1. DAA and GEP Orlando 20081 Audit & Compliance or Audit vs. Compliance

2. DAA and GEP Orlando 20082 Debbie Austin – CTCP, CFSA, VP Fiduciary Compliance Manager PNC Bank, Philadelphia, PA Gary Pelcak – CTA, CFSA, CFE Chief Audit Executive Central National Bank, Junction City, Ks

3. DAA and GEP Orlando 20083 AGENDA Introduction Rules of Engagement Differences and Similarities Role of Audit and Compliance in today’s Environment The relationship of continuous Auditing, Monitoring, and Assurance

4. DAA and GEP Orlando 20084 AGENDA (cont) Key Steps to Implementation Benefits of an Audit / Compliance Partnership Summary Questions Closing

5. DAA and GEP Orlando 20085 Differences and Similarities –Both considered part of the Risk Management Process –Audit Reports ultimately to the Board –Compliance reports to a joint risk committee –Compliance testing moved to IA

6. DAA and GEP Orlando 20086 Some Definitions To Help Us Internal auditing is an independent, objective, assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

7. DAA and GEP Orlando 20087 Some Definitions to Help Us Compliance is a broad term routinely applied to a financial institution’s responsibility to adhere to state and federal laws and regulations, many of which are intended to protect consumers.

8. DAA and GEP Orlando 20088 Audit and compliance together should: Add Value = Value is provided by improving opportunities to achieve organizational objectives, identifying operational improvement, and/or reducing risk exposure through both assurance and consulting services.

9. DAA and GEP Orlando 20089 The audit function should provide Assurance Services = An objective examination of evidence for the purpose of providing an independent assessment on risk management, control, or governance processes for the organization. Examples include financial, performance, compliance, system security, and due diligence engagements.

10. DAA and GEP Orlando 200810 and should work with compliance on Consulting Services = Advisory and related client service activities, the nature and scope of which are agreed with the client and are intended to add value improve an organization’s governance, risk management, and control processes without the internal auditor assuming management responsibility. Examples: counsel, advice, facilitation, training.

11. DAA and GEP Orlando 200811 Role of Audit and Compliance in today’s Environment –Today’s audit and compliance challenges Regulatory compliance & controls 12CFR 9.9(b) Continuous Audit - Audit of Fiduciary Activities Internal audit value and independence Availability of skilled resources Determining appropriate technology solutions –Need for timely, on-going assurance over risk management and control systems

12. DAA and GEP Orlando 200812 Role of Audit and Compliance in today’s environment (cont) –Provide more frequent, more timely, analyses to better manage control deficiencies and risk.

13. DAA and GEP Orlando 200813 The relationship of continuous Auditing, Monitoring, and Assessment –Continuous Auditing Method used to perform audit related activities on a continuous basis. Includes control and risk assessment Performed by internal audit

14. DAA and GEP Orlando 200814 –Compliance Monitoring IA Schedule and Compliance Schedule Specific Requests to IA Dashboard –conduct monthly “Where are we at?” and “What are you seeing?” meetings On the same committees Invited to all Entrance & Exit Meetings Copied on all reports & memos

15. DAA and GEP Orlando 200815 –Continuous Monitoring Processes to ensure policies / processes are operating effectively and to assess adequacy / effectiveness of controls Performed by operational / financial management; audit independently evaluates adequacy of management activities

16. DAA and GEP Orlando 200816 –Continuous Assurance Combination of continuous auditing and audit oversight of continuous monitoring

17. DAA and GEP Orlando 200817 Relationship of Continuous Auditing/Monitoring/Assurance Role of continuous auditing dependent on management’s role in continuous monitoring of controls –Inverse relationship: the greater the role of management, the less of a direct role of internal audit True continuous assurance –Depends on effective monitoring by management of internal controls and Audit’s independent assessment of that function

18. DAA and GEP Orlando 200818 Application Areas Continuous control assessment –Identification of control deficiencies –Identification of fraud, waste, abuse Continuous risk assessment –Examination of consistency of processes –Development of enterprise audit / compliance plan –Support to individual audits and compliance requests –Support / Follow-up on compliance recommendations

19. DAA and GEP Orlando 200819 Key Steps to Implementation –Establish the requirements for audit and compliance objectives –Gain executive – level support –Ascertain degree to which management is performing monitoring role –Select appropriate technology solutions –Identify information sources and gain access

20. DAA and GEP Orlando 200820 Key Steps to Implementation (cont) –Understand business processes and identify key controls and risks –Build audit and compliance skill set –Manage and report results

21. DAA and GEP Orlando 200821 Benefits of an Audit /Compliance Partnership –Increased scope of audit activities –Increased ability to mitigate risk –Reduced cost of internal control assessment –Increased confidence in financial results –Improvements to financial operations

22. DAA and GEP Orlando 200822 Benefits (cont) –Reduced financial errors and potential for fraud –Reduced revenue leakage for improved bottom – line results –Sustainable and cost effective means to support compliance

23. DAA and GEP Orlando 200823 Summary –Differences and Similarities –Role of Audit and Compliance in today’s Environment –The relationship of continuous Auditing, Monitoring, and Assurance –Key Steps to Implementation –Benefits of an Audit / Compliance Partnership