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More About This Title Audit and Accounting Guide Depository and LendingInstitutions- Banks and Savings Institutions, Credit Unions, Finance Companies, and Mortgage Compani
- English
English
The 2017 edition of this industry standard resource offers clear and practical guidance of audit and accounting issues such as transfers and servicing, troubled debt restructurings, financing receivables and the allowance for loan losses, and fair value accounting. It also provides direction for institutions assessing their operations and internal controls for regulatory considerations as well as discussions on existing regulatory reporting matters. Updates include:
SAS No. 132, The Auditor's Consideration of an Entity’s Ability to Continue as a Going ConcernSSAE No. 18, Attestation Standards: Clarification and RecodificationNote: FASB ASU No. 2016-13 will have a significant impact on the guide; however, incorporation of guidance will not occur until the 2018 or 2019 edition of the guide.- English
English
1 Industry Overview—Banks and Savings Institutions .01-.112
Description of Business .01-.07
Regulation and Oversight .08-.63
Regulatory Background .15-.23
Deposit Insurance Fund .24-.30
The Dodd-Frank Act .31-.63
Regulatory Capital Matters .64-.85
Capital Adequacy .66-.74
Prompt Corrective Action 75-.85
Annual Independent Audits and Reporting Requirements .86-.111
Additional Regulatory Requirements Concerning the
Sarbanes-Oxley Act, Corporate Governance, and
Services Outsourced to External Auditors 99-.111
Other Reporting Considerations 112
2 Industry Overview—Credit Unions .01-.62
Description of Business .01-.10
The Board of Directors . .07
The Supervisory Committee 08-.09
The Credit Committee .10
Charters, Bylaws, and Minutes 11-.17
Financial Structure .12-.13
Credit Union System .14-.16
Corporate Credit Unions .17
Regulation and Oversight .18-.23
Government Supervision .18-.20
NCUA 21-.23
Regulatory Capital Matters .24-.54
Natural Person Credit Unions 24-.44
Corporate Credit Unions .45-.54
Annual Audits .55-.62
Other Reporting Considerations 62
3 Industry Overview—Finance Companies .01-.20
Description of Business .01-.11
Debt Financing .08-.11
Regulation and Oversight .12-.20
4 Industry Overview—Mortgage Companies .01-.41
Description of Business .01-.20
Regulation and Oversight .21-.36
Reporting Considerations . .37-.41
HUD Programs .37-.39
Asset Servicing for Investors 40-.41
5 Audit Considerations and Certain Financial Reporting Matters .01-.257
Overview 01-.09
An Audit of Financial Statements 04-.05
Audit Risk .06-.09
Terms of Engagement .10-.13
Audit Planning .14-.15
Materiality .16-.20
Performance Materiality .19-.20
Use of Assertions in Assessment of Risks of Material
Misstatement .21-.22
Risk Assessment Procedures 23-.75
Risk Assessment Procedures and Related Activities .25-.32
Understanding the Entity and Its Environment, Including
the Entity’s Internal Control 33-.75
Risk Assessment and the Design of Further Audit Procedures . .76-.98
Identifying and Assessing the Risks of Material
Misstatement .77-.81
Designing and Performing Further Audit Procedures .82-.98
Evaluation of Misstatements Identified During the Audit .99-.101
Audit Documentation .102-.109
Timely Preparation of Audit Documentation 105
Documentation of the Audit Procedures Performed and
Audit Evidence Obtained 106-.108
Assembly and Retention of the Final Audit File 109
Using the Work of an Auditor’s Specialist 110-.115
Using the Work of a Management’s Specialist 116-.119
Processing of Transactions by Service Organizations .120-.122
Consideration of Fraud in a Financial Statement Audit .123-.151
Professional Skepticism .126-.128
Discussion Among the Engagement Team 129-.132
Risk Assessment Procedures and Related Activities .133-.136
Identification and Assessment of the Risks of Material
Misstatement Due to Fraud 137-.139
Responses to the Assessed Risks of Material Misstatement
Due to Fraud .140-.143
Evaluation of Audit Evidence 144-.147
Auditor Unable to Continue the Engagement 148
Communications to Management and With Those Charged With Governance 149
Communications to Regulatory and Enforcement Authorities .150
Documentation .151
Compliance With Laws and Regulations 152-.162
Responsibility for Compliance With Laws and Regulations .153-.156
The Auditor’s Consideration of Compliance With Laws and Regulations .157-.162
Going-Concern Considerations 163-.179
Evaluating Whether Substantial Doubt Exists 165-.174
Written Representations .175
Consideration of the Effects on the Auditor’s Report . .176-.178
Documentation .179
Written Representations .180-.189
Written Representations as Audit Evidence 181
Management From Whom Written Representations Are Requested .182-.183
Written Representations About Management’s Responsibilities and Other Written Representations .184-.186
Date of, and Period(s) Covered by, Written Representations .187
Form of Written Representations 188
Doubt About the Reliability of Written Representations and Requested Written Representations Not Provided .189
Information Other Than Financial Statements 190-.192
Certain Financial Reporting Matters 193-.211
Disclosures of Certain Significant Risks and Uncertainties . .193-.209
Segment Reporting .210-.211
Regulation and Supervision of Depository Institutions .212-.257
Introduction .212-.220
Rule Making .221-.222
Examinations .223-.228
Enforcement .229-.236
Planning .237
Detection of Errors and Fraud 238-.239
Evaluation of Contingent Liabilities and Related Disclosures .240
Going-Concern Considerations 241-.242
Regulatory Reporting Matters—Interpretation and Reporting Related to GAAP .243-.247
Auditor and Examiner Relationship 248-.257
6 Cash and Cash Equivalents .01-.42
Introduction .01-.08
CIPC and Cash Equivalents 02
Deposits With Other Financial Institutions 03-.05
Balances With Federal Reserve Banks and FHLBs . .06
Federal Funds Sold .07
Cash on Hand .08
Accounting and Financial Reporting 09-.33
Definition of Cash and Cash Equivalents 09-.11
Classification of Cash Flows 12-.22
Acquisition and Sales of Certain Securities and Loans .23-.24
Gross and Net Cash Flows 25-.28
Cash Receipts and Payments Related to Hedging Activities .29
Financial Statement Presentation and Disclosure .30-.33
Auditing 34-.42
Objectives .34
Planning .35
Internal Control Over Financial Reporting and Possible Tests of Controls .36-.40
Substantive Tests .41-.42
7 Investments in Debt and Equity Securities .01-.163
Introduction .01-.65
U.S. Government and Agency Obligations 05-.07
Municipal Obligations . .08-.11
Asset-Backed Securities .12-.49
Other Structured Credit Products 50-.59
Issues of International Organizations and Foreign Governments .60
Other Securities .61
Transfers of Securities .62-.65
Regulatory Matters .66-.82
Bank Accounting Advisory Series 82
Accounting and Financial Reporting 83-.137
Introduction .83-.91
OTTI 92-.103
Unrealized Gains and Losses 104-.106
Premiums and Discounts .107-.113
Interest Income .114
Consolidation .115
Special Areas .116-.118
Transfers and Servicing of Securities 119-.121
Troubled Debt Restructurings 122-.124
Loans and Debt Securities Acquired With Deteriorated Credit Quality .125
Financial Statement Presentation and Disclosure .126-.137
Auditing 138-.163
Objectives .138
Planning .139-.143
Internal Control Over Financial Reporting and Possible Tests of Control .144-.154
Substantive Tests .155-.163
8 Loans .01-.230
Introduction .01-.56
The Lending Process .02
Credit Strategy .03-.04
Credit Risk .05-.07
Lending Policies and Procedures 08-.16
Types of Lending .17-.18
Commercial, Industrial, and Agricultural Loans 19-.30
Consumer Loans .31-.39
Residential Real Estate Loans 40-.43
Lease Financing .44-.48
Trade Financing .49-.50
CRE and Construction Loans 51-.53
Foreign Loans .54
Loans Involving More Than One Lender 55-.56
Regulatory Matters .57-.88
Real Estate Lending Standards 57-.67
Retail Credit Loans and Residential Mortgage Loans .68-.70
Troubled Debt Restructurings 71-.75
Credit Card Lending .76-.77
Nontraditional Mortgage Products 78
Correspondent Concentration Risks 79
Leveraged Lending .80
Income Recognition on Problem Loans 81-.82
Credit Union Lending Restrictions 83
Lending Statutes .84
Uniform Commercial Code 85-.87
Bank Accounting Advisory Series 88
Accounting and Financial Reporting 89-.181
Interest Income, Delinquency Fees, Prepayment Fees, and Rebates .95-.100
Loan Fees, Costs, Discounts, and Premiums 101-.122
TDRs 123-.138
Real Estate Investments . .139
Lease Financing .140
Foreign Loans .141-.144
Commitments .145-.152
Financial Statement Presentation and Disclosure .153-.181
Auditing 182-.230
Objectives .182
Planning .183-.184
Internal Control Over Financial Reporting and Possible
Tests of Controls .185-.198
Substantive Tests .199-.230
9 Credit Losses .01-.111
Introduction .01-.22
Management’s Methodology 04-.12
Loan Reviews .13-.15
Loans Individually Evaluated for Impairment 16
Loans Collectively Evaluated for Impairment 17-.18
Estimating Overall Credit Losses 19-.22
Regulatory Matters .23-.37
Credit Unions .34-.37
Accounting and Financial Reporting 38-.61
Sources of Applicable Guidance 38-.40
Allowance for Loan Losses 41-.47
Loss Contingencies .48-.51
Financial Statement Presentation and Disclosure of Loan Impairment and Allowance for Credit Losses .52-.61
Auditing 62-.111
Objectives .62
Planning and Risk Assessment 63-.67
Internal Control Over Financial Reporting and Possible Tests of Controls .68-.74
Substantive Tests .75-.111
10 Transfers and Servicing and Variable Interest Entities .01-.123
Introduction .01-.08
Asset-Backed Securitizations 06
Loan Participations and Loan Syndications 07
Loan Servicing .08
Regulatory Matters .09-.15
Accounting and Financial Reporting 16-.109
Mortgage Loans and MBSs Held for Sale 16-.25
Transfers and Servicing of Financial Assets 26-.38
Sale of Financial Assets .39-.44
Transfers of Loans With Recourse 45-.46
Servicing Assets and Liabilities 47-.65
Secured Borrowings and Collateral 66-.69
Loans Not Previously HFS 70-.74
Financial Statement Presentation 75-.81
Financial Statement Disclosure 82-.92
VIEs 93-.109
Auditing 110-.123
Objectives .110
Planning .111-.114
Internal Control Over Financial Reporting and Possible Tests of Controls .115-.121
Substantive Tests .122-.123
11 Real Estate Investments, Real Estate Owned, and Other Foreclosed Assets .01-.72
Introduction .01-.03
Foreclosed Assets .02
Real Estate Investments . .03
Regulatory Matters .04-.15
Accounting and Financial Reporting 16-.54
Foreclosed Assets .16-.22
Accounting and Reporting for Long-Lived Assets to Be Disposed of by Sale .23-.32
Accounting and Reporting for Long-Lived Assets to Be Held and Used .33-.39
Real Estate Investments . .40-.42
Sale of Real Estate Assets 43-.44
Development Costs .45-.48
Allocation of Income and Equity Among Parties to a Joint Venture .49-.54
Auditing 55-.72
Objectives .55
Planning .56
Internal Control Over Financial Reporting and Possible Tests of Controls .57-.60
Substantive Tests .61-.72
12 Other Assets, Other Liabilities, and Other Investments .01-.91
Introduction .01-.10
Premises and Equipment, Net 03
FHLB or FRB Stock .04-.05
Identifiable Intangibles . .06-.07
Goodwill .08
Customers’ Liabilities on Acceptances 09
Other Miscellaneous Items 10
Regulatory Matters .11-.15
Accounting and Financial Reporting 16-.76
Premises and Equipment, Net 16-.26
FHLB or FRB Stock .27-.34
Goodwill and Other Intangible Assets 35-.50
Exit or Disposal Activities 51-.52
Asset Retirement Obligations 53-.56
Customers’ Liabilities on Acceptances 57
Mortgage Servicing Advances 58
Impairment of Long-Lived Assets 59
NCUSIF Deposit .60-.66
Other Investments .67-.72
Contributed Assets .73-.76
Auditing 77-.91
Objectives .77-.78
Planning .79
Internal Control Over Financial Reporting and Possible
Tests of Controls .80-.82
Substantive Tests .83-.91
13 Deposits .01-.70
Introduction .01-.32
Demand Deposits .04
Savings Deposits .05
Time Deposits .06-.10
Brokered Deposits .11-.13
Dormant Accounts .14
Closed Accounts .15
Other Deposit Services .16
The Payments Function and Services 17-.32
Regulatory Matters .33-.40
Limitations on Brokered Deposits 33-.38
Classification of Deposits of Credit Unions 39-.40
Accounting and Financial Reporting 41-.46
Auditing 47-.70
Objectives .47
Planning .48-.49
Internal Control Over Financial Reporting and Possible
Tests of Controls .50-.55
Substantive Tests .56-.70
14 Federal Funds and Repurchase Agreements .01-.69
Introduction .01-.25
Federal Funds Purchased 02-.03
Repos 04-.25
Regulatory Matters .26
Accounting and Financial Reporting 27-.47
Auditing 48-.69
Objectives .48
Planning .49-.53
Internal Control Over Financial Reporting and Possible Tests of Controls .54-.58
Substantive Tests .59-.69
15 Debt .01-.77
Introduction .01-.31
Long Term Debt .06-.09
Short Term Debt .10-.31
Regulatory Matters .32-.33
Accounting and Financial Reporting 34-.57
Auditing 58-.77
Objectives .58
Planning .59
Internal Control Over Financial Reporting and Possible Tests of Controls .60-.63
Substantive Tests .64-.77
16 Income Taxes .01-.36
Introduction .01-.13
Banks and Savings Institutions 03-.09
Other 10-.12
Credit Union .13
Regulatory Matters .14-.17
Accounting and Financial Reporting 18-.30
Deferred-Tax Assets and Liabilities 21-.23
Temporary Differences . .24-.26
Financial Statement Presentation and Disclosure .27-.30
Auditing 31-.36
Objectives .31
Planning .32
Internal Control Over Financial Reporting and Possible Tests of Controls .33-.34
Substantive Tests .35-.36
17 Equity and Disclosures Regarding Capital Matters .01-.115
Introduction .01
Banks and Savings Institutions 02-.46
Introduction .02
Equity 03-.10
Holding Company Equity and Regulatory Capital .11-.27
Disclosures for Banks and Savings Institutions 28-.37
Disclosure for Holding Companies 38-.40
Illustrative Disclosures for Banks and Savings Institutions (The example disclosures that follow are for illustrative purposes only) 41-.46
Credit Unions .47-.64
Introduction .47
Members’ Equity .48-.54
New Credit Unions and Low Income Designated Credit Unions .55
Disclosures for Natural Person Credit Unions 56-.60
Illustrative Disclosures for Natural Person Credit Unions .61-.64
Corporate Credit Unions . .65-.79
Introduction .65
Equity 66-.71
Disclosures for Corporate Credit Unions 72-.76
Illustrative Disclosures for Corporate Credit Unions . .77-.79
Mortgage Companies and Mortgage Banking Activities . .80-.84
Introduction .80
Disclosure for Mortgage Companies and Mortgage
Banking Activities .81-.83
Illustrative Disclosures for Mortgage Companies and Mortgage Banking Activities 84
Regulatory Capital Matters for All Entities 85-.88
Regulatory Capital Disclosures for Branches of Foreign Institutions .85-.86
Regulatory Capital Disclosures for Trust Operations . .87-.88
Auditing 89-.115
Banks, Savings Institutions, and Credit Unions 89-.105
Mortgage Companies and Activities 106-.115
18 Derivative Instruments: Futures, Forwards, Options, Swaps, and Other Derivative Instruments .01-.101
Introduction .01-.69
Risks Inherent in Derivatives 05-.13
Types of Derivatives .14-.52
Uses of Derivatives to Alter Risk 53-.64
Variations on Basic Derivatives 65-.69
Regulatory Matters .70-.78
Accounting and Financial Reporting 79-.100
Financial Statement Disclosures 95-.100
Auditing Considerations .101
19 Business Combinations .01-.41
Introduction .01
Regulatory Matters .02-.07
Accounting and Financial Reporting 08-.30
Purchase of a Loan or Group of Loans 18-.20
Loans and Debt Securities Acquired With Deteriorated Credit Quality .21
Special Considerations in Applying the Acquisition Method to Combinations of Mutual Entities 22-.25
Impairment and Disposal Accounting for Certain Acquired Long Term Customer Relationship Intangible Assets .26-.27
Branch Acquisitions .28-.30
Auditing Considerations .31-.41
20 Fair Value .01-.68
Introduction .01
Accounting and Financial Reporting 02-.63
Definition of Fair Value .02-.27
Valuation Techniques .28-.30
Present Value Techniques .31-.33
The Fair Value Hierarchy .34-.37
Measuring the Fair Value of Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) .38-.41
Measuring Fair Value When the Volume or Level of Activity for an Asset or a Liability Has Significantly Decreased .42-.47
Using Quoted Prices Provided by Third Parties 48
Disclosures .49-.60
Fair Value Option .61-.63
Auditing Considerations .64-.68
21 Trust and Asset Management Activities .01-.30
Introduction .01-.12
Personal Trusts .08-.09
Corporate Trusts .10
Employee Benefit Trusts .11
Common or Collective Trust Funds 12
Regulatory Matters .13-.14
Accounting and Financial Reporting 15-.16
Auditing 17-.30
Objectives .17
Planning .18
Internal Control Over Financial Reporting and Possible Tests of Controls .19-.21
Financial Reporting Controls of the Trust 22
Substantive Tests Related to Financial Statement Audits .23-.24
Substantive Procedures Related to the Trust 25-.29
Audits of Unit Investment Trusts 30
22 Insurance Activities .01-.70
Introduction .01-10
Types of Insurance Coverage 02
Credit Life .03-.05
Credit Accident and Health 06
Property and Liability .07
Writing Policies .08-.09
Commissions .10
Regulatory Matters .11
Accounting .12-.68
Premium Income .13-.17
Acquisition Costs .18-.50
Investment Portfolios .51-.54
State Laws .55
Commissions .56-.59
Consolidation Policy .60-.64
Financial Statement Presentation 65-.68
Auditing 69-.70
23 Reporting Considerations .01-.38
Introduction .01
Forming an Opinion on the Financial Statements 02-.04
Reports 05-.37
Unmodified Opinion .05-.06
EOM and Other-Matter Paragraphs Added to the Independent Auditor’s Report 07-.14
Modified Opinions .15-.21
Financial Statements Prepared in Accordance With a Special Purpose Framework 22-.23
Members’ Shares Reported as Equity 24
Communication of Internal Control Related Matters . .25-.27
Reports on Supervisory Committee Audits 28-.33
Example Report on the Application of Agreed-Upon Procedures Performed in Connection With a Supervisory Committee Audit 34
Example Reports on the FDIC Loss Sharing Purchase and Assumption Transactions 35-.36
Small Business Lending Fund Auditor Certification Guidance .37
Appendix A—Illustrative Unqualified PCAOB Reports . .38
Appendix
A FDI Act Reporting Requirements
B Regulatory Reporting Matters—Interpretation and Reporting Related to U.S. GAAP
C Information Sources
D Overview of Statements on Quality Control Standards
E The New Revenue Recognition Standard: FASB ASC 606
F The New Leases Standard: FASB ASU No. 2016-02
G Accounting for Financial Instruments
H Schedule of Changes Made to the Text From the Previous Edition Index of Pronouncements and Other Technical Guidance
Subject Index