Audit Checklist Could Change Remarketing Compliance

Compliance, the buzzword du jour in auto finance today, is even extending to remarketing.

The latest compliance innovation to aid remarketers comes from the International Automotive Remarketers Alliance, which recently published its first Standardized Auction Audit Checklist. Some industry professionals think the audit checklist could change the way remarketers implement compliance practices.

IARA’s document covers five primary risk categories:

  • physical & data security;
  • financial controls;
  • licensing & insurance;
  • compliance; and
  • business management review.

It also covers myriad control points, objectives, and tests within each group. If remarketers want to implement better compliance practice, IARA’s auction audit checklist, which was released last January, looks like a good starting point.

Tony W. Long, IARA’s executive director, says the project kicked off in 2013 as an effort to simplify the recordkeeping and audit process for consignors and auctioneers. The goal: a checklist that could “serve as a guide for auctions and consignors that are forming or modifying their own compliance policies,” Long says.

“The idea of a checklist isn’t new or revolutionary,” Long says. “Consignors and auctions alike have been facilitating the competitive auction bid process, accurately documenting the process, and protecting the ultimate consumer’s interests for many years.” He adds that federal and state agency have required audits from remarketers in the past, and for such audits, “preparation is the key to minimizing disruption of normal business functions.”

“By formulating ‘guidelines’ for preparedness,” says Long, “we hope to reduce the current time and effort required for maintaining and retrieving records in the event of an audit.”

Business as Usual

Under financial controls in the checklist, for example, the IARA covers key objectives related to financial statement review, ACH funds, and credit balances. Within each of those points, the organization spells out specific tests that should be initiated to ensure compliance across the different categories.

Matt Arias, Manheim’s director of arbitration, says he welcomed the checklist.

“We’re no strangers to audit checklists,” says Arias. “Relative to compliance, whether it’s new contracts or any type of new auditing procedures, we comply as best as possible.”

Arias says the checklist won’t put any constraints on Manheim. He says that similar compliance measures have benefitted both the industry and the end consumer. “Obviously, it’s a good thing to have new compliance measures for the sake of everyone,” Arias says.

Making Compliance Clearer

Long says the Standardized Auction Audit Checklist was designed to help both auctions and consignors. He says auctions regularly do business with, say, 20 different institutional consignors to be left trying to process the language across 20 different checklists. By creating a generic list of items and terminologies, the IARA wants to help organizations combine those lists into one.

Long hopes that IARA’s Standardized Auction Audit Checklist will serve as a central information point for communicating the processes and records required in the handling of consigned autos. “For the most part, consignors were already conveying the same types of expectations,” says Long, “but each existing checklist might be expressed in a different order and use various descriptions to basically say the same thing.”

Generally, Long feels that consignors and auctions will say, “This is nothing new, we have been doing this all along,” after reading through the checklist. “Keep in mind that consignors and auctions are encouraged to use this only as a guideline when forming or modifying their own compliance policies,” Long cautions. “They should seek guidance from their own legal counsel and from government authorities when establishing their own practices for audit procedures.”

Lenders that are sensitive to today’s compliance strictures — and that means every lender — might do well by looking to utilize the IARA checklist. As consigners, you might say, the checklist would offer lenders a compliance balm.

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