District Circular Letters
December 3, 1999
EXTERNAL AUDITS OF BANKS
WITH LESS THAN $500 MILLION
IN TOTAL ASSETS
To Bank Holding Companies
and Others Concerned
in the Twelfth Federal Reserve District
Banks and Savings Association with Less Than $500 Million in
Assets Should Adopt External Auditing Program
The Federal Financial Institutions Examination Council (FFIEC) has issued
an "Interagency Policy Statement on External Auditing Programs of Banks
and Savings Associations." The policy statement encourages banks and savings
associations that have less than $500 million in total assets ("small
banks") and that are not subject to other audit requirements to adopt
an external auditing program as a part of their overall risk management
process.
The federal banking agencies view a full scope annual audit of a bank's
financial statements by an independent public accountant as preferable to
other types of external auditing programs. However, the policy statement
recognizes that a full scope audit may not be feasible for every small bank.
In such cases, the policy statement encourages those banks to pursue appropriate
alternatives. The policy statement encourages small banks to establish an
audit committee consisting of outside directors and also provides guidance
to examiners on the review of external auditing programs.
This policy statement is consistent with the Federal Reserve's longstanding
position towards the use of external auditing programs. The policy statement
is also consistent with the Federal Reserve's goals of ensuring accuracy
and reliability of regulatory reports, improving the quality of bank internal
controls over financial reporting, and enhancing the efficiency of our risk-focused
examination process. The Federal Reserve is, therefore, adopting the FFIEC
policy statement effective for fiscal years beginning on or after January
1, 2000. The Federal Reserve requests that each state member bank
subject to this policy should submit a copy of any external auditing program
reports to its supervising Federal Reserve Bank.
Copies
Copies
of the Board's notice [SR 99-33 (SUP): November 18, 1999] are available
from our Corporate Services Department. To request copies via mail, please
call (415) 974-2748. To request copies
to be sent via fax. please call (415) 974-3333, and specify
document number 4192. Board notices are also available
via the Federal Reserve Bank of San Francisco's Internet site.
Additional Information
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