First Charter Bank provides loans to businesses in the community through its Commercial Lending Department. Small loans (less than $100,000) may be approved by an individual loan officer, while larger loans (greater than $100,000) must be approved by a board of loan officers. Once a loan is approved, the funds are made available to the loan applicant under agreed- upon terms. The president of First Charter Bank has instituted a policy whereby she has the in- dividual authority to approve loans up to $5,000,000. The president believes that this policy will allow flexibility to approve loans to valued clients much quicker than under the previous policy. As an internal auditor of First Charter Bank, how would you respond to this change in policy?
First Charter Bank provides loans to businesses in the community through its Commercial
Lending Department. Small loans (less than $100,000) may be approved by an individual loan
officer, while larger loans (greater than $100,000) must be approved by a board of loan officers.
Once a loan is approved, the funds are made available to the loan applicant under agreed- upon terms. The president of First Charter Bank has instituted a policy whereby she has the in- dividual authority to approve loans up to $5,000,000. The president believes that this policy will allow flexibility to approve loans to valued clients much quicker than under the previous policy.
As an internal auditor of First Charter Bank, how would you respond to this change in policy?
Internal Control:
Internal control refers to the policies, and plans of the business organization along with other measures with a view to safeguard its assets, encourage the employees to adhere to the plans, to improve on the operational efficiency, and to ensure correct and reliable accounting information. Internal control is a process which ensures continuous reliability of accomplishment of a company's objectives, related to operation; financial reporting, and in conformity with laws and regulations.
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