While auditing the advances of ABC Bank, the statutory auditor examines the following four accounts

While auditing the advances of ABC Bank, the statutory auditor examines the following four accounts as at 31 March 2026:

Account P:
The borrower has not paid interest and principal for 89 days as at 31 March 2026. On 1 April 2026, the borrower pays the entire overdue amount.

Account Q:
The borrower has not paid interest for 91 days, although no instalment of principal has fallen due under the repayment schedule.

Account R:
The borrower has a Cash Credit account. The outstanding balance has remained continuously in excess of the sanctioned limit/drawing power for more than 90 days.

Account S:
The borrower has a Cash Credit account where the outstanding balance is within the sanctioned limit, but there have been no credits sufficient to cover the interest debited during the previous 90 days.

The engagement partner concludes:

“P cannot be treated as an NPA as on 31 March because the 90-day period had not expired. Q cannot be treated as an NPA because only interest is overdue. R and S, however, may both satisfy the conditions for an ‘out of order’ account.”

Which ONE of the following is most appropriate?

A. The partner is correct regarding P and Q, but R alone satisfies the prescribed conditions because S remains within its sanctioned limit.

B. The partner is correct regarding P, but incorrect regarding Q, R and S because interest overdue independently determines NPA classification in every type of advance.

C. The partner is incorrect regarding P because subsequent recovery determines its classification as at 31 March, while Q, R and S are correctly classified on the basis of the stated facts.

D. The partner is correct regarding P, but incorrect regarding Q because interest overdue for 91 days can be relevant, while R and S can both satisfy the conditions for an out-of-order account.