Internal Control and Ethics
In 2010 three bank tellers working for First Keystone Bank’s Swarthmore branch were
arrested for an embezzlement scheme involving the ATM machines. Jean Moronese, the head
teller, started the embezzlement in 2008. She first stole from the ATM to pay for her credit card
debt. Getting away with it she decided to steal more to spend on herself. The Fall of 2008
Moronese approached Kelly Barksdale, a second teller, to help conceal her theft. Moronese and
Barksdale changed the ledger control sheets showing how much money was supposed to be in
the ATM.
First Keystone Banks internal control procedures required that two employees had to be
involved in the resupplying the ATM, it locked vault, and maintaining the ledger control sheets.
The purpose of this control was to secure that neither would commit fraud. The problem was
First Keystone never thought two people would conspire to steal from the ATM. Barksdale and
Moronese worked together to steal the money and bypass the securities, in place. In 2009, a
third bank teller overheard the two discussing their scheme. Tyneesha Richardson asked
Moronese for the money to pay off her car loan.
The scheme was unveiled when an internal audit was performed on the branch books.
The audit revealed that $40,590 in cash was missing from the ATM and that $60,000 was
missing from the vault in the ATM, at the branch. Barksdale confessed to the theft that she and
her coworkers were a part of. Also, Barksdale confessed to the theft of money from parking
meters that were dropped off at the bank to be sorted and applied to the parking funds
account.
Question 1. Prepare a list of internal control procedures that banks and other financial
institutions have implemented, or should implement, for their ATM operations.
Daily or weekly trial balances. Calculating the daily or weekly trial balance of accounts
can help firms find mistakes or fraud earlier (Ingram 2019).
Separation of duties. The ledgers should not be in the control of those who are handling
the refilling of the ATM, that way the likelihood of theft is lowered.
Limited accounting system access. After the separation of duties put in passwords to
secure which personnel can access the information (Ingram 2019).
Question 2. What general conditions or factors influence the audit approach or strategy
applied to a bank client’s ATM operations by its independent auditors?
The auditors should treat bank client’s ATM operations as high risk. Since it is a
high risk, auditors would most likely “need more persuasive evidence about its
operating effectiveness” (Louwers et al., 2018, p. 202).
They would point out internal control weaknesses and could recommend the
banks perform surprise testing/inspections of the ATM operations.
3. Identify specific audit procedures that may be applied to ATM operations. Which, if
any, of these procedures might have resulted in the discovery of the embezzlement
scheme at First Keystone’s Swarthmore branch? Explain.
Existence testing: This determines whether or not the asset in question exists
(Bragg, 2018).
Video surveillance whenever cash is being counted: This ensures the bank knows
what is happening to the money when it is being counted. If they see an employee
do anything shady, they can call them in to interview them.
Occurrence testing: This would have helped discover that the parking funds were
not there.
Biblical Integration
Proverbs 19:1 ESV says “better is a poor person who walks in his integrity than one who
is crooked in speech and is a fool”. Living with integrity is key to being a good Christian. If
either Barksdale or Richardson had any integrity the scheme would have ended there but each
acted in their own interest and saw a chance for free and easy cash to solve all their problems.
This whole scheme would have been caught sooner if Barksdale had done the right thing and
turned Moronese in the moment she came to her for help. Richardson also faced the same
dilemma and chose the same fate. If either one of these two would have walked with the integrity
of a good Christian they would not have looked the fool when they were arrested on the
embezzlement charges.
References
Bragg, S. (2018, January 17). Audit procedures.
https://www.accountingtools.com/articles/audit-procedures.html
Ingram, D. (2019, January 25). What Are the Seven Internal Control Procedures in Accounting?
https://smallbusiness.chron.com/seven-internal-control-proceduresaccounting-
76070.html
Knapp, M. C. (2018). Contemporary auditing real issues and cases. Boston: Cengage learning.
Louwers, T. J., Blay, A. D., Sinason, D. H., Strawser, J. R., & Thibodeau, J. C. (2018). Auditing &
assurance services. New York, NY: McGraw-Hill Education.
Proverbs 19:1. (n.d.).
https://www.biblegateway.com/passage/?search=Proverbs19:1&version=ESV
