Section 45-13-004 - SCOPE OF EXAMINATION004.01 General 004.01A The examination procedures listed below are minimum procedures to be performed under Section 8-124. They should not be construed as restrictive. Circumstances relating to individual engagements or situations encountered may make it necessary or desirable to expand certain procedures, apply alternate procedures, or extend examination procedures to other areas.004.01B At each annual audit, the auditor may prescribe a risk-focused review of accounts identified in this rule; however, all examination procedures described herein shall be performed at least once within a 24-month period.004.01C The scope of the examination should begin as of the date of the prior examination to avoid gaps.004.01D The examination should be coordinated with the Department to avoid conflicts with the Department's examination timing.004.02 Minimum Examination Procedures004.02A Control: 004.02A1 Commence examination on a surprise basis. Assume control over all irregular items and records to be examined until procedures have been completed.004.02B Cash, Cash Items, Foreign Currency, Clearings, and Exchange:004.02B1 Conduct a count of a portion of teller and vault cash on an unannounced basis; timing and scope should avoid recognizable patterns. Reconcile cash counts to general ledger. Examine cash items on a test basis, verifying legitimacy and collectability. Investigate any unusual or stale items and request confirmation of totals of clearings and exchanges. Determine disposition of larger return items.004.02C Due From Banks:004.02C1 Examine bank reconciliations with correspondent banks by obtaining statements for several days beginning with the audit date, and on a test basis, compare checks and drafts with the records of instruments issued. Investigate any unusual or stale items. Confirm the balance directly with the related banks.004.02D Investments: 004.02D1 Reconcile subsidiary ledger with carrying values and accrued interest recorded in the general ledger accounts. Confirm securities with safekeeping agents. Examine securities on hand and verify safeguarding procedures. Review investment portfolio to determine if all securities were purchased and/or being held in conformity with applicable statutes and regulations.004.02E Loans: - 004.02E1 Reconcile subsidiary loan ledger and accrued interest with applicable general ledger accounts. See Section 006 of this Rule for confirmation requirements.004.02F Allowance for Losses: 004.02F1 Ensure management's process for calculating adequacy of the reserve(s). The process is to be based on comprehensive, adequately documented, and consistently applied analysis of the underlying assets. Reconcile subsidiary records for charged-off loans to control records and apply transaction testing to a sample of reconciling items. Test large charged-off items to ensure appropriate prior Board of Directors' approval.004.02G Federal Funds Sold: -004.02G1 Confirm all Federal funds sold with the borrowing bank, ascertain that the aggregate of the detail agrees with the general ledger and examine evidence of subsequent settlement.004.02H Buildings - Furniture and Fixtures: -004.02H1 From the date of the prior examination, review transactions in the accounts, trace approval of major expenditures to the minutes of the Board of Directors' meetings, and test the computation of depreciation.004.02B2 Review lease accounting for appropriate recognition.004.02I Demand Deposits: - 004.02I1 Total individual ledgers or obtain a trial balance and prove totals on a test basis for the account balance and accrued interest, and reconcile totals with general ledger accounts.004.02I2 Review overdrafts, trace disposition of selected unposted items.004.02I3 Review the latest reconciliation for official checks and bank money orders. See Section 006 of this Rule for confirmation requirements.004.02J Time Deposits: - 004.02J1 Reconcile subsidiary ledger totals and accrued interest totals with general ledger accounts. Trace disposition of selected unposted items. See Section 006 of this Rule for confirmation requirements.004.02K Income and Expense:004.02K1 Test selected "debits" to both income and expense accounts for possible overstatement. Examine proper documentation for selected items.004.02K2 Ascertain on a test basis by independent means that all "credits" to the income and expense accounts have been recorded and have not been understated.004.02K3 Review the related accounts of accrued income, accrued expenses, unearned discounts, and deferred income by testing "debits" and "credits" as above, and ascertain that balances in these accounts are fairly stated.004.02L U.S. Savings Bond, Travelers Checks, and Other Consigned Items:004.02L1 Examine bank's most recent reconcilement of items on hand with memo controls and related confirmation from issuing agents, or, if such records are not available, count items on hand.004.02L2 Reconcile with total on consignment, and obtain confirmation from issuers.004.02M Safekeeping and Custodial Departments:004.02M1 Review accounting procedures for recording items held in safekeeping or custody for customers.004.02M2 Physically or virtually inspect selected items on hand or controlled.004.02M3 Confirm selected items held in custody by other banks004.02M4 Confirm selected safekeeping and control accounts by direct communication with customers.004.02M5 Inquire of bank if it holds, controls, or brokers digital assets. If yes, the bank may be subject to additional risk-focused examination procedures.004.02N Trust Department: 004.02N1 Total account activity ledgers for the various trust accounts and reconcile the totals with the trust general ledger control accounts where practicable.004.02N2 Total asset detail cards and reconcile to the amounts shown on the trial of selected trusts as noted on the detailed asset ledgers.004.02N3 Verify trust assets on a test basis by reference to the bank records or by direct communication with the bank.004.02O Other Activities: 004.02O1 The auditor, using professional judgment, should review for other financial reporting risks such as digital assets, mortgage lending, insurance activities, loan servicing, or other activities. When prudent, the auditor should expand the scope of the agreed upon procedures to test areas deemed to have a higher degree of risk.004.02P Internal Controls:004.02P1 The system of internal controls and operating procedures must be reviewed, and the audit report must include specific comments and recommendations from this review that are directed to the Board of Directors or audit committee.004.02Q Capital Accounts: 004.02Q1 Capital Notes and Debentures. 004.02Q1a Reconcile subsidiary records to the general ledger.004.02Q1b Review for compliance with terms of the agreement(s).004.02Q1c On a sample basis, test to ensure accuracy of interest paid and accrued, as applicable.004.02Q2 Surplus. 004.02Q2a Review all entries during the audit period for proper authorization from the Board of Directors.004.02Q3 Undivided Profits. 004.02Q3a Review all entries during the audit period to ensure accuracy.004.02Q3b Review for proper authorization from the Board of Directors for transfers or dividends.45 Neb. Admin. Code, ch. 13, § 004
Adopted effective 11/25/2023