Pub. 7 2010-2013 Issue 3

September/October 2012 13 Extraordinary Service for Extraordinary Members. events (procedures for daily functions and policies for future); 2. Address the implementation of activities; 3. Initiate based on departmental needs; 4. Primary client is department manager; 5. Involve staff throughout the organization; 6. Yields a product (policies, procedures, tools) rather than an audit report. Auditing Activities: 1. Focus on past or historical events (specific point in time, i.e., “as of date” for audit or exam); 2. Address compliance issues and business risks; 3. Initiated by audit committee or board of directors; 4. Primary client is audit committee/senior manager; 5. Conducted exclusively by members of third-party audit firm or internal audit department; 6. Yields an audit report with findings and recommenda- tion used by senior managers to address how well the or- ganization is adhering to policies and legal requirements, as well as to begin the development of a product (i.e., a policy, procedure, tool) to guide the organization with compliance for requirements of the policy or procedure. In regulatory opinion, as stated in several exam findings, allowing the audit personnel to perform traditional consulting activities (policy or procedure development) gives the bank a “false” sense of security. That is, although the auditors’ experience may give them insight in how to correct an issue or the ability to produce a product to assist the bank in imple- menting a specific finding, allowing the auditor to produce the policy or procedure would remove the independence, which in essence the auditor would then be auditing their own work. Given the importance of independence and objectivity to the internal audit function, it is of the utmost importance to consider this opinion. The credibility and effectiveness of the entire audit func- tion is at stake if, by engaging in certain activities, auditors are risking their independence. Based upon the Standards for the Professional Practice of Internal Auditing (SPPIA), the requirement for independence and objectivity can be summa- rized as follows: “Internal auditors should be independent of the activities they audit. Such independence permits internal auditors to perform their work freely and objectively. Without independence, the desired results of internal auditing cannot be realized. . . . [Independence] is achieved through organi- zational status and objectivity.” Objectivity is an independent mental attitude that internal auditors should maintain when Uncompromising Quality. Baird Holm represents Ànancial institutions and bank holding companies, in all aspects of banking and lending law. To learn more about our practice, please visit our website at www.bairdholm.com . 1500 Woodmen Tower Omaha, NE 68102 www.bairdholm.com 402.344.0500 Jonathan J. Wegner “Their legal guidance is practical, efÀcient, and positively delivered.” Chambers USA  Policy and Procedures — continued on page 14