The Audit of Derivative Products


Paul J. Sanchez, CPA, CBA, CFSA, CGMA conducts a small CPA practice in Port Washington, New York. He is also the owner of Professional Service Associates (PSA), a consulting and professional training and development business servicing corporate clients (auditors, controllers, etc.), CPA firms, professional associations and others. He was an assistant professor at Long Island University - C.W. Post Campus as well as an adjunct lecturer at City University of New York. Prior to starting PSA, he was the Vice President-Professional Development for the Audit Division of a regional bank and Director of Professional Practices and Vice President of a money-center bank, where he directed the professional practice development and training for internal auditors. He also was on the technical staff of the Auditing Standards and Examinations Divisions of the AICPA. He practiced public accounting in the New York office of Deloitte where he also was a firm recruiter and in-house professional development instructor. He was an owner and auditing and accounting seminar leader for the Person/Wolinsky CPA Review Courses, a company that prepared candidates to pass the Uniform CPA Examination. He is a frequent lecturer and seminar leader for accounting, auditing, banking, risk assessment and other professional presentations. He is the author of the textbook, “Accounting Basics for Community Financial Institutions” (Financial Managers Society, 2nd edition, Chicago, 2009) and the “Ideas an Analysis Letter: The Sanchez Take” (see www.sanchez-psa.com). As a contributing author, his chapter on ‘An Auditor’s Approach to Risk-Based Auditing: What to Audit and When,’ is included in the textbook, “Effective Auditing for Corporates: Key Developments in Practice and Procedures,” (Bloomsbury Information, Ltd, London, 2012).

This course, designed for all auditors, provides a working definition of "financial instruments." 

It identifies the typical derivatives (e.g. futures, forwards, options, swaps) and provides illustrations of derivatives and how they are specifically used by various organizations. The course carefully explores how the auditor approaches the audit of derivatives. Emphasis is placed on authorization controls over the derivatives as well as documentation of derivative product activities. Particular attention is given to proper derivative accounting (trading, fair value hedging, cash flow hedging) as well as required financial statement disclosures for financial instruments and related derivative products.

Derivatives were once thought of as weapons of financial destruction. Most banks said they didn’t use derivatives. They were too dangerous or the banker simply didn’t have the expertise to use them. Now, when asked if a bank uses derivatives and they reply with a “no” the next question is “why not?”. Today, they have become an essential tool to control risk, particularly credit risk. More and more corporate entities are asking internal auditors to give comfort that the derivative action in the bank is occurring in a safe and sound environment and derivatives are properly accounted for. 

This webinar provides an overview of derivatives and focuses on auditing and accounting for derivatives.

Learning Objectives:

  • Attendees will become familiar with the ever-increasing use of derivative products. 
  • Additionally, a sound audit approach for providing derivative product audit coverage to these products can be immediately implemented as a result of the course.
  • All auditors whose companies are currently using or considering the use of derivatives should attend this valuable course. Additionally, for companies that “do not” use derivatives, the course will force attendees to ask “why not?”
  • Attendees will learn about specific types of derivatives and their purpose. 
  • Attendees will distinguish between hedging (fair value and cash flow) and speculation.

Who Should Attend:

  • Auditors – internal 
  • Auditors – external 
  • Accountants – all levels 
  • Line management
  • Corporate management 
  • Board members 
  • Asset/liability committee members 
  • Regulators
  • $155.00