Get a grip on internal controls

Description

Abstract: Understanding borrowers’ control systems is an important part of loan due diligence. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) lists five components of internal controls. This article discusses them, along with what to look for in management letters. Specifically, a sidebar points out that such letters must include “material weaknesses” and “significant deficiencies” in internal controls unearthed during audit procedures.