Peter Wright, president of Security Systems Ltd., was talking to Doug Sentry, the controller, and Amy Alarme, the internal auditor, about a recent embezzlement. "I'm really disturbed about all this bad media publicity. We have a reputation to maintain and it does not look good to our customers and potential customers to find out that our chief accountant ran off with $250,000. I look to you two for assurances that we have a good control system!"

Doug pointed out that the chief accountant had been stealing from customer accounts over a very long period of time. He also reminded Peter that just last year, Peter had presented the chief accountant with a gold watch for 20 years of loyal service. Doesn't this imply that he was a trustworthy employee?

Peter was very displeased with this responseandturnedto Amy. "Why didn'tyou and your people disco ver this in your audits? Isn't that what I pay you for? I knowthatyou guys have been spending more time on operational audits and I let you do thatbecause ofall the good work that you've been doing. But is it too muchfor me to expectthatyou'd still do enough work to prevent something like this from happening?"

Required:

As Amy, respond to Peter's questions , comments , and concerns