Regulations and AuditMarch 26, 2014

Kathy Murphy Kathy Murphy OCC Deputy Comptroller & Chief Accountant

Paula JohnsonPaula JohnsonOCC Operational Risk and Core Policy Analyst

Regulations and AuditMarch 26, 2014

Kathy Murphy Kathy Murphy OCC Deputy Comptroller & Chief Accountant

Paula JohnsonPaula JohnsonOCC Operational Risk and Core Policy Analyst

IIA – DC Chapter Event

AgendaAgenda

• Increased Focus on Audit

• 2013 Regulatory Highlights

• On the Horizon

Regulations & Audit

• Reliance as 3rd line of defense

• Multiple Regulators• Evolving Rules &

Regulations • Effective Audit

Increased Focus on Audit

Increased Focus on Audit

Audit Capital PlanningCompensationOps Risk Mang

Enterprise Risk Mang

4

AuditCompliance

MgtCRA/Fair Lending

SUPERVISORY ATTENTION ON OVERLAPPING AREAS OF CONCERN

Increased Focus on Audit

EVOLVING RULES AND REGULATIONS

• Accountability / Effective Challenge

• Stature/Independence

• Competence/Talent

• Scope and Frequency

Increased Focus on Audit

HEIGHTENED EXPECTATION THEMES

• Robust Board and Audit Committee (Committee) engagement/oversight

• Strong audit management

• Highly effective audit processes

• Highly effective audit reporting

• Competent internal audit staff

Increased Focus on Audit

EFFECTIVE AUDIT CHARACTERISTICS

Regulatory Highlights

• Overview • OCC Accounting Policy• OCC Operational Risk &

Core Policy

Regulations & Audit

OVERVIEW

Regulatory Highlights

Regulatory HighlightsRegulatory Highlights

• Selected Bulletins• 2014-4: Clarification of the OCC’s expectations regarding

secured consumer debt discharged in Chapter 7 bankruptcy proceedings

• 2014-2: Mortgage Banking Comptroller Handbook• 2013-26: Interagency Supervisory Guidance Addressing

Certain Issues Related to Troubled Debt Restructurings • 2013-23: Regulatory Capital Rule (Basel III)• 2013-20: OREO Comptroller Handbook

• Bulletins can be obtained from OCC.gov (left side of the screen under key resources)

10

ACCOUNTING

Regulatory HighlightsRegulatory Highlights

• Volcker Rule & OTTI Accounting• BAAS

11

ACCOUNTING

OVERVIEW

Regulatory Highlights

On The Horizon

• OCC Accounting Policy• OCC Operational Risk &

Core Policy

Regulations & Audit

On The HorizonOn The Horizon

• Policy Pipeline• Basel Committee on Banking Supervision - External Audit

Document• ALLL Comptroller Handbook

• Hot Topics• Appropriateness of the ALLL and Accrual Status • HELOC “End of Draw”• Sales/Creation of Mortgage Servicing Rights (MSRs)• Appraisals• Valuation, including funding valuation adjustments• New capital rule and other regulation changes

14

ACCOUNTING

On The HorizonOn The Horizon

• FASB Developments• Classification and Measurement• Current Expected Credit Losses (CECL) • Leases• EITF Matters (e.g., OREO, Foreclosed FHA Guaranteed

Loans)• Private Company Council

• Changes to PCAOB Auditing Standards• Auditor’s Report • Auditor’s Responsibilities Regarding Other Information and

Related Amendments

15

ACCOUNTING

On the HorizonOn the Horizon

• Updating the Audit Booklet in the Comptroller Handbook• Risk Governance Framework Standards for Complex Banks –

New Appendix to Part 12CFR30 • Updating the Internal Controls Booklet in the Comptroller

Handbook• Updating The Director’s Book

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Internal & External Audit BookletInternal & External Audit Booklet• Board and Management Oversight * • Audit Programs (types of audits) • Internal Audit Function (Oversight & structure) * - Independence

and Competence *• Co-sourcing & outsourcing * • External Audit - Board & Committee Oversight, External audit

opinions* • Annual 12CFR363 reporting *• Internal Audit Program - Audit Universe * , Audit Work Programs,

Sampling Methods & Techniques * , Risk Scoring Methodology *, Follow-up Activities *, Professional Development Program*

• Quality Assurance Program* • Continuous Auditing *• Reliance on Assurance Providers * - External & Internal assurance

reports , Audit planning impact

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On the HorizonOn the Horizon

• Increased Focus on Audit – rules and guidance, regulators, Heightened expectations themes, and effective audit elements

• 2013 Regulatory Highlights – accounting and operational risk/core policy highlights

• On the Horizon - Handbook updates

Questions?

Midsize Bank Audit Roundtable

SummarySummary

Regulations and AuditMarch 24, 2014

Kathy Murphy Kathy Murphy OCC Deputy Comptroller & Chief Accountant

Paula JohnsonPaula JohnsonOCC Operational Risk and Core Policy Analyst

Regulations and AuditMarch 24, 2014

Kathy Murphy Kathy Murphy OCC Deputy Comptroller & Chief Accountant

Paula JohnsonPaula JohnsonOCC Operational Risk and Core Policy Analyst

IIA – DC Chapter Event