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#2202042 - 01/03/19 10:40 PM Audit Schedule
leo_bsayer Offline
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I'm preparing the audit schedule for this year and wondered if it is appropriate for other employees in the bank to know how I'm scheduling the audits for the year. For example, I sometimes have employees say to me, "It's April, it's almost time for you to start the loans audit," or "I know it's September, so you're going to be asking about the deposits audit."

Is there a problem in knowing when the audits will occur? I don't necessarily mean like a surprise audit, but is there value in changing up when the audits are performed so that people aren't used to being audited at any specific time?

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#2202051 - 01/03/19 11:56 PM Re: Audit Schedule leo_bsayer
Adam Witmer Offline
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This is really a matter of management philosophy. Personally, I like transparency - as much as possible as I want to give employees every chance possible to succeed (within reason, of course). While giving the schedule of surprise cash counts would defeat the purpose, most compliance-related audits don't really benefit from an element of surprise. In fact, it could be quite the opposite if you run into scheduling conflicts or your staff are backed-up for some reason.

If you were outsourcing your compliance audits, the bank would know full well when they were scheduled for (except for cash counts, of course).

On the other hand, internal audits that look at controls (such as cash counts) could benefit from the element of surprise.
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#2202057 - 01/04/19 12:56 PM Re: Audit Schedule leo_bsayer
DEL Offline
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I also am a fan of transparency - especially for planning purposes. Generally, sending some kind of opening communication a bit before you actually want to start the audit (say, two weeks) gives an opportunity for the business line to let you know if there are major reasons that this time is not good (going through a conversion, key person out on leave, etc.) Then you have some time to adjust your schedule if necessary. If its an area that you regularly work with or if you are in a small bank, you may already know some of this info and have already planned your schedule around it.

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#2202062 - 01/04/19 01:31 PM Re: Audit Schedule leo_bsayer
osucpa Offline
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I push my audit schedule out for the quarter about 2 weeks prior to the beginning of the quarter. I want to know if I have scheduling issues as quickly as possible. I ask upper management to forward this email to their respective department managers.

The last thing I want is my auditors sitting around not being productive.

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#2202089 - 01/04/19 05:02 PM Re: Audit Schedule leo_bsayer
P*Q Offline

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Other than cash/branch audits, nothing is secret around here.

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#2202102 - 01/04/19 05:56 PM Re: Audit Schedule leo_bsayer
osucpa Offline
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I am with you P*Q. I like transperancy.

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#2202105 - 01/04/19 06:30 PM Re: Audit Schedule leo_bsayer
Sunshine Lady Offline
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Me too!
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#2202136 - 01/05/19 05:03 PM Re: Audit Schedule leo_bsayer
Rocky P Offline
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Decades ago, when I was a bank examiner, secrecy was the issue. Surprise then so no records could be changed. Examiners at that time also classified loans.

Later, examiners identified that management should be implementing and aware of controls, so they started monitoring for controls more and more. Regs came out for banks to analyze and risk rate their loans. SOX started soon after that.

Examiners, (and auditors) found out that by requesting information ahead of time, and doing preliminary analysis, that their time could be significantly more effective. A lot depends on your Audit Committee, but in many cases (in audit role) I would do a technical review and limited testing. If there were no issues, that was the end of the audit. If there were gaps on the technical review, or exceptions in the testing, the audit would be expanded to cover more substantive testing (of documents, files, loans, etc.) In a small bank, outside of the teller line, the managers always new when the fieldwork would begin - I needed their help.
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#2202137 - 01/05/19 05:11 PM Re: Audit Schedule leo_bsayer
leo_bsayer Offline
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Thanks for the responses. While SOX isn't applicable to my bank, FDICIA. Similar to SOX, FDICIA is about having a good system of internal controls and segregation of duties, with a lot of focus on what could misrepresent the financial statement of the bank.

I guess that's the direction I was coming from, not that I don't value the assistance of other areas or want them to succeed, but I know the element of fraud is also looked for, especially in operational audits, so that's why I was wondering if there was value in employees not being aware of when their specific areas were going to be audited. To be honest, things should be working whenever the audit occurs, not just when you find out you're getting ready to be audited.

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#2202139 - 01/05/19 07:04 PM Re: Audit Schedule leo_bsayer
Rocky P Offline
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Leo, if the appropriate controls are adequate, in effect and effective, fraud should be detected (or at least questioned) by the system. Catching fraud (with the exception of surprise cash counts) is extremely rare. I've had dozens of years in audit and compliance, and involved in at least 15 defalcation audits, but only 2 were the result of an actual audit.

One was with a cashier balancing the due-from bank accounts (taking a cash advance on pay and repaying with a GL transfer from the due from bank).

The 2nd was a consumer loan audit and creating a list of multiple loans at the same address (greater than 2). There were 7 loans, all different names going to an AVP/loan officer's address. All were made by the LO and fictitious.

All others were caught by controls, or customer complaints.
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#2202217 - 01/07/19 07:42 PM Re: Audit Schedule leo_bsayer
Andy_Z Offline
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I think at the heart of the question, knowing is not an issue (with the exception of cash counts, as an example) especially as you are auditing for some period of time, hold notices for 6 months, HMDA LAR for the last quarter, loan disclosures for 6 months, etc. The scope of the audit period is not a "moment in time."
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