. Check compliance on:
4.1 10-day mandatory leaves
4.2 Rotation
4.3 Conflict of Interest
4.4 Proper Office decorum
4.5 Sanctions for employees with habitual
tardiness/ other violations.
EXPENSES
1. Obtain copy of duly approved budget
2. Inquire and evaluate monitoring of actual
versus budget, reporting and process of
securing additional budget/ approval for
unfavorable budget from the Group Head.
3. Test-check on validity and compliance to
proper approval.
INCOME
1. Check for any significant swings in the
income accounts. Account for the reasons.
2. Test-check for the validity and approval of
material reversals made to income (with
CAATs for a 3 month period).
INFORMATION SECURITY STANDARDS AND
POLICIES AND BUSINESS CONTINUTY
Refer to separate APGs as prepared by SNS
group.

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