Title Page

  • Property / Building Name

  • Program Manager

  • Registered Address
  • Auditor

  • Conducted on

HUD Audit Chapter 7

General Audit Requirements

Audit of the Financial Statements and Supplementary Information

  • The basic financial statements prepared in accordance with generally accepted accounting principles (GAAP) and the independent auditor’s report thereon in accordance with GAAS and GAGAS.

  • The independent auditor’s report must cover the lender’s computation of its adjusted net worth, the hardcopy of the electronic submission, and if applicable, consolidating schedules.

  • The auditor’s reporting on this information should be done in accordance with GAAS relating to “Supplementary Information in Relation to the Financial Statements as a Whole.”

Internal Control Report

  • An independent auditor’s report on internal control over financial reporting based on an audit of financial statements.

  • If the lender engages the auditor to provide an opinion on internal control over financial reporting, as required either by FDIC or under the standards of the Public Company Accounting Oversight Board, such reporting may be submitted for this requirement.

  • An independent auditor’s report on internal control over compliance with HUD-assisted programs. This report may be combined with the independent auditor’s report on internal control over financial reporting.

Compliance Report

  • It includes a listing of compliance areas tested.

  • An independent auditor’s opinion on compliance with specific program requirements that could have a direct and material effect on each major HUD-assisted program.

Schedule of Findings and Questioned Costs

  • This is required for all material instances of noncompliance, and significant deficiencies and material weaknesses in internal control identified by the auditor (including those cases in which corrective action was taken by the lender on the finding after the end of the fiscal year).

Corrective Action Plan

  • This is prepared by the lender using the lender’s letterhead, in which the lender describes the corrective action taken or planned in response to the findings identified by the auditor.

  • The plan should also include comments on the corrective action taken on prior findings resulting from relevant HUD, Office of Inspector General audits and HUD program reviews.

Electronic Submission of Audited Financial Statements and Compliance Data

  • All FHA-approved lenders are required to electronically submit their financial and compliance data to the Lender Approval and Recertification Division through FHA’s electronic data system within 90 days of the close of the end of their fiscal year.

  • The submission must be based on the signed issued paper copy of the audit of the lender’s financial statements, supplemental information, and the signed independent auditor’s report containing the auditor’s opinion.

  • A copy of the issued signed hardcopy of the financial statements, supplemental information, and the signed independent auditor’s report(s) must be submitted electronically.

  • The auditor is required to perform a separate agreed-upon procedures engagement to determine whether the financial data entered into HUD’s electronic system by the lender are accurate and reconcile with the data on the lender’s hardcopy audited financial statements that are contained in the issued signed audit report.

  • The auditor must compare the electronic data transmitted to HUD to the hardcopy of the basic financial statements, supplemental information, footnotes, the signed independent auditor’s reports, the computation of adjusted net worth, and financial data templates.

  • This procedure should be performed under the current AICPA Statements on Standards for Attestation Engagements for Agreed Upon Procedures Engagements.

  • A request for a 30-day extension must be submitted to HUD<br>management, through the electronic system, no earlier than 45 days before the electronic submission due date and no later than 15 days before the submission due<br>date.

  • Approved lenders must submit either audited or unaudited financial statements to HUD, within 30 days of the end of each fiscal quarter in which the lender experiences an operating loss of 20 percent or greater of its net worth and must continue to make submissions until the lender demonstrates an operating profit for two consecutive quarters or until the next annual recertification by FHA, whichever is the longer period.

  • The submission should be emailed to LEAPRecert@hud.gov

Compliance Requirements and Suggested Audit Procedures

  • Quality Control Plan Implementation

  • Sponsor Responsibility for Third-Party Originators

  • Branch Office Operations

  • Loan Origination

  • Loan Servicing

  • Federal Financial and Activity Reports

  • Lender Annual Recertification, Adjusted Net Worth, Liquidity, and Licensing

  • Loan Disbursement

  • Eligible Fees and Charges

  • Loan Settlement

  • Escrow Accounts

  • Kickbacks

Audit Finding Reporting

  • Content of Finding

  • Corrective Action in Process

  • Corrective Action Completed

Reference Material

  • the auditor should ensure that the updated references or the reference materials that were in effect during the period of the audit are used for performing the audits.

  • Auditors should make any needed modifications or updates to the material used to perform their audits.

  • If reference to the handbook is needed in the audit report findings or in any other part of their audit report, auditors should ensure that the entire updated reference (including the revision number) is used.

Technical Assistance

  • On behalf of the HUD Secretary, the Lender Approval and Recertification Division determines the acceptability of all audited financial statements submitted by FHA-approved lenders.

  • If a program participant has questions related to HUD’s audited financial statements’ requirements, the participant may contact the helpline at 202-755-7400 or submit an email to LEAPRecert@hud.gov


  • Additional Comments

  • Auditor Name and Signature

  • Program Manager Name and Signature

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