Quality Control Audit vs. Internal Audit  

QUESTION:

ANSWER:

A mortgage lender is required, for a variety of reasons, to implement a QC program that identifies credit and/or regulatory issues in its origination and servicing functions, as applicable.  A QC audit looks at the end product, regardless of whether the process is credit or compliance focused.  Generally, QC audits, which are forms of transactional testing, are narrower in scope than Internal Audits.

Internal Audits review for and identify a variety of items such as credit, regulatory, operational, financial, and reputational risks.  An Internal Auditor looks at the process itself and independently evaluates the risks and controlactivities within the process.  To this end, an Internal Auditor will perform a number of tasks, such as review policies, procedures and reports, conduct management interviews with the respective business units to gather information on the process evaluated, document evidence of the process through walkthroughs, and perform transactional testing, as needed.  The focus is not necessarily on the end product as is the case with a QC audit, but rather the focus is on the adequacy, soundness, and effectiveness of internal controls within a process to ensure that the mortgage lender attains the end result sought while complying with Agency and investor guidelines, laws and regulations and industry best practices.