Auditors' Approach to Auditing the Asset/Liability Management (ALM) Function

Duration: 90 Minutes
This 90-minute webinar provides an overview of ALM principles and ALM measurement techniques. The webinar provides an excellent review of ALM and how the auditor approaches ALM audit coverage.
ALM Measurement Techniques
Product ID: 507974
It focuses on auditor issues and procedures related to the audit of the ALM function and it covers:
  • Liability sensitivity
  • Monitoring the mismatch of maturing interest sensitive assets and maturing interest sensitive liabilities
  • Knowing management's view of the future direction of interest rates
  • Reviewing strategies used to react to expected changes in interest rates
  • Understanding "immunity"
  • Understanding "position management"
  • Managing the "gap"
It also discusses the composition of the ALM committee and the decisions expected of that high level committee. Attention is focused on ALM committee approaches to interest rate risk management such as: Net interest income analysis (NII), Net present value analysis (NPV).

Objectives of the Presentation
  • The purposes for an ALM committee
  • How decisions of ALM affect the entity
  • What is interest rate risk (IRR)
  • How IRR is monitored and controlled
  • How maturities are "manipulated" and "why?"
  • What is immunity?
  • What is position management?
  • What is the composition of high level committee
  • NII models for controlling IRR
  • NPV models for controlling IRR
Why Should you Attend
  • Learn about liability sensitivity
  • Appreciate the significance of the mismatch between interest sensitive assets and interest sensitive liabilities
  • Focus on the issue of knowing management's and the ALM committee's decision about the direction on interest rates
  • Understand key ideas about immunity, position management, gap, duration etc
  • Obtain an overview of NII and NPV approaches to ALM
  • Review how auditor's approach the audit of the ALM function
Areas Covered
  • Interest rate risk
  • Liability sensitivity
  • Simulation models
  • Position management
  • Gap positions
  • Immunity
  • Derivative usage for ALM
  • ALM committee composition and duties
Who will Benefit
  • Senior bank management
  • Selected directors on the Board
  • Controllership personnel
  • ALM committee members
  • Audit committee members
  • Internal auditors - all levels
  • External auditors
  • Primary regulators
  • Risk managers
  • Financial statement preparers
Topic Background
Depository institutions generally borrow short-term funds (deposits) and lend them out for long periods (loans). This creates a mismatch of the interest rates it pays for and when it pays liabilities and the rates it receives and when it receives amounts for assets. The mismatch in rates and different funds durations creates a serious interest rate risk. Auditors, who audit interest-rate risk generally, focus on the audit of the ALM function, the high-level group that tries to both minimize interest-rate risk as well as possibly capitalize from it.
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Instructor Profile:
Paul J. Sanchez, CPA, CBA, CFSA, CGMA conducts a small CPA practice in Port Washington, New York. He is also the owner of Professional Service Associates (PSA), a consulting and professional training and development business servicing corporate clients (auditors, controllers, etc.), CPA firms, professional associations and others. He was an assistant professor at Long Island University - C.W. Post Campus as well as an adjunct lecturer at City University of New York. Prior to starting PSA, he was the Vice President-Professional Development for the Audit Division of a regional bank and Director of Professional Practices and Vice President of a money-center bank, where he directed the professional practice development and training for internal auditors. He also was on the technical staff of the Auditing Standards and Examinations Divisions of the AICPA. He practiced public accounting in the New York office of Deloitte where he also was a firm recruiter and in-house professional development instructor. He was an owner and auditing and accounting seminar leader for the Person/Wolinsky CPA Review Courses, a company that prepared candidates to pass the Uniform CPA Examination. He is a frequent lecturer and seminar leader for accounting, auditing, banking, risk assessment and other professional presentations. He is the author of the textbook, "Accounting Basics for Community Financial Institutions" (Financial Managers Society, 2nd edition, Chicago, 2009) and the "Ideas an Analysis Letter: The Sanchez Take" (see www.sanchez-psa.com). As a contributing author, his chapter on 'An Auditor's Approach to Risk-Based Auditing: What to Audit and When,' is included in the textbook, "Effective Auditing for Corporates: Key Developments in Practice and Procedures," (Bloomsbury Information, Ltd, London, 2012).
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