Following are two lists. The first is a list of control procedures; the second is a list of related control objectives for the lending function in a commercial bank.

Required:

On your answer sheet, write down numbers 1 through 10. Next to each number, write the letter of the Control Objective that most closely relates to each of the Control Procedures. Some letters may be used more than once, but each number should have only one letter.

Control Procedures 1. Establishing a monitoring of lending limits for all loan officers.

2. Assigning responsibilities for receiving and investigating all customers' inquiries about loan balances to individuals having no control over cash receipts and collection procedures.

3. Sending periodic statements of loan activity to all credit customers.

4. Monitoring geographic concentrations in the loan portfolio.

5. Periodically reviewing and pricing the value of loan collateral to determine its adequacy in protecting the bank's investment.

6. Requiring the approval by an independent officer of all waivers of loan fees.

7. Reconciling the totals of the loan interest receivable ledgers to the corresponding control balance at least quarterly.

8. Assigning responsibilities for maintaining and safekeeping actual loan instruments (notes, collateral receipts, etc.) to individuals who do not receive loan payments.

9. Requiring that written appraisals be performed by competent, independent individuals to determine the value of real property that will be used to secure a loan.

10. Routing a copy of a computer-generated report of all changes made to loan payment due dates to a high-level, independent official for careful review on a daily basis.

Control Objectives

a. To ensure that potentially uncollectible amounts are promptly identified, evaluated, and accounted for.

b. To ensure that loan interest, fees, and other charges are recorded correctly as to account, amount, and period.

c. To ensure that each loan and its terms are reviewed and properly authorized before the transaction is consummated.

d. To ensure that physical loss or misuse of loan documents, collateral, and repossessed property is prevented or promptly detected.

e. To ensure that all completed lending transactions are recorded correctly as to account, amount, and period.

f. To ensure that loan interest, fees, and other charges are billed to customers in the correct amounts.