Everyone agrees that working remotely safeguards bank employees from the transmission of the coronavirus, not to mention the common cold and flu. However, the move from an in-person work environment to a remote one has created its own challenges. One of these challenges stems from the need to maintain audit transparency in commercial/member business lending activities. Providing a clear audit trail of each commercial/member business loan transaction is still necessary to ensure that credit and execution risk can be identified by bank and credit union examiners, CPA auditors and loan review analysts.
Prior to the onset of the COVID-19 pandemic, less than 40% of Cobblestone’s clients had adopted an electronically imaged file system sometimes referred to as enterprise wide software to replace traditional paper-based files. These banks/credit unions (and some non-profits) were better prepared to be audited remotely once the pandemic struck. The remaining banks/credit unions were required to quickly create home-grown systems that could be accessed remotely by auditors. Home-grown systems sometimes do not provide the necessary level of transactional transparency because historical information is not available. Also, home-grown file systems are typically not structured in a way that promotes efficient retrieval of information, creating obstacles to the audit process.
The economic impact of the pandemic has created a heightened level of credit risk for most financial institutions. During such times it is important that auditors can efficiently assess a sample of the bank/credit union’s commercial loan/member business lending transactions to alert management and board members of systemic risk that has not been identified.
The commercial banking industry and the credit union industry have reacted quickly to the challenges posed by the pandemic by being responsive to the unprecedented needs of customers and members. In developing a remote work environment for auditors, banks/credit unions should also know that auditors require an imaged file system that is user friendly and comprehensive if credit risk is to be identified.