ROLE OF OPERATIONAL AUDIT TO ENSURE EFFECTIVENESS AND EFFICIENCY IN LOAN ACTIVITIES

TOMMY, OCSARA (2016) ROLE OF OPERATIONAL AUDIT TO ENSURE EFFECTIVENESS AND EFFICIENCY IN LOAN ACTIVITIES. Masters thesis, Universitas Andalas.

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Abstract

Increasing in business also means increasing in number of lenders in order to get capital. But every business organizations contain various risks. Business risk implies uncertainty in profits or danger of loss and the event that could pose a risk due to some unforeseen events in future, which causes business to fail, and affect the loan. But when the loan cannot be recovered within certain stipulated time that is governed by some respective laws, we called it non-performing loans. There are several factor from lender side that become causes the nonperforming loan, they are: lenders lack plans to deal with risk, the lenders are unwilling to collect, lenders and project designers have low expectation, lack of good models, and loan sanctioned by corruption. In order to give the loan, the bank has to consider the risk that could happen. After the loan reaches the non-performing state, the probability of its repayment reduces significantly or has potential loss. Though it depends on the terms of the contract, loan classification as non-performing after a duration of 90 days where the interest payments are overdue. Islam et al. (2005) states, that the nonperforming loan can happen because of the lender. According to Siahaan (2010) the mistake that happened because of the bank or the lender could be start from the planning process, analysis process, and also controlling process. All of the things that can be one of factor factors of nonperforming loan should be realized by bank in order to prevent the nonperforming loan. Keywords: Operational Audit, Loan Activities, Effectiveness and Efficiency

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