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SIGNATURE CREIGHTON H. PEET
TITLE TREASURER
Board of Directors
Cowen Standby Tax-Exempt Reserve Fund, Inc.
In planning and performing our audit of the financial statements of Cowen
Standby Tax-Exempt Reserve Fund, Inc. for the year ended September 30,
1996, we considered its internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide assurance
on the internal control structure.
The management of Cowen Standby Tax-Exempt Reserve Fund, Inc. is
responsible for establishing and maintaining an internal control structure. In
fulfilling this responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs of internal control
structure policies and procedures. Two of the objectives of an internal
control structure are to provide management with reasonable, but
not absolute, assurance that assets are safeguarded against loss from
unauthorized use or disposition and that transactions are executed in
accordance with management's authorization and recorded properly
topermit preparation of financial statements in conformity with generally
accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods iis subject to the risk that I
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of
Certified Public Accountants. A material weakness is a condition in which
the design or operation of the specific internal control structure elements
does not reduce to a relatively low level the risk that errors or irregularities
in amounts that would be material in relation to the financial statements
being audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned
functions. However, we noted no matters involving the internal control
structure, including procedures for safeguarding securities, that we
consider to be material weaknesses as defined above as of September 30,
1996.
This report is intended solely for the information and use of management
and the Securities and Exchange Commission.
ERNST & YOUNG LLP
October 29, 1996
