What it is
Loan testing is the center of a bank or credit union audit: the auditor picks a sample, opens the file and checks whether the documents are there, the collateral is perfected, the financial information is current and the risk grade makes sense. This workbook records that work in a consistent layout and counts the exceptions.
Each row is one loan with Yes, No and N/A attributes, days past due, the bank’s grade and the auditor’s grade. The workbook flags conflicts between payment status and days past due, grade differences at your threshold and any No answer, then summarizes the exception rate by attribute and by segment and compares the classified balance under each grade.
When to use it
- On bank and credit union audits as the loan file test, for both documentation and risk rating.
- When the allowance depends on risk grades and the auditor needs to challenge them.
- In review of the bank’s own credit review, to re-perform a sample of its work.
What’s inside
- Sample tab: 40 loans with five attribute columns, status, days past due and both grades
- Automatic flags for status conflicts, grade differences and exceptions
- Summary tab with exception rate against a tolerable rate and coverage of the population
- Counts by attribute and segment, and classified balance by bank grade and auditor grade
Standard cited
This template follows AU-C 330 / AU-C 530. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 330 explained, AU-C 530 explained.
Questions
How should the sample be selected?
Under your sampling approach, with more weight on large balances, higher-risk segments, loans on the watch list and loans with changes in terms or recent restructurings. The workbook records the result and leaves the selection method to the sampling workpaper.
What happens with the exceptions?
Evaluate each for its effect on the allowance, on nonaccrual and past due reporting and on the bank’s credit review process, and project or extend the sample if the exception rate is above the tolerable rate you set.
Should borrower names go in the workbook?
No. Use the loan number and a borrower reference so the working paper does not carry personal or account details, and keep the file’s own identifiers in the secure source.
Related templates
- Audit Program: Bank Loans and Allowance for Credit Losses
- Bank Allowance for Credit Losses Calculation (ASC 326)
- Audit Sample Selection Workpaper (AU-C 530)
- Attribute Sampling Sample Size Worksheet
Last updated 11/05/2026. All free templates.