From what you have told us, we believe that you should continue to disclose interest as compounding monthly, not daily. It is possible that your auditor and your core processor have different understandings of the definition of “compounding.” We recommend clarifying with both of them that while accounts may “accrue” interest daily (meaning that the core processor is calculating the interest daily without adding it to the account balance), the amounts of interest that are accruing daily are not being added to the principal for purposes of calculating compound interest until the end of each month (even if the compound interest is credited quarterly).

The ABA’s Banking and Finance Terminology Dictionary includes helpful definitions for the relevant terms:

• “accrue . . . . (2) to accumulate in anticipation of payment. (3) To recognize income or expense over time.”

• “compound interest The method of interest computation in which the rate of interest is applied to a deposit for a specific period (one day, one month, one quarter) and then in subsequent periods is applied to the principal plus previously earned interest.”

• “compounding Adding interest accrued for one period to the principal at the beginning of the period and computing interest for the next period on the total interest plus principal. Compounding may be done at various intervals. The more frequent the compounding, the higher the actual rate of interest paid, or the ‘yield.’ Continuous (instantaneous) compounding yields the highest actual rate.”

• “credit . . . (4) An addition to a bank deposit account or a payment on a credit card account or other debt. . . . .”