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| 7. Forensic Report on Fraud |
| What you need to know | Join the meeting | Review the Reports | The Board's response |
| Watch the Video | The Risk Management Process |
Business Continuity Plans |
Final Thoughts | Practice |
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The following items are based on Mr. Bent's forensic accounting report. Apply your knowledge of internal controls to the information discussed in the report to reinforce your understanding of internal controls and operational risk management. Exercise 1 From your review of Mr. Bent’s findings, what is your assessment of the control environment for Insights Bank and Trust? There is a positive control environment at the bank. The McCard family members who serve as senior management have instilled in the bank’s management and staff a culture of hard work and ethical behavior. Little in the bank’s organization tone would lead anyone to believe that it would threaten the bank’s operational controls. Exercise 2 Risk identification and assessment at Insights Bank and Trust is informal (just as it is as many smaller banks). However, it is no less effective than a more formal process, given the bank’s emphasis on more traditional commercial bank activities. Typically, trust activities are considered to have low to moderate inherent risk; the biggest risk is typically the legal risk associated with a trust department fiduciary role in managing trust accounts. Is there anything in the trust operations at Insights Bank and Trust that would lead you to believe that they may be inherently more risky than those typically found at other banks? Several things point to higher inherent risk in the trust activities at Insights Bank: The income from trust activities is a significant part of the bank’s income. That in itself doesn’t necessarily make the inherent risk greater, but when coupled with fast growth and overworked/inadequate staffing, risk is elevated above that normally associated with trust activities. Exercise 3 Were there any warning signs that should have tipped off Insight’s board and senior management that more attention needed to be paid to the bank’s Trust Department operations? Certainly information contained in the examination report was a warning sign. Another possible warning sign was John’s discouraging any internal reviews of his area. His arguments against hiring another trust officer despite his workload could have been a warning as well. |
 
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| If you completed the Insights program in sequence, this is the last module for the course. Please click on Return to Meeting Agenda Page below, and then select the Adjourn item on the agenda. This will you take you to our feedback form. We will appreciate your frank comments on what you liked about Insights and how it might be improved. Good luck to you in your career as a bank director! | ||||||||||
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