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Audit and Accounting Guide Depository and Lending Institutions, 2nd Edition

by AICPA

October 2017

Intermediate to advanced

864 pages

28h 48m

English

Wiley

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Description of BusinessRegulation and OversightRegulatory BackgroundDeposit Insurance FundThe Dodd-Frank ActRegulatory Capital MattersCapital AdequacyPrompt Corrective ActionAnnual Independent Audits and Reporting RequirementsAdditional Regulatory Requirements Concerning the Sarbanes-Oxley Act, Corporate Governance, and Services Outsourced to External AuditorsOther Reporting Considerations
Description of BusinessThe Board of DirectorsThe Supervisory CommitteeThe Credit CommitteeCharters, Bylaws, and MinutesFinancial StructureCredit Union SystemCorporate Credit UnionsRegulation and OversightGovernment SupervisionNCUARegulatory Capital MattersNatural Person Credit UnionsCorporate Credit UnionsAnnual AuditsOther Reporting Considerations
Description of BusinessDebt FinancingRegulation and Oversight
Description of BusinessRegulation and OversightReporting ConsiderationsHUD ProgramsAsset Servicing for Investors
OverviewAn Audit of Financial StatementsAudit RiskTerms of EngagementAudit PlanningMaterialityPerformance MaterialityUse of Assertions in Assessment of Risks of Material MisstatementRisk Assessment ProceduresRisk Assessment Procedures and Related ActivitiesUnderstanding the Entity and Its Environment, Including the Entity’s Internal ControlRisk Assessment and the Design of Further Audit ProceduresIdentifying and Assessing the Risks of Material MisstatementDesigning and Performing Further Audit ProceduresEvaluation of Misstatements Identified During the AuditAudit DocumentationTimely Preparation of Audit DocumentationDocumentation of the Audit Procedures Performed and Audit Evidence ObtainedAssembly and Retention of the Final Audit FileUsing the Work of an Auditor’s SpecialistUsing the Work of a Management’s SpecialistProcessing of Transactions by Service OrganizationsConsideration of Fraud in a Financial Statement AuditProfessional SkepticismDiscussion Among the Engagement TeamRisk Assessment Procedures and Related ActivitiesIdentification and Assessment of the Risks of Material Misstatement Due to FraudResponses to the Assessed Risks of Material Misstatement Due to FraudEvaluation of Audit EvidenceAuditor Unable to Continue the EngagementCommunications to Management and With Those Charged With GovernanceCommunications to Regulatory and Enforcement AuthoritiesDocumentationCompliance With Laws and RegulationsResponsibility for Compliance With Laws and RegulationsThe Auditor’s Consideration of Compliance With Laws and RegulationsGoing-Concern ConsiderationsEvaluating Whether Substantial Doubt ExistsWritten RepresentationsConsideration of the Effects on the Auditor’s ReportDocumentationWritten RepresentationsWritten Representations as Audit EvidenceManagement From Whom Written Representations Are RequestedWritten Representations About Management’s Responsibilities and Other Written RepresentationsDate of, and Period(s) Covered by, Written RepresentationsForm of Written RepresentationsDoubt About the Reliability of Written Representations and Requested Written Representations Not ProvidedInformation Other Than Financial StatementsCertain Financial Reporting MattersDisclosures of Certain Significant Risks and UncertaintiesSegment ReportingRegulation and Supervision of Depository InstitutionsIntroductionRule MakingExaminationsEnforcementPlanningDetection of Errors and FraudEvaluation of Contingent Liabilities and Related DisclosuresGoing-Concern ConsiderationsRegulatory Reporting Matters—Interpretation and Reporting Related to GAAPAuditor and Examiner Relationship
IntroductionCIPC and Cash EquivalentsDeposits With Other Financial InstitutionsBalances With Federal Reserve Banks and FHLBsFederal Funds SoldCash on HandAccounting and Financial ReportingDefinition of Cash and Cash EquivalentsClassification of Cash FlowsAcquisition and Sales of Certain Securities and LoansGross and Net Cash FlowsCash Receipts and Payments Related to Hedging ActivitiesFinancial Statement Presentation and DisclosureAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionU.S. Government and Agency ObligationsMunicipal ObligationsAsset-Backed SecuritiesOther Structured Credit ProductsIssues of International Organizations and Foreign GovernmentsOther SecuritiesTransfers of SecuritiesRegulatory MattersBank Accounting Advisory SeriesAccounting and Financial ReportingIntroductionOTTIUnrealized Gains and LossesPremiums and DiscountsInterest IncomeConsolidationSpecial AreasTransfers and Servicing of SecuritiesTroubled Debt RestructuringsLoans and Debt Securities Acquired With Deteriorated Credit QualityFinancial Statement Presentation and DisclosureAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionThe Lending ProcessCredit StrategyCredit RiskLending Policies and ProceduresTypes of LendingCommercial, Industrial, and Agricultural LoansConsumer LoansResidential Real Estate LoansLease FinancingTrade FinancingCRE and Construction LoansForeign LoansLoans Involving More Than One LenderRegulatory MattersReal Estate Lending StandardsRetail Credit Loans and Residential Mortgage LoansTroubled Debt RestructuringsCredit Card LendingNontraditional Mortgage ProductsCorrespondent Concentration RisksLeveraged LendingIncome Recognition on Problem LoansCredit Union Lending RestrictionsLending StatutesUniform Commercial CodeBank Accounting Advisory SeriesAccounting and Financial ReportingInterest Income, Delinquency Fees, Prepayment Fees, and RebatesLoan Fees, Costs, Discounts, and PremiumsTDRsReal Estate InvestmentsLease FinancingForeign LoansCommitmentsFinancial Statement Presentation and DisclosureAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionManagement's MethodologyLoan ReviewsLoans Individually Evaluated for ImpairmentLoans Collectively Evaluated for ImpairmentEstimating Overall Credit LossesRegulatory MattersCredit UnionsAccounting and Financial ReportingSources of Applicable GuidanceAllowance for Loan LossesLoss ContingenciesFinancial Statement Presentation and Disclosure of Loan Impairment and Allowance for Credit LossesAuditingObjectivesPlanning and Risk AssessmentInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionAsset-Backed SecuritizationsLoan Participations and Loan SyndicationsLoan ServicingRegulatory MattersAccounting and Financial ReportingMortgage Loans and MBSs Held for SaleTransfers and Servicing of Financial AssetsSale of Financial AssetsTransfers of Loans With RecourseServicing Assets and LiabilitiesSecured Borrowings and CollateralLoans Not Previously HFSFinancial Statement PresentationFinancial Statement DisclosureVIEsAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests

IntroductionForeclosed AssetsReal Estate InvestmentsRegulatory MattersAccounting and Financial ReportingForeclosed AssetsAccounting and Reporting for Long-Lived Assets to Be Disposed of by SaleAccounting and Reporting for Long-Lived Assets to Be Held and UsedReal Estate InvestmentsSale of Real Estate AssetsDevelopment CostsAllocation of Income and Equity Among Parties to a Joint VentureAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionPremises and Equipment, NetFHLB or FRB StockIdentifiable IntangiblesGoodwillCustomers' Liabilities on AcceptancesOther Miscellaneous ItemsRegulatory MattersAccounting and Financial ReportingPremises and Equipment, NetFHLB or FRB StockGoodwill and Other Intangible AssetsExit or Disposal ActivitiesAsset Retirement ObligationsCustomers' Liabilities on AcceptancesMortgage Servicing AdvancesImpairment of Long-Lived AssetsNCUSIF DepositOther InvestmentsContributed AssetsAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionDemand DepositsSavings DepositsTime DepositsBrokered DepositsDormant AccountsClosed AccountsOther Deposit ServicesThe Payments Function and ServicesRegulatory MattersLimitations on Brokered DepositsClassification of Deposits of Credit UnionsAccounting and Financial ReportingAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionFederal Funds PurchasedReposRegulatory MattersAccounting and Financial ReportingAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionLong Term DebtShort Term DebtRegulatory MattersAccounting and Financial ReportingAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionBanks and Savings InstitutionsOtherCredit UnionRegulatory MattersAccounting and Financial ReportingDeferred Tax Assets and LiabilitiesTemporary DifferencesFinancial Statement Presentation and DisclosureAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsSubstantive Tests
IntroductionBanks and Savings InstitutionsIntroductionEquityHolding Company Equity and Regulatory CapitalDisclosures for Banks and Savings InstitutionsDisclosure for Holding CompaniesIllustrative Disclosures for Banks and Savings Institutions (The example disclosures that follow are for illustrative purposes only)Credit UnionsIntroductionMembers’ EquityNew Credit Unions and Low Income Designated Credit UnionsDisclosures for Natural Person Credit UnionsIllustrative Disclosures for Natural Person Credit UnionsCorporate Credit UnionsIntroductionEquityDisclosures for Corporate Credit UnionsIllustrative Disclosures for Corporate Credit UnionsMortgage Companies and Mortgage Banking ActivitiesIntroductionDisclosure for Mortgage Companies and Mortgage Banking ActivitiesIllustrative Disclosures for Mortgage Companies and Mortgage Banking ActivitiesRegulatory Capital Matters for All EntitiesRegulatory Capital Disclosures for Branches of Foreign InstitutionsRegulatory Capital Disclosures for Trust OperationsAuditingBanks, Savings Institutions, and Credit UnionsMortgage Companies and Activities
IntroductionRisks Inherent in DerivativesTypes of DerivativesUses of Derivatives to Alter RiskVariations on Basic DerivativesRegulatory MattersAccounting and Financial ReportingFinancial Statement DisclosuresAuditing Considerations
IntroductionRegulatory MattersAccounting and Financial ReportingPurchase of a Loan or Group of LoansLoans and Debt Securities Acquired With Deteriorated Credit QualitySpecial Considerations in Applying the Acquisition Method to Combinations of Mutual EntitiesImpairment and Disposal Accounting for Certain Acquired Long Term Customer Relationship Intangible AssetsBranch AcquisitionsAuditing Considerations
IntroductionAccounting and Financial ReportingDefinition of Fair ValueValuation TechniquesPresent Value TechniquesThe Fair Value HierarchyMeasuring the Fair Value of Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)Measuring Fair Value When the Volume or Level of Activity for an Asset or a Liability Has Significantly DecreasedUsing Quoted Prices Provided by Third PartiesDisclosuresFair Value OptionAuditing Considerations
IntroductionPersonal TrustsCorporate TrustsEmployee Benefit TrustsCommon or Collective Trust FundsRegulatory MattersAccounting and Financial ReportingAuditingObjectivesPlanningInternal Control Over Financial Reporting and Possible Tests of ControlsFinancial Reporting Controls of the TrustSubstantive Tests Related to Financial Statement AuditsSubstantive Procedures Related to the TrustAudits of Unit Investment Trusts
IntroductionTypes of Insurance CoverageCredit LifeCredit Accident and HealthProperty and LiabilityWriting PoliciesCommissionsRegulatory MattersAccountingPremium IncomeAcquisition CostsInvestment PortfoliosState LawsCommissionsConsolidation PolicyFinancial Statement PresentationAuditing
IntroductionForming an Opinion on the Financial StatementsReportsUnmodified OpinionEOM and Other-Matter Paragraphs Added to the Independent Auditor's ReportModified OpinionsFinancial Statements Prepared in Accordance With a Special Purpose FrameworkMembers' Shares Reported as EquityCommunication of Internal Control Related MattersReports on Supervisory Committee AuditsExample Report on the Application of Agreed-Upon Procedures Performed in Connection With a Supervisory Committee AuditExample Reports on the FDIC Loss Sharing Purchase and Assumption TransactionsSmall Business Lending Fund Auditor Certification GuidanceAppendix A — Illustrative Unqualified PCAOB Reports

Content preview from Audit and Accounting Guide Depository and Lending Institutions, 2nd Edition

Chapter 4 Industry Overview—Mortgage Companies

Description of Business

4.01 As a result of the relative imbalance between the supply and demand for residential mortgage funds, mortgage banking entities play an integral role in providing mortgage capital based on housing finance demands of the general public in various geographic locations. The market where mortgage banking entities originate loans to borrowers is referred to as the primary market. The market where originated loans and mortgage-backed securities (MBS) trade is referred to as the secondary market.

4.02 The principal participants in the secondary market for residential financing are government sponsored entities (GSEs), such as the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae). Also active in the secondary market are federal agencies such as the Government National Mortgage Association (Ginnie Mae), the U.S. Department of Veterans Affairs (VA), and the Federal Housing Administration (FHA). These entities participate in the secondary market as issuers, investors, or guarantors of asset-backed securities (ABSs) such as MBSs, real estate mortgage investment conduits, and collateralized mortgage obligations. Private entities have also been active in the secondary market as issuers, investors, and guarantors, though the extent of their participation has varied significantly in response to market conditions. (Chapter 7, “Investments in Debt and Equity Securities,” ...