Contributed June 27, 2001 by jackline staats *** AUDIT MANUAL *** MONEY MARKET AND EUROCURRENCY PLACED/TAKEN Objectives: 1. To determine the adequacy of existing policies and procedures and whether they are current or not. 2. To determine compliance with internal policies and procedures, and laws and regulations. 3. To ascertain proper segregation of duties exists. 4. To verify subsidiary records prove with the appropriate general ledger accounts. 5. To verify that transactions are promptly recorded. 6. To verify that interest income/expenses are accurately recorded. Pre-Audit Activities: For term placements/deposits: 1. Obtain a currency chart of accounts and identify all eurocurrency placements/deposits related accounts. 2. Based on the scope of the audit, generate all the general ledger activity applicable to Eurocurrency transactions. 3. Obtain supporting documentation: a. Daily position sheets b. Outstanding Balance List (For overnight placements/deposits, use the audit procedures for Federal Funds). 1. Prove the Eurocurrency deposits listed in the Outstanding Balance List to the applicable General Ledger Accounts. 2. Determine if accounts are opened with requests from customers to traders/account officers (i.e. telex, letter). Obtain copies of requests. 3. Are copies of the transactions given to Treasury Administration Department to continue processing (i.e. confirm with customers and enter necessary entries into the system)? Obtain necessary copies of the transactions. 4. Recalculate the interest due at maturity for a sample of time deposits accepted/placed since the last review. Determine if the original interest calculation has been verified. 5. Determine that each time deposit accepted/placed by the bank conforms to the maturity and interest rate requirements and procedures prescribed by Regulation Q of the Federal Reserve System. 6. Determine that unpaid matured items are not accruing interest and are properly controlled. 7. Determine that automated confirmation are generated and mailed to customers overseas on the respective transaction dates. Ascertain, where appropriate, reciprocal confirmations are received from the customers and filed into the corresponding files 8. Scan the daily trading sheets prepared by the traders and verify that contract confirmations are completed for deposit placements with future value. 9. Determine that all outgoing payments have been approved properly by Treasury Administration and executed by Money Transfer Department. 10. Determine that proper entries are made for deposit placement on the value date and reversed at maturity. 11. Review closing balances on statements from the U.S. nostro accounts to determine if the excess funds of the bank are profitably utilized. 12. Determine whether the position clerk is informed daily of all time deposits maturing within the next five business days. 13. Verify that total monthly unmatched deposits do not exceed authorized guidelines. 14. Determine that Treasury Administration Department opens accounts properly with instructions from Account Officers. 15. Review the department's documentation supporting each deposit accepted/placed. 16. Determine that the details of the deposit contract are entered on the Daily Position Sheet by maturity date. (Call deposits have no fixed maturities). 17. Determine that all incoming payments are reported to the Money Transfer Department one day prior to value date. 18. Determine that one day prior to maturity, payment instructions are given to the Money Transfer Department. 19. Determine that proper entries are made for both deposit accepted/placed as to amount and maturity. 20. Determine that deposits accepted in a foreign currency are matched and placed as to amount and maturity. 21. Determine that Eurodollar and Eurocurrency deposits conform to the current limits 22. Is detail information given to Treasury Division to place the time deposit transactions? INTERNAL CONTROL QUESTIONNAIRE 1. Is the Money Transfer Department physically separate from the dealing unit (i.e. Treasury Division)? 2. Is the Money Transfer Department responsible to the Head of Operations and not the Treasury Division? 3. Are copies of the dealer slips for deposits placed, maintained in maturity date order? 4. Are any dealers' slips missing, or have any dealers' slips been altered since the last review? 5. Do the dealers' slips indicate the payment instructions, the broker's name and the initial of the trader who originated the deal? 6. Is a check independent of the Treasury Department made of the numerical sequence of dealers' slips used? 7. Does the Treasury Department enter the details of contracts into the system? 8. Is a maturity tickler file maintained for each currency? 9. Are contract confirmation copies filed by maturity date within the currency tickler file? 10. Are contracts with future value dates filed by one day prior to value date in the currency tickler file? 11. Do traders adjust daily their currency position sheets to reflect deposits placed? 12. Does Treasury Department hedge its foreign currency placements including both its principal and interests? 13. Do good communications appear to exist between Treasury Department and Treasury Administration for: a. An effective working relationship with Operations and Management information? b. Coordination with Treasury Administration regarding correct delivery/settlement instructions? 14. Does Treasury Administration prove their subsidiary records to the General Ledger at least monthly? 15. Is the proof performed by someone other than the employee who confirms the deposits? 16. Are test keys used for payments made by cable? 17. Are authorized signers clearly designated? 18. Does a maturity tickler file exist to ensure prompt payment to time deposits? 19. Are time deposits confirmed with customers? 20. Has management established definite trading policies and guidelines? 21. Are procedures in place to monitor actual trading for compliance with the above policies? 22. Does management review credit exposure of counterparties? 23. Are estimation of cash flows performed and are reviewed by managers? 24. Are positions and related gains and losses periodically reviewed by management?