Louisiana Administrative Code
Title 10 - FINANCIAL INSTITUTIONS, CONSUMER CREDIT, INVESTMENT SECURITIES AND UCC
Part III - Banking
Chapter 7 - Directors' Examination Requirements
Section III-702 - Definitions
Agreed-Upon Procedures/State Required Examination Report- the fourth type of annual external audit program allowable under the Federal Regulatory Agencies' Interagency Policy Statement on External Auditing Programs of Banks and Savings Associations. If an audit committee chooses this type of annual external audit program, the audit program must be performed in compliance with a policy statement issued by the commissioner.
Annual Directors' Examination- an annual examination of an institution's books, records, and accounts that must be:
1. the responsibility of and performed under the direction of the audit committee of the board of directors;
2. one of the types of audit programs permitted in this rule;
3. performed by individuals that meet the requirements stated in this rule;
4. summarized in a written report that is presented to the board of directors; and
5. submitted to the Commissioner of the Office of Financial Institutions and the FDIC, along with copies of management letters and management's response, within the time frames established in this rule.
Federal Regulatory Agencies- the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS). These agencies cooperatively issue interagency policy statements.
Immediate Family Members- an individual's spouse, minor children and any children, including adult children, residing in the individual's home.
Independent Internal Auditor- a qualified internal auditor that is, in fact, independent as defined in the Standards for the Professional Practice of Internal Auditing by the Institute of Internal Auditors and/or the Statements of Principle and Standards for Internal Auditing in the Banking Industry by the Bank Administration Institute.
1. An internal auditor will not be considered independent if, for example:
a. he/she is employed by or accountable to anyone other than the board of directors of the institution or holding company, if applicable;
b. his/her performance is evaluated by, and salary and annual bonus are set by anyone other than the board of directors of the institution, or holding company if applicable;
c. his/her duties consist of non-audit responsibilities within the institution or holding company;
d. he/she has any proprietary interest in any partnership, firm or corporation which controls the institution, directly or indirectly, except that he or she may own and/or have a beneficial interest (including any shares of a retirement and/or incentive plan) of up to a maximum of 1 percent of the total outstanding shares of the institution or holding company which employs the internal auditor;
e. he/she has any loan (including any overdrafts, cash items, unposted items, drawing against uncollected funds, or any other such items) to or from the institution or holding company or any officer, director, or principal stockholder thereof. This latter prescription does not apply to the following loans from a financial institution, if they are free from classification by bank regulatory authorities, and made under normal lending procedures, terms and requirements:
i. automobile loans and leases collateralized by the automobile;
ii. loans secured by the surrender value of an insurance policy;
iii. loans fully collateralized by cash deposits at the same institution;
iv. credit cards and cash advances on checking accounts with an aggregate unpaid balance of $5,000 or less, provided that these are obtained from a financial institution under its normal lending procedures, terms, and requirements and are at all times kept current as to all terms;
f. he/she is a member of the immediate family of an officer, director, attorney, or employee of the institution or holding company.
2. The aforementioned examples are not to be construed as all-inclusive criteria in judging the independence of an internal auditor, as other conditions may also contribute to the lack of independence. It is the responsibility of the board of directors to determine if there are any unusual relationships or affiliations, which the internal auditor may have with the institution and to have any questions as to his or her independence resolved before he or she proceeds with the examination. Any unusual relationships shall be disclosed to the Commissioner of the Office of Financial Institutions.
Independent Public Accountant- an accountant who is independent of the institution and registered or licensed to practice, and holds himself or herself out as a public accountant, and who is in good standing under the laws of the state or political subdivision of the United States in which the home office of the institution is located. The independent public accountant must comply with the American Institute of Certified Public Accountants' (AICPA) Code of Professional Conduct and any related guidance adopted by the Independence Standards Board and the agencies. No certified public accountant or public accountant will be recognized as independent if he/she is not independent both in fact and in appearance.
Outside Director- members of an institution's board of directors who:
1. are not officers, employees, or principal stockholders (as defined below) of the institution, its subsidiaries, or its affiliates; or
2. are not immediate family members of officers, employees, principal stockholders of the institution, its subsidiaries, or its affiliates; or
3. do not have any material business dealings with the institution, its subsidiaries, or its affiliates.
Policy Statement-t he Interagency Policy Statement on External Auditing Programs of Banks and Savings Associations issued by the Federal Regulatory Agencies.
Principal Stockholder-a ny person that, directly or indirectly or acting through or in concert with one or more persons, owns, controls, or has the authority to vote more than 20 percent of any class of voting securities of the financial institution or its parent company. Voting securities owned or controlled by a member of a person's immediate family are considered held by that person.
Qualified Independent Internal Auditor -an internal auditor that meets the independent internal auditor definition in this Subsection who is a duly registered certified public accountant in good standing under the laws of this state, a certified internal auditor, a chartered bank auditor, or an individual that has functioned as an internal auditor in financial institutions for a minimum period of two years that recognizes and adheres to the rules of conduct and personal standards established for the professional designation(s) he or she holds. Any certified public accountant functioning as an internal auditor must adhere to the rules of conduct and standards applicable to the CPA in practice.
AUTHORITY NOTE: Promulgated in accordance with R.S. 6:290, 6:793 and 6:1310.
