OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
SUPERVISION AND REGULATION
November 18, 1999
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OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 |
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| DIVISION OF BANKING SUPERVISION AND REGULATION |
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| SR 99-33 (SUP) November 18, 1999 |
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TO THE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE SUPERVISORY AND EXAMINATION STAFF AT EACH FEDERAL RESERVE BANK AND TO CERTAIN DOMESTIC BANKING ORGANIZATIONS SUPERVISED BY THE FEDERAL RESERVE
The Federal Financial Institutions Examination Council (FFIEC) recently issued the attached "Interagency Policy Statement on External Auditing Programs of Banks and Savings Associations."1 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.2
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 to a full scope audit that are set forth in the policy statement. The policy statement also encourages small banks to establish an audit committee consisting of outside directors and provides guidance to examiners on the review of external auditing programs.
The policy statement is consistent with the Federal Reserve's longstanding guidance that encourages the use of external auditing programs. The policy statement is also consistent with the Federal Reserve's goals for ensuring the 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 state member banks subject to this policy submit a copy of any external auditing program reports to their supervising Federal Reserve Bank.
Reserve Banks are asked to distribute a copy of this SR letter and the policy statement to appropriate members of senior management of all bank holding companies with consolidated total assets of less than $500 million. These materials should also be sent to state member banks with less than $500 million in total assets that are not subsidiaries of holding companies. If you have any questions pertaining to this policy statement, please contact Arthur Lindo, Supervisory Financial Analyst, at (202) 452-2695.
Director
Notes: 1. The FFIEC published the policy statement in the Federal Register on September 28, 1999. See 64 FR 52319 (September 28, 1999). Return to text 2. Banking organizations with $500 million or more in total assets are required to have an external audit in accordance with Section 36 of the FDI Act and Federal Reserve guidelines. Return to text
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SR letters | 1999
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