I know I have seen this discussed before, but I was not able to find it. I need to find the information on who your committee members are comprised of. We are in the process of buying a bank and its three branches, and I know that the Bank President is on the committee. I was under the impression that the President should not be included. I would like to find the policy concerning this.

Our Audit Committee has three outside Directors, the CFO, the Branch Administrator, the IT/IS Officer (mainly because he used to be the Internal Auditor and was just never taken off the committee), the EVP/Senior Lender, the Bank President, and me (the Internal Auditor).

We have been criticized before by both examiners and our external audit firm for having the president on the committee. The compromise we have reached is that, at the end of the meeting, I have a few minutes where everyone but the outside directors is dismissed so that I could discuss any issues with them if necessary.

I don't know the size of your institution, but we are a fairly small bank, closely held, and the president is the biggest stockholder. He is not willing to step off the committee, and so far none of our regulators has absolutely insisted that he do so.

The Audit Committee should be comprised of independent directors - that is directors who are independent of management. Not sure how large you are, but SOX also has other requirements, such as needing a "financial expert."

AICPA has a lot of good Audit Committee resources, including an Audit Committee Toolkit.

We are a small bank. At this time our committee consist of myself (I am IA/Compliance in training), the ladies whose positions I am taking over, and 6 board of directors. I have been told I report only to them, that with our committee I am free to discuss any issues concerning anything at the bank with no fear of repecussions.

We have 4 board members that make uo the actual committee. The CEO and CFO plus the audit department are in attendance each month with guests as needed.

Your committee is supposed to be independent outside directors. That said, our committee is our 5 outside directors but the CEO and CFO attend the meetings. They are both directors. But after my audits are discussed they leave and we have a meeting without them for any other issues that need to be discussed. I am not thrilled with this but that is the way it is done. I am the one and only bank auditor. We have FDIC examiners here and they asked me about our meetings. If I get any feedback I will update you all.

We're not a SOX bank, but we are lucky enough to have an Audit Committee comprised of 3 independent directors, on of which qualifies as a financial expert. Officers of the bank only attend the meetings by special invitation. The OCC has praised the audit function at every exam.

JLJ - that almost mirrors our Bank. The FRB has been quite pleased as well.

The following snippets apply to national banks:
* At least a majority of the audit committee's members are outside directors when practicable (for banks not subject to 12 CFR 363).
* 363.5(b) applies to banks >$3B and says at least 2 members will have the following banking or related financial management expertise:

—Significant executive, professional, educational, or regulatory experience in financial, auditing, accounting, or banking matters as determined by the board of directors, or

—Significant experience as an officer or member of the board of directors or audit committee of a financial services company.

There are also prohibitions on members having fiduciary responsibilities under 12 CFR 9.9(c)(1)-(2).

Statutory and Regulatory Requirements —Comptroller's Handbook/Safety and Soundness
—Internal and External Audits
National banks with total assets of $500 million or more must have independent audit committees that meet the following standards:

* The committee must be made up entirely of outside directors of the bank.

* The members must be independent of the management of the bank. The guidelines accompanying the Part 363 rule outline factors that should be considered in determining independence.

NOTE: Exceptions to the independent audit committee membership requirements may be granted in certain circumstances. Some insider directors may be allowed to serve on the audit committee if the OCC determines that the bank has encountered a hardship in retaining and recruiting competent outside directors. However, in no circumstances may the audit committee be made up of less than a majority of outside directors.

Exceptions to the independent membership requirement should be rare and should be approved by the OCC's Office of the Chief Accountant.

* The committee's duties must include reviewing the basis of the reports required under Part 363, with management and the independent public accountant.

For banks with total assets of more than $3 billion, the audit committee also must:

* Include at least two members with banking and related financial management expertise.

* Not include any “large customers” of the banks.

Any individual or entity (including a controlling person of a company) whose relationship with the bank (credit or otherwise, direct or indirect) is so significant that termination of the relationship would materially and adversely affect the bank's financial condition or results of operations should be
considered a “large customer.”

* Have access to the committee's own outside counsel.

Then there are special rules, but I think they may get away from the point of this question.

Thanks to you all, you have been a tremendous help with this.

I am from a CU. We have 5 directors with a quorum of three. Other than myself (Internal Auditor/Compliance Officer) no one can come to the meeting without an invitation. If anyone asks to come and they have a legitimate reason they are always welcome. I report to the committee but i report administratively to the CEO.

I need help ASAP!
Can anyone give some guidance on how they documented, and how consideration was given, to the extension(s) of credit owed by a member of the audit committee? This is mentioned in Part 363.5 (#28 under the Guidance Section of this part states "(e) Has outstanding extensions of credit from the institution or its affiliates." should be a condsideration in naming audit committee members.)