A Japanese bank introduced the concept of around-the-clock access to cash in the 1960s when it...

  

       

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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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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. 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.' 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 count- less number of unsuspecting bank customers. A variety of low-tech schemes have also been used to rip off banks and their cus- tomers via ATMS, including forced withdrawals and post-withdrawal armed rob- beries. "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 embezzle- ment 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 2013, Forbes Magazine ranked Swarthmore College as the sixth best institution of higher learning in the United States-two slots below Yale, but two slots higher than Harvard. 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 1. In the United States, "ATM" generally refers to an "automated teller machine" or "automated transac- tion machine." In some English-speaking countries, however, "ATM" refers to "all-time-money." 2. C. Scharr, "Bank Employees Charged in Embezzlement Scheme," Delaware County Daily Times (online), 12 January 2010. 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. In fact, the cover-up was easily accomplished. According to the local police, Moronese and Barksdale simply changed the ledger control sheets that were supposed to report the amount of cash stored in the ATM and in the locked vault within the ATM. First Keystone's internal control procedures mandated that two employees be involved in resupplying the ATM and its locked vault and in maintaining the ATM ledger control sheets. However, either Moronese or Barksdale completed those tasks by themselves. In early 2009, a third teller, Tyneesha Richardson, overheard Moronese and Barksdale discussing the embezzlement scheme. Richardson then reportedly asked Moronese for money to pay off her car loan. Moronese agreed to give Richardson the money and told her that she shouldn't worry because "the bank had a lot of money and they would never miss it.".5 After telling Barksdale that she had given money to Richardson, Moronese told Barksdale that if she ever needed any money "to let her know. Not long thereafter, Barksdale allegedly asked Moronese for $600 to pay her rent. An internal audit eventually uncovered the embezzlement scheme at First Keystone's Swarthmore branch. That internal audit revealed that $40,590 was miss- ing from the branch's ATM, while another $60,000 was missing from the locked vault within the ATM's interior. While being interrogated by law enforcement authorities, Barksdale reportedly confessed that she and her colleagues had also stolen money from the local munici- pality. City employees periodically dropped off at the First Keystone branch large bags of coins collected from Swarthmore's parking meters. Tellers at the branch were supposed to feed the coins into a coin-counting machine and then deposit the receipts printed by the machine into the city's parking account. According to Barksdale, she and her two fellow conspirators diverted money from Swarthmore's parking funds and split it among themselves. The police estimated that the three tell- ers stole approximately $24,000 of the parking funds. In January 2010, when the three tellers were arrested, they did not have far to go since the Swarthmore police station was across the street from the First Keystone branch where they worked. In commenting on the case, the local district attorney observed that Barksdale and Richardson had a choice to make when they learned of Moronese's embezzlement scheme and that each had made the wrong choice. "So, the lesson is you can either be a witness or you can be a defendant. These two chose to be defendants."" The district attorney also commented on the branch's failure to require employees to comply with internal control procedures. "The case is yet another example of the importance of not only implementing internal accounting safeguards, but ensuring that those safeguards are being followed by all employees at all levels of the business."8,9 3. M. Schaefer, "Ex-tellers at Swarthmore Bank Charged in Theft," www.philly.com, 12 January 2010. 4. Scharr, "Bank Employees Charged." 5. While at work, the three coworkers reportedly used the code word "Todd" to refer to "their friend" when they needed or wanted to take money from the ATM. 6. Scharr, "Bank Employees Charged." 7. Schaefer, "Ex-tellers at Swarthmore Bank." 8. Press release issued 11 January 2010, by G. Michael Green, District Attorney, Delaware County, Media, Pennsylvania (http://www.delcoda.com/documents/FirstKeystoneStatement byMikeGreen.pdf). 9. In March 2010, an employee of First Keystone's branch in Berwick, Pennsylvania, pleaded guilty to embezzling $750,000 over the 17 years that she had worked for that branch. According to published reports, the employee routinely "skimmed" money received by the bank and deposited the stolen funds into bank accounts that she controlled. 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.

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Ans1 financial institution should implemented the followimg intrenal control procedures i The first is risk assessment which means is financial instit... View the full answer