if we routinly use the new account hold on all new accounts - but we have an officer who waives this hold - is this an audit violation?

IMHO - no. You can allow benefits to the customer without being in violation. But if the bank is holding funds longer than your disclosure states, then you are in violation.

I would agree with flaire on that.

For your disclosure to be accurate, it must reflect what you do more than 50% of the time. In that context, waiving the hold on a case by case basis is not a violation. If only one person does it routinely and he or she does it whenever requested, it might be evaluated as poor judgment, but not a violation.

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is this an audit violation

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It also depends on what you mean by an "audit violation". A regulatory violation - most likely not as pointed out above. However, if the officer did not follow bank policy - it still could be considered an "audit violation".