In the past few years Auditors and Supervisory Committees have taken on new roles in the financial services industry. Until HR 1151, the decision to have an outside opinion audit was viewed as optional. Now all credit unions over $500 million in assets are required to have an annual opinion audit performed by a CPA firm. Credit unions, regardless of asset size, are also required to report the date and description of the last audit performed of the credit unions records in their quarterly 5300 call reports filed with the NCUA. As credit unions prepare for their upcoming audits we thought it might be helpful to provide answers to the Top 5 questions a credit union might ask when preparing for an audit.
- Q: Who may do an audit or verification?
A: Depending on a credit unions asset size and source of charter, either an independent accountant licensed by the state or jurisdiction, an independent compensated qualified credit union auditor, or an internal credit union auditor or uncompensated representative.
- Q: What types of audit services satisfy the annual supervisory committee audit requirement?
A: Again depending on asset size and source of charter, a Financial Statement opinion audit, a Balance Sheet audit, a Report on Examination of Internal Control over Call Reporting, or an audit per the NCUA's Supervisory Committee Guide may satisfy the requirement. (See §715.5-§715.7 of NCUA Rules and Regulations)
- Q: Who hires the auditor?
A: The credit union Supervisory Committee is responsible for hiring the auditor, however the credit union board is responsible for authorizing the budget and approving the expense.
- Q: What is an engagement letter?
A: While not quite the same as an engagement ring, an engagement letter is used to facilitate communication at the contracting point. It documents ''who agreed to do what'' and provides the credit union with an enforceable contract. The engagement of an independent compensated auditor to perform all or a portion of a Supervisory Committee audit shall be evidenced by an engagement letter.
- Q: Who receives the final written report from the compensated auditor and is responsible for ensuring the report complies with the terms of the engagement letter?
A: The Supervisory Committee must receive the written audit report and is responsible for meeting with the compensated auditor at the end of the audit to determine if the auditor complied with the terms of the engagement letter.
Interested in CPA/Auditing firm contact information and 2003 market share data, check out Callahan's soon to be released 2003 Credit Union CPA Survey, or contact Jeff 800-446-7453 ext. 161 for more info.
* For more Supervisory Committee questions and answers reference the complete NCUA Supervisory Committee Guide for FCUs and for complete rules and regulations reference section 715 of NCUA Rules and Regulations.