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Where can your audit staff, consulting staff and tax staff go to learn the accounting and auditing fundamentals of banks, savings institutions, credit unions and other financial institutions such as mortgage companies? This course features practical worksheets and insights such as the applicable metrics that create value for financial institutions. Financial institutions are specialized and one of, if not the most, regulated industries in the world. Comparisons to commercial audits efficiently and effectively make the transition to financial institution audits. International financial institution audits are a module in this course.
Objectives:
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Chapter 1
Modern Depository and Lending Institutions
Learning Objectives
The learning objectives for this course are to
Introduction
Depository and Lending Institutions are ambidextrous. In one hand they collect money for a price (liability interest) and with the other hand deliver money to borrowers for a price (asset interest). Since the money in the two hands is infrequently equal, the institutions manage the difference or "spread" by analytical tools such as Asset/Liability financial models.
This program is dedicated to demonstrating how your audit staff, consulting staff, and tax staff can learn the accounting, tax, and auditing fundamentals of modern depository and lending institutions. The course is complete with practical worksheets and insights such as the applicable metrics that create value for depository and lending institutions. These institutions are specialized and are one of, if not the most, regulated industries in the world. Numerous references to best practice audits allow the auditor and consultants the opportunity to plan efficient and effective audits and reports.
Note about Income Taxes
Interpretations of FASB No. 109 governing income tax accounting and FIN 48 on disclosures for income taxes have changed the methodology for auditors and tax specialists. The area of income taxes, while important, is beyond the scope of this book at the present time.
Authoritative Literature
A summary of the most current auditing and accounting for depository and lending institutions is found in a companion audit guide: Depository and Lending Institutions (Banks and Savings Institutions, Credit Unions, Finance Companies, and Mortgage Companies and Mortgage Servicers), AICPA Audit and Accounting Series, 2007.
The author recommends you consider this guide for your library or personal use.
Organization of the Chapter
The Influence of Risk Management on Depository and Lending Institutions
The link between ability to raise capital through deposits and providing needed capital is referred to as intermediation. Government regulators recognize this important function and alternatively provide special privileges and protections and demand specific risk management requirements.
The complex requirements to maximize profits, obtain competitive advantage over rivals, deal with technological advances, and meeting changes in regulatory policies all comprise a significant risk to depository and lending institutions. How can the institutions respond to, and manage, these risks?
Management of the risks includes several modern techniques:
In summary, the demands for adequate risk management for depository and lending institutions have caused fundamental changes to the industry and the nature of regulatory requirements. Specific descriptions of risk management will be in chapters to follow.
The Business of Banks and Savings Institutions
The original and still true purpose of banks and savings institutions is to organize the collection of deposits and also lending to business and consumers. Entrance of new competitors such as investment companies, brokers and dealers in securities, insurance companies, and financial arms of commercial entities such as developers have added a new dimension to maintain and attract customers. New lines of business that are close to the traditional banking and savings institution core businesses such as credit card issuance and processing, insurance products, and more complex nontraditional lending are present.
Banks and savings institutions face many risks in the modern business environment:
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Customer Service
Customer Service
Customer Service
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