IIA – DC Chapter Event
Regulations and Audit
March 26, 2014
Kathy Murphy
OCC Deputy Comptroller & Chief Accountant
Paula Johnson
OCC Operational Risk and Core Policy Analyst
Agenda
• Increased Focus on Audit
• 2013 Regulatory Highlights
• On the Horizon
Regulations & Audit
Increased Focus on Audit
• Reliance as 3rd line of
defense
• Multiple Regulators
• Evolving Rules &
Regulations
• Effective Audit
Increased Focus on Audit
SUPERVISORY ATTENTION ON OVERLAPPING AREAS OF CONCERN
Audit
Audit
Compliance
Mgt
CRA/Fair
Lending
Capital Planning
Compensation
Ops Risk Mang
Enterprise Risk
Mang
4
Increased Focus on Audit
EVOLVING RULES AND REGULATIONS
January 2013 – IIA
publishes enhanced
Internal Audit Standards
June 2012 – Basel Committee issues
Supervisory Guidance on Internal Audit
functions in Banks
July 2010 - OCC Announces Heightened Expectations for Audit
and Risk Management for its Largest Institutions
July 2009 – FDIC Rule update Reporting
Requirements for Annual Independent Audits and
Reports (12 CFR Part 363)
January 2013 FRB
Supplemental
Policy Statement
on the
Interagency
Internal Audit
Function and its
Outsourcing
Increased Focus on Audit
HEIGHTENED EXPECTATION THEMES
•
•
•
•
Accountability / Effective Challenge
Stature/Independence
Competence/Talent
Scope and Frequency
Increased Focus on Audit
EFFECTIVE AUDIT CHARACTERISTICS
• Robust Board and Audit Committee
(Committee) engagement/oversight
• Strong audit management
• Highly effective audit processes
• Highly effective audit reporting
• Competent internal audit staff
Regulations & Audit
Regulatory Highlights
• Overview
• OCC Accounting Policy
• OCC Operational Risk &
Core Policy
Regulatory Highlights
OVERVIEW
October 2013 - NR 2013-158
Bank Accounting Advisory Series
updated
October 2013 - OCC Bulletin
2013-26 Guidance on Certain
issues related to Troubled Debt
Restructurings
October 2013 - OCC Bulletin 2013-29 enhanced
‘Third Party Relationships: Risk Management’
November 2013 OCC Bulletin
2013-30 new
‘Qualified Thrift
Lender’ booklet
of the
Comptrollers
Handbook
November 2013–
OCC 2013-31
publishes
enhanced "Insider
Activities” booklet
of the
Comptroller’s
Handbook
Regulatory Highlights
ACCOUNTING
• Selected Bulletins
• 2014-4: Clarification of the OCC’s expectations regarding
secured consumer debt discharged in Chapter 7
bankruptcy proceedings
• 2014-2: Mortgage Banking Comptroller Handbook
• 2013-26: Interagency Supervisory Guidance Addressing
Certain Issues Related to Troubled Debt Restructurings
• 2013-23: Regulatory Capital Rule (Basel III)
• 2013-20: OREO Comptroller Handbook
• Bulletins can be obtained from OCC.gov (left
side of the screen under key resources)
10
Regulatory Highlights
ACCOUNTING
• Volcker Rule & OTTI Accounting
• BAAS
11
Regulatory Highlights
OVERVIEW
October 2013 - NR 2013-158
Bank Accounting Advisory Series
updated
October 2013 - OCC Bulletin
2013-26 Guidance on Certain
issues related to Troubled Debt
Restructurings
October 2013 - OCC Bulletin 2013-29 enhanced
‘Third Party Relationships: Risk Management’
November 2013 OCC Bulletin
2013-30 new
‘Qualified Thrift
Lender’ booklet
of the
Comptrollers
Handbook
November 2013–
OCC 2013-31
publishes
enhanced
"Insider
Activities”
booklet of the
Comptroller’s
Handbook
Regulations & Audit
On The Horizon
• OCC Accounting Policy
• OCC Operational Risk &
Core Policy
On The Horizon
ACCOUNTING
• Policy Pipeline
• Basel Committee on Banking Supervision - External Audit
Document
• ALLL Comptroller Handbook
• Hot Topics
•
•
•
•
•
•
Appropriateness of the ALLL and Accrual Status
HELOC “End of Draw”
Sales/Creation of Mortgage Servicing Rights (MSRs)
Appraisals
Valuation, including funding valuation adjustments
New capital rule and other regulation changes
14
On The Horizon
ACCOUNTING
• FASB Developments
•
•
•
•
Classification and Measurement
Current Expected Credit Losses (CECL)
Leases
EITF Matters (e.g., OREO, Foreclosed FHA Guaranteed
Loans)
• Private Company Council
• Changes to PCAOB Auditing Standards
• Auditor’s Report
• Auditor’s Responsibilities Regarding Other Information and
Related Amendments
15
On the Horizon
• Updating the Audit Booklet in the Comptroller Handbook
• Risk Governance Framework Standards for Complex Banks –
New Appendix to Part 12CFR30
• Updating the Internal Controls Booklet in the Comptroller
Handbook
• Updating The Director’s Book
16
On the Horizon
Internal & External Audit Booklet
• Board and Management Oversight *
• Audit Programs (types of audits)
• Internal Audit Function (Oversight & structure) * - Independence and
Competence *
• Co-sourcing & outsourcing *
• External Audit - Board & Committee Oversight, External audit
opinions*
• Annual 12CFR363 reporting *
• Internal Audit Program - Audit Universe * , Audit Work Programs,
Sampling Methods & Techniques * , Risk Scoring Methodology *,
Follow-up Activities *, Professional Development Program*
• Quality Assurance Program*
• Continuous Auditing *
• Reliance on Assurance Providers * - External & Internal assurance
reports , Audit planning impact
17
Summary
Midsize Bank Audit Roundtable
• Increased Focus on Audit – rules and guidance,
regulators, Heightened expectations themes, and
effective audit elements
• 2013 Regulatory Highlights – accounting and
operational risk/core policy highlights
• On the Horizon - Handbook updates
Questions?
IIA – DC Chapter Event
Regulations and Audit
March 24, 2014
Kathy Murphy
OCC Deputy Comptroller & Chief Accountant
Paula Johnson
OCC Operational Risk and Core Policy Analyst