ICQs and Verification Procedures

ICQs and

Verification Procedures

Comptroller¡¯s Handbook

December 2007

Internal Control Questionnaires

and Verification Procedures

Table of Contents

Introduction............................................................................................................ 1

Pre-Examination Planning..............................................................................................1

During the Examination.................................................................................................2

Accounts Receivable and Inventory Financing........................................................ 6

Internal Control Questionnaire .....................................................................................6

Verification Procedures .................................................................................................8

Agricultural Lending ............................................................................................. 11

Verification Procedures ............................................................................................... 11

Allowance for Loan and Lease Losses ................................................................... 14

Internal Control Questionnaire ................................................................................... 14

Verification Procedures ............................................................................................... 15

Asset and Liability Management ........................................................................... 17

Internal Control Questionnaire ................................................................................... 17

Asset Securitization............................................................................................... 19

Internal Control Questionnaire ................................................................................... 19

Verification Procedures ............................................................................................... 22

Bank Dealer Activities........................................................................................... 27

Internal Control Questionnaire ................................................................................... 27

Bank Dealer Activities............................................................................................................ 27

Private Placements ................................................................................................................. 51

Verification Procedures ............................................................................................... 53

Bank Dealer Activities............................................................................................................ 53

Private Placements ................................................................................................................. 56

Bank Premises and Equipment .............................................................................. 57

Internal Control Questionnaire ................................................................................... 57

Verification Procedures ............................................................................................... 60

Bankers¡¯ Acceptances ........................................................................................... 62

Internal Control Questionnaire ................................................................................... 62

Verification Procedures ............................................................................................... 65

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Capital and Dividends........................................................................................... 68

Internal Control Questionnaire ................................................................................... 68

Verification Procedures ............................................................................................... 69

Cash Accounts ...................................................................................................... 72

Internal Control Questionnaire ................................................................................... 72

Verification Procedures ............................................................................................... 81

Commercial Lending ............................................................................................. 85

Internal Control Questionnaire ................................................................................... 85

Verification Procedures ............................................................................................... 91

Commercial Real Estate and Construction Lending............................................... 94

Internal Control Questionnaire ................................................................................... 94

Verification Procedures ............................................................................................. 111

Concentrations of Credit..................................................................................... 114

Internal Control Questionnaire ................................................................................. 114

Consigned Items.................................................................................................. 116

Internal Control Questionnaire ................................................................................. 116

Verification Procedures ............................................................................................. 123

Credit Card Lending............................................................................................ 127

Internal Control Questionnaire ................................................................................. 127

Verification Procedures ............................................................................................. 130

Due From Banks ¡ª Domestic and International ................................................. 131

Internal Control Questionnaire ................................................................................. 131

Demand Deposits ................................................................................................................ 131

International Time Deposits ................................................................................................. 136

Verification Procedures ............................................................................................. 140

Demand Deposits ................................................................................................................ 140

International Time Deposits ................................................................................................. 145

Emerging Market Country Products and Trading Activities ................................ 147

Internal Control Questionnaire ................................................................................. 147

Verification Procedures ............................................................................................. 151

Employee Benefits............................................................................................... 153

Internal Control Questionnaire ................................................................................. 153

Floor Plan Financing ........................................................................................... 155

Internal Control Questionnaire ................................................................................. 155

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Verification Procedures ............................................................................................. 162

Foreign Exchange ................................................................................................ 164

Internal Control Questionnaire ................................................................................. 164

Verification Procedures ............................................................................................. 170

Income and Expense ........................................................................................... 172

Internal Control Questionnaire ................................................................................. 172

Verification Procedures ............................................................................................. 175

Interest Rate Risk ................................................................................................ 177

Internal Control Questionnaire ................................................................................. 177

Investment Securities .......................................................................................... 181

Internal Control Questionnaire ................................................................................. 181

Verification Procedures ............................................................................................. 184

Lease Financing................................................................................................... 189

Internal Control Questionnaire ................................................................................. 189

Verification Procedures ............................................................................................. 192

Loan Portfolio Management................................................................................ 195

Internal Control Questionnaire ................................................................................. 195

Management Information Systems...................................................................... 202

Internal Control Questionnaire ................................................................................. 202

Verification Procedures ............................................................................................. 205

Mortgage Banking ............................................................................................... 208

Internal Control Questionnaire ................................................................................. 208

Other Assets/Other Liabilities ............................................................................. 219

Internal Control Questionnaire ................................................................................. 219

Verification Procedures ............................................................................................. 222

Other Real Estate Owned.................................................................................... 224

Internal Control Questionnaire ................................................................................. 224

Verification Procedures ............................................................................................. 225

Payment Systems and Funds Transfer Activities.................................................. 227

Internal Control Questionnaire ................................................................................. 227

Module A............................................................................................................................. 227

Module B............................................................................................................................. 234

Verification Procedures ............................................................................................. 238

Regulatory Reports.............................................................................................. 240

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Internal Control Questionnaire ................................................................................. 240

Retail Nondeposit Investment Sales .................................................................... 243

Internal Control Questionnaire ................................................................................. 243

Risk Management and Insurance ........................................................................ 258

Internal Control Questionnaire ................................................................................. 258

Risk Management of Financial Derivatives ......................................................... 260

Internal Control Questionnaire ................................................................................. 260

Tier I and Tier II Dealers ...................................................................................................... 260

Active Position-Takers and Limited End-Users ...................................................................... 275

Verification Procedures ............................................................................................. 285

Trade Finance ..................................................................................................... 290

Internal Control Questionnaire ................................................................................. 290

Guarantees Issued................................................................................................................ 290

Letters of Credit.................................................................................................................... 292

Verification Procedures ............................................................................................. 296

Guarantees Issued................................................................................................................ 296

Letters of Credit.................................................................................................................... 298

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