Ripples from the Impact of Accounting Scandals reach Credit Unions

Did any of the accounting scandals of the past years affect the credit union industry? In many ways, they did not. Arthur Andersen's credit union clients had to look for new auditors; however, by and large, credit unions made it through the past two years unaffected. Unlike large publicly held corporations, in credit unions, the incentives to fudge the numbers are small.

 
 

Did any of the accounting scandals of the past years affect the credit union industry? In many ways, they did not. Arthur Andersen's credit union clients had to look for new auditors; however, by and large, credit unions made it through the past two years unaffected. Unlike large publicly held corporations, in credit unions, the incentives to fudge the numbers are small.

In that case, why are accounting scandals relevant to bring up now, two years later, to a credit union audience? Even though it is not possible that a credit union might become the next Enron, the events of the past few years have opened many eyes in the credit union industry - and in CPA firms that serve the credit union industry.

Concurrent with the fall of Enron and other corporate scandals, Xcel Federal Credit Union showed how credit unions set a good example in the business world. After losing a branch in the World Trade Center in 2001, Xcel Federal Credit Union faced a difficult situation in maintaining their internal auditing practices, but they rose to the challenge gracefully.

In the past, Xcel worked an external audit partner but did not work with an outside audit firm to perform internal audits. By late 2002, Xcel sent out RFPs to CPA firms to bid for both their internal and external audits, but one firm, DeLeon & Stang, CPA replied with an interesting response. We had heard of different offices of a CPA firm each performing the internal or the external audit of a credit union, said Corrine McDonnell, a supervisory committee member at Xcel, but DeLeon & Stang downright refused. It's straight out of their ethics.

After undergoing the first part of internal control with DeLeon & Stang in spring 2003, McDonnell appreciates that Xcel has two sets of eyes to check everything. With greater awareness of issues surrounding credit union audits, many credit unions have taken time to evaluate their relationships with their auditors, thus increasing not only the comprehensiveness of their audits but also their operational efficiency.

 

 

 

Oct. 27, 2003


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