Risk Management Manual of Examination Policies - FDIC

INTERNAL ROUTINE AND CONTROLS Section 4.2
programs have been developed to check
compliance with those laws; and
• Review such programs and the results of any
audits.
5. Analyze the general level of internal control to
determine whether there is sufficient protection
against improper or illegal payments under the
aforementioned statutes being inaccurately recorded
on the bank's books.
6. If the review and analysis under paragraphs 4 and 5
indicate that either the audit program or the internal
controls or both are inadequate, then the examiner
should perform the following verification techniques:
• Randomly select charged off loan files and
determine whether any charged off loans are to
foreign government officials or other persons or
organizations covered by the Foreign Corrupt
Practices Act or are to persons covered by the
Federal Election Law;
• Review bank controlled accounts on a random
sample basis, such as dealer reserves and
cash/collateral accounts, to determine the validity
of entries and notification procedures to the
customer of activity. With respect to official bank
checks, review copies of the checks and
supporting documentation on a random sample
basis for unusual items or any checks to persons
or organizations which may be in violation; and
• For those significant income and expense
accounts on which verification procedures have
not been performed elsewhere, analyze such
accounts for the period since the last examination
and obtain by discussion with bank personnel and
the review of supporting documents explanations
for the significant fluctuations and unusual items
noted.
7. Examiners should be alert in the course of usual
examination procedures for any transactions, or the
use of any bank services or equipment, which might
represent violations. Examiners should be especially
alert with respect to:
• Commercial and other loans, including
participations, which may have been made in
connection with any political campaigns;
• Income and expense ledger accounts for unusual
entries and significant entries from an unusual
source;
• Activity in overdrafts and accounts of directors,
officers, and employees; and
• Reconcilement of bank controlled accounts such
as official checks and escrow accounts.
Internal Routine and Controls (12-04) 4.2-24 DSC Risk Management Manual of Examination Policies
Federal Deposit Insurance Corporation