San Francisco Professional Events List

Understanding and Auditing Investments and Derivatives - OAP285

Dec 04, 2017 - 08:30 AM - Dec 06, 03:00 PM
MIS Training Institute
MicroTek Computer Lab SF
655, Montgomery St

San Francisco,
ZIP: 94111

"Thorough and good information. Very helpful."
- Director, MUFG Union Bank

Auditing investments and derivatives can be very challenging in today's volatile markets. In this three-day seminar attendees will gain a basic understanding of investment and derivative terminology, the strategies entered into by portfolio managers/investment managers/traders and the core processes used in the risk management and back-office operations. We will examine front-office, back-office and middle-office activities; control objectives; red flags and internal control best practices. In addition, attendees will learn to differentiate between derivative hedging and speculating activity and gain an understanding of the new financial regulation changes being introduced into the market over the next several years. We will pay special attention to identifying the specific risks common to investment and derivative strategies and cover how to minimize those risks with a strong internal control environment. Through class discussions, case studies and practical exercises, you will learn how to develop meaningful audit programs to use in one of the most material areas an auditor can review.

Prerequisite: Fundamentals of Internal Auditing (OAG101)​Bank Internal Audit School (OAP385) ​or equivalent experience
Advance Preparation: None
Learning Level: Intermediate
Field: Auditing
Delivery Method: Group-Live

Who Should Attend

Internal and External Auditors; Risk Managers and Middle Managers; Investment Auditors and Accountants; Regulators and Bank Supervisors

CPEs: 24
INSTRUCTOR:Robert McDonough
LEVEL: Intermediate
Tuition: $2,495


What You Will Learn:​

1. Introduction to Investment and Derivative Auditing​

2. Understanding the Investment Environment
• introduction to the investment process
• understanding the short-term market: T-Bills, commercial paper, banker’s acceptance, CDs, Eurodollars, agencies.
• reviewing major securities in capital markets
• fixed income securities: Treasuries, corporate bonds, zero-coupon bonds, asset-backed, mortgage-backed securities, and municipals.
• equities: preferred, common, equity-linked notes

3. Understanding the Derivative Environment
• the importance of auditing derivatives
• what’s going wrong
• derivative debacles of the past
• hedging vs. speculation
• introduction to derivative risk management
• what’s going right
• earnings stability
• price certainty

4. The Forward and Futures Contracts
• defining the forward contract
• why forwards rather than futures
• forward example
• defining the futures contract
• why futures rather than forwards
• characteristics of exchange-traded contracts
• the mechanics of margin
• using futures to hedge fair market value
• financial future examples

5. The Option Market
• fundamentals of options
• option terminology
• analyzing the option premium
• types of financial options: exchange-traded, caps and floors, swaptions
• strategic use of options

6. The Swap Market  
• swap mechanics
• swap terminology
• comparative advantage swap examples
• foreign currency hedging with swaps
• advantages to hedgers: swaps vs. futures
• understanding financial swaps examples
• the mechanics of swaptions

7. The Investment Infrastructure: Best Practices 
• back office and reporting
• back office systems and controls
• understanding the pitfalls of investment reporting
• reporting class exercise
• the roles of the front office
• learning the portfolio management process
• investing class exercise
• auditing broker activity
• auditing soft-dollar activity
• reviewing the functions of the middle office
• model verifications
• price verifications

8. Controlling Investment and Derivative Risks
• management risk
• responsibilities
• policies and procedures
• segregation of duties: front office, middle office, back office
• internal controls and audit considerations
• market risk
• model risk
• price risk
• liquidity risk
• internal controls and audit considerations
• credit/counterparty risk
• master agreements
• credit enhancements
• credit metrics
• internal controls and audit considerations
• legal risk
• netting enforceability
• foreign counterparties
• internal controls and audit considerations
• operational risk: internal controls and audit considerations

9. Accounting for Derivatives 
• FAS 133 concepts
• understanding the “accounting concept of hedging”
• hedge criteria qualifications
• reviewing the documentation standards

10. Establishing a Comprehensive Compliance Function: The Current State of the New Financial Regulation​

11. Case Study: Auditing the Investment and Derivative Environment​

12. Summary
• key controls
• red flags

Event Categories
Keywords: class , environment, Financial , identifying, learn, Learning , Management , program


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