A Japanese bank introduced the concept of around-the-clock access to cash in the 1960s when it installed the world’s first cash-dispensing machine. In 1968, the first networked ATM appeared in Dallas, Texas.1 Two generations later, there are more than two million “cashpoints,”

“bancomats,” and “holes-in-the-wall” worldwide, including one in Antarctica.

Not surprisingly, ATMs have been a magnet for thieves since their inception.

In 2009, an international gang of racketeers used a large stash of counterfeit ATM cards to steal \($9\) million from hundreds of ATMs scattered around the globe in a well-planned and coordinated 30-minute crime spree. Several high-tech thieves have hacked into the computer networks of banks and modified their ATM software. One such miscreant reprogrammed a network of ATMs to change the denomination of bills recognized by the brainless machines–the ATMs treated \($20\) bills as if they were

\($5\) bills. High-powered video cameras and miniature electronic devices attached to ATMs have been used to steal personal identification numbers (PINs) from a countless number of unsuspecting bank customers.

A variety of low-tech schemes have also been used to rip off banks and their customers via ATMs, including forced withdrawals and post-withdrawal armed robberies.

“Ram-raiding” involves using heavy-duty equipment to rip an ATM from its shorings. The ram-raiders then haul the ATM to a remote location and blast it open with explosives.

The most common and lowest-tech type of ATM pilfering involves the aptly named tactic of “shoulder-surfing.”

Many banks have suffered losses from their ATM operations due to embezzlement schemes perpetrated by employees. One such bank was the Swarthmore, Pennsylvania, branch of First Keystone Bank. Swarthmore, a quiet suburb of Philadelphia, is best known for being home to one of the nation’s most prestigious liberal arts colleges. In 2008, Forbes Magazine ranked Swarthmore College as the fourth best institution of higher learning in the United States–Princeton, CalTech, and Harvard claimed the top three spots in that poll.

In January 2010, three tellers of First Keystone’s Swarthmore branch were arrested and charged with stealing more than \($100,000\) from its ATM over the previous two years. The alleged ringleader was Jean Moronese, who had worked at the branch since 2002 and served as its head teller since 2006. According to media reports, Moronese told law enforcement authorities that she initially began taking money from the branch’s ATM in 2008 to pay her credit card bills, rent, and day care expenses.

No doubt emboldened by the ease with which she could steal the money, Moronese reportedly began taking cash from the ATM “just to spend” because she “got greedy.”2 Prior to taking a vacation in the fall of 2008, a tearful Moronese approached one of her subordinates and fellow tellers, Kelly Barksdale, and confessed that she had been stealing from the ATM. Moronese “begged” Barksdale to help her conceal her thefts “because she didn’t want her children to see her go to jail.” Barksdale was apparently persuaded by Moronese’s tearful plea and agreed to help her cover up the embezzlement scheme.

Questions:-
1. Prepare a list of internal control procedures that banks and other financial institutions have implemented, or should implement, for their ATM operations.
2. What general conditions or factors influence the audit approach or strategy applied to a bank client’s ATM operations by its independent auditors?
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.