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This post discusses Alison Marsh, Small City State Bank case

Alison Marsh was a trusted employee of Small City State Bank. She was involved in everything. She worked as a teller,she accounted for the cash at the other teller windows,and she recorded many of the transactions in the accounting records. She was so loyal that she never would take a day off, even when she was really too sick to work. she routinely worked late to see that all the day's work was posted into the accounting records. she would never take even a day's vacation because they might need her at the bank. Tick and Tack, CPAs,were hired to perform an audit, the first complete audit that had been done in several years. Marsh seemed somewhat upset by the upcoming audit. She said that everything had been properly accounted for and that the audit was a needless expense. When Tick and Tack examined some of the bank's internal control procedures, it discovered problems. In fact, as the audit progressed, it became apparent that a large amount of cash was missing. Numerous adjustments had been made to customer accounts with credit memorandums, and many of the transactions had been posted several days late. In addition, there were numerous cash payments for office expenses. "When the audit was complete, it was determined that more than $200,000 of funds was missing or improperly accounted for. All fingers pointed to Marsh. The bank's president, who was a close friend of Marsh, was bewildered. How could this type of thing happen at this bank?

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Due to the recent internal activity that has taken place at our company, I would like to recommend the following procedure be considered for immediate approval and use.

The bank president shall immediately enforce a segregation of duties internal control policy. By initiating this type of policy, no one employee will retain control over every area of the bank. Under the guidelines of this policy, the bank tellers are to never, ever account for cash at the other teller windows. A second bank employee that is not a teller should be in charge of counting the cash at the other teller windows. When a bank employee records transactions into the accounting records, a bank accountant or other bank representative or executive should receive a printout of the accounting ledger in order to review transaction entries that tellers have recorded, on a regular basis.

No employee will retain complete control over recording in the bank's accounting ledgers. Proper segregation of duties dictates that a second employee will record the transactions who is not handling customer cash. If this is not possible, a second employee who is not ...

Solution Summary

The solution provides a very detailed explanation/solution for the Alison Marsh, Small City State Bank case that deals with weak internal controls. The solution is based on 25+ years of professional accounting and auditing experience.