>>Return to Bulletins
BUREAU OF BANKING
Department of Professional and Financial Regulation
State of Maine
June 11, 1993
BULLETIN #25 AUDIT REQUIREMENTS
To the Chief Executive Officer Addressed:
Title 9-B M.R.S.A. § 453 requires the board of directors of a financial institution to employ an independent public accountant to conduct an annual audit. The duty of the public accountant shall be to audit the books, accounts, notes, operating systems, etc., and to make a written report of the condition of the institution to the president and chairman of the board, for the board. Under the statute, the Superintendent has the authority to review the annual audit and to comment on its adequacy.
The Bureau of Banking continues to interpret § 453 such that "independent public accountant" is construed to mean "independent certified public accountant," and "written report of condition" is construed to mean "audited financial statements prepared in accordance with generally accepted accounting principles, and a management letter detailing the internal control weaknesses and exceptions found during the course of the annual audit." Audit engagements that do not contemplate issuance of a management letter addressing internal control weaknesses, if any, are deemed not to meet the requirements of Title 9-B M.R.S.A. § 453.
In order to facilitate the Bureau of Banking’s review of annual audits, it is requested that each financial institution provide the Bureau of Banking with a copy of their audited financial statements, including notes thereto, and the management letter within 10 days after they are made available to the financial institution. The prior requirement that verification data be forwarded to the Bureau is rescinded concurrently with this Bulletin; however, verification data along with other audit data and workpapers should be made available to examiners upon request.
Institutions that are subsidiaries of holding companies are not required to have a separate annual audit provided that the holding company is audited by a certified public accountant on an annual basis and the subsidiary bank has, or is subject to, a holding company internal audit program that is deemed satisfactory by the Bureau of Banking. Given the consolidation of operation functions in many larger banking organizations, however, the parent company is required to provide the Bureau of Banking with copies of its audited financial statements and management letter, even those §s which may not specifically pertain to the subsidiary Maine bank(s).
The Federal Deposit Insurance Corporation ("FDIC") at 12 CFR Part 363 of FDIC Rules and Regulations adopted a final rule on May 11, 1993 implementing the audit and reporting guidelines of the Federal Deposit Insurance Improvement Act. This regulation exempts all institutions with less than $500 million in assets from the requirements of the regulation. The regulation, however, does not pre-empt state law; therefore, all financial institutions remain obligated to provide for an annual audit in accordance with Title 9-B M.R.S.A. § 453. Financial institutions of $500 million and over will need to comply with the additional requirements of 12 CFR Part 363 regarding audit committees, internal control attestation, compliance attestation, etc.
Credit unions are reminded that Title 9-B M.R.S.A. § 844 requires that the Supervisory Committee audit the books and records of the credit union annually, and perform a 100% verification of shares and deposits at least every 3 years, or more frequently if required by NCUA Rules and Regulations.
/s/H. Donald DeMatteis
Superintendent
