Workpaper Reviews: What You Can Do; How Auditors Can Satisfy Bank Regulators and Keep Their Clients Happy
If you're a CPA who audits financial institutions and this hasn't happened yet to you, it almost certainly will: Federal bank regulators examining the institution you're auditing ask to see a copy of your workpapers. While this may raise a host of concern--after all, workpapers contain enormous amounts of confidential information--you probably know that you have little choice but to cooperate. CPAs who frequently perform bank audits say they can help examiners accomplish more, with fewer headaches for themselves, if they work with the examiners to make workpaper reviews efficient. All banks, regardless of their size, are subject to some form of regulatory review. Regulators expect banks to retain knowledgeable and well-trained auditors. Conversely, CPAs who perform bank audits must be familiar with banking regulations and must also be aware that regulators have the right to review their workpapers. Depending upon which federal agency is, making the request and how big the institution that's under inspection is, the agency may have specific regulatory authority to demand the workpapers. For example, under the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), auditors are required to make workpapers available, upon request, to regulators for client banks with assets in excess of $500 million. If the agency doesn't have authority, it always can subpoena the documents. In addition, many financial institutions, at regulators' urging, have recently reworded their audit engagement letters to require that the workpapers be made available. TRY OPEN DIALOGUE AU section no. 9339, "Working Papers: Auditing Interpretations of Section 339" (Professional Standards, AICPA) sets forth guidelines for providing regulators with access to auditors' workpapers. "When regulators ask for workpapers, our answer is routinely `yes,'" says Craig Dabroski, CPA, national technical director for banking at Andersen LLP. "I can't remember if we have ever said `no.' The only time a typical CPA firm would be reluctant to do so would be when there was a threat of litigation involved, at which point it would start funneling requests through its lawyers. But that is by far the exception." Still, it's worth knowing that meeting a request for workpapers does not necessarily mean dumping reams of paper or stacks of computer disks into the laps of bank examiners. "We try to stress to our personnel that when examiners ask to look at copies of workpapers, they should talk to them first, find out what they're trying to do and what they're looking for," Dabroski explains. "In our minds, that is number one: Have a discussion with them, and see if we can satisfy their needs just by talking, which may save us both a lot of time. If not, we try to direct them to the workpapers that we think make the most sense for what they're looking for." That approach sits well with regulators, too. Doris L. Marsh, CPA, CFA, an examination specialist with the Federal Deposit Insurance Corporation's (FDIC) division of supervision, agrees that workpapers can be voluminous and regulators don't want to spend their time looking through irrelevant material. "I think if examiners are looking at a bank, and have questions in certain areas, they can talk to the auditors and perhaps the auditors can satisfy them without looking at the workpapers. And certainly asking the regulators if they found anything, or have anything they want to report, is valid," says Marsh. "We're attempting to encourage our examiners to open up those communication lines early in the examination and review process," says Bill Morris, a senior policy analyst and national bank examiner in the Office of the Comptroller of the Currency, (OCC) which oversees national banks. "If the auditor and examiner are discussing what the auditor has done for the bank and what the examiner might be looking for, the answers may come through those discussions. …