Auditing Counterparty Limits and Trading Limits

Abstract

Chapter 9 has explained that limits to the line of credit of a counterparty, particularly in connection with loans, are nothing new. Indeed, they constitute one of the earlier and better examples of internal control. What is new is the cross-functional and transborder dimension of credit limits which should characterize their setting and their follow-up. Similarly market limits today have a dynamic structure, leading to the conclusion that both the limits themselves and the way in which they are set and they are observed must be audited.