Memo RM2000-4
To: All State Chartered Banks
From: George E. Myers, Director of Examinations
Date: August 2, 2000
RE: Annual Audit Function
Recently this department was asked to clarify question #8 (Review the audit report of the bank's in-house electronic data processing department, if applicable) under "Annual Functions" of the Office of the State Bank Commissioner's (OSBC) Minimum Audit Requirements. The scenario is as follows: A bank with an in-house data processing system hired an outside audit firm to do the bank's annual audit. When the audit firm's report came back to the bank, it indicated there was no "audit report" of the EDP area/operations for them to review. It appears the bank did provide the audit firm with the OSBC's "Minimum Audit Requirements" and contracted with them to perform the items listed. It was the bank's view that the audit firm should have performed an audit of their in-house system. The audit firm said question #8 under "Annual Functions" did not require that function. The firm asserted that unless the bank wants to pay more money for the performance of an EDP audit, the bank is responsible for performing their own audit.
Based on the above scenario, the OSBC will utilize the following guidelines during an examination.
1) Question #8 under "Annual Functions" will be changed to read: "Review the available audit report of the bank's in-house electronic data processing department or perform a full scope EDP examination, if applicable."
2) OSBC examiners will review the most recent FDIC Information Systems examination and/or an audit firm's report and follow-up on the suggestions for compliance, making comment in the Management Section of the report, in appropriate.
3) If no audit is found and the bank has an EDP department, OSBC examiners will suggest the bank proceed with their own internal audit using the FDIC's Information Systems Handbook. A comment will be made in the Management Section of the examination report, when appropriate.
If you have any questions or desire assistance of any kind, please feel free to contact this department at (785) 296-2266.
