The examiner counts all the bonds in the vault and checks them to the records of the department. If the records show that certain bonds are held for the bank's account by other in stitutions, this fact is verified by correspondence. Where bonds are sold with an agreement to repurchase or are loaned or de posited to secure circulation or deposits, the receipts which are found in the department are counted in lieu of the bonds them selves. The examiner lists the various issues together with their book values and proves the total of these book values against the figures in the general ledger. He then appraises the bonds, that is, determines the market value of all the bonds at the time of the examination. If the market value is less than the book value, the difference is reported and written off.
4. The Discount Department. In the examination of the dis count department the examiner makes up the totals of: (a) the bills discounted, (b) acceptances of other banks discounted, (c) acceptances of this bank purchased.
Since the discount department keeps separate ticklers for these and separate accounts appear in the general ledger, these totals can be checked to the ledger balances. From the notes them selves the examiner then makes up the totals of each day's maturi ties and proves them against the footing of the tickler for that particular day, thus determining that the department's entries in the ticklers are correct. The grand total of the various days' totals must agree with the figures of the general bookkeeper.
Where items payable out of town are not found in the note boxes, the records of the country collection department are examined and their figures used to effect the proof. The bills receivable held as collateral security are examined to determine that proper margins are maintained.
5. Foreign Division. In the examination of the foreign division the balances of all accounts on the general ledger which affect the foreign division are taken. Then the balances of all the foreign deposit accounts are added and made to prove, and are compared with the control figure. The balances of the ac counts which the bank keeps abroad are proved in a similar way. The deposit accounts contain the control figure of the drafts, advised as having been drawn on the bank by its foreign corre spondents, which have not yet been paid. These drafts are listed and the total is compared with the ledger. All the ac counts in the general ledger of the foreign division are listed and compared with the control figures.
In the commercial credit departments the outstanding lia bility in the commercial letters of credit is proved and the out standing acceptances are listed and proved. The foreign teller's petty cash, if there be any, is counted, and also the foreign currency which he may be holding.
A list is made of all the outstanding collections, including those received from abroad and drawn on interior points and those received from interior points and drawn on foreign coun tries. These lists, as well as the lists of the outstanding accept ances, of the outstanding drafts, and the various general ledger accounts, are retained by the auditing department and checked against the tickets which go through after the date of the examina tion. In this way the auditor knows that the moneys received are being properly applied to the respective accounts. His examination shows among other things whether the acceptances are being paid at maturity, whether the proceeds of collections are being credited to the indorsers or the items themselves are being returned unpaid, and whether the acceptances under commercial letters of credit are being paid as they mature.
As the reconcilements of the accounts which foreign corre spondents keep with this bank (" their" accounts) are received by the auditing department, they arc checked against the balance book in the foreign division. As the statements of the accounts which this bank carries with foreign banks ("our" accounts) are received, they are reconciled by the auditing department. When practically all of the statements have been received and checked, the balances of foreign moneys at the close of business on the last steamer-day, that is, on the date of sailing of the last steamer which will reach England before the end of the period, are taken and converted at the demand rate of exchange of that day. The difference between the dollar amount thus obtained and the dollar amount shown in the account will be the profit in trading. This profit is then charged out. As soon as this entry has been made, the various profit and loss accounts on the general ledger of the bank are analyzed, and a statement is made up showing the earnings of the foreign division. The examination of the foreign division and this final determination of profits is made at regular dates, usually twice a year.