Client:

Tier 1 Canadian bank

Duration:

3 months

Key Roles/ Services Performed:

Team lead on IT audit

Details:

Led and performed the IT assistance required for the support of the external audits evaluation of the bank's IFRS 9 Expected Credit Loss (ECL) model calculations.   Work entailed:

- Developing an understanding of the client's approach to the model development and validation processes including the source data collection processes and integrity controls, as well as the conversion and ongoing/operational processes and controls to ensure the integrity of data inputs and model calculations and outputs

- Developing and executing an audit program which examined the controls to ensure accuracy and completeness of the ECL calculation that included examination of:

- the data sources used for model calculations to ensure they were obtained and imported to the model completely and accurately, and represented all relevant sources of of loan sources (e.g., mortgage, LOC/HELOC, credit cards) and the requisite loan measures (such as credit grading, credit risk, PDs, LGDs, collateral values, and various macroeconomic factors).

- model calculation validation points to ensure that data points and calculated data variables were accurate and complete, as the calculations proceeded through various stages of the model calculation

- model output calculations and transitional processes for booking adjustments to the bank's financial statements, including the authorization controls and controls to ensure outputs were accurately and completely determined and recorded to the financial statements. 

- Audit procedures included extensive data analysis and tests to cross-check control totals and individual key variable testing, review of source scripts and outputs from Extract/Transform/Load (ETL) procedures, interviews with key project, systems and business personnel, documentation of process flows and key control points and inspection of supporting documentation and systems configurations.

- In addition, IT general controls relating to the systems which provided the source data and model calculation systems, were examined including the logical access, change management and computer operations controls.

Benefits to Client:

Through the work performed, the audit team was able to rely on the automated control processes and mitigated the extent of manual verification procedures otherwise necessary.   The bank received further validation from an independent source that their methodology and processes were sound and reliable.