integrated supervision / internal controls/audit

Question 1

Primary institutions supervised by the FRB

Answer 1

State member banks; BHCs; FBOs, Edge and Argeement Corps, State and Federal Branches/Agencies of Foreign Banks,

Question 2

At what point do you assign a rating to a non-bank subsidiary of a BHC?

Answer 2

TA of >= $10 MM or 5% of consolidated captial

Question 3

4 goals of BS&R

Answer 3

1. protect depositors 2. protect consumers 3. stabilize the monetary system 4. ensure safety and soundness

Question 4

The FRS acts as ____for the US Treasury

Answer 4

a fiscal agent

Question 5

Dual control of the vault should include

Answer 5

1. combination lock/separate key 2. movement log

Question 6

5 components of the COSO internal control framework

Answer 6

1. control environment 2. control activities 3. information and communication 4. monitoring 5. risk assessment

Question 7

Segregation of duties should NOT combine

Answer 7

1. authorization to execute the transaction 2. ability to record the transaction 3. custody of the asset

Question 8

Section 201 of Sarbanes Oxley

Answer 8

Prohibits accounting firm from acting as the external auditor of public company during same period the firm provides internal audit work

Question 9

Part 363 of FDIC Regs

Answer 9

Privately held institutions w/assets of $500MM or more adhere to Section 201. Small non-public depository institution, less than $500MM in TA, are encouraged to follow Section 201.

Question 10

according to FDICIA 112 an independent audit committee comprised entirely of outside directors is necessary for institutions

Answer 10

with assets > or = $500MM

Question 11

Part 363 Annual Report

Answer 11

Due 90 after end of fiscal year, if publicly traded. Due 120 days if not public

Question 12

Management letter sent to regulators

Answer 12

within 15 days of receipt

Question 13

Audit Committee of institution more than $3 Billion in TA

Answer 13

Must include members with banking or related financial mgmt expertise, have access to own outside legal counsel, and not include large customers of institution.

Question 14

Detective Control

Answer 14

Reveals errors and irregularities AFTER they have already occurred

Question 15

Preventative Control

Answer 15

minimizes the likelihood that an undesirable event can occur

Question 16

Directive Control

Answer 16

verbal and written directives from management and the board. policies and procedures that establish limits and define procedures

Question 17

Compensating Control

Answer 17

alternative controls when at least one of the above, especially preventative, is
weak or absent

Question 18

The ultimate responsibility for an effective audit function rest with whom?

Answer 18

The Board of Directors

Question 19

The components of Operational Risk

Answer 19

Board and Senior Management Oversight, Policies, Procedures, and Limits, Risk Identification and Assessment, Risk Monitoring and Reporting, and Risk Transfer

Question 20

Internal Audit SCARE factors

Answer 20

Safeguarding assets; Compliance with policies, plans, procedures & laws; Accomplishment of objectives; Reliability of financial information; Economical use of resources.

Question 21

Primary objectives of internal control

Answer 21

1. effectiveness and efficiency of operations 2. reliability of financial reporting 3. compliance with applicable laws and regs

Question 22

4 Segregation of Duties Steps

Answer 22

Authorization, Recording/Reporting, Safekeeping, and Reconciliation

Question 23

Internal Control definition per COSO

Answer 23

a process, implemented by an entity’s board and mgmt, designed to provide reasonable assurance regarding the achievement of the primary objectives of internal controls

Question 24

Internal Control: Control Activities

Answer 24

Independent Review; segregation of duties, exposure Limits

Question 25

Internal Control: Information and Communication

Answer 25

systems enabling bank to communicate

Question 26

Internal Control: Monitoring

Answer 26

mgmt’s reviews and reconcilements

Question 27

Internal Control: Risk Assessment

Answer 27

board’s awareness of bank’s risk

Question 28

Internal Control: Control Environment

Answer 28

reflects mgmts attitude regarding controls implementation (mgmt philosophy, organizational structure, integrity)

Question 29

Internal Audit’s responsibility

Answer 29

to independently monitor the effectiveness of the internal control system

Question 30

2 components of internal controls

Answer 30

administrative controls, accounting controls

Question 31

7 types of internal controls

Answer 31

1. competent, trustworthy personnel with clear lines of authority and responsibility 2. adequate segregation of duties 3. proper procedures for authorization 4. adequate documents and records 5. property procedures for record keeping 6. physical control over assets and records 7. independent checks on performance

Question 32

The need for Internal Auditor depends on

Answer 32

The size of the institution and # of locations; # and complexity of operations; division of operational resposibilities, existence of an external audit

Question 33

To discharge IA responsibilities to the BOD and Sr Mgmt

Answer 33

Be accountable only to BOD or a board committee; have the board and mgmt support; have sufficient delegated responsibility; be independent of all audited activities

Question 34

Auditor Competence

Answer 34

educational background, professional job qualifications, training, relevant work experience, quality of work

Question 35

Types of Audit Reports

Answer 35

unqualified opinion; explanitory language; qualified opinion; adverse opinion; disclaimer of opinion

Question 36

Generally Accepted Accounting Procedures

Answer 36

Concerned w/practices and procedures; professional standards that guide public accountants

Question 37

Generally Accepted Auditing Procedures

Answer 37

Concerned w/independent public accountant’s professional qualifications

Question 38

Services a registered accounting firm may provide

Answer 38

Tax services, if board provide advance approval

Question 39

Public Company Accounting Oversight Board (PCAOB)

Answer 39

establish auditing standards for registered accounting firms

Question 40

American Institute of CPAs - Code of Conduct

Answer 40

Independence and Integrity and Objectivity

Question 41

Auditors independence not impared if their loans

Answer 41

Auto loans/leases, loans in amount of cash surrender value of life insurance, loan fully collateralized by cash deposit, CC or cash advances with unpaid balance of $5,000 or less

Question 42

Under FDICA and Sarbanes Oxley, whose responsibility is to establish and maintain a system of financial controls?

Answer 42

The Board of Directors and Sr Management

Question 43

Compliations

Answer 43

Offers no assurances about the financials; simply providing info that’s the representation of mgmt in financial statement form; no opinion rendered; no independence requirement, must disclose lack of independence

Question 44

Reviews

Answer 44

Accountant makes some inquiries and performs analytical procedures; give limited assurance they’re not aware of material changes; no opinion rendered; doesn’t obtain understanding of internal controls or test records;

Question 45

Agreed-upon Procedures

Answer 45

client hires accountant to issue report of findings based upon specific procedures; no opinion rendered on financials.

Question 46

The 4 characteristics considered by an independent CPA when evaluating an accting system

Answer 46

Validity, Timeliness, Disclosure, Valuation