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Published byPhyllis Lambert Modified over 8 years ago
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Application of Continuous Auditing To a Sub Prime Loan Portfolio Presentation By Benedetto Bongiorno CPA, CRE Lynford Graham CPA, PhD, CFE
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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
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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
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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)
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Demonstration - Sub Prime Loan Portfolio $2 Billion Sub Prime Loan File –Download all primary records –Identify incomplete & unusable records –All data have predictive properties
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Demonstration - CA Analytics Compute & simulate each note’s theoretical (optimal) performance Compare computed results to –System records –Internal reporting –Financial reporting Specific evaluation analytics
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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 supportConclusions
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