MORNBFI Vol. 1 - Planters Development Bank

§ 4190Q08.12.31volume of past due loans as well as loanlossprovisions. On the other hand, financialaudit report (FAR) shall refer to the AFS andthe opinion of the auditor. The AFS of QBswith subsidiaries shall be presented side byside on a solo basis (parent) and on aconsolidated basis (parent and subsidiaries).QBs shall cause an annual financialaudit by an external auditor acceptable tothe BSP not later than thirty (30) calendardays after the close of the calendar year orthe fiscal year adopted by the QB. Report ofsuch audit shall be submitted to the boardof directors and the appropriate departmentof the SES not later than 120 calendar daysafter the close of the calendar year or thefiscal year adopted by the QB. The report tothe BSP shall be accompanied by the:(1)certification by the external auditor on the:(a) dates of start and termination of audit;(b) date of submission of the FAR andcertification under oath stating that nomaterial weakness or breach in the internalcontrol and risk management systems wasnoted in the course of the audit of the QB tothe board of directors; and (c) the absenceof any direct or indirect financial interest andother circumstances that may impair theindependence of the external auditor;(2) reconciliation statement between the AFSand the balance sheet and IS for the QB andtrust department submitted to the BSPincluding copies of adjusting entries on thereconciling items; and (3) other informationthat may be required by the BSP.In addition, the external auditor shallbe required by the QB to submit to the boardof directors, a Letter of Comment (LOC)indicating any material weakness or breachin the institution’s internal control and riskmanagement systems within thirty (30)calendar days after submission of the FAR.If no material weakness or breach is notedto warrant the issuance of an LOC,a certification under oath stating that nomaterial weakness or breach in the internalcontrol and risk management systems wasnoted in the course of the audit of the QBshall be submitted in its stead, together withthe FAR.Material weakness shall be defined asa significant control deficiency, orcombination of deficiencies, that resultsin more than a remote likelihood that amaterial misstatement of the financialstatements will not be detected orprevented by the institution’s internalcontrol. A material weakness does notmean that a material misstatement hasoccurred or will occur, but that it couldoccur. A control deficiency exists when thedesign or operation of a control does notQ RegulationsPart I - Page 54Manual of Regulations for Non-Bank Financial Institutions