Think audits are just for the beleaguered taxpayer? Don't worry, private citizens don't get all the fun—both big and small companies from a variety of industries undergo regular audits, too.
The banking sector is no stranger to the auditing process. In fact, bank audits are routine and common procedures that affect financial institutions of all sizes. If you're involved in the management of a bank and are preparing for an upcoming audit, it can help if you gain some clarity about what bank audits are and what to expect during the process. Keep reading to learn more.
A bank audit is a formal process in which the services, systems, financial statements, and/or procedures of a bank, credit union, or other financial institution is reviewed and summarized in a report. Every financial service company must undergo audits regularly in order to comply with legal and jurisdictional regulations, laws, and industry standards.
Bank audits are performed by a kind of accounting specialist called a bank auditor. A bank audit can be done as an internal audit, which is run by an employee of the financial institution, or it can be done as an external audit, which is run by an independent auditor under the direct guidance of certified public accountant (CPA).
Bank audits serve many purposes, but their main goal is to make sure a financial institution is operating in line and above board with all industry and local regulations. Bank auditors will take the time (and be afforded the resources) to pour over a bank's financial activities, risk management processes, systems, and procedures to make sure that all related information is complete, timely, and accurate.
Once auditors have had the chance to test and evaluate their findings, they can compile a report or audit opinion that outlines any feedback or corrective steps that a bank needs to take in order to remain in compliance. (Results of a bank audit are also shared with stakeholders and creditors if the audit was done externally.)
Here are a few common areas and metrics that a bank audit will evaluate within a financial institution:
As you can see, bank audits are important for ensuring the integrity of a financial institution and its practices. Undergoing audits and responding to the feedback generated by audits protects not only a financial institution's management, but also its shareholders, creditors, lenders, and clients. And while bank audits can certainly be stressful experiences, they can be made more streamlined through the use of auditing software and related services.
It's the New Year—and the new decade! Does your financial institution feel prepared for your next bank audit? The business and technology specialists at Integrity Technology Solutions are standing by ready to help you get the most out of the auditing process. Contact us at 309-664-8150 to connect with one of our team members today.