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Register February 2004 No.578
Chapter DFI-CU 73
AUDITS AND VERIFICATIONS
DFI-CU 73.01 Purpose and scope.
DFI-CU 73.02 Definitions.
DFI-CU 73.03 General responsibilities of the board of directors.
DFI-CU 73.04 Audit of credit unions with total assets of $500 million or greater.
DFI-CU 73.05 Audit of credit unions with total assets of less than $500 million.
DFI-CU 73.06 Alternatives to financial statement audit.
DFI-CU 73.07 Requirements for verification of accounts and passbooks.
DFI-CU 73.08 Compensated auditor.
DFI-CU 73.09 Audit report and working papers.
DFI-CU 73.10 Sanctions.
DFI-CU 73.01 DFI-CU 73.01 Purpose and scope. The purpose of this chapter is to prescribe the responsibilities of state-chartered credit unions for annual audits and the verification of member accounts as required by s. 186.15, Stats.
DFI-CU 73.01 History History: CR 02-133: cr. Register February 2004 No. 578, eff. 3-1-04.
DFI-CU 73.02 DFI-CU 73.02 Definitions. In this chapter:
DFI-CU 73.02(1) (1) "Audit committee" means a committee of one or more capable persons appointed by the board of directors of a credit union to annually audit the records, accounts and cash of the credit union and to verify the credit union's accounts.
DFI-CU 73.02(2) (2) "Balance sheet audit" means an examination of credit union assets, liabilities and equity under GAAS by an independent public accountant for the purpose of rendering an opinion on the fairness of the presentation on the balance sheet. Credit unions required to file call reports consistent with GAAP shall ensure the audited balance sheet is prepared in accordance with GAAP. The opinion need not address the fairness of the presentation of the credit union's income statement, statement of changes in equity or statement of cash flows.
DFI-CU 73.02(3) (3) "Compensated auditor" means any accounting professional or auditing professional, excluding a credit union employee, who is compensated for performing more than one audit or verification of members' accounts, or both, in a calendar year.
DFI-CU 73.02(4) (4) "Director" means the director of the office of credit unions or an authorized representative of the director.
DFI-CU 73.02(5) (5) "Financial statements" means a presentation of financial data, including accompanying notes, derived from accounting records of the credit union, and intended to disclose a credit union's economic resources or obligations at a point in time, or the changes therein for a period of time, in conformity with GAAP or regulatory accounting procedures.
DFI-CU 73.02 Note Example: Financial statements include any of the following: balance sheet or statement of financial condition, statement of income or statement of operations, statement of undivided earnings, statement of cash flows, statement of changes in members' equity, statement of revenue and expenses, and statement of cash receipts and disbursements.
DFI-CU 73.02(6) (6) "Financial statement audit" or "opinion audit" means an audit of the financial statements of a credit union performed in accordance with GAAS by an independent state-licensed person. A financial statement audit shall express an opinion as to whether those financial statements present fairly, in all material respects, the credit union's financial position, and the results of its operations and its cash flows, in conformity with GAAP or regulatory accounting practices.
DFI-CU 73.02(7) (7) "GAAP" means "generally accepted accounting principles," the conventions, rules, and procedures that define accepted accounting practice.
DFI-CU 73.02 Note Note: GAAP includes broad general guidelines and detailed practices and procedures; provides a standard by which to measure financial statement presentations; and encompasses not only accounting principles and practices, but also the methods of applying them.
DFI-CU 73.02(8) (8) "GAAS" means "generally accepted auditing standards," as approved and adopted by the American Institute of Certified Public Accountants. GAAS apply when an independent, licensed certified public accountant audits financial statements.
DFI-CU 73.02 Note Note: Auditing standards differ from auditing procedures in that procedures address acts to be performed, whereas standards measure the quality of the performance of those acts and the objectives to be achieved by use of the procedures undertaken. In addition, auditing standards address the auditor's professional qualifications, and the judgment exercised in performing the audit and in preparing the report of the audit.
DFI-CU 73.02(9) (9) "Independent" means the impartiality necessary for the dependability of the compensated auditor's findings and the exercise of fairness toward credit union officials, members, creditors and others who may rely upon an audit committee report.
DFI-CU 73.02(10) (10) "Internal control" means the process, established by the credit union's board of directors, officers and employees, designed to provide reasonable assurance of reliable financial reporting and to safeguard assets against unauthorized acquisition, use or disposition. Internal control over safeguarding of assets against unauthorized acquisition, use or disposition refers to prevention and timely detection of transactions involving such unauthorized access, use or disposition of assets which could result in a loss that is material to the financial statements.
DFI-CU 73.02(11) (11) "NCUA" means the National Credit Union Administration.
DFI-CU 73.02(12) (12) "Reliable reporting" means the preparation of call reports on NCUA-prescribed call report forms.
DFI-CU 73.02(13) (13) "Reportable conditions" means a matter coming to the attention of the independent, compensated auditor which, in the auditor's judgment, represents a significant deficiency in the design or operation of the internal control structure of a credit union, and which may adversely affect the credit union's ability to record, process, summarize and report financial data consistent with the representations of management in the financial statements.
DFI-CU 73.02(14) (14) "Report of examination of internal control over call reporting" means an engagement in which an independent, licensed, certified public accountant or public accountant, consistent with attestation standards, examines and reports on management's written assertions concerning the effectiveness of its internal control over financial reporting in its most recently filed semi-annual or year-end call report, with a concentration in high risk areas.
DFI-CU 73.02 Note Note: High risk areas most often include lending activity, investing activity, and cash handling and deposit-taking activity.
DFI-CU 73.02(15) (15) "State-licensed person" means a certified public accountant who is licensed by the state of Wisconsin to perform accounting or auditing services for the credit union.
DFI-CU 73.02(16) (16) "Supervisory committee" means a committee appointed by the board of directors consisting of not less than three members nor more than five members, one of whom may be a member of the board of directors other than a compensated officer of the board that assumes the responsibilities under s. DFI-CU 73.03.
DFI-CU 73.02(17) (17) "Working papers" means a principal record, in any form, of the work performed by the auditor or audit committee, or both, to support its findings and conclusions concerning significant matters.
DFI-CU 73.02 Note Example: Working papers include any of the following: the written record of procedures applied, tests performed, information obtained and pertinent conclusions reached in the engagement; proprietary audit programs; analyses; memoranda; letters of confirmation and representation; abstracts; credit union documents; reviewer's notes; schedules; and commentaries prepared or obtained in the course of the engagement.
DFI-CU 73.02 History History: CR 02-133: cr. Register February 2004 No. 578, eff. 3-1-04.
DFI-CU 73.03 DFI-CU 73.03 General responsibilities of the board of directors.
DFI-CU 73.03(1)(1) The board of directors shall ensure that financial reporting objectives are met by management, and that management shall establish practices and procedures sufficient to safeguard members' assets.
DFI-CU 73.03(2) (2) In meeting the responsibilities of this section, the board shall do all of the following:
DFI-CU 73.03(2)(a) (a) Ensure that internal controls to achieve reporting objectives are established and effectively maintained. These controls shall be sufficient to satisfy the requirements of the audit, verification of members' accounts and any additional responsibilities.
DFI-CU 73.03(2)(b) (b) Ensure that accounting records and financial reports that accurately reflect operations and results are prepared.
DFI-CU 73.03(2)(c) (c) Ensure that relevant plans, policies and control procedures are established and properly administered.
DFI-CU 73.03(2)(d) (d) Ensure that policies and control procedures that are sufficient to safeguard against error, conflict of interest, self-dealing and fraud are established.
DFI-CU 73.03(2)(e) (e) Ensure that the credit union adheres to the measurement and filing requirements for the call report or any other reports requested in writing by the office of credit unions or NCUA.
DFI-CU 73.03(2)(f) (f) Obtain an annual audit, as set forth in ss. DFI-CU 73.04 and 73.05, which occurs at least once every calendar year or the period of performance, and covers the period elapsed since the last audit period or period effectively covered.
DFI-CU 73.03(2)(g) (g) Ensure the verification of members' passbooks and accounts against the records of the credit union, as set forth in s. DFI-CU 73.07.
DFI-CU 73.03(3) (3) In carrying out the responsibilities of this section, the board may appoint a supervisory committee to oversee these responsibilities and report to the board.
DFI-CU 73.03 History History: CR 02-133: cr. Register February 2004 No. 578, eff. 3-1-04.
DFI-CU 73.04 DFI-CU 73.04 Audit of credit unions with total assets of $500 million or greater. To fulfill its audit requirement, a credit union having total assets of $500 million or greater shall obtain an annual financial statement audit performed in accordance with GAAS by an independent state-licensed person.
DFI-CU 73.04 History History: CR 02-133: cr. Register February 2004 No. 578, eff. 3-1-04.
DFI-CU 73.05 DFI-CU 73.05 Audit of credit unions with total assets of less than $500 million. To fulfill its audit requirement, a credit union having total assets of less than $500 million shall obtain an annual audit as set forth in s. DFI-CU 73.04 or 73.06.
DFI-CU 73.05 History History: CR 02-133: cr. Register February 2004 No. 578, eff. 3-1-04.
DFI-CU 73.06 DFI-CU 73.06 Alternatives to financial statement audit.
DFI-CU 73.06(1)(1) A credit union that is not required to obtain a financial statement audit shall fulfill its audit requirements by any one of the following methods:
DFI-CU 73.06(1)(a) (a) Balance sheet audit. A balance sheet audit performed by a state-licensed person.
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