Banking institutions are required by federal law to protect the investments of their customers, and there is a reasonable expectation that monies placed into the trust of the facility are safe. In order to make sure the bank is in compliance, a bank audit is usually conducted. The audit will reveal how well the institution is complying with industry standards and all applicable laws. While there are many things that are examined, the primary function of the audit is to ensure compliance. It checks the bank’s activities, information systems, and control processes. The auditor will conduct tests on all the systems, and generate a report on the findings. An institution’s fear is receiving notice of internal control failure.
According to the professionals at Financial Guaranty Insurance Brokers, Inc., risk-based audits are looking for the following risk items:
- Operational risk
- Compliance risk
- Strategic risk
- Reputation risk
- Credit risk
- IT and cyber risk
Going through an audit isn’t easy, and failures can be damaging to an organization. However, the purpose of the audit isn’t to hurt the institution, but to expose the areas where it can improve. The way a bank responds to these areas of improvement can dictate the overall safety and security of the consumer investments and its overall operations. The bank leaders can either acknowledge areas where changes can be made or they can ignore the audit altogether.