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Internal Audit Considerations for CECL – Financial Institutions

Read on for a look at potential risks in estimated credit losses under ASU 2016-13, known as CECL, and sample internal controls to address those risks.
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The deadline for implementing Accounting Standards Update 2016-13, known as CECL, has arrived. This model likely will change internal audit’s risk assessments and audit approach. Due to the estimation uncertainty, materiality of the loan loss provision, level of judgment on key data, and assumptions, the new model is likely to give rise to one or more significant risks of material misstatement. This article includes general examples of risks (what could go wrong) that may arise when estimating credit losses and example control activities to address those risks.

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