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#875076 - 12/18/07 05:22 PM Exception Materiality
davidm Offline
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Have you established dollar thresholds to determine your exception materiality and risk rating? For example, if you determined that the identified exception/finding could result in a $100k loss to the bank, then you would assign a moderate risk rating. If you have established such a system, how did you determine the thresholds? I am looking for examples of how to set the threshold.

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#875089 - 12/18/07 05:30 PM Re: Exception Materiality davidm
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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I have done this but we established criticality levels not tied to dollar amount of a particular loan. For example, signed notes, recorded mortgages and UCCs were obviously critical or we had no collateral.

We did not tie it to a loan $ amount for one loan because risk can pile up if a number of loans in a portfolio do not have properly perfected collateral, the bank has a big issue.
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy

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#875094 - 12/18/07 05:42 PM Re: Exception Materiality Kathleen O. Blanchard
RR Jen Offline
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RR Jen
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We have established a dollar amount to use as a guideline. We chose 1/2 percent of Net Income after tax or $45,000.

That means that any exception/item I find during an audit (lets say a GL expense account) where the exception is greater than $45,000...IA researches the item. If the exception is less than $45,000 we would ask the department head to research the item and provide an explanation to the AC.
I don't need any more negativity in my positive and helpful people or I will kick you in the shins!!!

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#888915 - 01/16/08 08:41 PM Re: Exception Materiality RR Jen
Mr Jones Offline
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Joined: Dec 2003
Posts: 24
How are the dollar values determined? These would be "possible" losses and how are those reconciled to "probable" losses?

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