The FDIC is amending its regulations concerning annual independent audits and reporting requirements which implement section 36 of the Federal Deposit Insurance Act (FDI Act). Section 36 is generally intended to facilitate early identification of problems in financial management at larger insured depository institutions through annual independent audits, assessments of the effectiveness of internal controls and compliance with designated laws and regulations, and more stringent reporting requirements. Section 2301 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) repealed section 36(e) of the FDI Act which required that each insured depository institution over a certain size have an independent public accountant perform specified procedures for determining compliance with designated safety and soundness laws. Accordingly, the FDIC is eliminating Schedule A to Appendix A, ``Agreed Upon Procedures for Determining Compliance with Designated Laws''. Section 2301 of EGRPRA also permits the FDIC in certain circumstances to exempt institutions from the requirement that audit committees be comprised entirely of outside directors. It further permits the FDIC to designate certain information filed under section 36 as privileged and confidential and therefore not available to the public. The FDIC is also making several technical changes to the Guidelines and Interpretations (Guidelines) published as an appendix to the annual independent audit rule. The changes delete certain filing requirements that have been determined to be unnecessary, and clarify ambiguities identified by the Corporation, financial institutions, and accountants since the audit rule was promulgated.