Accurate financial reporting is critical for banks and credit unions—not only for regulatory compliance but also for decision-making, stakeholder trust, and long-term stability. Yet, financial institutions often face reporting misstatements caused by overlooked details, complex transactions, or gaps in internal controls. A well-structured internal audit process can help identify and address these issues before they escalate.

At KPM CPAs & Advisors we work closely with financial institutions to educate teams, evaluate internal audit structures, and provide insight into risk-focused areas that may impact reporting accuracy.

Why Misstatements Happen

Understanding the root causes of misstatements is the first step in reducing them. Common contributors include:

• Complex Estimates: Allowance for credit losses under CECL, interest accruals, or fair value estimates can be difficult to model and monitor without strong controls.
• Classification Errors: Misclassifying loans, investments, or income streams may lead to reporting inconsistencies or compliance concerns.
• Manual Processes: Spreadsheets, journal entries, and reconciliations done manually—without review—leave room for human error.
• Regulatory Reporting Challenges: Call reports and other filings require precise mapping of financial data, and missteps can occur when reporting processes are unclear.
• Compliance Weaknesses: In areas such as BSA/AML or ACH processing, breakdowns in oversight can result in operational and reporting issues.

By recognizing these risk areas, institutions can begin to take a more strategic approach to internal audit planning.

The Educational Role of Internal Audit

Internal audit serves not just as a control function, but as an opportunity to learn from internal processes and improve them. An effective internal audit program:

• Highlights trends or recurring issues that may lead to reporting inaccuracies
• Provides insight into how policies are applied in practice
• Reveals control gaps that could expose the institution to unnecessary risk
• Encourages thoughtful dialogue between departments on risk and compliance
• Offers a chance to revisit processes, documentation, and training

What to Look for in a Strong Internal Audit Program

For financial institutions evaluating their internal audit process, here are a few guiding questions:

• Are audit activities aligned with the institution’s risk profile?
• Does the audit plan include coverage of financial reporting processes?
• Are audit findings used to drive process improvements or staff training?
• Is there a balance of compliance-focused and operational reviews?
• Do internal audit reports provide clear, useful information for management?

We often work with institutions that want to better understand how their current audit efforts support reporting accuracy and regulatory preparedness.

Our Role as an Educational Partner

We’re here to supplement your team’s knowledge and offer an external perspective on common pitfalls and opportunities. Our services for financial institutions include:

• Internal audit outsourcing or co-sourcing
• Reviews of specific functional areas (e.g., lending, BSA/AML, financial reporting)
• ACH and wire transfer audits
• Call report review support
• Presentations or training sessions for boards or audit committees

We aim to provide value not only through testing but also by helping institutions better understand the “why” behind our recommendations.

Knowledge Supports Confidence

Accurate reporting starts with informed decision-making. Whether your institution is developing an internal audit plan, reviewing internal controls, or preparing for an upcoming exam, knowledge and education are key to building stronger systems.

Interested in Learning More?

If you’re exploring ways to strengthen your internal audit process—or would like to discuss common misstatement risks with our team—we welcome the opportunity to connect. Our goal is to share insight and help you make informed choices that support your institution’s goals.