These failures include basic types of internal control breakdowns, such as failure to reconcile accounts in a timely fashion or failure to segregate duties in critical transaction-processing or accounting functions. In some of these cases, the external auditor did not identify the known failure in the attestations. We are working with banks to make sure this basic control process has substance in the future.
Management reports on internal controls can also help bank boards of directors and audit committees gain a better understanding of the nature of the risks and the quality of the controls in place. Audit committees should not just hear that the outside auditors have "signed off" on the FDICIA report.