Development Best Practices in Credit Union Supervision: Examination Definition, Objectives, Scope, and Process
How does examination help in determining the financial status of a credit union?
This paper discusses the role of on-site examination, which is an important risk-determining tool.
The paper discusses:
- The definition of the full scope of the examination process, stating that:
- The examination is a series of procedures used to determine the economic and financial status of credit unions;
- It focuses on trends, ratios, management and operations.
- The examination's objectives, such as:
- Evaluating the credit union's financial soundness;
- Appraising the quality of management, etc.
- Scheduling the examination frequency, taking into consideration the size and complexity of the credit union and its geographic location;
- The scope of examination, listing the five major areas that the examination should analyze;
- The procedures to be carried out to determine the scope of the exam, like reviewing the external audit, the financial information, ratio trends, etc.
- The contents of a normal full scope examination, which consists of a review of:
- General ledger and financial statements;
- Cash and investment analysis, etc.
- Initiation of the examination process, which includes:
- Pre-examination planning;
- On-site execution of the process.
- The total analysis process, describing the procedures of collecting, reviewing and interpreting data.
The paper concludes by describing limited scope or follow-up exams.
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