Question

If a trust instrument instructs a National Bank as trustee to lend trust funds to an officer of the trustee bank, the auditor should determine that the loan:

a. Was in fact consistent with the provisions of the governing instrument.
b. Was approved by a court of proper jurisdiction.
c. Received approval of the appropriate regulatory authority.
d. Was reported to the authorities as a criminal violation.

Answer 1

The auditor must check if the loan made by a National Bank as trustee to one of its officers complies with the trust instrument's provisions and has received the necessary regulatory and legal approvals. This ensures adherence to trust and banking laws.

Step-by-step explanation:

If a trust instrument instructs a National Bank as trustee to lend trust funds to an officer of the trustee bank, the auditor should determine that the loan:

1. Was in fact consistent with the provisions of the governing instrument.
2. Was approved by a court of proper jurisdiction.
3. Received approval of the appropriate regulatory authority.
4. Was reported to the authorities as a criminal violation.

When assessing the validity of trust loans to bank officers, multiple aspects need to be considered, including adherence to the trust instrument's directives, legal oversight, and regulatory compliance.

It is essential to ensure that such transactions don't compromise the trust's interests and abide by banking and trust law.

The context of the question and the provided options suggest that most relevance is given to regulatory oversight and compliance with the trust's provisions.