Internal controls Obj. 2, 3
One of the largest losses in history from unauthorized securities trading involved a securities
trader for the French bank, Societe Generale (SCGLY). 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.
What general weaknesses in Societe Generale’s internal controls contributed to the
occurrence
and size of the losses?AppendixLO1