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Application of Continuous Auditing To a Sub Prime Loan Portfolio

Application of Continuous Auditing To a Sub Prime Loan Portfolio. Presentation By Benedetto Bongiorno CPA, CRE Lynford Graham CPA, PhD, CFE. Introduction. Applications to public and private RE & financial clients More than a decade of application experience Required understanding

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Application of Continuous Auditing To a Sub Prime Loan Portfolio

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  1. Application of Continuous Auditing To a Sub Prime Loan Portfolio Presentation By Benedetto Bongiorno CPA, CRE Lynford Graham CPA, PhD, CFE

  2. Introduction • Applications to public and private RE & financial clients • More than a decade of application experience • Required understanding • Industry • Comparables & indices • Entity’s prior performance • Frequency of CA during reporting period

  3. Integration of Continuous Audit and Sarbanes-Oxley Section 404 • Dual Purpose testing for identified transactions • Small additional sample • Reliance on IT Systems and Information and Communication Component of COSO • Continuous audit and monitoring

  4. Applications • Connecting to client data • Direct server connectivity (ODBC or JDBC) • Server connectivity on site, through WEB • Transportable laptop connectivity • Identifying benchmarking data for substantive testing • Examples of continuous audit tests • Compare Loans To Client Listing (completeness) • Compute Theoretical (Optimum) Performance of Loans • Compare Computed Balances to Actual Balances (valuation, accuracy) • Compare Computed Level Annuity Payments to Actual Payments • Identify Modified Loans (unusual transactions) • Perform Independent Aging of Loans (valuation)

  5. Demonstration - Sub Prime Loan Portfolio • $2 Billion Sub Prime Loan File • Download all primary records • Identify incomplete & unusable records • All data have predictive properties

  6. Demonstration - CA Analytics • Compute & simulate each note’s theoretical (optimal) performance • Compare computed results to • System records • Internal reporting • Financial reporting • Specific evaluation analytics

  7. Demonstration • Identify problem loans via analysis • Focused sampling of loans for substantiation • Benchmark loan portfolio • Compare evaluated performance reserve to financial statement • Alternative outcomes • Analyses supports • Analyses not support Conclusions

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