Post on 03-Apr-2018
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INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF
XYZ CO-OPERATIVE CREDIT UNION LIMITED
We have audited the accompanying financial statements of the Credit Union which comprise the balance
sheet at 31
st
, December 2008 and the related statement of income and accumulated deficit and cash flowsfor the year then ended and a summary of significant accounting policies and other explanatory notes.
Responsibility for the Financial Statements
Those charged with governance are responsible for the preparation and fair presentation of these financialstatements in accordance with International Financial Reporting Standards. This responsibility includes:designing, implementing and maintaining internal controls relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies; and making accounting estimates that arereasonable in the circumstances.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with International Standards on Auditing. Those standards require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditors judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the entitys preparationand fair presentation of the financial statement in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitysinternal control. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.
Opinion
In our opinion, the accompanying financial statements present fairly in all material respects, the financialposition of the Union as of 31
stDecember, 2008 and of its financial performance and its cash flows for the
year then ended in accordance with International Financial Reporting Standards.
GRENADA:
7th
May, 2009 Accountants & business advisers:
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Internal Control Checklist: Cash
Yes No
1. Does each teller have his Determine this by inquiry during the own cash drawer? cash count.
1. Does each teller have Determine this during the cash count. bait money?
2. Are spare keys for cash Review internal controls with individuals drawers under a system responsible for the change fund duringof dual control? the cash count. Access to spare keys
must be authorized by at least twoindividuals.
3. Is there a system to Review this with the tellers by inquiry identify the transfer of funds during the cash count.from the vault to individualtellers?
4. Is a change fund limit in A written change fund policy should place for the tellers, the include limits for the teller and vaultvault and a total for change fund and branch offices.each branch office?
5. Do teller transaction Transaction receipts should include a
receipts identify the teller identification number.teller who performed thetransaction?
6. Is the change fund Review the change fund records which balanced daily with the compare teller and vault end-of-daygeneral ledger? totals with the general ledger balance.
Tellers should balance cash daily.
7. Does a written cash Review with management. The policy over and short policy exist? should include dollar and frequency
limits concerning cash over and shortdifferences. The policy shouldaddress disciplinary action.
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. Credit Union Limited.
Supervisory Committee Working Papers
Examination as of (date)
Prepared by . Date
Reviewed by . Date .
Organisational Management Yes No Comments
1 Does the credit union have the following?
Mission Statement?
Strategic Plan?Annual Work plan and Budget?
Organisation Chart?
Job descriptions, Job specifications andstaffing plan?
2Does the Credit union have Policies andprocedures that outline the following?Organisational Design
Mission and Objectives
Governing Rules and Regulations
Standards of Professional Conduct
Corporate Relations
Organisational StructureBoard and Staff Responsibilities and Relations
Definition and Duties
Job Description
Working Relationships
Board Committees
Annual Planning
Meetings of the Board
Compensation Administration
Recognition of Service
Performance Review
Member Referral Endorsements
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Personnel Administration
Human Resource Development
Directors and Officers LiabilityInsurance
Hours of Business
Examinations and AuditCash Management
Travel
Operating Policies Yes No Comments
Membership Qualification and Rights
Loans to other Credit Unions
Financial Administration
Financial Accounting and Administration
Capital Expenditure
Investment Control
Deposit Taking GuidelinesCredit Administration
General Guidelines
General Restrictions
Security
Refinancing of Loans
Business and Commercial Loans
Delinquency Control
Information Systems
General
Physical Security
Production Applications
Internet Access
Password Usage
Virus Policy
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Risk Management
General Practices
Safekeeping and Security
Insurance Protection against disasters
FacilitiesGeneral Administration
Maintenance
Equipment
Alarm Systems
Safety Measures
Facilities and Equipment Insurance
Disaster Recovery Plans
Anti-Money Laundering Policy
Marketing
Promotion and Advertising
Co-operative Education
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Credit Union Limited
INTERNAL CONTROL INTERNAL AUDIT CHECKLIST
Prepared by... Date..
Reviewed by.. Date ...
NO. GENERAL YES NO REMARKS
1 Has the Board of Directors developed and
approved an Internal Audit Charter?
2 Does the internal auditor report to and take
direction from the Supervisory Committee,
free from undue influence by management
and/or the Board?
3 Does the internal auditor have the authority
needed to perform the job i.e. free access to
all records?
a. Have a commitment to a
programme of continuing
education and professional
development?
b. Have a certification as an internalauditor or as a certified public
accountant?
c. Have audit experience and
possess organizational and
technical skills commensurate
with the assigned responsibilities?
d. Communicate well both orally and
in writing?
5 Do audit staff supervisors possess adequate
knowledge of audit objectives and an
understanding of the audit procedures
performed by staff?
6 Are the practices of the supervisor in
assigning and supervising the tasks of the
internal auditors adequate?
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NO. STANDARDS FOR PERFORMING WORK YES NO REMARKS
7 Does the internal auditor(s) performing the
audit meet regulatory standards for
performing audits?
a. Adequate technical training and
proficiency?
b. Reasonable care?
c. Work adequately planned and
assistants properly supervised?
d. Sufficient understanding of internal
controls to determine nature, timing
and extent of necessary testing?
e. Use inspection, observation, inquiry
and confirmation to obtain sufficient
evidence?
NO. INTERNAL AUDIT PROGRAMME
ADEQUACY
YES NO REMARKS
8 Is there a documented record of work
performed?
9 Do work papers exist and include audit work
programmes and analyses that indicate the
procedures performed the extent of testing
and the basis for the conclusions reached?
10 Do audit programmes include:
a. Surprise contacts when appropriate?
b. Maintenance of control over records
selected for audit?
c. Review and evaluation of the credit
unions policies and procedures and
the system of internal control?
d. Proof of detail to related control
records?e. Verification of selected transactions
through examination of supporting
documentation, direct confirmation
and physical inspection?
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NO. INTERNAL AUDIT PROGRAMMEADEQUACY
YES NO REMARKS
11 Are internal audit reports issued to theSupervisory Committee withrecommendations for any required remedial
actions?12 Are follow-ups being performed on audit
findings and remedial actions made?
NO. INTERNAL AUDIT PROGRAMMEEFFECTIVENESS AND REPORTING
YES NO REMARKS
13 Have the credit unions internal controls andoperating procedures been adequatelyreviewed?
14 In the reporting process, are all findings andrecommendations clearly and conciselycommunicated, pinpointing problems and
suggesting solutions?15 Are such findings and recommendations
and the audit procedures and testing whichled to them clearly documented in internalaudit working papers?
16 Are such audit reports submitted timely afterthe audit work is finished?
17 Are deficiencies reported to the SupervisoryCommittee and communicated by them tomanagement?
18 Are the official who received the report
those who have both the responsibility andauthority to implement suggested changes?
19 Is a prompt and effective managementresponse made to the auditorsrecommendations?
20 Is the internal audit work acceptable (A)partially acceptable (PA) not acceptable(NA)?
NO. SUPERVISORY COMMITTEE REVIEW YES NO REMARKS
21 Did you interview the SupervisoryCommittee or a representative?
22 Did you review the Minutes of theSupervisory Committee?
23 Are you comfortable that the Committee isfamiliar with the credit unions operations,management and the state of the creditunions financial condition?
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Credit Union LimitedINTERNAL CONTROL EXTERNAL AUDIT CHECKLIST
Prepared by : Date
Reviewed by: . Date:
NO. BANK RECONCILIATION YES NO REMARKS
24 Are cheques that have been outstanding longer
than 90 days transferred to Accounts Payable?
25 Is a procedure in place to follow up on cheques
of a material size outstanding for substantial
periods?
26 Are adjusting entries to the bank reconciliation
cleared in a timely manner (not exceeding 60
days)?27 Are deposits made in accordance with applicable
rules and regulations?
28 Does someone who is not involved in other cash
functions prepare the bank reconciliation?
29 Do the internal/external auditors periodically
prepare bank reconciliations on a surprise basis?
30 Has the credit union established a procedure to
ensure bank reconciliation is completed each
month?
31 Are voided or spoilt cheques marked as such and
retained?
32 Is signing blank cheques against credit union
policy?
NO. CHANGE FUND/IMPREST ACCOUNT YES NO REMARKS
33 Is the daily change fund activity properly
recorded and identified in the Journal and cash
record?
34 Are cheques to replenish the fund made payable
to the credit union only?35 Has the Board of Directors approved adjustments
to the size of the fund?
36 Are currency shipments received and counted
under dual control?
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.. Co-operative Credit Union Ltd.
Prepared by... Date..
Reviewed by.. Date ..
NO. EXTERNAL AUDIT PROGRAMME
ADEQUACY
YES NO REMARKS
1 Is there a documented record of work
performed?
2 Do working papers exist and include audit
work programme and analyses that indicate
the procedures performed, the extent of
testing and the basis for the conclusionsreached?
3 Do audit programmes include:
a. Maintenance of control over records
selected for audit?
b. Review and evaluation of the credit
unions policies and procedures and
the system of internal control?
c. Proof of detail to related control
records?
d. Verification of selected transactions
of confirmation and physical
inspection?
4 Are audit reports brought before the Board
of Directors with recommendations to
management or responsible parties for any
required remedial action?
5 Does follow-up on audit findings and
remedial actions take place?
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NO. EXTERNAL AUDIT EFFECTIVENESS YES NO REMARKS
6 Have the credit unions internal controls and
operational procedures been adequately
reviewed?
7 In the reporting process are all findings and
recommendations clearly and concisely
communicated, pinpointing problems and
suggesting solutions?
8 Are timely audit reports submitted after the
audit work is finished?
9 Do the audit designees communicate with or
liaise with the internal audit and are results
communicated to management raising
deficiencies?
10 Are the officials who receive the reportthose who have both the responsibility and
authority to implement suggested changes?
11 Is a prompt and effective management
response made to the auditors
recommendation?
12 For what period was the last external audit
conducted?
13 Did the audit report comply with the terms of
engagement letter?
14 Was the audit report prepared in
accordance with the Regulations and
Industry Standards?
15 Do audit programmes include evaluation of
the credit unions compliance with
applicable legislation?
NO. AUDIT REPORT ACCECSS YES NO REMARKS
16 Were you given unconditional access to the
auditors management letter?
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.. Co-operative Credit Union Ltd.
Prepared by... Date..
Reviewed by.. Date: .
NO. TELLER CASH CONTROL YES NO REMARKS
1 Is each Teller provided with adequatestorage facilities for cash under his/hercontrol both during business hours andovernight?
2 Do the Tellers have control over their cash
at all times?3 Do Tellers keep all cash storage facilitieslocked during their absence?
4 If applicable, are relief Tellers provided withseparate cash and prevented from operatingfrom regular Tellers cash during the reliefperiod?
5 When a Teller is absent because of illness,is his/her cash counted in the presence oftwo employees and turned over to anotherTeller?
6 Is Teller cash counted the day Teller leavesfor vacation?
7 Are systematic and unannounced detailedcash counts for funds held by Tellers,performed at least once monthly by seniorpersonnel? (N.B.) an officer should notcount the same Teller in consecutivemonths)
8 Does each Teller maintain a daily settlementsheet that summarizes all of his/hertransactions and reflects the balance status
of his/her cash?9 Are cash transactions between Tellers
signed for by the receiving Teller) (N.B.describe the method used for suchtransactions)
10 Does the Teller validate (by Teller stamp) allcheques, withdrawals and depositsprocessed by him/her?
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NO. TELLER CASH CONTROL YES NO REMARKS
11 Does the Teller initial all passbook entriesand does the printed deposit receipt identifythe Teller?
12 Are Tellers prohibited from making out
deposits slips for members?13 Are changes in the cash total on slips
initialed by member?
14 Are Tellers forbidden to take deposits ascarry-over to the next business day?
15 Are Tellers required to transfer their cashitems to the Head Teller or other controlpoint?
16 Are Tellers instructed to put through generalledger debit or credit vouchers for shortagesor overages in their statement within seven
(7) days after occurrence, if not located bysupervisory or control personnel?
17 Is a subsidiary record of shortages andoverages kept for each Teller, to show thecumulative number and amountdifferences?
18 Are limits established as to the amount ofcash a Teller may carry? What is the limit?
19 Does the institution keep daily record ofTellers differences?
20 Are Tellers cash limits adhered to? (Spot
check cash drawers and drop safes, ifapplicable. Also review a sample ofTellers settlement sheets)
21 Are limits established as to the amount ofcash a designated area may carry? What isthe limit?
22 Are Teller workstations equipped with dropsafes and are they being utilized asintended?
23 Are Tellers restrictions on cashing ofcheques adhered to?
24 Do officers initial cheques cashed thatrequire authorization?
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. . Co-operative Credit Union Ltd.
INVESTMENT CONTROL
Prepared by: Date:
Reviewed by: .. Date:
POLICY YES NO REMARKS
1. Does the credit union have written investment
policies that include the following:
a. Purpose and objectives.
b. The characteristics of the investment such
as issuer, maturity, and interest rate risk?
c. A statement on the management of interest
rate risk, including the amount of risk
acceptable in the investment portfolio in
relation to earnings and net capital?
d. The designation of authority specifying
persons, and/or committees and the extent
of their authority?
e. An approval list of safekeeping facilities if
acceptable?f. A procedure addressing investments which
fall outside Board policy, or fail to meet
regulatory requirements, after purchase.
g. Guidelines for trading activities if authorized
by the Board?
2. Does the Board review and revise investment
policies at least annually?
3. Are the written investment policies being adhered
to by the credit union?
4. Are all investment transactions properly authorized
by the Board?
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NO. BOARD AND INVESTMENT COMMITTEE YES NO REMARKS
5. If an Executive or Investment Committee has been
authorized to make investment transactions, has
the Committee been provided with written
guidelines and is a summary of all investment
transactions reported to the Board?
6. Is the discussion reflected in the Board minutes
adequate to demonstrate that the Board is made
aware of the risk of investments and the portfolio?
7. Does the Board or Investment Committee review
all investment transactions at least monthly and
are these reviews incorporated into the minutes?
8. Does the Board review regular investment reports
showing such data as type, amount, current
valuation, maturity, distribution and yield?NO. REPORTING YES NO REMARKS
9. Does the credit union maintain all documentation
regarding an investment transaction as long as the
investment is held and until it has been both
examined and audited?
10. Does the credit union maintain adequate
subsidiary records for investments?
11. If the credit union accrues interest on investments,
is the General Ledger balance accurate?
12. Has any official, senior management employee or
their immediate family member received anything
of value in connection with any investment
transaction?
13. Are there any indications of conflict of interest or
kickbacks from investment companies to the credit
union officials or senior management staff?
14. If the credit union uses an institution for
safekeeping, does the credit union have a signed
agreement with the institution?
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NO. SAFEKEEPING YES NO REMARKS
15. Is confirmed of purchase compared to the actual
securities in safekeeping?
16. Does the credit union physically separate
securities owned by it from securities held as
collateral on loans?
17. Are transactions reviewed after the fact by an
authorized officer or other responsible person
18. Are detailed subsidiary records maintained
independently from records maintained by the
custodian that contain a full description, including
identification numbers and related income data?
19. Is a formal record maintained of the reconciliation
for later review?
20. Is Investment income reviewed periodically andcompared with the investments to determine if all
income has been received fully and promptly
accounted for?
21. Is there adequate segregation of duties among
those who approve, have access to, record and
reconcile investments?
22. Is authorization required for all write down of
investments?
23. Are adequate records maintained for all
investments, which have been written off?
24. Are securities periodically inspected and counted
on a surprise basis?
25. Is the accounting for and classification of the
various investment types evaluated periodically to
ensure their conformity with International
Accounting Standards?
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.. Co-operative Credit Union Ltd.
ANTI-MONEY LAUNDERING
Prepared by: Date:
Reviewed by: .. Date:
NO. GENERAL YES NO REMARKS
1. Does the credit union have a Compliance Officer
with adequate job description?
2. Does the credit union have an Alternate
Compliance Officer?
3. Are the Compliance Officer and Alternate working
as a team?
4. Are there Board approved Anti-Money Laundering
Policies and Procedures?
5. Are there sufficient copies of the relevant Act and
Regulations available to staff and committee
members?
6. Does the credit union subscribe to Anti-Money
Laundering journals or periodicals?
7. Is there evidence that the Compliance and
Alternate Compliance Officers are upgrading theirskills on Anti-Money Laundering procedures?
8. Is there documented evidence that new
knowledge is transferred to all parties at the credit
union?
9. Does the Compliance Officer arrange training for
the Board, Committees and staff?
10. When was the last time that training was
organized by the Compliance Officer?
11. Are all staffers well trained with the administration
of Anti-Money Laundering policies and
procedures?
12. Do all the employees adhere to the procedures for
Anti-Money Laundering?
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NO. GENERAL YES NO REMARKS
13. Is the process of interviewing a member with large
transactions or multi-transactions or suspicious
transactions thorough?
14. Is there a clear audit trail to indicate that there has
been thoroughness with regards to interviews of
members
15. Is there evidence of know your customer or
employee?
16. Is there a register of suspicious transactions
reported to the Compliance Officer but not filed
with the Authority?
17. Is the Board presented with monthly updates on
Anti-Money Laundering activities at the credit
union?18. Is there evidence that the appropriate forms are
completed and submitted where necessary to the
Anti-Money Laundering Supervisory Authority?
19. Are all employees capable of completing all the
required forms accurately?
20. If the Compliance Officer requires information,
does he or she have a readily available contact at
the Supervisory Authority?
21. Does the Compliance Officer keep records stored
in a secure place?
22. Is there a register in which transactions and
activities reported to the Authorities are recorded?
23. Is documentation filed in chronological order?
24. Is there evidence that the credit union complies
with all requirements of applicable Anti-Money
Laundering Laws, Regulations, and Procedures?
25. Is there a register of enquiries made by the
Supervisory Authority?
26. Are there internal controls to ensure ongoing Anti-Money Laundering compliance?
27. Is there independent testing of compliance by the
Internal Auditor or an outside party?
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Credit Union Ltd.
LOANS COLLECTION
Prepared by: .. Date:
Reviewed by: .. Date:
NO. COLLECTIONS DEPARTMENT YES NO REMARKS
1. Does the credit union have a separately staffed
Collections Department?
2. Are persons who approve or disburse loans
denied access to cash and record keeping
(including access to terminals where loan
payments can be changed?)
3. Do supervisors regularly review reports showing:
a. Changes in delinquency status?
b. Changes in repayment terms?
c. Changes in repayment terms?
d. Prepaid loans?
e. Unusual interest rates?
f. Unusual date of first payment?
g. Unusually small loan payments?
4. Do supervisors regularly review employeesloans?
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.. Co-operative Credit Union Ltd.
SURVEY OF ADMINISTRATIVE AND OPERATING ENVIRONMENT
Prepared by . Date
Reviewed by Date ....
NO. Organizational Management Yes No REMARKS
1 Does the credit union have thefollowing?
Mission Statement?
Strategic Plan?
Annual Work plan and Budget?
Organization Chart?
Job descriptions, Job specifications andstaffing plan?
Does the Credit union have Policiesand procedures that outline thefollowing?
2 Organizational Design
Mission and Objectives
Governing Rules and Regulations
Standards of Professional ConductCorporate Relations
Organizational Structure
3 Board and Staff Responsibilities andRelations
Definition and Duties
Job Description
Working Relationships
Board Committees
Annual PlanningMeetings of the Board
Compensation Administration
Recognition of Service
Performance Review
Member Referral Endorsements
Personnel Administration
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Human Resource Development
Directors and Officers LiabilityInsurance
Hours of Business
Examinations and Audit
Cash ManagementTravel
4 OPERATING POLICIES YES NO REMARKS
Membership Qualification and Rights
Loans to other Credit Unions
5 Financial Administration
Financial Accounting andAdministration
Capital Expenditure
Investment Control
Deposit Taking Guidelines6 Credit Administration
General Guidelines
General Restrictions
Security
Refinancing of Loans
Business and Commercial Loans
Delinquency Control
7 Information system YES NO REMARKS
General
Physical Security
Production Applications
Internet Access
Password Usage
Virus Policy
8 Risk Management
General Practices
Safekeeping and SecurityInsurance Protection against disasters
Facilities
General Administration
Maintenance
Equipment
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Alarm Systems
Safety Measures
Facilities and Equipment Insurance
Disaster Recovery Plans
Anti-Money Laundering Policy9 Marketing
Promotion and Advertising
Co-operative Education