Okla. Admin. Code § 85:10-7-3

Current through Vol. 42, No. 4, November 1, 2024

Section 85:10-7-3 - Minimum examination procedures

(a)Generally. Commence examination on a surprise basis. Assume control over the assets and records to be examined until procedures have been completed.

(b)Cash, cash items, clearings and exchanges.

(1) Count cash and reconcile total with the general ledger balance.

(2) Examine cash items; investigate any unusual or noncurrent items; trace disposition of selected amounts.

(3) Confirm totals of clearings and exchanges direct with drawee banks or paying agents; trace disposition of selected return items.

(c)Due from banks.

(1) Obtain current statements from correspondents; reconcile and clear selected open items; obtain confirmation of balances at the examination date.

(2) Trace disposition of selected return items recorded by correspondents on examination date and several days thereafter.

(d)Investments.

(1) Obtain trial balance of securities and reconcile totals with applicable general ledger accounts.

(2) Examine all securities on hand and confirm those held by others.

(3) Inspect documents supporting carrying values of selected securities held at examination date and of selected acquisitions and retirements since last examination.

(e)Loans.

Obtain trial balance of loan portfolio and reconcile totals and reconcile totals with applicable general ledger accounts.

(f)Building, furniture and fixtures.

(1) Review transactions in the accounts.

(2) Trace selected additions to supporting documentation.

(g)Other resources (including customers' liabilities under acceptances and confirmed letters of credit).

(1) Accruals. Review accounting procedures and test selected transactions.

(2) Other. Review and test selected transactions to supporting documentation and confirm balances to extent necessary to be satisfied with accuracy of amounts recorded.

(h)Demand deposits.

(1) Obtain trial balance of demand deposits and reconcile totals with general ledger account.

(2) Review overdrafts; trace subsequent disposition of selected items.

(3) Obtain trial balance of outstanding official checks and reconcile totals with general ledger accounts; review selected items paid subsequent to examination date.

(4) Trace disposition of selected unposted items.

(5) Prepare or obtain listing of due-to-bank accounts; confirm selected account balances directly with the correspondent bank.

(i)Time deposits. Obtain trial balance of time deposit accounts and reconcile totals with applicable general ledger accounts; trace disposition of selected unposted items. Examine selected certificates of deposit paid subsequent to examination date to determine proper payment of proceeds.

(j)Other liabilities (including bank's liability under acceptance and confirmed letters of credit).

(1)Accruals. Review accounting procedures and test selected transactions.

(2)Unearned discount and deferred income. Review accounting procedures and test selected transactions, including rebates.

(3)Other. Review and test selected transactions to supporting documentation, and confirm balances to extent necessary to be satisfied with accuracy of amounts recorded.

(4) Obtain statement of treasury tax and loan account, reconcile with general ledger account, and confirm balance.

(k)Capital stock.

(1) Obtain trial balance of stockholders' ledger and open stubs of stock certificate books and reconcile total par value with the general ledger account.

(2) Trace open stubs of stock certificate book to stockholders' ledger on a test basis where practical.

(3) Examine stock transfers for proper assignments, cancellation and recording in the stockholders' register.

(4) For institutions using an outside registrar and/or transfer agent, confirm the number of shares of stock issued and outstanding and reconcile totals with the general ledger account.

(5) Obtain trial balance of capital notes and debentures outstanding and reconcile total with general ledger account; determine that the bank is in compliance with applicable accounting provisions of such instruments; confirm balances with holders on a test basis.

(l)Surplus and reserves. Review transactions in the account and trace selected additions and reductions to supporting documents.

(m)Undivided profits. Review selected transactions in the account. Trace income and expense account balances closed to undivided profits since the last examination.

(n)Income and expense (non-operating). Test selected transactions to supporting documents.

(o)Collection items.

(1) Schedule selected outstanding items at the examination date; inspect items or confirm with holders.

(2) Examine, credit or remittance advices, checks or other evidence of payment applicable to scheduled items paid subsequent to examination date.

(p)Safekeeping department. Review accounting procedures for recording items held in safekeeping for customers; inspect selected items on hand and confirm selected items held in custody by other banks; confirm selected safekeeping accounts by direct communication with customers.

(q)Trust department.

(1) Obtain a trial balance of individual trust accounts and reconcile the totals with the trust department balance sheet.

(2) Verify the existence of assets contained within selected trust accounts. Savings accounts and certificates of deposit should be confirmed on a test basis by reference to the bank records or by direct communication with the bank.

(3) Review selected trust accounts and test transactions to supporting records and data.

(r)Trust Companies. The examination of a trust company must be geared to those particular activities of the specific trust company being examined. The minimum examination procedures required by this rule should be utilized for all trust companies as applicable.

(s)General.

(1) Review minutes of Board of Directors since last examination; determine that formal resolutions of an accounting nature have been followed.

(2) Review accounting procedures for handling nonledger assets, such as charged-off loans, recoveries, etc.

(3) Compare most recent daily statement with general ledger accounts; review examination date transactions reflected in general ledger accounts; investigate any unusual transactions.

(4) Review board authorization on purchases and sales of investments.

(t)Direct confirmation with borrowers and depositors.

(1) Mail negative and/or positive confirmation requests on a test basis for all loan and deposit categories, including participation loans purchased and sold. (Most bonding companies have minimum requirements. This determination should be made prior to examination.)

(2) For participation loans purchased, confirm balances with the selling bank only. For participating loans sold, confirm the balances sold with the purchasing bank and the total balances with the borrower on a test basis.

(3) Mail confirmation requests to a selected number of customers whose loans have been charged off.

(4) Mail confirmation requests to a selected number of deposit customers whose accounts have been closed since last examination.

(5) Any positive confirmation request not acknowledged by a loan customer after two weeks from the date of the original mailing shall be followed by a second confirmation request. A listing of significant positive confirmation requests not acknowledged after the mailing of both a first and second request shall be included in the report.

(u)Others. The examination procedures listed above are the minimum procedures to be performed and deal primarily with the accountability for the bank's recorded assets and liabilities. However, they should not be construed as restrictive. Circumstances relative to individual banks or situations encountered may make it necessary or desirable to expand certain procedures, apply alternative procedures, or extend examination procedures to other areas.

Okla. Admin. Code § 85:10-7-3

Amended at 25 Ok Reg 1064, eff 5-25-08