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AUDIT PROGRAM
Section A General
Audit Program
Audit Objectives
Audit Program
1. Select asset accounts more than $100,000, and all liability accounts
and internal DDAs that are reconciled by the commercial loan
department.
Determine that the proper reconciliation format was used and all
account reconciliation standards were adhered to.
Foot the reconcilements on a test basis.
Trace totals to the general ledger and subsidiary ledgers as
appropriate.
Verify that adequate supporting documentation exists and each
reconciling item is listed with an initial entry date.
Verify that the reconcilement is signed and dated by the preparer
and a reviewer.
Determine that unreconciled accounts, unsubstantiated reconciling
items, and items more than 90 days old were communicated to
management.
2. From the remaining accounts not already tested, select all general
ledger suspense accounts and "in process" accounts.
Audit Objectives
Audit Program
2. For each loan selected, note the purpose of the loan, the approved
underwriting documents, the credit and financial information, and the
loan agreement and perfected lien information, such as:
Financing statement.
Pledge and hypothecation.
Uniform commercial code filed with state and county.
Mortgage.
If cash collateral, note if there is a hold on the account.
Title insurance.
11. Agree information from the loan documents to the system report to
ensure proper entry to the system.
Audit Objectives
Audit Program
Business loans.
Credit lines.
Personal loans.
Real estate loans.
Determine that all related accrued interest has been reversed from
income in accordance with policy.
Agree control totals to management's report of non-accrual loans.
Obtain the accrued interest summary report and reconcile the total
to the general ledger accrued interest commercial loans account.
Audit Objective
Audit Program
2. For loans that are manually adjusted, review and document rate change
procedures and determine if segregation of duties is adequate.
Audit Objective
Audit Program
Audit Objectives
Audit Program
2. Obtain the monthly LOC report for the period under audit from
commercial loan administration.
Audit Objective
Determine that floor plan loans are properly approved, recorded, and
supported by notes and other necessary documents.
Determine that assets actually exist and are adequately protected from
misuse, destruction, or misappropriation.
Audit Program
2. Obtain a system audit report of floor plan loans and select new loans
since the last audit date and perform the following:
3. Obtain several months recent floor plan inspection reports and review
each for:
Audit Objectives
Audit Program
3. Determine and document the process by which the credit area performs
the post-closing loan documentation review function. Include the
following information:
Audit Objective
Audit Program
2. From the business loan application, obtain the security activity journal
and select a sample of days within the audit period and test a sample
of _____ maintenance changes.
Audit Objective
Audit Program
4. Determine if the overdraft for that day caused the individual borrowers
outstandings to exceed the inhouse lending limit.
NOTE: The nature and scope of the audit procedures performed in this section
are not designed to draw a conclusion concerning the adequacy of the
allowance for loan losses, but rather to test the input used in the allowance for
loan loss calculations. The focus is to determine if management has
established appropriate policies and procedures for evaluating the adequacy of
the allowance and has properly implemented those procedures as necessary to
ensure that adequate reserves for projected and unknown credit losses are
maintained.
Audit Objectives
Audit Program
1. Obtain all supporting workpapers and documentation used to prepare
the analysis of the adequacy of the allowance for loan losses as of the
audit date. Indicate in the workpapers how often the analysis is
performed.
5. For one test month, trace the entries for charge-offs and recoveries to
the detail documentation.
6. For our test month selected above, determine that charge-offs have
been properly approved and are in conformance with the company's
policy.
Participations Purchased
Audit Objectives
Audit Program
Audit Objective
Audit Program
1. Identify all users within the department and obtain the supporting
documentation for their most recently completed official check
inventory.
Audit Objective
Audit Program
Audit Objective
Audit Program
4. For loans listed on the system report of commercial loans with current
balance > loan amount, determine that overdraws have been properly
approved.
Audit Program
1. Identify the process used to monitor loan fee income. Document the
individuals responsible for monitoring loan fees, the process for
determining the loan fees on a loan-to-loan basis, the general ledger
accounts used during the monitoring process, and the journal entries to
record loan fees.
Audit Objective
Audit Program
1. Obtain the loan advance disbursement policies and procedures.
Audit Objective
Audit Program
2. Review the current tickler file and determine if the tickler is worked
on a current basis. Pay particular attention as to whether flood
insurance items are current.
Audit Objective
Audit Program