Management Accounting Case Book

Out of Control: Lax Procedures at National Capital Trust?

Ron Messer, Kwantlen Polytechnic University

THIS CASE STUDY IS BASED ON A REAL FINANCIAL INSTITUTION and requires students to identify weaknesses in the internal control processes described, which relate to the operations of a trust company. Students will also determine the appropriate controls that need to be in place and their purpose and will need to make suggestions for audit tests that will identify whether any improprieties have occurred. This case is particularly timely, as the aging baby boomer generation places significant assets in the care of third parties. It’s based on actual events that resulted in significant loss to a financial institution, as well as a great deal of negative publicity. To maintain confidentiality, the names of the trust company and persons involved have been changed.

The case is intended for a course in auditing, risk management, or advanced management accounting. It is most appropriate once students have discussed the nature and purpose of internal controls within an organization.

Keywords: internal controls, fraud, audit, risk management.

Out of Control: Lax Procedures at National Capital Trust?

Ron Messer, CA, CMA (Canada)Kwantlen Polytechnic UniversityVancouver, Canada.

INTRODUCTION

As manager of the Finance department for National Capital Trust, Miriam Richardson was in charge of financial functions at the institution. It was her job to ensure that clients’ funds were managed ...