Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
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Question
Chapter 5, Problem 5.5E
To determine
Introduction:
The internal
Control Procedures is an important element within internal control which helps to achieve organizational objectives laid down by the management including prevention of fraud. It includes segregation of duties, rotation of responsibilities, mandatory vacations, authorizations, verifications and monitoring activities within organization.
To discuss:
The weaknesses of internal control system that led to thepresence and size of losses.
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Internal Controls
One of the largest losses in history from unauthorized securities trading involved a securities trader for the French bank, Societe Generale. The trader was able to circumvent internal controls and create more than $7 billion in trading losses in six months. The trader apparently escaped detection by using knowledge of the bank's internal control systems learned from a previous back-office monitoring job. Much of this monitoring involved the use of software to monitor trades. In addition, traders were usually kept to tight trading limits. Apparently, these controls failed in this case.
Answer the following True or False questions about Societe Generale's internal controls. These will assist you in determining the weaknesses.
1. The loss could have been avoided with a number of internal controls.
2. Required vacation time may have alerted managers to the hidden losses.
3. If traders have access to the monitoring software, then the separation of duties control is…
One of the largest losses in history from unauthorized securities trading involved a securities trader for the French bank Societe Generale. The trader was able to circumvent internal controls and create more than $7 billion in trading losses in six months. The trader apparently escaped detection by using knowledge of the bank’s internal control systemslearned from a previous back-office monitoring job. Much of this monitoring involved the use of software to monitor trades. In addition, traders were usually kept to tight trading limits. Apparently, these controls failed in this case.What general weaknesses in Societe Generale’s internal controls contributed to the occurrence and size of the losses?
Computer Frauds and Missing Control Procedures. The following are brief stories ofactual employee thefts and embezzlements perpetrated in an IT environment.Required:What type of control procedure that might have prevented or detected the fraud was missingor inoperative?a. An accounts payable terminal operator at a subsidiary entity fabricated false invoicesfrom a fictitious vendor and entered them in the parent entity’s central accounts payable/cash disbursement system. Five checks totaling $155,000 were issued to the “vendor.”b. A bank provided custodial and record-keeping services for several mutual funds. Aproof-and-control department employee substituted his own name and account numberfor those of the actual purchasers of some shares. He used the accounting informationsystem to conceal and shift balances from his name and account to names and accountsof the actual investors when he needed to avoid detection because of missing amounts inthe investors’ accounts.c. The university’s…
Chapter 5 Solutions
Survey of Accounting (Accounting I)
Ch. 5 - Prob. 1SEQCh. 5 - Prob. 2SEQCh. 5 - Prob. 3SEQCh. 5 - Adjustments to the company’s records based on the...Ch. 5 - Prob. 5SEQCh. 5 - Prob. 1CDQCh. 5 - Prob. 2CDQCh. 5 - Prob. 3CDQCh. 5 - Prob. 4CDQCh. 5 - Prob. 5CDQ
Ch. 5 - Prob. 6CDQCh. 5 - Prob. 7CDQCh. 5 - Prob. 8CDQCh. 5 - Prob. 9CDQCh. 5 - Assume that Leslie Hunter, accounts payable clerk...Ch. 5 - Prob. 11CDQCh. 5 - The accounting clerk pays all obligations by...Ch. 5 - Prob. 13CDQCh. 5 - Prob. 14CDQCh. 5 - Do items reported as a credit memorandum on the...Ch. 5 - Prob. 16CDQCh. 5 - Prob. 17CDQCh. 5 - Prob. 5.1ECh. 5 - Prob. 5.2ECh. 5 - Prob. 5.3ECh. 5 - Prob. 5.4ECh. 5 - Prob. 5.5ECh. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.8ECh. 5 - Prob. 5.9ECh. 5 - Prob. 5.10ECh. 5 - Prob. 5.11ECh. 5 - Prob. 5.12ECh. 5 - Prob. 5.13ECh. 5 - Prob. 5.14ECh. 5 - Prob. 5.15ECh. 5 - Prob. 5.16ECh. 5 - Prob. 5.17ECh. 5 - Prob. 5.18ECh. 5 - Prob. 5.19ECh. 5 - Entries for note collected by bank Accompanying a...Ch. 5 - Prob. 5.21ECh. 5 - Prob. 5.22ECh. 5 - Prob. 5.23ECh. 5 - Prob. 5.24ECh. 5 - Prob. 5.25ECh. 5 - Prob. 5.1PCh. 5 - Prob. 5.2.1PCh. 5 - Prob. 5.2.2PCh. 5 - Prob. 5.3.1PCh. 5 - Prob. 5.3.2PCh. 5 - Prob. 5.4.1PCh. 5 - Prob. 5.4.2PCh. 5 - Prob. 5.4.3PCh. 5 - Prob. 5.4.4PCh. 5 - Prob. 5.1.1MBACh. 5 - Prob. 5.1.2MBACh. 5 - Prob. 5.1.3MBACh. 5 - Prob. 5.1.4MBACh. 5 - Ratio of cash to monthly cash expenses AcelRx...Ch. 5 - Prob. 5.2.1MBACh. 5 - Prob. 5.2.2MBACh. 5 - Ratio of cash to monthly cash expenses Pacira...Ch. 5 - Ratio of cash to monthly cash expenses Pacira...Ch. 5 - Prob. 5.2.5MBACh. 5 - Prob. 5.3.1MBACh. 5 - Prob. 5.3.2MBACh. 5 - Prob. 5.3.3MBACh. 5 - Prob. 5.3.4MBACh. 5 - Prob. 5.3.5MBACh. 5 - Prob. 5.4.1MBACh. 5 - Prob. 5.4.2MBACh. 5 - Prob. 5.1CCh. 5 - Prob. 5.2CCh. 5 - Prob. 5.3CCh. 5 - Prob. 5.4CCh. 5 - Prob. 5.5.1CCh. 5 - Prob. 5.5.2CCh. 5 - Prob. 5.5.3CCh. 5 - Prob. 5.6C
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