Chapter 12 – AFIC audit

This module allows you to perform various tests on loan and investment accounts to enable you to meet AFIC (now APRA) requirements.

0. Introduction

0.1 Description of Audit Tests

0.2. Suggested sequence and frequency of using this module

1. Year End Data Capture

2. Loans Related Parameters

3. Loans Related Tests

4. Print Loans Related Tests

5. Investment Related Parameters

6. Investment Maturity Test

7. Print Investment Maturity Test

8. Clear AFIC Audit Files

0. INTRODUCTION

0.1 Description of Audit Tests

This module has been designed to enable the auditor to meet some AFIC requirements. It is composed of various tests for loans and one test for investments. The tests are as follows:

All these tests can be run as at a Balance Date specified by the auditor.

  • Loan & Overdraft Maturity: For each loan account the amount of principal repaid in each period specified by the auditor is calculated under current repayment conditions and added to the corresponding period total. Overdraft accounts are allocated to the first period. The periods and balance date are specified by the auditor. This ensures that the test can be adjusted according to potential loan dissection requirement changes.
  • Investment Maturity: The maturity date for all investment account deposits is calculated and the account balance added to the corresponding period total. The periods and balance date are specified by the auditor. This ensures that the test can be adjusted according to potential deposit profile requirement changes.
  • Loan & Overdraft accounts with stopped interest: This test selects all loan and overdraft accounts for which interest is not currently being charged. A totalled detail report is produced.
  • Loans Purpose Code test: All loans are allocated to one of three Purpose Code classes, defined by the auditor, and the balance is added to the class total. If a loan has a purpose code which is not part of a class then this loan is reported on an exception report.
  • Loans Security Code test: All loans are allocated to one of three Security Code classes, defined by the auditor, and the balance is added to the class total. If a loan has a security code which is not part of a class then this loan is reported on an exception report.

0.2 Suggested sequence and frequency of using this module

This module would typically be used at the end of the financial year, however the information it provides may be useful on a more frequent basis.
The steps in using this module include:

Step Description
1. If required, run the Year End Data Capture using menu option 1. This is usually run overnight. Further details about when and why it may be necessary to use the Capture file are detailed in the section below "1. YEAR END DATA CAPTURE".
2. The following day (or within a few days) use menu option 2 - LOANS RELATED PARAMETERS or menu option 5 INVESTMENT RELATED PARAMETERS to enter the parameters you require for the Loans and Investment Tests.
3. When you decide to run the tests, select menu option 3 - LOANS RELATED TESTS or 6 - INVESTMENT MATURITY TEST.
4. The following day (or at any time later) use menu option 4 or 7 - PRINT LOANS RELATED TESTS and PRINT INVESTMENT MATURITY TEST to print the results of these tests.
5. When you are satisfied the AFIC audit is complete and you have no further use for any of the CAPS files generated during the AFIC audit, you can select menu option 8 - CLEAR AFIC AUDIT FILES to release the space used on the Financial Institution's computer system. Note that the 'Year End Data Capture' file is not cleared using this menu option.

The special feature of the trial balance program is that you can request a trial balance for individual accounts, classes or groups rather than just all accounts. This would be useful, for instance, to check the asset accounts only when auditing fixed assets.

1. YEAR END DATA CAPTURE

This option generates a Data Capture file containing Loan, Overdraft and Investment information which can be used for the subsequent tests of this module. You only need to use this option if you are unable to run all the AFIC processes you require on the Balance Date you require. In this case you can run the Data Capture on one night and then run the audit programs at a later more convenient date. For example, you may want to run a Data Capture on or just prior to June 30 and then run the audit programs sometime later when the Financial Institution has finished it's year end processing.

NOTE: You do not have to use this option. You can back-date the AFIC audit programs by specifying the 'Balance Date'. However the balance will be calculated as at this date and all other information such as the interest rate, maturity date etc. will be read off the current system files and this information may have changed since the balance date. Provided the Data Capture date is the same as the balance date, or close to the balance date, (a day earlier), and you can be reasonably sure loan and investment account details won't change considerably before or on the balance date, your resulting reports will accurately reflect the loan and investment account information as at the balance date.

The main reason this option has been included is because you may require reports dated as at June 30 but because of Financial Institution year end processing, you may be unable to run the audits at this time. Also, it is usual for account information to change on July 1, so that if you wait until after June 30 to run the audits, you run the risk of using information which did not apply in this prior period. Either you can run a Data Capture on June 30 taking a fraction of the time of an audit program or you can run it just prior to June 30, ensuring that your audit programs are using all the data relevant to the balance date. You can then run the audit at a more convenient time later.

Selecting this menu option and given you are in Test Mode, and the Data Capture has previously been run in live mode, CAPS prompts:

You are in Test Mode, do you want to overwrite the live Data Capture file? [N]
You would usually enter [N] to this question at which point you will be prompted:

Then, do you want to have a practice run without creating a Data Capture file? [Y]
Enter [Y] if you want to perform a quick 'test' run of the Data Capture file. This is not necessary. The message only appears in Test Mode - there are no warnings in Live Mode.

You are in Test Mode, do you want to start now (Y/N)
Enter [N] if you don't want a test run, but want to run the Data Capture file overnight.

- If you answer [Y], CAPS asks:

How many records do you want to process?
Enter the number of records you want CAPS to use as a test sample.

CAPS displays messages to indicate its progress. When finished it returns to the AFIC menu. This process displays the number of records processed in increments of 100.

The counter is counting Loan and Investment accounts.

- If you are in Live Mode, or if you answer [N], CAPS asks:

Do you want 'Year End Data Capture' submitted for overnight running?

Confirm (Y/N)

Enter [Y] to queue the program in NIGHT AUDIT

Enter [N] to cancel the request, and return to the AFIC menu.

Result

If you chose a test sample only, CAPS immediately runs 'Year End Data Capture'. If you chose a full live sample, CAPS sets up an instruction for 'Year End Data Capture' to be run overnight under 'NIGHT AUDIT, (See CAPS Utilities, Option 2 - NIGHT AUDIT for more details).

The results of running 'Year End Data Capture' are stored for later use.

2. LOANS RELATED PARAMETERS

This screen lets you enter parameters for the various loans tests.

<1> Balance Date
This is the date CAPS uses to calculate the balances. All balances are calculated as at this date.

<2> Loan Accts with Int Stopped
Indicate [Y] if you would like to select Loan accounts for which interest is not being charged, otherwise enter [N]. The default is [N].

<3> Loan Maturity Periods
Enter the maturity periods for which you would like a balance total. For example if you would like principal repaid totals for loans: less than 3 months, 3 months to 1 year, 1 to 5 years and more than 5 years, then enter dates as shown above. You must enter the dates in the format dd/mm/yy. NOTE: You can enter a Start date and no End date for the last of your periods which means that all loans with a maturity period greater than or equal to this date will fall in this last category. To do this, type your last Start Date and press [Enter]. Then for the Ending Date type the hash (#) key and press [Enter].

Purpose Code Classes

<4> (Class 1), <5> (Class 2) and <6> (Class 3)
Input all the Purpose Codes which correspond to a 'class'. For example you may have purpose classes of Personal, Commercial and Other for which various ranges of Purpose codes apply. NOTE: You may enter the class descriptions in the Print Parameters which will appear on the resulting report.

Security Code Classes

<7> (Class 1), <8> (Class 2) and <9> (Class 3)
Input the Security Codes which correspond to each 'class'. For example you may have classes of Unsecured, Secured by mortgage, Secured by other. NOTE: You may enter the class descriptions in the Print Parameters which will appear on the resulting report.

<10> Check Purpose Code Classes
Indicate [Y] if you wish to run the Purpose Code Class selection, otherwise enter [N]. The default is [N].

<11> Check Security Code Classes
Indicate [Y] if you wish to run the Security Code Class selection, otherwise enter [N]. The default is [N].

<12> Levels to Exclude
Enter any loan levels you would like to exclude. If you would like to include all levels leave this field blank.

3. LOANS RELATED TESTS

Do you wish to use the End of Year Data Capture file for this audit?
Enter [Y] if you have previously run the Data Capture and would like to use this information in the audit. Enter [N] to use the current data on the system.

- if you are in Test Mode. CAPS prompts:

You are in Test Mode, do you want to start 'AFIC loans selection' now? (Y/N)
Enter [Y] if you want to do a quick test run by selecting only a small number of accounts.

Enter [N] if you don't want a test run, but want to select all loan accounts overnight.

- if you answer [Y], CAPS prompts:

How many records do you want to process?
Enter the number of records you want CAPS to use as a test sample.

CAPS displays messages to indicate its progress. When finished it returns to the AFIC menu.

- if you are not in Test Mode, or if you answer [N], CAPS asks:

Do you want 'AFIC Loans Selection' submitted for overnight running? Confirm (Y/N)
Enter [Y] to queue the program in NIGHT AUDIT.

Enter [N] to cancel the request, and return to the AFIC menu.

Result

CAPS selects all loan accounts either from the Data Capture file or from the TRAN file and runs the tests you have specified in your parameters. This information is stored in the CAPS AFIC data files ready to be printed when required.

4. PRINT LOANS RELATED TESTS

This screen allows you to print the results of menu option 4 - LOANS RELATED TESTS. You can choose to print specific reports from the following menu.


If an asterix ‘*’ appears in a report column this means that this test was not selected in the Loans Related Parameters and the test has not been run; therefore no information is available for printing.

Report 1 to 6
Enter [Y] to print the report or [N] if you do not want to print it.

Print Password
Enter your print password. No user can print a report unless they have their print password. 

YOU MUST COLLECT THE PRINT OUT IMMEDIATELY !
DO NOT LEAVE AT THE PRINTER !

Result

Please refer to the example at the end of the chapter.

5. INVESTMENT RELATED PARAMETERS

The Investment Parameters screen is as follows :

<1> Balance date
This is the date CAPS uses to calculate the balances. All balances are calculated as at this date.

<2> Investment Maturity Periods
Enter the maturity periods for which you would like a balance total. For example if you would like totals for investments maturing: less than 3 months, 3 months to 1 year, 1 to 5 years and more than 5 years, then enter dates as shown above. You must enter the dates in the format dd/mm/yy.

NOTE: You can enter a Start date and no End date for the last of your periods which means that all investments with a maturity period greater than or equal to this date will fall in this last category. To do this, type your last Start Date and press [Enter]. Then for the Ending Date type the hash (#) key and press [Enter].

6. INVESTMENT MATURITY TEST

Do you wish to use the End of Year Data Capture file for this audit?
Enter [Y] if you have previously run the Data Capture and would like to use this information in the audit. Enter [N] to use the current data on the system.

- if you are in Test Mode. CAPS prompt:

You are in Test Mode, do you want to start 'AFIC Investment selection' now (Y/N)
Enter [Y] if you want to perform a quick test run by selecting only a small number of accounts.

Enter [N] if you don't want a test run, but want to select all investment accounts overnight.

- if you answer [Y], CAPS prompts:

How many records do you want to process?
Enter the number of records you want CAPS to use as a test sample.

CAPS displays messages to let you know what it is doing. When finished it returns to the AFIC menu.

- if you are not in Test Mode, or if you answer [N], CAPS prompts:

Do you want 'AFIC Investment Selection' submitted for overnight running?

Confirm (Y/N)
Enter [Y] to queue the program in NIGHT AUDIT.

Enter [N] to cancel the request, and return to the AFIC menu.

Result

CAPS selects all investment accounts either from the Data Capture file or from the Certificate file and runs the maturity test according to the dates you have specified in your parameters. This information is stored in the CAPS AFIC data files ready to be printed out when required.

7. PRINT INVESTMENT MATURITY TEST

This allows you to print out the information produced by the Investment Maturity Test, menu option 6.

Print Password
Enter your print password. No user can print a report unless they have their print password.

YOU MUST COLLECT THE PRINT OUT IMMEDIATELY !

DO NOT LEAVE AT THE PRINTER !

Result

Please refer to the example report at the end of the chapter.

8. CLEAR AFIC AUDIT FILES

This allows you to clear all files relating to the AFIC audit.

Are you sure you want to clear all AFIC audit files?
This is just a warning and a check to make sure you really know what you are doing. If you answer [Y], CAPS immediately clears all AFIC audit files. They cannot be recovered. If you answer [N] CAPS returns you to the AFIC menu without doing anything.

Result

The AFIC audit work files are irretrievably cleared.