# Audit of Expenses - Banks
## Interest Expense - Audit Approach
The auditor's concern is to assess the overall reasonableness of interest expense by analysing ratios of interest paid on different types of deposits and borrowings to average quantum of respective liabilities during the year.
### Procedures
- Obtain from the bank an analysis of various types of deposits outstanding at end of each quarter; work out a weighted average interest rate
- Compare average rate of interest paid on relevant deposits with corresponding figures for previous years; analyse material differences
- On a test check basis, verify calculation of interest and ensure that:
- Interest has been provided on all deposits up to date of B/S
- Interest rates are as per bank's internal regulations, RBI directives, and agreements with depositor
- Interest on savings accounts is as per rules framed by bank/RBI
- Interest on inter-branch balances has been provided at rates prescribed by HO/RBI
## Operating Expenses - Audit Approach
- Study and evaluate IC system relating to expenses, including authorisation
- Examine whether there are any divergent transfers of major items of expenses
- Perform Substantive Analytical Procedures (SAP)
- Verify expenses with supporting documents
## Provisions and Contingencies - Audit Approach
- Ensure compliance with various regulatory provisioning requirements
- Obtain understanding of how the bank computes provision on standard assets and NPAs
- Obtain detailed break-up of standard loans, NPAs and agree outstanding balances with the ledger
- Obtain tax provision computation from management; verify nature of items debited/credited to P/L
- Examine other provisions for expenses vis-a-vis circumstances requiring provisioning