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Credit Risk Management Audit Checklist

A comprehensive checklist for auditing credit risk management practices in financial institutions, covering risk assessment, underwriting standards, monitoring processes, and regulatory compliance.

Credit Risk Management Audit Checklist

by: audit-now
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About This Checklist

In the dynamic world of financial services, effective credit risk management is crucial for maintaining a healthy loan portfolio and ensuring institutional stability. This Credit Risk Management Audit Checklist is designed to help financial institutions evaluate and enhance their credit risk assessment processes, underwriting standards, and monitoring practices. By systematically reviewing key aspects of credit risk management, this checklist enables auditors to identify potential weaknesses, ensure compliance with regulatory requirements, and optimize the institution's approach to managing credit exposure. Regular use of this checklist can significantly improve loan quality, reduce potential losses, and strengthen overall risk governance.

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Industry

Financial Services

Standard

Financial Reporting Standards

Workspaces

ATM locations

Occupations

Credit Risk Analyst
Internal Auditor
Risk Manager
Loan Officer
Chief Credit Officer
1
Are the underwriting standards being adhered to?

Select compliance status.

To assess if the organization is following established underwriting practices.
2
What is the current amount of loan loss reserves?

Enter the amount in USD.

To evaluate the adequacy of reserves for potential loan losses.
Min: 0
Target: 1000000
Max: 5000000
3
Describe the credit monitoring processes in place.

Provide a brief description.

To understand how credit risk is monitored and managed.
4
Is the organization compliant with Basel III and IFRS 9?

Select compliance status.

To ensure adherence to key regulatory requirements.
5
Provide details on the credit risk governance framework.

Describe the governance framework in detail.

To assess the effectiveness of governance in managing credit risk.
6
Is the loan approval process compliant with internal guidelines?

Select compliance status.

To assess adherence to the established loan approval processes.
7
What is the current average loan default rate?

Enter the default rate as a percentage.

To evaluate the performance of the loan portfolio.
Min: 0
Target: 5
Max: 100
8
Describe the risk assessment methodology used for the loan portfolio.

Provide a brief description.

To understand the approach used in assessing credit risk.
9
When was the last loan portfolio review conducted?

Select the date of the last review.

To ensure regular reviews are conducted to manage credit risk.
10
Is the current loan loss reserve adequate based on the portfolio risk?

Select adequacy status.

To evaluate the sufficiency of reserves against potential losses.
11
How frequently is credit risk monitored?

Select the frequency of monitoring.

To assess the regularity of monitoring activities in managing credit risk.
12
Is there a regular reporting mechanism for credit risk?

Select true if reporting mechanism is in place.

To ensure that credit risk is adequately reported to management.
13
Describe the strategies in place for remediating identified credit risks.

Provide detailed remediation strategies.

To understand how the organization addresses and mitigates credit risks.
14
What is the current risk exposure value of the loan portfolio?

Enter the risk exposure value in USD.

To evaluate the potential risk exposure related to the loan portfolio.
Min: 0
Target: 5000000
Max: 10000000
15
When was the last comprehensive risk assessment conducted?

Select the date of the last assessment.

To ensure that risk assessments are performed regularly.
16
Is the governance structure for credit risk clearly defined?

Select the clarity status of the governance structure.

To determine if there is a well-established governance framework for credit risk management.
17
Are the roles and responsibilities for credit risk management documented?

Provide details on the documentation of roles and responsibilities.

To ensure that all stakeholders understand their responsibilities in managing credit risk.
18
How many risk committees are in place to oversee credit risk?

Enter the number of risk committees.

To evaluate the organizational commitment to credit risk governance.
Min: 1
Target: 3
Max: 10
19
Describe the training programs available for staff on credit risk governance.

Provide details on the training programs.

To assess the organization's efforts in educating staff about credit risk governance.
20
When was the last review of the credit risk governance framework conducted?

Select the date of the last governance review.

To ensure that the governance framework is regularly evaluated for effectiveness.
21
What is the current risk rating of the loan portfolio?

Select the risk rating.

To assess the overall risk associated with the loan portfolio.
22
What percentage of the portfolio consists of non-performing loans?

Enter the percentage of non-performing loans.

To evaluate the quality of the loan portfolio.
Min: 0
Target: 10
Max: 100
23
What mitigation strategies are in place for high-risk loans?

Provide details on mitigation strategies.

To understand how the organization manages high-risk loans.
24
When was the last comprehensive risk assessment of the loan portfolio conducted?

Select the date of the last risk assessment.

To ensure that risk assessments are performed periodically.
25
Describe any findings from the last internal audit related to the loan portfolio.

Provide a detailed description of audit findings.

To assess any issues or concerns identified in the audit process.

FAQs

Credit risk management audits should be conducted at least annually, with more frequent reviews of high-risk portfolios or in response to significant changes in market conditions or lending strategies.

Key areas include credit underwriting policies, risk rating systems, loan documentation practices, credit monitoring processes, stress testing methodologies, and loan loss reserve adequacy.

These audits are typically conducted by internal audit teams, risk management specialists, or external auditors with expertise in credit risk assessment and banking regulations.

The checklist ensures that credit risk management practices are robust and consistent, leading to better-informed lending decisions, improved risk identification, and more effective portfolio management strategies.

Yes, the checklist can be customized to address specific credit risk management requirements of various lending institutions, including commercial banks, credit unions, mortgage lenders, and fintech lenders.

Benefits of Credit Risk Management Audit Checklist

Enhances the effectiveness of credit risk assessment and monitoring processes

Ensures compliance with regulatory guidelines on credit risk management

Improves loan portfolio quality and reduces potential credit losses

Facilitates early detection of deteriorating credit conditions

Strengthens overall risk governance and decision-making processes