Insider Activities

Internal Controls and Audit

Internal or external audits should complement the bank’s internal controls and information systems. Such functions should be sufficient to detect actual conflicts of interest and the risk of insider abuse. The board should ensure that management has implemented a process to monitor compliance with insider laws, regulations, and bank policy.

A system of strong internal controls is critical to ensuring compliance with bank policies and with laws and regulations concerning insider transactions. A sound internal control system minimizes the possibility of significant errors and irregularities, and ensures timely detection of those that do occur. The board, through its oversight role, should ensure that the bank’s system of internal controls and audit alerts the bank to the following practices or conditions:

If any of these practices or conditions is discovered, the board should determine the cause, instruct management to take appropriate corrective action, and oversee necessary revisions to policies or internal controls.

For additional guidance and requirements regarding management and Board responsibilities for establishing and maintaining an effective internal control structure and complying with safety and soundness laws concerning transactions with insiders, refer to the "Internal and External Audits" booklet of the Comptroller’s Handbook; 12 CFR 363, Annual Independent Audits and Reporting Requirements; and section 404 of the Sarbanes-Oxley Act. [6]

6.
Under Section 301 of Sarbanes-Oxley, the audit committees of public companies are required to establish procedures for (a) the receipt, retention, and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and for (b) the issuer’s employees to submit information about questionable accounting or auditing matters in a confidential, anonymous manner.
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