Compliance Audit
Topic Center
As with the burden of cleaning out a fridge, no one wants to undergo an audit – not even a compliance audit.
Audits are arduous and time-consuming, and they routinely shine a light on host of messy, sticky issues— but, in an industry bound by strict regulations, audits need to happen.
Audits: Painful But Necessary
Can you remember the last time you cleaned out your refrigerator? A grimy fridge isn’t just unpleasant; it can hasten spoilage, encourage mold and bacteria growth, and even increase your electric bills. Still, many of us don’t sort through the food we keep in cool storage as much as we should—it’s just not very high on anyone’s list of priorities. And, as long as no one gets sick, it’s probably no big deal… right?
If you’re lending to consumers, it’s like you’ve got a giant commercial fridge. And compliance audits help you get rid of the rotten stuff.
A Compliance Management System contains 4 areas of focus:
Mouse over each area to learn more.
Compliance audits are one of a few mechanisms through which government agencies, banking partners, and members of executive leadership can ensure that a business is following fair lending practices. Audits not only allow capital lenders to verify that clients conform to their standards and industry regulations, but help organizations uncover areas of risk and take proactive corrective action.
And don’t forget about third parties. Consumer lenders must themselves audit their third parties (e.g. collections agencies) to ensure they are complying with fair lending practices as well.
The level of complexity in lending regulations has reached an all-time high, but lenders have unprecedented access to auditing tools that uncover compliance data at the granular level. Imagine that your fridge could clean itself, or at least notify you when it’s time and illuminate the yogurt cups and salsa jars that need to be tossed out. This is the power of a robust compliance management system.
What the CFPB Looks for in an Audit Program
Clearly, the CFPB insists that the lenders it oversees have some kind of audit functionality in place, but what exactly are regulators looking for? In assessing an organization’s CMS, examiners will seek to determine whether:
- The audit program is sufficiently independent and reports to the board or a committee of the board.
- The audit program addresses compliance with all applicable Federal consumer financial laws.
- The schedule and coverage of audit activities is appropriate to the size of the entity, its consumer financial product offerings, and its manner of conducting its consumer financial products business.
- All appropriate compliance and business unit managers receive copies of audit reports in a timely manner.
- Audit results lead to appropriate, timely corrective action.
The Last Line of Defense
Just as stocking and using the right ingredients will help keep your fridge clear before a mess can accumulate, your CMS should provide several defensible compliance processes in addition to audit functionality. A well-structured CMS includes three lines of defense against regulatory action:
Audits + Automation = Awesome Compliance
Make life easy for your auditors and your compliance staff: consider adopting and implementing an automated compliance management system. An automated compliance management system provides with you a single platform with which to store, assign, and track the policies and training your financial and customer-focused staff are accountable for. This, in turn, gives auditors one place to go for the reports, evidence, and documentation they require.
With an automated CMS, you will no longer encounter any nasty surprises or missing documentation—because you’re already tracking compliance across your business, always. It’s about as close as you can get to a self-tidying fridge. In terms of audits, that is.
Recent Articles on Compliance Audits
Compliance audits are always a hot topic for our readers. Here’s the latest research and perspectives.
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Hate Internal Audits? Read This.
There are two general truths about internal audits: They provide you with the information necessary to make pivotal decisions that reduce risk and improve operations. Federal and state regulators expect [ More... ]
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Use Complaints & Audits to Gain a Competitive Advantage: Learn How
When was the last time you cleaned out your refrigerator? [ More... ]
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Stat of the Week: Don’t Forget Which Audit Activities that Bring the Most Value
Happy Holidays! We have a really fun gift for you [ More... ]
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Tools You Can Use: Audit Compliance Initiative Worksheet
Welcome to Tools You Can Use, our series about—what else?—tools [ More... ]
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How to Make Life Easier for Your Auditors
What’s the status of that consumer complaint? Are we classifying [ More... ]
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What Is the Secret to Internal Audits?
It’s audit season here on the Compli blog. Earlier this [ More... ]
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A How-to for Auditors: Internal Audit Insider Tips, Part 2
Can you remember the last time you conducted an audit [ More... ]
Compliance Audit Resources
Study up on the topic be downloading these great resources.
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CMS University
Enroll in CMS University today! Nobody likes a 1,500-page textbook. But, that’s the material regulators expect you to know about consumer lending compliance and building a ... [More]
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Worksheet: Audit Your Compliance Initiatives
This worksheet will help you think through how to effectively audit your compliance initiatives. Get an in-depth view of the quality of your compliance program ... [More]
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Internal Audit Blueprint eBook
Learn what the CFPB looks for when evaluating your company’s internal audit program, and how to create a rock-solid internal audit program that protects your ... [More]
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CMS Blueprint eBook
Building a solid Compliance Management System is no easy task. It’s a big, hairy, complicated beast. But an important one. Let’s demystify what the CFPB ... [More]
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CFPB Workshop: Compliance Audit
When you have employees and managers inspecting their own work, they can either miss or hide the truth. The key is an independent, objective audit. This ... [More]