Audit

Action Summary

The board of directors should ensure that an effective internal audit function for the financial institution's payment systems is in place.  The audit program should test the quality of retail payment systems internal controls and compliance with laws, regulations, management policies, procedures, and limits.  Audit coverage should be risk-focused and should cover all retail payment systems including third party relationships.  Special attention should be given to new retail payment technologies and products.

 

An effective audit function should include internal and external audit coverage, tailored to the complexity of the financial institution, and based upon an accurate, enterprise-wide assessment of the institution's risk profile.  Due to the potentially large transaction volumes and associated dollar value when initiating payments, internal audit coverage is critical for an effective oversight of the financial institution's retail payment systems.  Auditors should perform an evaluation of the financial institution's retail payment system business lines on the basis of overall risk to the financial institution.  Based on this evaluation, they should develop an appropriate schedule of audits.  The audit coverage should be sufficient to validate the internal control environment surrounding the processing, clearance, and settlement of retail payment transactions.  Auditors should review accounting controls and assess the effectiveness of transaction processing, clearance, and settlement processing procedures.

The board of directors should ensure the operational and IT audit program tests retail payment system internal controls, management policies, and procedures.  IT audit coverage should include the design and implementation of retail payment products, and the supporting IT environment encompassing internal data centers, contingency sites, and network infrastructure.  IT audit coverage should verify the adequacy of internal controls in applicable business lines responsible for managing day-to-day retail payment system services.  Internal audit should assess the comprehensiveness of the institution's vendor management program to ensure the institution is appropriately managing vendor risk. See the IT Handbook Audit Booklet. Internal audit should also evaluate payment systems when conducting BSA audits.

 

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