Preparing for an Exam – Key Considerations

Exams and audits are an inevitable part of any financial institution’s lifecycle. Whether you’re facing a routine regulatory exam or an internal audit, how you prepare can make a significant difference in the outcome. Financial institutions must not only meet regulatory requirements but also demonstrate transparency, compliance, and a commitment to sound operational practices. 

Proper preparation can help ease the exam process, minimize potential findings, and ensure that your institution is positioned for long-term success. Here are some key considerations to keep in mind as you prepare for an upcoming exam. 

Understand the Scope of the Exam 

Before diving into the preparation process, it’s essential to clearly understand what the exam will cover. Exams can vary widely in scope depending on the institution’s size, complexity, and regulatory environment. The most common exams include: 

• Safety and Soundness Examinations: These focus on the financial health and stability of the institution. 

• Regulatory Compliance: These assess your adherence to regulatory requirements, consumer protection laws, and more. 

• IT and Cybersecurity Exams: Given the growing reliance on technology, exams often include a review of your institution’s cybersecurity posture. 

• Internal Audits: These may focus on specific operational areas, financial reporting, or even governance and internal controls. 

Ensure that you are clear on what exam is being conducted and what specific areas will be under scrutiny. This allows for a targeted and effective approach to preparation. 

Organize Your Documentation and Records 

One of the first steps in preparing for an exam is ensuring that all documentation and records are organized, accessible, and up to date. This includes: 

• Financial statements: Ensure they are complete, accurate, and compliant with accounting standards. 

• Policies and Procedures: Review internal policies to ensure they reflect current practices and compliance requirements. 

• Compliance Records: Verify that all required reports and forms, including Suspicious Activity Reports (SARs), Currency Transaction Reports (CTRs), and others, are up to date. 

• Contracts and Agreements: Ensure that any contracts or legal agreements are stored correctly and easy to access. 

During the exam, you may be asked to provide evidence of your institution’s operations, decisions, or compliance with regulatory requirements. Having everything well-organized can save valuable time and demonstrate your institution’s commitment to compliance. 

Conduct an Internal Review 

Before the formal exam, conduct an internal review or pre-audit to identify any potential weaknesses or areas for improvement. This will help you identify gaps in your policies, procedures, or records and give you a chance to address them before regulators or auditors arrive. 

Key areas to review include: 

• Internal controls: Are your internal controls robust enough to detect and prevent fraud or errors? 

• Compliance with regulations: Ensure that you are fully compliant with the latest financial regulations, including those related to BSA/AML, data protection, and consumer rights. 

• Audit trails: Verify that audit trails are complete and accurate for all transactions and processes. 

This internal review can help you identify potential issues that could arise during the exam and give you time to address them proactively. 

Communicate with Your Team 

Clear communication with your team is critical when preparing for an exam. Ensure that your key staff members are informed about the process, what’s expected of them, and their roles during the exam. It’s essential that everyone is on the same page so that the exam process goes smoothly. 

Consider scheduling internal meetings or training sessions to discuss the upcoming exam and any key areas of focus. This will help your staff understand the importance of the exam and the need for their cooperation. 

Plan for the Exam Day 

Finally, have a plan in place for the actual exam day. Designate a point of contact who will liaise with the examiners to streamline communication. Ensure that the necessary documentation is readily available, and make sure key personnel are available to answer any questions the examiners may have. 

A calm, organized approach to the exam will set a positive tone for the process and can help ensure that everything runs efficiently. 

How Brady Martz Can Help 

At Brady Martz, we assist financial institutions with thorough exam preparation, from organizing documents to conducting internal reviews and offering compliance support. Our team is well-versed in regulatory requirements and can provide guidance on how to ensure your institution is fully prepared for any upcoming exams or audits.