Since 1976, we have been engaged by principal banks in Puerto Rico to assist them in policing their assets based loans portfolio.  Throughout the years we have developed an examination program and trained our ABLES’ professionals to perform these examinations in an orderly and expedite manner.  Our extensive experience in performing this type of engagements usually enables us to identify promptly most of the situations that constitute, or will lead to, violations to the loan agreement and bring them to the attention of the bank before they become critical.  Since these examinations are limited in scope and do not constitute audits in accordance with generally accepted auditing standards we will refer to them as inspections.

The objective of the inspections is to give the bank and the loan officer comfort as to accuracy and reliability of the information provided by the client.  To achieve this objective the inspections cover and test the following areas of the client’s operations and accounting records:

  

• Loan proceed information is reconciled with accounting records.
• Overall internal controls over accounts receivable and inventory cycles are evaluated and tested.
• Accounts receivable are tested as to accuracy and proper aging of the accounts and are reconciled with the general ledger.
• Collections from accounts receivables and cash sales are estimated and compared to deposits made in the account designated by the bank.  Sales invoices are examined and traced for evidence of delivery.
• Receivable dilution and delinquency are evaluated, and inventories are toured to evaluate overall condition and safeguarding.
• Physical counts of inventories are made and reconciled with perpetual record.  If no perpetual record exists, inventories are estimated and reconciled with the amounts reported by the client.
• Payroll and corporate taxes are examined to determine compliance.
• Accounts payable are reviewed to see that they are being kept up to date.
• Other matters are also reviewed such as insurance policies, key personnel turn over, review of audited financial statement, etc.
• In addition, at bank’s request, year end inventory observation and, accounts receivable are confirmation might be performed.

  

At the completion of the inspection an exit meeting is held with a responsible officer of the client and a confidential report is prepared for the bank.  Throughout the years these confidential reports have proved to be an invaluable tool to the bank’s officer by providing them with inside information that corroborate or contradict clients’ representations.  These reports to the bank are confidential and are not to be distributed to any person outside the bank.  As can be noticed the scope of these inspections is not that of an audit and should not be relied upon to discover fraud or any other irregularities should any exist; this is only a tool to assist the bank in policing its loans. However, if any irregular situation is detected during the inspection it will be brought to the attention of the bank’s officer for action.