CMS Case Study

C loyd Bank and Trust Risk Assessment Summary 2020-2021

Audit Area:

Fixed Assets

Definition (score range)

Risk Factor

Score

High (21-30)

Moderate (11-20)

Low (0-10)

Rationale

The Bank is subject to minimal regulatory requirements with regard to fixed assets.

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

Compliance

4

Nature of Transactions

Expenditures for fixed assets are typically high in dollar amounts. The Chief Executive Officer and Chairman of the Board employ a high level of scrutiny over high dollar fixed asset expenditures. Additionally, members of the Accounting Department perform an annual inventory of all fixed assets.

15

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

Members of management with responsibility in this area have a broad base of experience with accounting for fixed assets, and the process is carefully monitored by the Bank's Chief Financial Officer. Annually, an inventory of fixed assets is performed using asset tracking software (Creative Solutions).

Nature of Operations

10

decision making, or important to product delivery.

Controls are strong or adequate.

Control activities over fixed assets are in place and appropriate policies and procedures govern the accounting function, as a whole.

Controls are nonexistent or known to be weak.

Internal Controls

10

No changes since last audit are planned this year.

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

The Bank's fixed assets will increase with the construction of a new branch in 2021.

Changes to systems, processes, or procedures

10

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.

Management

9

58

Risk Score

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