Regulatory Compliance & Audit Standards Flashcards

Under the Fair Housing Act, a verification agent discovers a landlord is requiring a higher security deposit from applicants of a specific national origin. This is an example of:

Answer: Disparate treatment discrimination

Disparate treatment occurs when individuals are treated differently based on a protected class, such as national origin, which violates the Fair Housing Act.

Which regulation requires financial institutions to implement a Customer Identification Program (CIP) as part of anti-money laundering compliance?

Answer: Bank Secrecy Act / USA PATRIOT Act Section 326

Section 326 of the USA PATRIOT Act amended the Bank Secrecy Act to require financial institutions to establish CIP procedures to verify customer identities.

An auditor reviewing an employment verification process finds that the employer retains I-9 forms for 10 years after hire for all employees. What issue should the auditor flag?

Answer: Retention should be 3 years from hire or 1 year after termination, whichever is later

USCIS regulations require I-9 forms to be retained for 3 years from the date of hire or 1 year after the date employment ends, whichever is later.

During a compliance audit, a CVA finds that a background screening company sends adverse action notices simultaneously with the pre-adverse action notice. Which law does this violate?

Answer: Fair Credit Reporting Act (FCRA)

The FCRA requires a waiting period between the pre-adverse action notice and the final adverse action notice to give the consumer time to dispute inaccuracies.

Which of the following best describes the purpose of a 'compliance audit trail' in verification processes?

Answer: A chronological record of actions taken during verification for accountability and review

A compliance audit trail provides a chronological, documented record of verification steps taken, ensuring accountability and enabling post-audit review.

A CVA is auditing a tenant screening process. The screening company uses an algorithm that results in Black applicants being denied at a statistically higher rate than white applicants with similar credit profiles. This may constitute:

Answer: Disparate impact under the FHA

Disparate impact under the FHA occurs when a facially neutral policy or practice has a discriminatory effect on a protected class, even without discriminatory intent.

Under SOX Section 404, who is responsible for assessing the effectiveness of internal controls over financial reporting?

Answer: The company's management and external auditors jointly

SOX Section 404 requires both management to assess and external auditors to attest to the effectiveness of internal controls over financial reporting.