Internal Control Questionnaires and Verification Procedures

Verification Procedures

1. Test the additions of the subsidiary ledgers, and reconcile total to the general ledger. Include in substance foreclosures and property sold in “covered transactions.”

2. Using appropriate sampling techniques, select specific properties and determine that:

   1. Legal title to the property is obtained when the asset is recorded as other real estate owned.

   2. Legal fees and direct costs of acquiring title, including payment of existing liens, taxes, and recording fees, are expensed when incurred and not capitalized.

   3. Insurance, including liability coverage, is adequate, and the bank is named as loss payee.

3. Using appropriate sampling techniques, select specific properties, and for expenses incurred in maintaining the properties or capitalized costs of improvement and development:

   1. Trace the transaction to any succeeding summary records and to postings in the general ledger.

   2. Examine documentation supporting the transaction, and prove any computations reflected on the supporting document.

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