United Bank provides loans to businesses in the community through its Commercial Lending Department. Small loans (less than 100,000) may be approved by an individual loan officer, while larger loans (greater than 100,000) must be approved by a board of loan officers. Once a loan is approved, the funds are made available to the loan applicant under agreed-upon terms.

United Bank has instituted a policy whereby its president has the individual authority to approve loans up to 5,000,000. The president believes that this policy will allow flexibility to approve loans to valued clients much quicker than under the previous policy.

REQUIREMENT

• As an internal auditor of United Bank, how would you respond to this change in policy from the internal control point of view?

• Summarise the relative advantages and drawbacks of the four different legal types of business entity (sole trader, partnership, private limited company and public limited company) from the perspective of the entrepreneur.