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 to expect during the audit process.
What Is A Bank Audit?
A bank audit is a formal process in which the services, systems, financial records, and/or procedures of a bank, credit union, or other financial institution are reviewed and summarized in a report.
Every financial service company has a legal requirement to undergo audits regularly in order to comply with laws and regulations, as well as industry standards.
What Do Bank Auditors Do?
Bank audits are performed by a kind of accounting specialist called a bank auditor.
There are two types of audits:
- An employee of the financial institution can conduct an internal audit.
- An independent auditor under the direct guidance of a certified public accountant (CPA) can conduct an external audit.
Learn more about the 8 key differences between an internal audit and an external audit.
What Is The Purpose of a Bank Audit?
Bank audits serve many purposes.
Here are a few common areas and metrics that a bank audit will evaluate within a financial institution:
- Security and risk management, including operational, strategic, reputation, credit, compliance, and IT and cyber risk
- Liquidity and monetary flow
- Financial transactions, including bank wires and automated clearing house (ACH) networks
- Company financials and regulatory reports
- Whether a financial institution is correctly following its own policies and/or operating in compliance with internal controls, and legal and best-practice standards
- Whether there is any evidence of law violations, money laundering, fraud, and any other anomalies
Above all else, the main goal of an audit is to make sure a financial institution is operating in line and above board with all industry and local regulations.
How Long Does A Bank Audit Take?
Bank auditors will typically spend about three months investigating a bank's financial activities, risk management processes, systems, and procedures to make sure that all related information is complete, timely, and accurate.
What Happens After The Bank Audit Is Finished?
Once auditors have had the chance to test and evaluate their findings, they can compile an audit report or audit opinion that outlines any feedback or corrective steps that a bank needs to take in order to remain in compliance.
If the audit was completed by an external auditor, the results will be shared with stakeholders and creditors.
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.
While bank audits can certainly be stressful experiences, they can be made more streamlined through the use of auditing software and related services.
Integrity specializes in GLBA compliance and provides support for audits and exams. We have extensive experience working with auditors from many firms, as well as examiners from the OCC and FDIC. We also follow guidelines outlined in your financial institution’s due diligence process. To learn more about preparing for your next audit, or remediating existing vulnerabilities, please download our complimentary GLBA Compliance Checklist!