Reshaping the Credit Union/Auditor Relationship for the Better

While credit unions were untouched by recent accounting and corporate scandals many have wisely taken a cautionary lesson and have scrutinized the roles and responsibilities of auditors, credit union boards and supervisory committees. This openness is welcomed by all parties it seems, and may help to preserve the credit union industry's white hat reputation.

 
 

While credit unions were untouched by recent accounting and corporate scandals many have wisely taken a cautionary lesson and have scrutinized the roles and responsibilities of auditors, credit union boards and supervisory committees. This openness is welcomed by all parties it seems, and may help to preserve the credit union industry's white hat reputation.

Linda Boring, VP of administrative services at Community America Credit Union, Lenexa, Kansas ($1.3B- assets) summed up that feeling in a recent Callahan and Associates Webinar on the subject by saying, "Given the current environment, we felt it was something we wanted to do." The something was change auditors -after four years with the same one- not because "it was a broken relationship and needed to be fixed," but rather to add zest to the new relationship and management's oversight and procedures.

CACU stipulated a three-year term and required separation of auditing and consulting services. They considered the firm's auditing team experience, its seniority; time needed for transition and price. From RFP to selection it took just three months, said Boring.

George Poitou, chief operating officer and Bob Toohey, chairman of the supervisory committee of SCE Federal Credit Union, El Monte, California ($350M-assets) noted another important reason to reassess the auditing relationship: the increasing complexity of credit union operations. "We're a community charter with a lot of SEGs, and we plan to grow through branching and through CUSOs, so we wanted a firm that saw the relationship as an ongoing process rather than a static one," Toohey said.

Critical to the selection process is allowing sufficient time for both CU staff and audit firms to discuss findings with management and later, for management to respond to those findings. That helps the Supervisory Committee to make an informed decision.

It was mostly music to a CPA's ears, as Alan DeLeon, a CPA with DeLeon & Stang CPA in Gaithersburg, Maryland suggested that credit unions consider adopting some provisions of Sarbanes-Oxley, Congress' response to the scandals, which pertains only to publicly held companies. Credit unions should not use the same firm for internal and external audit services either, he agreed.

Clarifying the role of the Supervisory Committee is essential and its members (appointed by the CU board of directors) must be highly qualified, as they hire and fire the external auditor, DeLeon said. They must be free of inside pressure and able to meet the auditor outside the presence of CU management.

When, and how often auditors should be rotated varies from a short 3-years to a long 9-years, but DeLeon stressed that changing too often can be disruptive. Never changing is not an option, however, and while NCUA has no set rotation policy, they look for a reasonable period.

The true value of the CPA firm extends beyond the numbers, he said, also serving as a "sounding board" and fulfilling the role of advisor/counselor.

 

 

 

Nov. 17, 2003


Comments

 
 
 
  • Do not agree that you have to change audit firms. Internal Audit and External should be separate firms if a contractor is used for both functions.
    Anonymous