Michigan Collections Manager License Practice Test

What type of audit is required biennially for collection agencies?

1. Internal audit

2. Independent CPA audit

3. Volunteer-led audit

4. No audit required

The correct answer is: Independent CPA audit

The requirement for a biennial audit by an independent Certified Public Accountant (CPA) for collection agencies emphasizes the importance of accountability and adherence to regulations in the collections industry. This type of audit provides an objective assessment of the agency's financial practices, internal controls, and compliance with applicable laws and regulations. It helps ensure that the agency operates in a transparent manner, safeguarding against fraudulent activities and mismanagement of consumer funds. An independent CPA audit is conducted by a professional who is not affiliated with the agency, which lends credibility to the audit report and results. This third-party perspective can uncover potential issues that internal stakeholders may overlook. By requiring collection agencies to undergo this audit every two years, regulators help maintain a standard of integrity within the industry and protect consumer interests, enhancing trust in collection practices. Other types of audits, such as an internal audit or a volunteer-led audit, do not fulfill the same regulatory requirements nor provide the same level of impartiality and thoroughness that a CPA audit ensures. Additionally, stating that no audit is required would undermine the regulatory framework established to ensure the ethical operation of collection agencies. Thus, the necessity of a biennial audit by an independent CPA underscores the commitment to compliance and protection in the collection field.