CMS Case Study

C OR\G Bank and Trust Risk Assessment Summary 2020-2021

Audit Area

Cash Disbursements

Definition (score range)

Risk Factor

Score

High (21-30)

Moderate (11-20)

Low (0-10)

Rationale

Compliance

Cash disbursements are subject to a comparatively lower level of regulatory requirements.

Regulatory requirements are limited to low-profile regulations and law issues that warrant action but have significantly lower levels of risk. Impact on accurate timely financial reporting is minimal. Likelihood of material financial reporting effect is negligible.

Significant regulatory requirements are evident; however, regulatory expectations are clear, seasoned, and considered routine. Violations if any will be technical in nature. Material financial effect is possible; however, activity is routine and noncomplex and errors would be readily evident in normal operations. Seasoned and complex manual or automated systems are important to management decision making or product delivery; however, collaborating or alternative back-up systems exist. There is no basis for control assessment, or they are thought to be weak. Minor changes since last audit are anticipated this year.

Potential violations of high profile regulations with potential fines, legal liability or costly corrective action are possible. Material financial misstatement is possible due to incorrect handling of infrequent, complex transactions or estimates. Critical management decisions may be based on these financial areas. Complex manual or automated systems are new, critical to management

5

Nature of Transactions

Risk of loss is inherent in cash transactions. However, the disbursement process is relatively routine and the process does not involve a great degree of complexity. Financial statements and related expense accounts for cash disbursements are closely monitored by the accounting department.

13

Nature of Operations

The process of cash disbursements is automated and considered routine. Disbursements are subject to high levels of approval, scrutiny, and reconciliation by members of management. Department managers must approve employee expense reports through the accounts payable system. Additionally, the Bank's Chief Financial Officer is actively involved in the monitoring of cash disbursements.

Noncomplex systems and operations are seasoned, with well established back up routines.

11

decision making, or important to product delivery.

Internal Controls

Controls are strong or adequate.

As noted above, control activities over cash disbursements are in place.

Controls are nonexistent or known to be weak.

9

Changes to systems, processes, or procedures

No changes since last audit are planned this year.

The Bank plans to open two loan production offices (LPO) and begin construction of a new branch in 2021.

Major changes since last audit are anticipated this year or not recently reviewed. Management lacks experience or places low priority on internal controls.

11

Management

Members of management have achieved their positions within the Bank because of their level of knowledge, demonstrated skills, and experience within the banking industry. A strong emphasis is placed on maintaining a sound control environment.

Management has average experience.

Management is experienced and has high priority on controls.

8

57

Risk Score

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