Why these audit findings were not raised before by the other auditors in the previous audits?. This question is always comes up during audit report discussion. What would be your response to such a question? I always say, next year there might be other new issues raised by different auditors. I really would like to have your input in to this. Thank you.

The Good Ol', "you never looked at that before, why are you looking at it now?". Yeah, I've gotten that one too. Well, the answer could be several reasons:

1. Through discussions/research you realize this is an area that recently has been scrutinized by examiners, when in the past maybe they have not paid much attention to it, i.e. Flood insurance.
2. You have a better understanding of how the control fits into the big picture and you feel it warrants review.
3. Due to an incident in the recent times, this control warrants greater scrutiny, i.e. teller embezzeled money, maybe we need to look at our controls a bit better.
4. If it was a regulatory requirement, maybe it was amended recently and it is required to be reviewed.
5. Last but not least, "Because I said so!". (Thats my personal favorite! )

Having been in the public accounting industry, I have seen this several times. Actually, we recently has the same thing happen during our annual audit.

Some additional reasons that may warrant for a comment during the current year that was not raised in the past include:

1. The Bank is currently focusing on increasing the particular operation. This may cause for a policy or procedures to be drafted.

2. The Bank's increase in asset size.

3. Change in regulators, regulations, etc.

I'm sure there are several other reasons, but also a lot of times, during the closing meeting, when management from the Bank meets with external auditors, they may agree to exclude something form the letter to the Audit Committee. But if they come back, and determine nothing has been done to address the issue, they will include the comment in subsequent years.

I would not hesitate to contact the auditors and get their input on why it was included this year and not during last year. They should be able to give you some reasons.

I've heard this comment numerous times, both as a bank regulator and as an auditor.

My first reaction has always been, "Who cares? If is wrong, it is wrong...quit looking for excuses."

Then, realizing that audit and management need to get along, the answer is, of course, it depends...

A few possible reasons...

1 - The issue may not have been in the audit scope in the past. This could be due to new, updated procedures; time constraints during the last audit; considered low risk last time around (low risk items may only be reviewed every few years); etc.

2 - Hot topics. Many times, auditors tend to spend more time on hot topics, as defined by the regulators, accountants, management, etc. The issue may not have been a hot topic last year but is this year.

3 - The environment may have changed. Prior to 9/11, business continuity planning was an important but often overlooked or underaddressed issue...both the regulators and the banking industry in general consider it critical. Because of the increase in fraud, many internal controls are now receiving a more indepth look. Errors or irregularities may have occured in the bank and now merit a closer review of the associated controls.

4 - Training and expertise. The auditor may not have known to look at the issue, or didn't understand the importance of the issue. As each year passes, our knowledge base and experience increases.

5 - And one of the hardest answers to give...I just missed it. No one is perfect. When reviewing exam or audit workprograms from the past year, I have almost always found something that wasn't quite perfect...and some things that were totally wrong (and people following me up find errors as well).

Bottom line, let management know why it wasn't addressed in the past, then move on to the real issue...the actual audit finding.

This is a very common comment, one I heard very recently. I recently discovered during Reg Z training that we were not disclosing credit sales when we financed repos or foreclosed property, also discovered we were not always 15 days grace period on primary dwellings (OTS requirement), also on ROR's were not refunding all monies. Of course the first thing they say is "examiners never questioned that, none of the other auditors ever cited us for that, when did that go into effect?" My response is not that I am questioning the expertise of any examiner/auditor. There sample size/scope may not have included any items where this was as issue. Also, all examiners seem to focus on different things, even tho thorough. We all have different experiences, and the items I mentioned were items I had to deal with in the past and know these are some problem areas, so I always look and question procedures. I am sure there are things I miss also. Different examiners pick up on different things.

We hire outside auditors to periodically check our compliance, and I have asked this question myself. In my case, usually it is the result of a deeper delve into the area based on the improvements made to our program since the prior audit. I attribute it to the "I've gotta find SOMETHING" syndrome.