Internal Audit Considerations for CECL

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Executive Summary

Successfully implementing the new credit impairment standard will require significant time and cross-functional resources. Upfront planning for data collection and developing and documenting new internal controls around the additional information required will help ensure a smooth transition.

The current expected credit loss (CECL) 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.

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