Internal Control Questionnaires and Verification Procedures

Verification Procedures

1. Test the addition of the trial balance.

2. Test reconciling items to the extent considered necessary.

3. Using appropriate sampling technique, select floor plan loans, and:

   1. Prepare and mail confirmation forms to dealers (information confirmed should include the loan balance and the schedule and date of items floored).

   2. After a reasonable time period, mail second requests.

   3. Follow-up on any no-replies or exceptions, and resolve differences.

   4. Compare title documents and/or invoices to trust receipts.

   5. Obtain a list of the most recent floor plan interest billings, and check calculation of interest report.

   6. Determine whether interest payments are delinquent, and trace to inclusion in delinquency report.

   7. Determine that appropriate action has been taken to bring delinquent accounts to a current status.

4. Review physical inspections of collateral, and:

   1. Determine the reason for differences between the bank’s collateral records and the actual items held by the dealer.

   2. Trace those items represented as sold or in process at time of inspection to their subsequent removal from the bank’s liability ledger.

   3. Determine the number of days between the sale date and removal from liability ledger.

   4. Using the above information, review the dealer’s deposit account(s) and determine whether the dealer may be withholding funds received from the sale of the pledged collateral.

   5. Investigate other differences to the extent considered necessary.

5. If floor plan inspection procedures are considered deficient or if they are not performed on a timely basis, perform physical inspection of collateral on sample basis.

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