California Code of Regulations
Title 10 - Investment
Chapter 2 - Savings and Loan Commissioner
Subchapter 5 - Operations-Accounting
Article 3 - Independent Audits
Section 105.302 - Scope and Requirements of Statutory Audit

Universal Citation: 10 CA Code of Regs 105.302

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

The statutory audit shall be made in accordance with generally accepted auditing standards and shall include such tests of the accounting records and such other auditing procedures as the statutory auditor considers necessary in the circumstances. The tests and procedures shall include but not be limited to the following:

(a) Analysis and tests of the system of internal check and control.

(b) Appropriate tests of assets including the following which, in circumstances considered appropriate by the statutory auditor, may be performed on a sample basis:

(1) The unannounced (surprise) count of cash and cash items and negotiable securities and satisfactory reconcilement with general ledger accounts.

(2) Satisfactory reconcilement of bank accounts with general ledger accounts.

(3) Inspection of documents supporting real estate loans made or purchased since the date of the last audit. The documents to be inspected shall include:
(A) note,

(B) deed of trust, and

(C) policy of title insurance which insures the association as the first lien holder. Fire insurance policies, loan applications and appraisals shall be inspected as considered necessary by the statutory auditor. In addition, the inspection of loan documents shall include a reasonable percentage of all active real estate loans made prior to the date of the last audit.

(4) Confirmation of real estate and other loan accounts by direct correspondence with the borrower.

(5) Review of the adequacy of valuation allowances on loans, real estate owned and other assets.

(c) Appropriate tests of liabilities including the following which, in circumstances considered appropriate by the statutory auditor, may be performed on a sample basis:

(1) Confirmation of savings accounts by direct correspondence with the holder of the account.

(2) Appropriate review of escrow accounts (if any) which are not related to or a part of escrows involving association loans.

(d) Appropriate tests of income and receipts.

(e) Appropriate tests of expenses and disbursements.

(f) Review of compliance with applicable provisions of the Savings and Loan Association Law and regulations and the association's articles of incorporation and by-laws which might materially affect the association's financial position or results of operations.

(g) Reading of a representative sample of the internally prepared financial reports, including projections.

(h) Analysis of the accounting procedure to determine its conformity with Subchapter 1 of this Chapter.

(i) Such specific procedures or the preparation and review of such additional information which may be requested by the Commissioner.

1. Change without regulatory effect renumbering former Section 162 to Section 105.302 (Register 87, No. 14). For prior history, see Register 82, No. 21.

Note: Authority cited: Section 5255, Financial Code. Reference: Sections 8750, 8751 and 8752, Financial Code.

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