The internal audit activity has just completed an engagement to review loan processing and commercial loan account balances for a financial institution. Following are a few excerpts from the working papers indicating potential engagement observations. The auditors took a statistical sample of 100 loan applications and determined that only 85 loans were granted. Of the 85 loans granted, the auditors noted that 4 loans should have been reviewed and approved by the loan committee but were not. Organizational policy states that all loans must be approved by the committee prior to funding. Each of the 4 loans, however, was approved by the vice president. The matter was discussed with the vice president, who indicated it was a competitive loan situation to a new customer and in the best interests of the financial institution to expedite the loan and establish a firm relationship with a growing customer. All of the other loans were formally approved by the loan committee. Of the 81 loans approved by the loan committee, the auditors found 7 in which the actual amount lent exceeded the approved amount. The auditors noted three instances in which loans were made to related groups of organizations without an analysis of the total amount of loans made to the controlling entity. There may be statutory limitations on the amount of loans that can be made to any individual controlling organization. Of the 81 loans approved by the loan committee, the auditors found that 14 contained either in