The asset/liability management process at a financial institution should not be limited to one that “checks the box” of meeting regulatory requirements. Rather, institutions and Asset/Liability Management Committees (ALCOs) with a dynamic ALCO process are able to inform decisions related to strategy as well as risk management.

The AICPA CECL auditing subgroup is meeting regularly to set industry-wide standards for how CECL will be approached from an audit and assurance perspective. Early takeaways from the group’s work have indicated a clear bias toward practices that produce a sound, defensible allowance for credit losses as well as model evaluation efforts that ensure internal controls and transparency.

The current expected credit loss standard, or CECL, has been called one of the biggest changes ever to accounting for financial institutions, and every bank and credit union in the U.S. must assess CECL’s impact on its processes and on the allowance. With the change comes new roadblocks, one of which is explaining the complexities of CECL to a board in a straight-forward and clear manner.