Independent Banker - August 2020 - 22

PORTFOLIO
concise list of findings and be sensitive to areas that may
require less technical explanations.
7
Keep up with training.
While on-the-ground experience is a critical piece of
auditor training, a lack of investment in training outside
the process is not conducive to success on site. Banking is
an ever-evolving industry, and knowledge about the latest
software and techniques in the industry helps ensure the
quality of auditors' work and facilitates the flow of the audit
process. Failure to maintain highly trained audit staff may
result in damage to a third party's reputation and reduces
the usefulness of internal audit teams. A client should be
prepared to provide background and context on bank practices,
staff responsibilities and internal controls. However,
the client should not need to train the audit team on governing
requirements or the audit process.
To correct or enhance practices, avoid these pitfalls during
an effective audit: failing to consider the appropriateness of
PPP audit pitfalls
Should a bank's Small Business
Administration's (SBA) Paycheck
Protection Program (PPP) lending
be an audit and compliance
review element? " As with anything
related to banking, especially a
process that is customer-facing,
community banks will need to
address documentation, procedure
and review issues for their SBA
PPP loans, " says Lindsay LaNore,
ICBA group executive vice
president and chief learning and
experience officer.
Banks sped into the PPP to
support business customers, and,
while this was necessary, it did
not afford banks time to carefully
incorporate PPP activity into their
overall audit and compliance
review plans. " To get out ahead of
future audits and internal reviews,
community banks will benefit
from taking time now to evaluate
their operations, controls and
Knowledge about the latest
software and techniques in
the industry helps ensure the
quality of auditors' work.
written and unwritten internal controls; not determining root
causes of errors and omissions; not fully documenting the audit
procedures, findings and recommendations; and not setting
the right tone for the conduct of the audit. Whether performed
by internal or external auditors, the purpose of the process is
to obtain reasonable assurance as to whether the bank is complying
with regulatory rules, objectives and to determine the
degree of efficacy with which the bank operates.
Mary Thorson Wright a former Federal Reserve examiner, is a
writer in Virginia.
origination practices, " LaNore says.
In many cases, banks were
leveraging staff from all parts of the
bank to process PPP loans. Lenders
had to make quick decisions in
the processing and origination of
the PPP loan requests. It would be
prudent for banks to review for
consistent internal practices and
handling of their PPP loan requests.
Making PPP activity a part of a
bank's internal or external audit
practices is a sensible decision.
Consistent application and
process is important. Banks should
also be considerate of regulatory
compliance requirements that
affect the PPP activity. Regulation B
adverse action rules for business
credit apply to PPP loan requests
that were not approved, and
banks will be required to retain
documentation demonstrating
their compliance. Application of
fair lending laws is also required for
all commercial loans insured by the
SBA and are especially critical for
banks that had multiple application
channels and allowed lender
discretion to play a role in the
evaluation process. Importantly,
banks should also evaluate
whether they adhered to their
complaint policy and procedures
throughout the PPP process and
ensure that proper escalation
of such complaints occurred
when necessary.
The bottom line for banks
participating in the PPP is that the
lending activity quickly became an
integral part of business practices,
making it subject to audit and
compliance review and oversight.
Even if a bank is participating
in other SBA programs or has
participated in the past, PPP
lenders should evaluate policies,
procedures, internal controls and
monitoring practices.
22 Q ICBA Independent Banker Q August 2020
Independent Banker - August 2020

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