INDIVIDUAL RETIREMENT ACCOUNTS AUDIT PROGRAM
Audit Program Sections: A. Issuance B. Settlement C. Interest D. Distribution E. IRS Reporting F. Follow-Up
SECTION A - ISSUANCE
1.
Review and document the internal controls associated with the booking of new IRA’s.
2.
Review and document internal controls and procedures associated with performing IRA system maintenance.
3.
Select a sample of issued IRAs and determine that they are adequately logged with the following attributes: a. name of the customer. b. initials of the person responsible for opening the IRA c. date the IRA was opened
4.
Select a sample of recently issued IRA’s. a. Review terms for appropriateness. b. Verify the information on applications to associated time deposit system documentation. c. Trace IRA support, documentation back to system. d. Verify the customer acknowledges receiving the IRS 5305A “Individual Retirement Custodial Account “ and applicable disclosure documents. e. Determine that all applicable bank and regulatory forms are being used to open IRA’s, i.e. W-9s.
5.
Verify that deposits to the account are supported by deposit slips and that the trancodes are appropriate for the type of transaction.
SECTION B - SETTLEMENT
1.
Review and document internal controls over reconciliation process of IRA’s. Test subsidiary ledgers. Reconcile balances to the G/L control accounts. Review records to determine that subsidiary records are regularly reconciled to the G/L.
2.
3.
4.
Review any outstanding differences to ensure that they are being researched and cleared accurately and timely.
SECTION C- INTEREST
1.
Review and document internal controls associated with interest check preparation and interest expense reconciliation.
2.
Determine the accuracy of interest calculations, accruals and payments.
3.
Select a sample of the most recent rate changes For IRAs and determine that rates were Accurately and timely changed in the bank’s IRA system.
SECTION D – DISTRIBUTION
1.
Review and document internal controls associated with the redemption of IRA’s. Controls related to the redemption of non-matured, as well as matured IRA’s, should be evaluated.
2.
Verify compliance with established distribution procedures. ** a. Note that the customer signed the distribution form or election of payment.
b. Trace proceeds disbursed via check and / or wire transfers on IRA system records to verify accuracy. Note if proper transcode were used.
3.
For closed IRAs determine that rollover or direct Transfers were properly authorized. Ensure that Transfers were properly designated.
**Note: it is only necessary for customers to make mandatory withdrawals from one IRA that the customer owns once they reach the age of 70 ½ therefore the bank is under no obligation to ensure the customer complies with IRA withdrawal requirements.
SECTION E – IRS REPORTING
1. Review and document internal controls associated with the process over IRS Reporting for all IRA accounts.
2. Determine that the Bank reports Traditional, ROTH, and Education IRA contributions on separate 5498 forms and that the 5498 statements agree with the automated system. Include deceased/beneficiary accts in sample. a) Verify Traditional, ROTH, and Education IRAs are being properly reported on the 5498 Form. b) Verify the Fair Market Value (FMV) for each IRA type agrees with the automated system. Note FMV is as of December 31, of the tax year being reviewed.
3. Determine if the Bank reports distributions on IRS Form 1099-R. Beneficiary Accounts should be included in the sample selected.
4. Determine that the bank follows specific reporting requirements for deceased IRA owners and their beneficiaries. Note: If deceased and beneficiary IRAs were included in E-2 and E-3, additional testing may not be necessary. (a) Verify if the financial organization generates IRS Form 5498 and FMV reports for decedents/beneficiaries. (b) Verify that Required Minimum Distributions (RMD) not taken by the IRA Owner in the year of their death are reported to the beneficiaries on Form 1099-R.
5. Determine that the custodian, at least annually, supplies form W-4P. (Note: This must be done each tax year, prior to the first distribution taking place, and should be maintained on file in accordance with IRS rules)
6. Verify that IRS Reporting Forms are generated and transmitted to the IRS in accordance with the following: 1099-R (Magnetic Filing) by February 28th 1099-R (Paper Filing) by April 1st 5498 Reporting by May 31st
SECTION F - FOLLOW-UP
1. Review prior audit report and responses. Determine from inquiry and testing if corrective action has been taken.