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LEARNING CENTER

Using the NCUA Examiner’s Guide for an Internal Control Audit

By Brad Powell

Brad Powell

NCUA rules and regulations require a demonstrable level of risk management from credit unions. If you’re looking to prepare for your next examination, your best bet is to look at the NCUA examiner’s guide. In it you will find the resources that your NCUA examiners will reference for your next internal control audit.

NCUA examiner's guide

We strongly recommend familiarizing yourself with the NCUA examiner’s guide to learn the steps to take to ensure smooth audit proceedings. Whether you’re preparing for an external or an internal control audit, the guide can help you navigate tricky sections and understand murky ones.

 

The Internal Control Audit Process

Your credit union’s board of directors, management team, and various experts are tasked with establishing policies, processes, and procedures to manage risk. Per the NCUA examiner’s guide, your internal control audit should safeguard your credit union in several key areas. The three objectives they identify are:

 

  1. Effectiveness and efficiency of operations.
  2. Reliability of financial reporting.
  3. Compliance with applicable laws and regulations.

 

Examiners will look for established procedures that address these metrics. Although no credit union could be expected to take into account all risks and contingencies, and although no examiner will expect a comprehensive internal control process, it’s worth your time to develop robust processes to insure against a variety of common risks to financial institutions.

 

The NCUA Examiner’s Guide as Reference

Doing your due diligence as a credit union means managing risk. Assessing, mitigating, and reporting every risk that presents itself is key to demonstrating compliance. Management will require a very strong, stable set of protocols to follow to keep your credit union from taking on too much risk.

 

Failure to properly plan for and accommodate risk presents its own risk to your credit union. If it is unable to effectively demonstrate an ability to manage risk, measure performance, reach objectives, and detect errors (or remain error-free), there will be consequences.

 

Using the NCUA examiner’s guide as a reference during your own internal control audit can help. Most importantly, it’s what your auditor uses when they administer your examination. Consequently, you’ll know what it is that they’re looking for and can take steps to demonstrate your risk management processes firsthand.

 

It may sound sneaky, but by using the same reference materials as your examiners, you can effectively stay one step ahead during your next audit.

 

Why Establish Internal Control?

Audit processes should adequately prepare you and your credit union for continued success. Demonstrating adequate internal control shows a healthy understanding of the risks and errors credit unions face, as well as a reasonable plan to mitigate them.

 

Failure to establish such levels of internal control may complicate your next audit, so that you could face time-intensive follow-up questions, remediation, and even regulatory action. Above all, you want to show that you’re following NCUA rules and regulations.

 

In order to do so, we recommend taking a closer look at the NCUA examiner’s guide to help you through your next internal control audit. You can find their guide here.

 

For other great content that will help you prepare for your next audit, check out these articles below:  

Tracking Data Through your Internal Audit Process

Topics: credit union, internal control audit, NCUA examiner's guide, NCUA rules and regulations

Brad Powell

Written by Brad Powell

Brad Powell runs Redboard, a company that helps credit unions better respond to regulatory examinations. He has 20 years of experience developing technology for credit unions and financial services companies.

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