The Growing Importance of the Audit Relationship

Reinforcing the credit union difference in in the public’s mind is crucial to both their value proposition and political standing. What steps can your credit union take to raise governance and financial transparency standards even higher?

 
 

Corporate governance and accounting practices of public organizations remain in the spotlight today. Ongoing revelations of questionable, if not unethical, directives from management across Corporate America have ensured that regulators, shareholders, customers and employees will keep a close eye on the financial reports of public entities. In credit unions, the potential for manipulation of financial results is presumably less due to the lack of a public market for ownership shares. Nevertheless, credit unions are public entities that must continue to reinforce that they are acting in the best interests of their membership in all of their management decisions.

The Importance of Transparency

Beyond ensuring that the controls are in place for accurate financial reporting, each credit union's management team, Supervisory Committee and audit partner have the opportunity to work together to make the benefits of the cooperative structure visible to members. Credit unions are able to highlight a number of key differences in their governance, not the least of which is that their Boards of Directors and Supervisory Committee are composed of member volunteers elected by their peers. These differences are a start, but steps can be taken to raise the governance and financial transparency standards even higher, including:

  • Making financial results accessible to members via regular postings in branches and on the credit union website
  • Establishing qualifications for Supervisory Committee members as well as an ongoing training program on issues related to accounting guidelines and credit union industry trends
  • Adopting term limits for Supervisory Committee members and lead audit partners to strengthen audit independence

As credit unions increase their presence in their communities through expanded charters, the ability to differentiate their organization from competitors will be an important aspect of their success. Credit unions' corporate governance directly reflects the member-owned structure that distinguishes these institutions. Reinforcing this difference in the public's mind is crucial to both their value proposition and political standing.

The seventh edition of the Guide to Credit Union Auditors is now available. Designed for both credit unions and their audit partners, this Guide is an important tool when issues arise that would benefit from discussion across the industry. For more information, click here.

 

 

 

Aug. 30, 2004


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