Amendments Bring Changes to Audit Requirements for Credit Unions

On September 19, 2019, the National Credit Union Administration (NCUA) Board (the Board) approved amendments to Code of Federal Regulations, Title 12, Part 715 (Part 715), Supervisory Committee Audits and Verifications, which covers audit requirements for federally insured credit unions (FICUs).

The amendments primarily focus on FICUs in the $10–$500 million range, introducing the following changes.

Key Changes

Reporting Options

The revisions eliminate the following two reporting options:

  • The Report on Examination of Internal Controls Over Call Reporting
  • The Balance Sheet Audit

These options were eliminated because the Board felt they were seldom used and provided limited insight into a FICU’s financial condition.

Minimum Procedures

Reference to the Supervisory Committee Guide as the basis for the minimum required procedures to meet the Other Supervisory Committee Audit option for a FICU completing its annual audit requirements under Part 715.7 was replaced with a principles-based set of minimum requirements. This change resulted from the Board’s conclusion that the procedures outlined in the Supervisory Committee Guide were outdated.

The new principles-based set of minimum requirements were set forth in a new Appendix A to Part 715. They provide an up-to-date resource, giving FICUs greater flexibility in meeting the audit requirements. According to Appendix A to Part 715, FICUs must now complete the following procedures to satisfy the requirements:

  • Review board of director minutes
  • Test and confirm material asset and liability accounts
  • Test material equity, income, and expense accounts
  • Test for unrecorded liabilities
  • Review key internal controls
  • Test the mathematical accuracy of the allowance for loan and lease loss account and verify the methodology is properly applied
  • Test loan delinquency and charge-offs

Timing Requirements

The revisions also eliminate the 120-day report delivery deadline from the required terms for engagement letters with outside auditors. This change will provide enhanced flexibility and potential cost savings, without any adverse impact to the auditing process.

Effective Dates

The final rule takes effect 90 days from the date of publication in the federal register.

We’re Here to Help

Implementing Appendix A revisions can be challenging. FICUs that have been using the Supervisory Committee Guide minimum procedures to satisfy the Other Supervisory Committee Audit option under Part 715 requirements can work with their independent auditor to develop a set of procedures that satisfy the new Appendix A minimum requirements and address the FICU’s specific risks.

For more information on Appendix A minimum requirements or to begin implementing the changes, contact your Moss Adams professional.