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Pursuant to a congressional request, GAO assessed the quality of audits of savings and loan associations in the Federal Home Loan Bank Board's (FHLBB) Dallas district.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Other 1. The American Institute of Certified Public Accountants (AICPA) should revise the AICPA Audit and Accounting Guideline for Savings and Loan Associations to include specific steps for ensuring that those audits are performed in a quality manner. The guide should include the detailed discussion and specific requirements for, among other things: (1) identifying the nature and inherent risks of land and acquisition, development, and construction projects loans; (2) evaluating the potential effects of increases in restructured and past-due loans; (3) following up on the work of federal examiners; (4) ensuring that regulatory violations and formal regulatory actions are disclosed; and (5) properly reporting all material weaknesses in internal controls.
Closed - Implemented
AICPA issued a revised savings and loan audit guide in August 1991, which addressed GAO recommendations.
Other 2. AICPA should communicate the results of the GAO review and other noted savings and loan associations (S&L) audit problems to all AICPA members, instructing them on the types of problems that may occur in auditing S&L. Such instruction should recommend that CPA firms performing savings and loan audits review the quality of those audits to help ensure that: (1) staff performing the audits have sufficient knowledge in S&L operations; (2) audit methodologies are specifically tailored to take into account changes in the operations of their individual S&L clients and the S&L industry environment; (3) evidence of all audit work is properly documented in the working papers; and (4) financial risks, regulatory violations and formal regulatory actions, and internal control weaknesses are fully disclosed in audit reports.
Closed - Implemented
AICPA took a number of actions to communicate the review. For example, AICPA reprinted the report in its entirety in the March 1989 Journal of Accountancy. The journal has a distribution of over 300,000.

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