deposit & trust embezzlement
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4. What evidence presented indicates that the control environment at Greater Providence may have been deficient and contributed to the embezzlement.
This is for Accounting Information Systems class.
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1. Discuss how Greater Providence Deposit & Trust might improve its control procedures over the disbursement of loan funds to minimize the risk of this type of fraud. In what way does this case indicate a lack of proper segregation of duties?
There are several methods by which Providence Deposit & Trust might improve its control procedures over the disbursement of loan funds to minimize the risk of this type of fraud. No single employee should be authorized to make consumer loans. The segregation of authority should be such that two employees of the same level and not having any reporting relationship should give authorization of loans. The next control measure should be that the checks should be issued by a third person not having any reporting relationship with the two approvers of the loan. Further, no teller should pay loan money to any employee of the bank. The checks must be account payable only and should not be cashed at the branch which is disbursing the loan. No loan above a certain limit, (suggested limit $10,000) should be passed without the approval of the loan committee. No loan should be passed by Providence Deposit without a full credit report from an outside independent agency. Every loan application should be reviewed by the internal auditor or her staff. There should be a checklist that bank loan review clerk should check and should flag off the loan if any of the conditions is missing. There is no point in ...
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