New Guidance for Institutions With Less Than $500 Million in Assets

On March 17, 2003 the federal banking and thrift regulatory agencies revised their guidance on the independence of accountants who provide institutions with both external and internal audit services to reflect the provisions of the Sarbanes-Oxley Act of 2002.

The policy statement encourages non-public institutions not subject to Section 36, which includes non-public depository institutions with less than $500 million in assets, to refrain from outsourcing internal audit activities to their external auditor. If such an institution decides to use the same firm for both internal and external audit work, however, the audit committee should document its consideration of the independence issues associated with this arrangement.

In addition to changes related to the Sarbanes-Oxley Act, the agencies enhanced the 1997 policy statement’s discussion of the responsibilities of the board of directors and senior management with respect to the internal audit function and its placement within an organization, its management and staffing, and the communication of concerns and weaknesses in accounting and internal control. The policy also reiterates the need for institutions to maintain strong systems of internal control, including internal controls over financial and regulatory reporting, and high quality internal audit programs. The policy statement also includes guidance for examiners on addressing concerns they may have about the adequacy of the internal audit function or related outsourcing arrangements.

For many institutions, compliance with the updated policy will require a comprehensive overhaul of their internal audit structure and related policies and procedures. In addition, financial institutions will be responsible for ensuring the adequacy of their outsourcing firm’s qualifications, as well as the quality and scope of audits performed.

We'll Get You Into Compliance. Just Give Us a Call.

Since our inception in 1998, AuditSolutions has provided specialized Internal Audit Services exclusively to financial institutions. Our standards of quality and expertise have always met or exceeded regulatory requirements relating to internal audit outsourcing; especially those detailed in the updated interagency policy statement. AuditSolutions has already implemented these requirements for our clients and can quickly implement them for your organization. If you would like additional information on requirements of the Interagency Policy on Internal Audit Outsourcing, or AuditSolutions Internal Audit Services, please feel free to contact us at 1.877.592.3248.

To view the entire Interagency Policy Statement on the Internal Audit Function and Its Outsourcing, click here. (Adobe Acrobat reader required.)

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