This may be either in the form of overdraft limits or firm loans. The verification in each case should be as follows:
Reconcile the balances in each type of borrowing as per bank statement.
Confirm the year-end balance by obtaining relevant certificates from the bank showing balance in the accounts respectively.
Verify the authority under which amounts have been borrowed. Since in the case of a company the authorization from the Board of Director is essential.
Obtain a certificate from the bank showing particulars of securities deposited with the bank as security for the borrowings or of the charge created on assets of the concern and confirm appropriate disclosure and registration thereof with the Registrar of Companies and record in the Register of Charges.
Ascertain that the purpose of the borrowings and the manner of utilization is acceptable and that it has prejudicially affected the concern.