Internal Audit Best Practices: How to Survive an FDIC or NCUA Audit

  • May 12, 2021
  • Quantivate

Organizations today are facing fast-moving risks and increasing demand for real-time awareness and collaboration in internal audit (IA). Rather than auditors working and wading through opaque processes—lost in spreadsheets, internal checklists, and fractured auditing protocols across different business functions—we are seeing organizations adopting cloud-based process automation tools that enable a unified audit framework and consistent processes.

These methodologies allow IA to achieve more effective engagements. Whether internal auditors need to manage risk assessments; document requests; process mapping; or financial, operational, and internal controls; they’re better prepared for audits from the FDIC and NCUA.

Developing a Unified Audit Framework

Regulators are increasingly taking action against companies that are too reliant on manual processes. To fulfill regulatory requirements and prepare for external audits, organizations need an internal audit platform that enables:

  • Robust planning
  • Cross-functional coordination and communication
  • Strategic audit management tied to the long-term resilience of the institution

A unified internal audit program is a symbiotic relationship between information technology, as well as financial and operational controls, in establishing an effective and efficient internal control environment. Financial institutions are required to conduct unified audits by mandating that auditors express an opinion on internal controls, integrating the financial reporting audit with an internal controls audit. This is the legal requirement, but the process of holistic integration in audit is left undefined for organizations to determine themselves. Management is partially responsible for designing the approach, but auditors can determine the scope of actionable operations in advising executives on how audit can be used as a competitive advantage rather than simply operational overhead. The ideal state should be designing an organized framework for establishing, maintaining, and reporting on an internal control structure, along with protocols for assessment.

The following areas deserve consideration in designing an effective, unified audit framework to meet FDIC and NCUA expectations:

Questions to Evaluate Your Internal Audit Framework

  • How effective and accurate is your process mapping? Does internal audit enable managers to take responsibility for documenting and maintaining their processes?
  • Do all stakeholders understand and agree on business and information processing risks?
  • Are manual and automated feeds, system interfaces, and communications accurate, timely, controlled, and secured?
  • Are manual and automated transactions approved on a predetermined schedule and accurately processed?
  • Is information secure and do confidentiality controls follow current regulations?
  • Do business continuity and disaster recovery plans provide reasonable assurance that both systems and operations can recover and continue when a disruption or crisis occurs?
  • Are program and process changes tested, approved, and migrated to production as prescribed by the business process owners?

Developing an internal audit framework informed by industry best practices is a crucial step toward organizational maturity. A unified audit framework doesn’t just adhere to the legal requirement but establishes precedent within your organization for how the compliance landscape will evolve and scale over time, considering the processes and technology needed to preemptively prepare for change.

Explore More Internal Audit Insights and Resources:

  • Audit Risk Toolkit: Chart your path to GRC maturity with this 3-part guide to better audit risk management, covering strategic alignment, risk and performance, and policy management.
  • Internal Audit Strategy: Align auditing priorities with enterprise risk—get insights on commonly neglected risk areas to consider in audit planning and resource allocation.