Helpful Steps to Prepare for an Audit

Helpful Steps to Prepare for an Audit

Preparing for an audit can be challenging; however, if you follow the steps below, it will help you and your staff prepare for an audit and help it run smoothly. If the reconciliations and requested forms can be prepared in advance and submitted for review, this will allow us to sample and select files before the audit. If possible, the information requested from the files should be prepared before the auditor(s) arrival and be available for review once the auditor(s) arrive. This organization of information will help expedite the audit and be less intrusive and less time consuming during the on-site review.

Key Steps and Items to Review: 

  • Have your reconciliations current and up to date- Ensure all your accounts are reconciled and in balance and have the reconciliations available for review.
  • Review your reconciliations for any areas of concern-Review to ensure your accounts are in balance. This means your adjusted bank balance matches your ending book balance and trial balance for the period being reconciled.
  • Review the following reports in your reconciliations
    • Outstanding Deposit Report – Review any outstanding deposits listed on the outstanding deposit report and investigate any stale-dated deposits.
    • Outstanding Disbursements Report – Review your outstanding disbursements report for stale-dated checks that may cause additional fees or penalties if not cleared timely, such as, check payable for taxes, recordings, payoffs, Hazard Insurance, and HOA dues.
    • Trial Balance Report – Review your Trial Balance Report for files that may be short. Investigate and fund file shortages timely. Also, review miscellaneous records for activity and errors and make posting corrections as required to clear these types of files.

Ensure your Insurance coverages are current and up 

  • To date- Review your E&O, Fidelity, and Surety bonds (if required) to ensure they are current and up to date and are in compliance with state-required coverage amounts.
  • Review recording procedures and ensure documents recorded promptly – Review your recording procedures to ensure materials are being recorded timely, recording rejections are followed up with timely and recording overages are refunded back to the customers.
  • Review policy remittance process- Review your policy and remittance process and ensure you are current on typing and remitting policies and premium timely to your underwriters.
  • Ensure files are well documented and are available for review-Whether you have electronic files or physical files, be sure to have the files well documented. This includes but is not limited to: copies of incoming and outgoing funds, wire confirmations, payoff letters, commitments and updates to commitments, ID’s, copies of recorded documents, signed settlement statements or (HUD if utilized), up to date file ledgers, final policies, premium calculation worksheets if available in your system. 
  • Review your ALTA Best Practices Policies, and Procedures manuals-You should have up to date written policies and procedures related to the ALTA Best Practices. For agents who participate in the Westcor Compliance Program, it is essential to have your policies and procedures reviewed and updated annually to ensure you have addressed all items published in the most current Best Practices Standards by ALTA. Additional testing will be performed related to all areas of the ALTA Best Practices for any agents participating in the program to be eligible for a Westcor Compliance certification. This includes but is not limited to review of safeguarding NPI, utilizing secure email, up to date virus protection and active firewalls, background checks completed on employees with access to NPI and escrow funds, backup procedures and disaster recovery plans.

Although audits can be time-consuming and may interrupt the ordinary course of business, you can take steps to make the audit a more pleasant experience by preparing before the on-site portion of the audit. The underwriter requires the audit, and in many cases, required by the states you are operating within. Westcor tries to make the audit process as pleasant as possible. We provide feedback to assist agents in ensuring they are in compliance with any state and underwriter requirements and point out areas that may need review or improvement. With a little preparation ahead of the audit, the on-site portion of the audit should be a smooth process.

Written by: Anthony Messineo, Audit Director at Westcor Land Title Insurance Company