Audit Options & Requirements

A full opinion financial statement audit is completed when the independent auditor issues a report and opinion on whether the financial statements fairly present the financial position and performance of the credit union in accordance with generally accepted accounting principles (GAAP). This type of audit covers:

• The statement of financial condition (balance sheet)
• The statement of income and expenses
• The statement of other comprehensive income (if applicable)
• The statement of changes in members’ equity
• The statement of cash flows

To issue a clean (unqualified) audit opinion, the auditor must determine that the aggregate amount of error in the financial statements does not exceed the planned acceptable error (materiality). The auditor must also ensure the financial statements are presented in accordance with the evolving reporting standards issued by the Financial Accounting Standards Board (FASB). Any significant findings are either included in the auditor’s report or communicated to management and the Supervisory Committee in a separate letter.

A full opinion audit provides the highest level of assurance to users of the financial statements. It is also the costliest option due to the substantial time and effort required to complete the audit. However, this is partially offset by the fact that a verification of member accounts is required by auditing standards. A supplemental member verification report is provided to clients electing this level of service.

Minimum agreed-upon procedures (AUP), as defined in the NCUA Other Supervisory Committee Audit Minimum Procedures Guide, represent the minimum level of examination procedures acceptable to the NCUA and most state regulators. A credit union examiner may require a higher level of service if there are concerns or suspicions that a credit union is not properly reporting assets, liabilities, or has weaknesses in its internal control systems.

For well-managed smaller institutions, agreed-upon procedure engagements offer a lower-cost option for meeting regulatory requirements with minimal disruption to operations. Minimum procedures can also be expanded with additional testing at the discretion of the supervisory committee. For example, reviews of Bank Secrecy Act (BSA) compliance, SAFE Act compliance, or other regulatory compliance areas may be incorporated into the agreed-upon procedures engagement to address specific requirements.

No opinion on the financial statements is issued for an AUP engagement. Instead, the AUP report includes a supplement detailing the procedures agreed upon by the supervisory committee and the results of performing those procedures.

In addition to fulfilling the requirements outlined in Part 715 of the NCUA Rules and Regulations, an audit can act as an “annual check-up” on the effectiveness of the credit union’s policies and procedures. It assesses how well the credit union safeguards assets, meets regulatory compliance requirements, and produces fairly stated and useful financial reports.

Supervisory committee members should take into account the credit union’s structure, complexity, management challenges, regulatory examination results, and any recent events at the credit union when determining the appropriate level of audit service.