Audit Options & Requirements
Request For Proposal
Click here to submit a request for proposal.
Levels of Professional Service
Audit Options and Requirements
Credit union audit requirements are defined in Section 715 of the NCUA rules and regulations. All federally insured credit unions with assets of $500 million or more must have a full opinion financial statement audit performed by a licensed independent CPA in accordance with generally accepted auditing standards. Credit unions with less than $500 million in assets have another option available. This option consists of procedures as defined by Section 715.7 of NCUA Rules and Regulations that the auditor agrees to perform on behalf of the Supervisory Committee. This type of engagement must contain the minimum procedures as described in the NCUA Other Supervisory Committee Audit Minimum Procedures Guide. While financial statements are ultimately the responsibility of credit union management, the independent auditor can provide assurance to directors, regulators, and other financial statement users that financial information is fairly reported and materially correct.
A full opinion financial statement audit is completed when the independent auditor issues a report and opinion as to 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, and the statement of cash flows.
In order 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 amount acceptable error (materiality). The auditor must also make certain the financial statements are presented in accordance with constantly evolving reporting standards issued by the Financial Accounting Standards Board (FASB). Any findings that are of significance 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 amount of time and effort required to complete the audit. This is mitigated somewhat 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, provides 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 the examiner suspects or believes a credit union is not properly reporting assets, liabilities or otherwise has weaknesses in its system of internal controls. However, for well managed smaller institutions, agreed-upon procedure engagements provide a lower cost option for meeting regulatory requirements with a minimum of disruption to operations. Minimum procedures can also be augmented with testing in additional areas at the discretion of the supervisory committee. A review of Bank Secrecy Act (BSA) compliance, SAFE Act compliance, or other compliance review may also be integrated into the agreed-upon procedures engagement in order to meet regulatory requirements. No opinion on the financial statements is issued for an AUP engagement. Instead, the AUP report includes a supplement of procedures agree-upon by the supervisory committee and the results of performing the procedures.
In addition to meeting the requirements defined in Part 715 of the NCUA Rules and Regulations, an audit can serve as an “annual check-up” on the effectiveness of the Credit Union’s policies and procedures for safeguarding assets, meeting regulatory compliance requirements and producing fairly stated and useful financial reports. Supervisory committee members should consider credit union structure, complexity, management issues, regulatory examination results, and recent events at the credit union when determining an appropriate level of audit service.
START A DIALOG
Every credit union has different requirements. Contact Daren B. Tanner, P.C. to learn what a credit union specialist can do for your credit union.