Internal Control Questionnaires and Verification Procedures

Verification Procedures

1. Agree the total charged-off loans since the last examination date as recorded in the charged-off ledger to the total debit entries in the allowance for loan and lease losses for the same period.

2. Select charged-off loans and:

   1. Examine supporting documentation.

   2. Trace approval by the directors, as evidenced in the minutes of board meetings.

   3. Send positive confirmation requests to the borrower. (There should be no indication to the borrower that the accounts have been charged off.)

   4. Determine whether any charged-off loans are extended to foreign government officials or other persons or organizations covered by the Foreign Corrupt Practices Act or the Federal Election Law.

3. Select recovery entries in the charged-off ledger since the last examination and compare to credit entries in the allowance account.

Previous: Conclusion Next: Asset and Liability Management