The memorandum of changes generally accompanies the branch audit reports. Any changes which are material and which have an impact on assets and liabilities, classification of advances and profit and loss account are suggested through memorandum of changes, which form part of auditors report
Normally before the final report auditors observations are incorporated in the books of account and modified financial statements are prepared while in case of banks by the time report is sent by auditors there is compilation at regional and Zonal level hence there is another statement called Memorandum of Changes (MOC). Main report must state about this and also shall mention whether MOC is nil or contains observation
The following points have to be noted about memorandum of change:
There should be clear justification for every change suggested by auditor
The format of MOC in most banks will have both sides like a trial balance. It should be ensured that total of change suggested in balance sheet and profit and loss account is tallied on both accounts
The total of reclassification of the advances suggested in secured , unsecured ,guaranteed advance and sector wise advance should be correctly brought out in the MOC and total of both sides should tally
In case of change suggested as per prudential norms on income recognition, the impact, if any on the provisioning of the assets is also to be looked into
It is to be ensured that a ?NIL MOC is invariably forwarded, even if there are no change to report
Branch manager are required to report on each item reported in MOC
MOC can be of following natures
Relating to suggested changes in Balance Sheet
Relating to suggested changes in Profit and Loss Account
Relating to suggested changes in advances portfolio of the bank
Relating to outstanding balances of the advances
Yearly return of provisions
Details of accounts for various changes
Reconciliation balances in interest not collected account
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