Over the course of three years, the chief teller at the Union Dime Savings Bank in New York stole $1.5 million by taking advantage of an error correction routine that was integrated into the computer system.

The duties of training new tellers in the use of the bank's online system fell to the responsible of the head teller. As a result of the numerous errors that these trainees made, the head teller had to explain his entries to multiple accounts on a daily basis utilizing the error-correction routine as often as was required in order to fix the errors that these trainees made.

Near the end of the period during which he embezzled money, he was making as many as fifty supervisory corrections every day in order to sustain a gambling addiction that cost him $30,000 per day. The following controls were prescribed for the system:

 

a. At the center, there was a control clerk who was responsible for performing a daily review of all supervisory transactions. Even though the control clerk had been instructed to check for an unusually high number of corrections, the fact that such a condition had already existed since the first day the clerk completed the review meant that there was no cause for alarm over the situation at this particular branch.

b. The branch manager chose to disregard a daily report of all supervisory corrections that was delivered to him because he was unable to understand the purpose of the report.

c. It was required that the head teller take a vacation once a year, but any issues that arose while he was away were held for him to deal with when he returned.

d. Exceptions that were found by the auditors when they were verifying account balances were brought to the attention of the head teller so that they could be resolved. He would then implement the error-correction routine, pointing his finger at the recently hired tellers who were said responsible for the errors.

 Questions:

1. Discuss the relevance of the controls that were prescribed?

2. Describe the reviews and tests of compliance that might have detected the fraud?