Societe Generale - Kerviel's Trade
Advanced Auditing Case 5.7
SOCIETE GENERALE
Questions 1
Using Auditing standards or your Textbook, define the following control – related terms:- a. Control environment b. Segregation of duties c. Restricted access d. Preventive and detective controls e. Design and operating effectiveness
Answer: a. Control Environment:
The control environment is the reflections of overall attitude of top management and owners of entities about control and its importance to the entity. The control environment includes the actions, policies and procedures and the way of implementation its strategies and overall attitude. For better understanding and assessing the control environment the following subcomponents should be taken into consideration (text book page no. 275): 1. Active integrity and promotion of ethical values 2. Commitment and competence 3. The Board of Directors or Audit Committee participation 4. Management philosophy and operating style 5. Organization structure 6. Human resource policies and practices 7. Methods of assigning authority and responsibility 8. Management control methods 9. System development methodology 10. Management reaction to external influences 11. Internal audit
b. Segregation of duties: Segregation of duties is the vital part of the control activities in individual transaction cycle. Segregation of duties is an effective part of internal control as it reduces the risk of misstatement and inappropriate of actions and it also protect and discourage the fraud.
Under segregation of duties the following functions should be done by different employees: i. Authorization/Approval ii. Record keeping iii. Assets custody.
The basic concept of segregation of duties is to distribution of the following works among different employees like initiate transaction, approve transaction, record transaction, handle assets and review & monitor reports.
c.
SOCIETE GENERALE
Questions 1
Using Auditing standards or your Textbook, define the following control – related terms:- a. Control environment b. Segregation of duties c. Restricted access d. Preventive and detective controls e. Design and operating effectiveness
Answer: a. Control Environment:
The control environment is the reflections of overall attitude of top management and owners of entities about control and its importance to the entity. The control environment includes the actions, policies and procedures and the way of implementation its strategies and overall attitude. For better understanding and assessing the control environment the following subcomponents should be taken into consideration (text book page no. 275): 1. Active integrity and promotion of ethical values 2. Commitment and competence 3. The Board of Directors or Audit Committee participation 4. Management philosophy and operating style 5. Organization structure 6. Human resource policies and practices 7. Methods of assigning authority and responsibility 8. Management control methods 9. System development methodology 10. Management reaction to external influences 11. Internal audit
b. Segregation of duties: Segregation of duties is the vital part of the control activities in individual transaction cycle. Segregation of duties is an effective part of internal control as it reduces the risk of misstatement and inappropriate of actions and it also protect and discourage the fraud.
Under segregation of duties the following functions should be done by different employees: i. Authorization/Approval ii. Record keeping iii. Assets custody.
The basic concept of segregation of duties is to distribution of the following works among different employees like initiate transaction, approve transaction, record transaction, handle assets and review & monitor reports.
c.