Wells Far Go 3940

INTERNAL AUDIT REPORT
WELLS FARGO
San Francisco, California USA
MAY 8, 2019
Wells Fargo & Co
420 Montgomery Street,
San Francisco, California USA
Dear Sir:
The purpose of this letter will confirm if has a connection between our audit
services and Wells Fargo & Co for the year ended December 31, 2019.
Our firm will audit the Wells Fargo & Co financial statement as of December
31, 2019 to express our opinion whether it presented fairly in accordance with
General Accepted Auditing Standard. This standard will require that we plan
and perform the audit to obtain reasonable assurance whether the Financial
Statement are free from misstatement.
This report will include our observation in why the risk of the company have
not been resolved and this will includes the company’s internal control structure
that we believed it is necessary. This report will remain confidential and
retained to us in accordance with our policies and procedures.
We would like to thank and extend our appreciation to Wells Fargo & Co for
the trust and cooperation for this audit .
Yours faithfully:
Executive Summary
INTRODUCTION
Wells Fargo is an American multinational financial services company

headquartered in San Francisco, California with central offices throughout the
United State. Henry Wells, William Fargo, and other investors founded Wells
Fargo and Company during March 1852. The three different business segment
of Wells Fargo includes Community banking, wholesale banking and wealth,
brokerage and retirement. It is the world’s fourth largest bank by market
capitalization and third largest bank in the US by total asset.
During July 2015, Wells Fargo became the world’s largest bank by
market capitalization before slipping behind JPMorgan Chase. September 2016
Wells Fargo has a scandal involving the creation over 2 million fake bank
account by Wells Fargo employees. Wells Fargo fell behind Bank of American
to third by bank deposit in 2017 and behind Citigroup to fourth by total asset in
2018.
AUDIT SCOPE AND METHOLOGY
Our audit report covered the period of 2016-2019 in focus on utilizing

the risk based approach from the planning stage up to testing. We gathered the
information through research to obtain complete understanding on the financial
requirements of agreement.
The audit procedures are performed include the following:
 We reviewed the retail banking sales practices and related matters

launched by independent members of the Board.
 Reviewing the practice concerning the origination , servicing and
the collection of consumer automobile loans in relations of
insurance products.
 Reviewing the “ add on” product that includes the identity theft and
debt protection as wells as the automobile warranty products and to
membership discount programs.
 W
e conducted a review on the fee calculations within the certain
fiduciary and custody accounts in its investment.
 We also reviewed the mortgage loan modification.
 We enhanced the risk management program and practices.
 Analysed the financial statements per line items for significant
outliers.
With the audit several audit test, we conduct the audit with the applicable
standards to performed in accordance with the General Accepted Auditing
Standard to obtained a sufficient and appropriate evidence to provide a basis for
our findings and conclusion based on the audit objectives and for the
improvement of the performance and operations of Wells Fargo and
Corporation .
AUDIT OBJECTIVES
The objectives of our team was as follows:
 To ensure if Wells Fargo are compiled with applicable accounting policy

and standards.
 To determined and develop the effectiveness of Wells Fargo’s internal
controls in ensuring the mortgage loans and deposit accounts .
 And to ensure the company’s commitment to integrity and ethical values
We reviewed the report of Wells Fargo for the audit period, For purposes of
rendering our opinion, we focused on the period January 1, 2016 through
December 31, 2019.
SUMMARY OF FINDINGS
The Wells Fargo fraud scandal is about the creation of millions of

fraudulent savings and checking accounts of the Wells Fargo clients without
their consent. The new about the fraud became widely later 2016 after various
regulatory bodies like United State Consumer Financial Protection Bureau with
the fined $185 million as a result of the illegal activity. The company fined
additional civil and criminal suits reaching estimated $2.7 billion by the end of
2018.
We reviewed the documents and analysed some fincial documents and we
also research about the information to identify the fraud that was happened to
the company. The initial reports blamed the individual Wells Fargo branch
workers and managers for the problem. This includes also the sales incentives
associated with selling multiple solution or financial products. Later, the blames
was shifted to a top- down pressure from a higher-level management to open as
many accounts as possible through cross selling.insurance policies like
Prudential Financial and renters insurance policies by Assurant. Here are some
findings that we research:
1 COMMUNITY BANK SALES CULTURE
There was a lot of issue in that We found out that there was conflict in the
Community Bank between Wells Fargo’s Vision& Values and the Community
Bank’s emphasis on sales goals. Aided by a culture of strong compliances to
management of the lines of business , the Community Bank’s senior leaders
distorted the sales model and performance management system, fostering an
atmosphere that prompted low quality sales and improper and unethical
behaviour. The Community Bank became a sales organization rather than a
service oriented financial institution. This provided justification for a relentless
focus on sales, abbreviated training and high employee turnover.
Senior management in the Community Bank had a deep-seated

adherence to its sales model, which generally called for significant annual
growth in the number of products sold each year. They didn’t appreciate their
sales goals were too high and increasingly untenable made by regional leaders
and they tolerated low quality accounts as a necessary by-product of a sales-
driven organization.
2 Community Bank performance management and incentive programs
Wells Fargo wants to keep the sales model intact and sales growing
meant that the performance management system had to exert significant, and
in some
cases extreme, pressure on employees to meet or exceed their quotas. Many
employees felt that failing to meet their quotas that will result in termination
or receive a criticism by their supervisors. Employees wants to be praised,
rewarded and held out as models for success were high sales performers.
Compensation incentives contributed to problematic behaviour by over-
weighting sales customer service or other factors.. According to our research ,
As reflected in the reduction in plan sales goals for 2013, while the Community
Bank did take steps over time to address issues associated with sales practice
violations and aggressive sales goals, those steps were incremental,
implemented slowly and insufficient to address the root cause of the problem.
3 Senior management oversight
The former CEO was too late and too slow to call for inspection of or
critical challenge to the basic business model. And he was aware that many
doubted that remained the right person to lead the Community Bank in the
face of sales practice revelations, including the Board’s lead independent
ddirector and the head of its Risk Committee. Stumpf nonetheless moved too
slowly to address the management issue.Timothy J. Sloan’s direct involvement
with sales practices issues was limited.
4. Decentralized organizational structure
Wells Fargo’s decentralized organizational structure meant that

centralized functions had parallel units in the Community Bank, which impeded
corporate-level insight into and influence over the Community Bank. Wells
Fargo’s decentralized organizational structure and the deference paid to the
lines of business contributed to the persistence of this environment. As
problems with sales practices in the Community Bank became more apparent
in 2013-2015, Corporate Risk was still a work in progress and the Chief Risk
Officer had limited authority with respect to the Community Bank. As events
were unfolding, the Chief Risk Officer’s visibility into risk issues in the
Community Bank was hampered by his dependence on its group risk officer
though he
attempted to persuade Ms. Tolstedt and the Community Bank to be more
responsive to sales practice-related risks.
5. Control function oversight
The culture of substantial deference accorded to the lines of business

carried over into the control functions.Even when senior executives came to
recognize that sales practice issues within the Community Bank were a serious
problem or were not being addressed timely and sufficiently, control functions
relied on to carry out corrective actions. Underreaction to sales practice issues
resulted in part from the incorrect belief, extending well into 2015, that
improper practices did not cause any “customer harm”, which itself was
narrowly construed to mean only financial harm such as fees and penalties.
6. Management reporting to the Board
Before February 2014, sales practice issues had not been identified to the
Board as a “noteworthy risk”. The directors in 2014 received reports from the
Community Bank, from Corporate Risk, and from Corporate Human Resources
that sales practice issues were receiving scrutiny and attention and, by early
2015, that the risks associated with them had decreased. At the same time, the
Risk Committee and the Chief Risk Officer were continuing the program that
had begun in 2013 to centralize and increase the resources of Corporate Risk.
7 Board oversight and performance
The Board’s Oversight Committee believes that the Board’s own actions
could have been improved in three respects.
1. Even though the Risk Committee and Board initiated a comprehensive

program in 2013 to increase the resources and enhance the effectiveness of
Corporate Risk, Wells Fargo should have moved toward the centralization of
the risk function earlier than it did.
2. Starting in February 2014 and continuing thereafter, the Board and

Risk Committee received from management assurances that Corporate Risk,
HR, and the Community Bank were undertaking enhanced monitoring and
otherwise were addressing sales practice abuses, which were said to be
subsiding.
3. In light of the Board’s substantial doubts about and dissatisfaction with

Ms. Tolstedt’s leadership by the time of the October 2015 Board meeting, the
Board should have been more forceful in pushing the former CEO to change
leadership so that the Community Bank could move more quickly.
CONCLUSION
Wells Fargo has a big issues that they need to fix it that they need them to
revaluate the way they do business. They should restart their business to show
their stakeholders that they will do the right thing for the company. Even the
Wells Fargo are into this scandal it didn’t change the fact that they still the
second leading financial brach. We believe that Wells Fargo will recover and
will be better in the future.
RECOMMENDATION
In order to minimize the risk and to ensure the Wells Fargo transaction is
accurate, we recommend this:
 We recommend that the Wells Fargo and Company will improved their
internal controls specially to the employees and to their data that needed
to their different transaction.
 We recommend to increased transparency with board of directors and
stakeholders .
 We recommend to reviewed all the time all incentives compensation
arrangements .
 We recommend that Wells fargo should ensure the ethical values to their
workplace
 We also recommend to provide a security on their interest and loans.

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INTERNAL AUDIT REPORT

San Francisco, California USA

420 Montgomery Street,

San Francisco, California USA

Wells Fargo is an American multinational financial services company

AUDIT SCOPE AND METHOLOGY

Our audit report covered the period of 2016-2019 in focus on utilizing

The audit procedures are performed include the following:

 We reviewed the retail banking sales practices and related matters

The objectives of our team was as follows:

 To ensure if Wells Fargo are compiled with applicable accounting policy

The Wells Fargo fraud scandal is about the creation of millions of

1 COMMUNITY BANK SALES CULTURE

Senior management in the Community Bank had a deep-seated

2 Community Bank performance management and incentive programs

3 Senior management oversight

4. Decentralized organizational structure

Wells Fargo’s decentralized organizational structure meant that

5. Control function oversight

The culture of substantial deference accorded to the lines of business

6. Management reporting to the Board

7 Board oversight and performance

1. Even though the Risk Committee and Board initiated a comprehensive

2. Starting in February 2014 and continuing thereafter, the Board and

3. In light of the Board’s substantial doubts about and dissatisfaction with

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