Publication Date


Document Type


First Advisor

Hrubec, Thomas R.

Degree Name

B.S. (Bachelor of Science)

Legacy Department

Department of Accountancy


Through my summer 1987 internship in accountancy at Continental Bank of Chicago, IL, I was exposed to some of the accounting-related topics that are faced by the banking industry. One of the most relevant topics to today's economy is loan loss reserves. A loan loss reserve is an estimate of the total potential principal loss inherent in a bank's loan portfolio as of a certain date. It is the role of bank management to perform the highly judgmental process of determining the amount that should be in the reserve. During the bank's annual audit, the independent auditor has the difficult role of determining the adequacy of the reserves. Both bank management and internal auditors are facing pressure from various organizations to determine the most accurate estimate. Auditors are even facing lawsuits. The reason that so much attention has been focused on this topic is the Third World debt problem. Many banks are going out of business because they have not been facing the economic realities of the debt problem through building up their loan loss reserves.


21 pages




Northern Illinois University

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