A new guide to minimum procedures for federally insured credit unions using the “other supervisory committee audits” option was issued Wednesday by the institutions’ federal regulator.
The National Credit Union Administration (NCUA) said it issued the guide as a follow-up to its new rules, adopted in September (and which took effect Jan. 6), allowing a federally insured credit union that is not required to obtain a financial statement audit to fulfill its supervisory committee audit responsibilities by obtaining an “other supervisory committee audit” such as that led by an independent accountant.
Under the new rule, federally insured credit unions meeting certain minimum requirements – which the agency has said reflect common industry practices for testing accounts and controls over financial institution financial statements – may choose the option.
The minimum requirements under the rule include: review of board of director minutes to determine whether there are any material changes to the credit union’s activities or condition that are relevant to the areas to be reviewed in the audit; and test and confirm material asset and liability accounts. Those accounts include loans, cash on deposit, investments, shares, borrowings, at least eight other categories.
“The sufficiency of the procedures, judgments about materiality, and any need for additional or expanded procedures, remains the responsibility of the supervisory committee,” the guide states. “The supervisory committee, internal auditor, or other qualified person may need to perform additional procedures to supplement these procedures, based upon the credit union’s risk profile and products and services offered.”
The guide also notes that because an independent accountant licensed to perform audits by the state in which the credit union is located “takes no responsibility for the sufficiency of the procedures in an agreed upon procedures engagement,” they may need to consult with the supervisory committee about the number of items selected for testing and the selection criteria.